TRUSTS

By: Prof. Joseph Ferdinand M. Dechavez

CHAPTER 1
General Provisions

Article 1440. A person who establishes a trust is called the

trustor; one in whom confidence is reposed as regards
property for the benefit of another person is known as the
trustee; and the person for whose benefit the trust has been
created is referred to as the beneficiary.

Concept of Trust. A trust is a right of property, real or personal,

held by one party for the benefit of another.1 It is the legal
relationship between one person having an equitable ownership
of 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 the exercise of certain
powers by the latter.2 In its technical legal sense, a trust is
defined as the right, enforceable solely in equity, to the
beneficial enjoyment of property, the legal title to which is
vested in another, but the words 'trust' is frequently employed
to indicate duties, relations, and responsibilities which are not
strictly technical trusts.3

A person who establishes a trust is called the trustor; one in

whom confidence is reposed is known as the trustee; and the
person for whose benefit the trust has been created is referred

1
See Goodwin v. McMinn, 193 Pa. 646, 44 A. 1094, 74 Am.St. Rep. 703; Boyce v.
Mosely, 102 S.C. 361, 86 S.E. 771, 773; King v. Richardson, C.C.A.N.C., 136 F.2d
849, 856, 857.
2
Tigno v. Court of Appeals, 345 Phil. 486, 497 (1997), citing Morales v. Court of
Appeals, 274 SCRA 282 (1997).
3
89 C.J.S. 712.
to as the beneficiary. 4 There is a fiduciary relation between the
trustee and the cestui que trust as regards certain property, real,
personal, money or choses in action. 5 Thus, where one provided
the money for the purchase of a lot but the corresponding deed
of sale and transfer certificate of title were placed in the name
of another because the subdivision owner prohibited the
acquisition of two (2) lots by a single individual, the Court found
that a resulting trust was created. The latter became the trustee
of the property and its improvements for the benefit of the
former as owner.6

Article 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.

Article 1442. The principles of the general law of trusts,

insofar as they are not in conflict with this Code, the Code of
Commerce, the Rules of Court and special laws are hereby
adopted.

Classification of Trust. Trusts are either express or implied. 7

Express trusts are those which are created by the direct and
positive acts of the parties, by some writing or deed, or will, or
by words evincing an intention to create a trust. 8 Thus, if the
intention to establish a trust is clear, the trust is express. 9 In
Cuaycong v. Cuaycong,10 the Supreme Court held that an express
trust over an immovable was created especially since it is
alleged that the trustor expressly told the defendants of his

4
Civil Code, Art. 1440.
5
Pacheco v. Arro, 85 Phil. 505.
6
Spouses Huang v. Court of Appeals, G.R. No. 108525, Sept. 13, 1994.
7
Article 1441, Civil Code of the Philippines states: 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.
8
Buan Vda. de Esconde v. Court of Appeals, 323 Phil. 81, 89 (1996).
9
Cuaycong v. Cuaycong, G.R. No. L-21616, Dec. 11, 1967.
10
Id.
intention to establish the trust. Such a situation definitely falls
under Article 1443 of the Civil Code.

Spouses Gomez v. Duyan

G.R. No. 144148, Mar. 18, 2005

In express terms, Feliza undertook in the subsequent

Pagpapahayag to convey the property subject of the fictitious
deed of sale to her own nephews and nieces who are the children
of her brother Eulogio. To reiterate, Feliza stated ". . . At pag
mangyari ang nasabing hatian ng lote, ay aming ilalagay agad sa
pangalan ng aming mga pamangkin na sina … ". It must be noted
that this Pagpapahayag was entered into by Eulogio and Feliza
after the supposed sale of the property on 25 January 1978.
Based on the clear provisions of this document, the intent of the
siblings to create a trust was manifest with Eulogio as the trustor,
Feliza as the trustee and Eulogio's children as the beneficiaries or
the cestui qui trust of the res which was the disputed property. x
xx

Even if the word "trust" was not expressly used by the

signatories to the 10 February 1978 Pagpapahayag and the
document did not expressly state that a trust was being
established by reason thereof, the establishment of an express
trust cannot be discounted. Under the Civil Code, "No particular
words are required for the creation of an express trust, it being
sufficient that a trust is clearly intended." In a decision penned by
Justice Paras, this Court held that ". . . under the law on Trusts, it
is not necessary that the document expressly state and provide
for the express trust, for it may even be created orally, no
particular words are required for its creation."

