TRUSTS

(Art. 1440 1457)

Fiduciary relationship between one person having an equitable ownership in property and another 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 for the benefit of the former A legal arrangement whereby one person transfers his legal title to property to another to be administered by the latter for the benefit of a third party Concept: Trust implies confidence in a relationship Denotes confidence, fiduciary relationship, and is often used in reference to the confidential aspect of any kind of a bailment or possession by one person of the property of another Trust cannot be established in violation of law Trust is the right, enforceable in equity, o the beneficial enjoyment of property the legal title which is another

Trust distinguish from other relations Bailment Bailment Trust It is a characteristic of a bailment that the A delivery of property in trust bailee has possession of, without legal title necessarily involves a transfer of legal to, the property subject to the bailment title, with the legal title in the trustee

Donation Donation Trust A gift is a transfer of property and except in A trust is an existing legal relationship the case of a gift in trust, involves a and involves the separation of legal

disposition of ownership. Contract

both

legal

and

equitable and equitable title

Contract

Trust

a legal obligation based on an undertaking Always involves an ownership supported by a consideration, which embracing a set of rights and duties obligation may or mat not be fiduciary in fiduciary in character character Debt Debt Trust

A creditor merely has a personal claim The beneficiary of a trust has a against the debtor beneficial interest in the trust Debt merely implies an obligation to pay a property sum certain of money There is a fiduciary relation between a trustee and a beneficiary

Persons involved in the creation of an express trust Trustor the person who intentionally creates or establish the trust Trustee the person who undertakes and holds the legal title to the property in trust solely for the benefit of another, with certain powers and subject to certain duties Beneficiary the person who has the equitable title or interest in the property and enjoys the benefit of the administration of he trust by the trustee Nature of ownership of trustee and beneficiary 1. 2. 3. 4. 5. Ownership by two persons at the same time Ownership of trustee, a mere matter of form and nominal Trustee, not mere agent Transfer of equitable title Rights of beneficiary Character of office of trustee As principal the trustee is not an agent of the trust estate, but he acts for himself in the administration of the trust estate, although subject of the terms of the trust and the law of trusts As Agent in some cases, a trustee has been regarded as agent of beneficiaries of the trust at least for certain purposes of imputing to the beneficiaries of the trust notice given to the trustee

 As fiduciary a trustee, like an executor or administrator, holds an office of trust

Classification of Trusts Creation Express trust Implied trust Resulting trust Constructive trust Effectivity Testamentary trust Trust inter vivos Revocability Revocable Trust Irrevocable Trust Elements A competent trustor and trustee An ascertainable trust res; Sufficiently certain beneficiaries

Art. 1442 Principles of the general law of trusts are adopted A trust or a provision in the terms of a trust would be invalid if its enforcement is against the law even though its performance does not involve the commission of a criminal or tortuous act Termination of express trust Expiration of period fixed Accomplishment of purpose Mutual agreement of beneficiaries Exercise of power of terminate Express Trusts

Evidence to prove express trust Burden of proof Trust concerns immovable therein Failure to object to parol evidence

Express trusts are those trusts intentionally created by direct and positive act of the trustor, by writing, deed, will or oral declaration evincing an intention to create the trust

Kinds of express trusts Charitable trust Accumulation trust Spendthrift trust Sprinkling Trust

Art. 1445 Acceptance, declination, or renunciation by the trustee In the case of an express trust, acceptance of trust by a trustee is necessary to charge him with the office of the trustee and the administration of the trust and to vest the legal title in him One designated or appointed as trustee may decline the responsibility and thereby be free from any legal or equitable duty or liability in the matter Renunciation of a trust after its acceptance can only be by resignation or retirement with court approval or at least, with agreement of beneficiaries and on satisfaction of all legal liabilities growing out of the acceptance of the trust.