Implied Trust. Implied trusts are those which, without being

expressed, are deducible from the nature of the transaction as
matters of intent or, independently, of the particular intention
of the parties, as being superinduced on the transaction by
operation of law basically by reason of equity.11 If the intent to
establish a trust is to be taken from circumstances or other
matters indicative of such intent, then the trust is implied.

11
Buan Vda. de Esconde v. Court of Appeals supra.
Implied trusts are ordinarily subdivided into resulting and
constructive trusts.12

Resulting Trust. A resulting trust is 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.13Resulting trusts arise from the nature or
circumstances of the consideration involved in a transaction
whereby one person becomes invested with legal title but is
obligated in equity to hold his title for the benefit of another.
This is based on the equitable doctrine that valuable
consideration and not legal title is determinative of equitable
title or interest and is always presumed to have been
contemplated by the parties.14 Such intent is presumed as it is
not expressed in the instrument or deed of conveyance and is to
be found in the nature of their transaction. 15 Implied trusts of
this nature are hence describable as "intention-enforcing
trusts."16 Specific examples of resulting trusts may be found in
the Civil Code, particularly Articles 1448, 1449, 1451, 1452 and
1453.17

Articles 1448 to 1456 of the Civil Code enumerate cases of

implied trust, but the list according to Article 1447 is not
exclusive of others which may be established by the general law
on trusts so long as the limitations laid down in Article 1442 are

12
Ramos v. Ramos, G.R. No. L-19872, Dec. 3, 1974; citing 89 C.J.S. 722.
13
Id. citing 89 C.J.S. 725.
14
Estate of Cabacungan v. Laigo, G.R. No. 175073, Aug. 15, 2011; citing Buan
Vda. de Esconde, 323 Phil. 81, 89 (1996).
15
Id., citing Salao v. Salao, G.R. No. L-26699, Mar. 16, 1976, 70 SCRA 65, 81.
16
Id. citing 76 Am Jur 2d, §163, citing Martin v. Kehl (2nd Dist.), 145 Cal App 3d
228.
17
Id., citing Lopez v. Court of Appeals, G.R. No. 157784, December 16, 2008, 574
SCRA 26.
observed,18 that is, that they be not in conflict with the New Civil
Code, the Code of Commerce, the Rules of Court and special
laws.19

Estate of Cabacungan v. Laigo

G.R. No. 175073, Aug. 15, 2011

While resulting trusts generally arise on failure of an express

trust or of the purpose thereof, or on a conveyance to one
person upon a consideration from another (sometimes referred
to as a "purchase-money resulting trust"), they may also be
imposed in other circumstances such that the court, shaping
judgment in its most efficient form and preventing a failure of
justice, must decree the existence of such a trust. A resulting
trust, for instance, arises where, there being no fraud or violation
of the trust, the circumstances indicate intent of the parties that
legal title in one be held for the benefit of another. It also arises
in some instances where the underlying transaction is without
consideration, such as that contemplated in Article 1449 of the
Civil Code. Where property, for example, is gratuitously conveyed
for a particular purpose and that purpose is either fulfilled or
frustrated, the court may affirm the resulting trust in favor of the
grantor or transferor, where the beneficial interest in property
was not intended to vest in the grantee.

Constructive Trust. A constructive trust is a trust raised by

construction of law, or arising by operation of law. In a more
restricted sense and as contra distinguished from a resulting
trust, a constructive trust 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

18
Id., citing Roa v. Court of Appeals supra.
19
Id., citing that Article 1442 incorporates and adopts a large part of the
American law on trusts and thereby the Philippine legal system will be
amplified and will be rendered more suited to a just and equitable solution of
many questions. See The Report of the Code Commission, p. 60.
but by operation of law.20 If a person obtains legal title to
property by fraud or concealment, courts of equity will impress
upon the title a so-called constructive trust in favor of the
defrauded party. A constructive trust is not a trust in the
technical sense.21

Constructive Trust is also known as trusts ex maleficio, trusts

ex delicto and trusts de son tort, they are construed against one
who by actual or constructive fraud, duress, abuse of
confidence, commission of a wrong or any form of
unconscionable conduct, artifice, concealment of questionable
means, or who in any way against equity and good conscience
has obtained or holds the legal right to property which he ought
not, in equity and good conscience, hold and enjoy. 22 They are
aptly characterized as "fraud-rectifying trust,"23 imposed by
equity to satisfy the demands of justice 24 and to defeat or
prevent the wrongful act of one of the parties.25 Constructive
trusts are illustrated in Articles 1450, 1454, 1455 and 1456.26

CHAPTER 2
Express Trusts

Article 1443. No express trusts concerning an immovable or

any interest therein may be proved by parol evidence.

Article 1444. No particular words are required for the

creation of an express trust, it being sufficient that a trust is
clearly intended.

20
Ramos v. Ramos supra citing 89 C.J.S. 7260727.
21
Id. citing Gayondato v. Treasurer of the P.I., 49 Phil. 244; Civil Code, Art. 1456.
22
Cañezo v. Rojas G.R. No. 148788, Nov. 23, 2007, 538 SCRA 242, 251; citing
Heirs of Yap v. Court of Appeals, 371 Phil. 523, 531 (1999).
23
Roa, Jr. v. Court of Appeals, G.R. No. L-27294, Jun. 23, 1983, 123 SCRA 3, 15-16.
24
76 Am Jur 2d, §163, citing Martin v. Kehl (2nd Dist.), 145 Cal App 3d 228.
25
Roa, Jr. v. Court of Appeals, supra.
26
Estate of Cabacungan v. Laigo, G.R. No. 175073, Aug. 15, 2011.
 Article 1445. No trust shall fail because the trustee
appointed declines the designation, unless the contrary should
appear in the instrument constituting the trust.

Article 1446. 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.

Express Trust. Express trusts, sometimes referred to as direct

trusts, are intentionally created by the direct and positive acts of
the settlor or the trustor — by some writing, deed, or will, or
oral declaration.27 It is created not necessarily by some written
words, but by the direct and positive acts of the parties. No
particular words are required, it being sufficient that a trust was
clearly intended.28 Unless required by a statutory provision, such
as the Statute of Frauds, a writing is not a requisite for the
creation of a trust.29 Such a statute providing that no
instruments concerning lands shall be “created” or declared
unless by written instruments signed by the party creating the
trust, or by his attorney, is not to be construed as precluding a
creation of a trust by oral agreement, but merely as rendering
such a trust unenforceable.30

Ringor v. Ringor
G.R. No. 147863, Aug. 13, 2004

Oral testimony is allowed to prove that a trust exists. It is not

error for the court to rely on parol evidence, — i.e., the oral
testimonies of witnesses Emeteria Ringor, Julio Monsis and
Teofilo Abalos — which the appellate court also relied on to
arrive at the conclusion that an express trust exists. What is
crucial is the intention to create a trust. While oftentimes the

27
Ringor v. Ringor, G.R. No. 147863, Aug. 13, 2004, 480 citing 76 Am Jur 2d, p.
50.
28
Id., citing Vda. de Esconde v. Court of Appeals, G.R. No. 103635, 1 Feb. 1996,
253 SCRA 66, 73.
29
Id., citing 76 Am Jur 2d, p. 98 citing Huff v. Byers, 209 Ky 375, 272 SW 897.
30
Id., citing Simpson, Jr. v. Henry N. Clark Co., 316 Mass 118, 55 NE2d 10, 154
ALR 380.
 intention is manifested by the trustor in express or explicit
language, such intention may be manifested by inference from
what the trustor has said or done, from the nature of the
transaction, or from the circumstances surrounding the creation
of the purported trust.

Elements. It is fundamental in the law of trusts that certain

requirements must exist before an express trust will be
recognized. Basically, these elements include a competent
trustor and trustee, an ascertainable trust res. and sufficiently
certain beneficiaries. Stilted formalities are unnecessary, but
nevertheless each of the above elements is required to be
established, and, if anyone of them is missing, it is fatal to the
trusts. Furthermore, there must be a present and complete
disposition of the trust property, notwithstanding that the
enjoyment in the beneficiary will take place in the future. It is
essential, too, that the purpose be an active one to prevent trust
from being executed into a legal estate or interest, and one that
is not in contravention of some prohibition of statute or rule of
public policy. There must also be some power of administration
other than a mere duty to perform a contract although the
contract is for a third-party beneficiary. A declaration of terms is
essential, and these must be stated with reasonable certainty in
order that the trustee may administer, and that the court, if
called upon to do so, may enforce, the trust.31