Art 1446 Acceptance of trust by the beneficiary Acceptance of or assent to the trust by the beneficiary is essential to the creation and validity of a trust Art 1447 Implied Trusts Those which, without being express, are deducible from the nature of the transaction as matters of intent, or which are super induced on the transaction by operation of law, as matters of equity, independently Kinds of Implied Trust Resulting trust broadly defined as a trust which is raised or created by the act or construction of law. Constructive Trust a trust raised by construction of law or arising by operation of law

Distinctions between express trusts and implied trusts Express Trusts Creation trust Proof of trust of Implied Trusts

Created by the intention of theComes into being by operation trustor or parties of law An express trust concerning an Implied trust concerning an immovable or any interest therein immovable or any interest cannot be proved by parol therein may be proved by oral evidence evidence

Repudiation trust

of

In order that laches or acquisitive Laches constitutes a bar to prescription may bar an action to actions to enforce an implied enforce an express trust, an trust even when there is no express repudiation made known repudiation, unless there is to the beneficiary is required concealment of the fact giving rise tot he trust

Implied trust converted to express trust 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 1. Trustee acknowledged in a public instrument sale of land by his parents to beneficiary 2. Trustee directed his tenant to pay rentals to beneficiary and allowed latter to take possessions Acquisition of property through prescription 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 trusts 1. By trustee possession of a trustee is, in law, possession of the cestui que trust and, therefore, it cannot be a good ground for title by prescription 1. Trustee may claim title by description founded on adverse possession where it appears that: 1. He has performed open and unequivocal acts of repudiation amounting to an ouster of the cestui que trust or the other coowners 2. Such positive acts of repudiation have been made knwon to the cestui que trust or the other co-owners 3. The evidence thereon should be clear and conclusive or convincing 4. The period fixed by law has prescribed 2. By third persons though the statutes of limitations does not run between trustee and cestui que trust as long as the trust relation subsists, it does not run between the trust and third persons.

Sample acts amounting to repudiation of trust Filing by a trustee of an action in court against the trustor to quiet title to property, or for recovery of ownership thereof, held in possession by the former, may constitute an act of repudiation of the trust reposed on him by the latter; Issuance of certificate of title would constitute an open and clear repudiation of any trust, and in the lapse of more than 20 years, open an adverse possession as owner would certainly suffice to vest title by prescription Prescriptibility of action for reconveyance based on implied trust

Period of prescription Where person claiming to be owner in actual possession of property When prescription period begins to run Where rights of the beneficiary are recognized by the trustee When tacking of possession not permitted Where property in possession of third person

Art 1448 Sale to a party but price paid by another General Rule : A resulting trust arises in favor of a person from whom a consideration comes for a conveyance of property, whether realty or personality, to another. The presumption is that he who pays for a thing intends a beneficial interest therein for himself Exception: No trust is implied of the person to whom the legal estate is conveyed is a child, legitimate or illegitimate, of the payor, because it is presumed that a gift or donation was intended in favor of a child

Art 1449 Donation to a person but beneficial interest vested in another An implied trust arises on a donation of property where it appears that although the legal estate is transmitted to the donee, he is to have no beneficial interest or only a part thereof Art. 1450 Purchase with borrowed funds Trust in favor of lender Trust in favor of borrower Art 1451 Legal title to land inherited by heir placed in name of another Where 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 favor of the true owner Art. 1452 Legal title to property purchased taken in one co owner Where the 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 favor of the others in proportion to the interest of each.

Art. 1453 Conveyance under a promise to hold for, or transfer to another

The trust is based on the promise or representation of the grantee to hold the property conveyed for, or transfer it to another

Art. 1454 Absolute conveyance to a person to secure performance of grantors obligation 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 created by operation of law for the benefit of the grantor Art. 1455 Purchase of property with use of trust funds 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 persons name using trust funds for the purchase, establishes a resulting trust for the benefit of the persons to whom the funds belong

Art 1456 Acquisition of property through mistake or fraud 1. Constructive trust created where a party acquires through mistake or fraud a legal title of property to which another has a better right 2. Not trust in the technical sense 3. Remedy of owner under the torrens title Art 1457 Proof of Implied trust 1. An implied trust may be proved by oral evidence. Thus, where the grantor conveys land to the grantee with the understanding that after the latters death the property would be returned to the grantor or his heirs, an implied trust is created in favor of the grantor or his heirs which may be proved by parol evidence 2. An implied trust cannot be established contrary to the recitals of a Torrens Title, upon vague and inconclusive proof. 3. The doctrine of implied trust finds no application where there are no proven facts to support it. 4. The bare existence of confidential relation between grantor and grantee does not, standing alone, raise the presumption of fraud.