Mindanao Development Authority v. Court of Appeals

G.R. No. L-49087. April 5, 1982

There is no express trust where the stipulation in the deed of

sale executed by Ang Bansing in favor of Juan Cruz is a mere
condition that Ang Bansing shall pay the expenses for the
registration of his land and for Juan Cruz to shoulder the
expenses for the registration of the land sold to him. The
stipulation does not categorically create an obligation on the part
of Ang Bansing to hold the property in trust for Juan Cruz. It is
essential to the creation of an express trust that the settler
presently and unequivocally make a disposition of property and

31
Mindanao Development Authority v. Court of Appeals, G.R. No. L-49087 Apr.
5, 1982 citing Sec. 31, Trusts, 76 Am. Jur. 2d, pp. 278-279.
 make himself the trustee of the property for the benefit of
another (Sec. 35, Trusts, 76 Am. Jur. 2d, 281).

Clear and unequivocal language is necessary to create a trust

and mere precatory language and statements of ambiguous
nature, are not sufficient to establish a trust. As the Court stated
in De Leon v. Packson,32 a trust must he proven by clear,
satisfactory and convincing evidence; it cannot rest on vague and
uncertain evidence or on loose, equivocal or indefinite
declarations.

CHAPTER 3
Implied Trusts

Article 1447. The enumeration of the following cases of

implied trust does not exclude others established by the
general law of trust, but the limitation laid down in article 1442
shall be applicable.

Article 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 implied by law, it being
disputably presumed that there is a gift in favor of the child.

Purchase Money Resulting Trust. 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 implied by law,
it being disputably presumed that there is a gift in favor of the
child.33 The trust created under the first sentence of Article 1448

32
11 Phil. 1267.
33
Civil Code, Art. 1448.
is sometimes referred to as a purchase money resulting trust,
the elements of which are: (a) an actual payment of money,
property or services, or an equivalent, constituting valuable
consideration; and (b) such consideration must be furnished by
the alleged beneficiary of a resulting trust.34

Article 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.

Trust created in Deed of Donation. There is 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.35 In Adaza v. Court of Appeals,36 where Violeta had
admitted in the Deed of Waiver, that is, that the "property [here
involved] is owned in common by [her] and [her] brother,
Horacio G. Adaza, although the certificate of title was issued
only in [her] name," the Supreme Court held that this statement
is an admission that she held half of the land in trust for
petitioner Horacio. Thus:

The execution of the Deed of Donation of 10 June 1953 by

respondent Violeta's father created an implied trust in favor of
Violeta's brother, petitioner Horacio Adaza, in respect of half of
the property donated." Article 1449 of the Civil Code is directly in
point: "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.

Article 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

34
Comilang v. Burcena, G.R. No. 146853, Feb. 13, 2006.
35
Civil Code, Art. 1449.
36
Adaza v. Court of Appeals, G.R. No. L-47354, Mar. 21, 1989.
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 its is
paid. The latter may redeem the property and compel a
conveyance thereof to him.

Trust created from Loan. Implied trust under Article 1450

presupposes a situation where a person, using his own funds,
buys property on behalf of another, who in the meantime may
not have the funds to purchase it. Title to the property is for the
time being placed in the name of the trustee, the person who
pays for it, until he is reimbursed by the beneficiary, the person
for whom the trustee bought the land. 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.37 In Spouses Paringit v. Bajit,38 although no express
agreement covered Felipe and his wife's purchase of the lot for
the siblings and their father, it came about by operation of law
and is protected by it. The nature of the transaction established
the implied trust and this in turn gave rise to the rights and
obligations provided by law. Implied trust is a rule of equity,
independent of the particular intention of the parties.39

Prescriptive Period. As differentiated from constructive trusts,

where the settled rule is that prescription may supervene, in
resulting trust, the rule of imprescriptibility may apply for as
long as the trustee has not repudiated the trust. Once the
resulting trust is repudiated, however, it is converted into a
constructive trust and is subject to prescription. A resulting trust
is repudiated if the following requisites concur: (a) the trustee
has performed unequivocal acts of repudiation amounting to an
ouster of the cestui qui trust; (b) such positive acts of
repudiation have been made known to the cestui qui trust; and,
(c) the evidence thereon is clear and convincing. The right to
seek reconveyance based on an implied or constructive trust is

37
Nakpil v. Intermediate Appellate Court, G.R. No. 74449, Aug. 20, 1993, 225
SCRA 456, 464.
38
Spouses Paringit v. Bajit, G.R. No. 181844, Sept. 29, 2010.
39
Nakpil v. IAC supra.
not absolute. It is subject to extinctive prescription. An action for
reconveyance based on implied or constructive trust prescribes
in 10 years. This period is reckoned from the date of the
issuance of the original certificate of title or transfer certificate
of title. Since such issuance operates as a constructive notice to
the whole world, the discovery of the fraud is deemed to have
taken place at that time.40

In Tale v. Court of Appeals,41 the Court categorically ruled

that an action for reconveyance based on an implied or
constructive trust must perforce prescribe in ten (10) years, and
not otherwise, thereby modifying previous decisions holding
that the prescriptive period was four (4) years. So long as the
trustee recognizes the trust, the beneficiary may rely upon the
recognition, and ordinarily will not be in fault for omitting to
bring an action to enforce his rights. There is no running of the
prescriptive period if the trustee expressly recognizes the
resulting trust. Since the complaint for breach of trust was filed
by respondent-spouses two (2) months after acquiring
knowledge of the sale, the action therefore has not yet
prescribed.42 In Spouses Paringit, the spouses registered the lot
in their names in January 1987 but they could not be said to
have repudiated the implied trust by that registration. Their
purchase of the land and registration of its title in their names
are not incompatible with implied trust. It was understood that
they did this for the benefit of Julian and all the children. At any
rate, even assuming that Felipe and his wife's registration of the
lot in their names in January 1987 constituted a hostile act or a
violation of the implied trust, Marciana, et al., had 10 years or
until January of 1997 within which to bring their action. 43

Article 1451. When land passes by succession to any person

and he causes the legal title to be put in the name of another,

40
Lopez v. Court of Appeals, G.R. No. 157784, Dec. 16, 2008.
41
G.R. No. 101028, Apr. 23, 1992
42
O'Laco v. Chit, G.R. No. 58010, Mar. 31, 1993.
43
Spouses Paringit v. Bajit, G.R. No. 181844, Sept. 29, 2010.
a trust is established by implication of law for the benefit of
the true owner.

Inheritance placed in Trust. 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.44 In Angcog v. Court of Appeals,45 the
Supreme Court held that the registration of the land in Rosario
Diez's name created an implied trust in his favor by analogy to
Art. 1451 of the Civil Code, . . . citing that in the case of O'Laco v.
Co Cho Chit,46 Art. 1451 was held as creating a resulting trust,
which is founded on the presumed intention of the parties. As a
general rule, it arises where such may be reasonably presumed
to be the intention of the parties, as determined from the facts
and circumstances existing at the time of the transaction out of
which it is sought to be established. In Angcog, the records
disclose that the intention of the parties to the extrajudicial
settlement was to establish a trust in favor of petitioner Yap, Jr.
to the extent of his share. Rosario Diez testified that she did not
claim the entire property, while Atty. de la Serna added that the
partition only involved the shares of the three participants. 47

Article 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.

Title placed in Co-owner. The law expressly allows a co-owner

(first co-owner) of a parcel of land to register his proportionate
share in the name of his co-owner (second co-owner) in whose
name the entire land is registered. The second co-owner serves
as a legal trustee of the first co-owner insofar as the
proportionate share of the first co-owner is concerned. The first
44
Civil Code, Art. 1451.
45
G.R. No. 112260, Jun. 30, 1997.
46
G.R. No. 58010, Mar. 31, 1993.
47
Ancog v. Court of Appeals, G.R. No. 112260, Jun. 30, 1997.
co-owner remains the owner of his proportionate share and not
the second co-owner in whose name the entire land is
registered. Article 1452 of the Civil Code provides:

Art. 1452.If two or more persons agree to purchase a

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.

In Ossorio v. Court of Appeals,48 the Supreme Court held that

for Article 1452 to apply, all that a co-owner needs to show is
that there is "common consent" among the purchasing co-
owners to put the legal title to the purchased property in the
name of one co-owner for the benefit of all. Once this "common
consent" is shown, "a trust is created by force of law." The BIR
has no option but to recognize such legal trust as well as the
beneficial ownership of the real owners because the trust is
created by force of law. The fact that the title is registered solely
in the name of one person is not conclusive that he alone owns
the property.

Mallilin, Jr. v. Castillo

G.R. No. 136803, Jun. 16, 2000

Petitioner contends that an implied trust existed pursuant to

Art. 1452 of the Civil Code which provides that "(I)f 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." We do not think this is
correct. The legal relation of the parties is already specifically
covered by Art. 148 of the Family Code under which all the
properties acquired by the parties out of their actual joint
contributions of money, property or industry shall constitute a
co-ownership. Co-ownership is a form of trust and every co-
owner is a trustee for the other. The provisions of Art. 1452 and
Art. 1453 of the Civil Code, then are no longer material since a
trust relation already inheres in a co-ownership which is
governed under Title III, Book II of the Civil Code.

48
G.R. No. 162175, Jun. 28, 2010.
 Article 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.

Trust based on Promise. 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 .49 In O’Laco v. Chit,50
the Supreme Court found that the document of sale, the
owner's duplicate copy of the certificate of title, insurance
policies, receipt of initial premium of insurance coverage and
real estate tax receipts ware all in the possession of respondent
spouses. As emphatically asserted by respondent O Lay Kia, the
reason why these documents of ownership remained with her is
that the land in question belonged to her. Thus, it held that:

Indeed, there can be no persuasive rationalization for the

possession of these documents of ownership by respondent-
spouses for seventeen (17) years after the Oroquieta property
was purchased in 1943 than that of precluding its possible sale,
alienation or conveyance by Emilia O'Laco, absent any
machination or fraud. This continued possession of the
documents, together with other corroborating evidence spread
on record, strongly suggests that Emilia O'Laco merely held the
Oroquieta property in trust for respondent-spouses.

Article 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.

Conveyance to Secure Performance. 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

49
Civil Code, Art. 1453.
50
O'Laco v. Chit, G.R. No. 58010, Mar. 31, 1993.
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.51 In Napocor v. Posada,52
petitioners conveyed Lots Nos. 916 and 920 to the government
with the latter obliging itself to use the realties for the
expansion of Lahug Airport; failing to keep its bargain, the
government can be compelled by petitioners to reconvey the
parcels of land to them, otherwise, petitioners would be denied
the use of their properties upon a state of affairs that was not
conceived nor contemplated when the expropriation was
authorized.

Article 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.

Investment of Trust Fund. 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. 53 In Estate
of Sotto v. Palicte,54 the probate court ruled that while the
redemption of the subject properties was made under the name
of Matilde, it was the estate which provided the funds to
redeem the properties. Thus, the probate court held that
Matilde redeemed the subject properties in behalf of all the
heirs of Filemon. Citing Article 1455 of the Civil Code, the
probate court held that as trustee of the subject properties,
Matilde should return and account for the subject properties to
the estate.

51
Civil Code, Art. 1454.
52
G.R. No. 191945, Mar. 11, 2015.
53
Civil Code, Art. 1455.
54
Estate of Sotto v. Palicte, G.R. No. 158642, Sept. 22, 2008.
 Article 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.

Property Obtained through Mistake or Fraud. 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. 55 Here,
the implied trustee only acquires the right "to the beneficial
enjoyment of [the] property." The legal title remains with the
true owner. In Crisostomo v. Garcia, Jr.,56 it was held that when a
party uses fraud or concealment to obtain a certificate of title of
property, a constructive trust is created in favor of the
defrauded party. In Crisostomo, the petitioners were able to
transfer the property under their names without knowledge of
the respondent.

Article 1457. An implied trust may be proved by oral

evidence.

Parol Evidence. Unlike express trusts concerning immovables or

any interest therein which cannot be proved by parol evidence,
implied trusts may be established by oral evidence. However, in
order to establish an implied trust in real property by parol
evidence, the proof should be as fully convincing as if the acts
giving rise to the trust obligation were proven by an authentic
document. It cannot be established upon vague and inconclusive
proof.57

55
Civil Code, Art. 1456.
56
G.R. No. 164787, Jan. 31, 2006; see Heirs of Sumagang v. Aznar Enterprises,
Inc., G.R. No. 214315, Aug. 14, 2019.
57
O'Laco v. Chit, G.R. No. 58010, Mar. 31, 1993.