I.

NATURE AND CLASSIFICATION OF TRUSTS

I. NATURE AND CLASSIFICATION OF TRUSTS

1. DEFINITION OF, AND PARTIES TO, A TRUST Title V of the Civil Code does not contain a particular definition of "Trust", but its first article Article 1440 defines the persons who constitute the parties in a trust relationship, thus: TRUSTOR - the person who establishes a trust (referred to as "settlor", or "founder" in co on law parlance!" TRUSTEE - the person in who confidence is reposed as re#ards the propert$ placed in trust (referred to as the "corpus"!" and BENEFICIARY - the person for whose benefit the trust has been created (the cestui qui trustant !% &erhaps the best wa$ to describe the le#al essence of trust is to consider it as a le#al relationship based pri aril$ on the parties' relationship to the propert$ that constitutes the corpus or the estate of the relationship, whereb$ a person, called the trustor, conve$s the na(ed or le#al title to a propert$ in the na e of another person, called the trustee, who ta(es title thereto under a fiduciar$ obli#ation to ana#e the propert$ in favor of another person, called the beneficiar$, to who therefore beneficial or e)uitable title pertains% *uotin# fro A erican le#al literature, Tolentino defines trust as "the le#al relationship between one person havin# an e)uitable ownership in propert$ and another person ownin# the le#al title to such propert$, the e)uitable ownership of the for er entitlin# hi to the perfor ance of certain duties and e+ercise of certain powers b$ the latter%" (T,-./T0/,, C0V0- C,1. ,2 T3. &30-0&&0/.4, Vol% 0V, at p% 556, citin# 74 A8% 9:;% <1, hereinafter referred to as "Tolentino"!% The anner of splittin# the le#al title and beneficial ownership over the propert$ (i.e., the corpus! to be held in trust a$ be done in several wa$s% 2or e+a ple, the situation covered under Article 1440 would involve a situation where the full owner of a propert$, defined as the trustor, conve$s the na(ed title to one person, sa$ a ban(in# institution, as trustee, under the ter s of the trust a#ree ent for the benefit of another person called the beneficiar$, sa$ the retarded child of the trustor% 0n this case, $ou would have three parties to the trust arran#e ent% Another ode would be for the trustor to conve$ the na(ed title of the trust propert$ to a trustee, sa$ a ban(in# institution, with trustor hi self to beco e the beneficiar$ of the trust% 0n this case $ou would onl$ have two parties to the trust a#ree ent, the trustor-beneficiar$ and the trustee% A third ode would be for the trustor to conve$ the title to the propert$ to hi self erel$ as trustee for the benefit of a beneficiar$, such as when a father donates a propert$ to his son b$ constitutin# hi self as the trustee durin# the infanc$ of the son% 0n this case, there are essentiall$ onl$ two parties, the trustor-turned-trustee and the beneficiar$% 4uch an arran#e ent essentiall$ covers a #ift b$ the trustor to the beneficiar$%

2. DISTINGUISHING TRUST FROM OTHER SIMILAR RELATIONS "Trust" is (nown as fideicomiso under 4panish le#al s$ste , with the trustee bein# desi#nated as the fiduciario, and the beneficiar$ referred to as the fidecomisario or the cestui que trustant% Barretto v. Tuason, 70 &hil% === (16<5!% a. Splitting ! F"ll D #ini n Int Na$%& Titl% an& B%n%!i'ial Titl% The process of splittin# the full do inion of a particular propert$ between le#al title in one person and beneficial ownership in another, does not necessaril$ create the trust relationship% 2or e+a ple a usufruct is a propert$ arran#e ent reco#ni>ed under Articles 75< and 75? of the Civil Code, whereb$ a usufructuar$ en@o$s the propert$ of another (the na(ed title owner!, and a$ be constituted on the whole or a part of the fruits of the thin#% Conse)uentl$, it is the usufructuar$ who directl$ possess and en@o$s the fruits and benefits of ownership of the propert$, and in fact under Articles 755 and 7=6, it is the usufructuar$ who is obli#ed to preserve the for and substance of the propert$ held in usufruct, and to ta(e care of its with the dili#ence of a #ood father of a fa il$% 0n contrast, under a trust relationship, it is the trustee, the na(ed title holder, who activel$ ana#es and ad inisters the trust propert$, and the beneficiar$ ainl$ is a passive receiver of the fruits and benefits arisin# fro the trust propert$% Another e+a ple would be a lease a#ree ent, whereb$ the lessor retains not onl$ na(ed title to the propert$ leased and an$ other beneficial title, and what is contracted out to the lessee is the narrow en@o$ ent of the possession and use of the leased propert$, and onl$ for a li ited period provided in the lease a#ree ent% 0n contradistinction, in a trust relationship, full beneficial ownership over the trust propert$ is for the account of the beneficiar$, and reall$ what is assu ed b$ the trustee is the obli#ation to ana#e the trust propert$ as the le#al title holder for the benefit and interest of the beneficiar$% 0n addition, unli(e in a lease arran#e ent where the benefits en@o$ed b$ lessee are onl$ for a li ited contracted period, those of the beneficiar$ in a trust arran#e ent are usuall$ of a per anent nature% (. On B%ing B "n& t Fi&"'ia)* D"ti%+ an& O(ligati n+ The essence of what a(es a part$ in a trust arran#e ent the "trustee" is b$ reason of the fact that he receives na(ed or le#al title to the propert$ to be held in trust" and the reason wh$ the office of the trustee is fiduciar$ in character is because he holds title to the propert$ for the benefit of another person, the beneficiar$% Thus, there is no trust relationship erel$ because the trustor stipulates in a contract that he reposes trust and confidence in the person deno inated as trustee" trust relationship is essentiall$ borne out of a propert$ relationship whereb$ full do inion over a propert$ is split between na(ed title in the na e of the trustee where he would ana#e and ad inister the propert$ for the benefit of the another person in who beneficial ownership is #iven% 0n the case of an a#ent, the fiduciar$ relationship is strictl$ based on a personal level: that he has been co issioned b$ the principal to represent hi and his interest in dealin#s with third parties% The a#ent is therefore bound b$ the duties of obedience, dili#ence and lo$alt$ b$ reason of his contractual co it ent to act for and represent the principal and the latter's interest with third parties" he does not purport to act for hi self or upon his own powers, but b$ the principal's authorit$, and therefore the a#ent does not have an$ title to the propert$ placed in his custod$% An a#ent therefore is

bound to act in accordance with the instructions of the principal, and in the na e of the principal" conse)uentl$, the a#ent is not a part$ to the contracts entered into b$ hi in the na e of the principal, and has no ri#hts, or assu es no obli#ations, under such contracts% ,n the other hand, the trustee is #iven na(ed title to the propert$ to be held in trust, and he transacts business with third parties under the trust in his own behalf as a trustee and le#al title holder and not in the na e of the beneficiar$% Althou#h a trustee is bound b$ the dut$ of lo$alt$, i.e., he ust act for the best interest of the beneficiar$, and that in a conflict-of-interests situation, he ust prefer the interest of the beneficiar$ over that of his own estate" nonetheless, he is not bound b$ an$ dut$ of obedience, for indeed he has been #iven le#al title to the trust propert$ precisel$ because he is e+pected to use his discretion and best @ud# ent in pursuin# transactions under the trust arran#e ent% 3e is not e+pected to be bound b$ the instructions of the beneficiar$, who often is an infant, or who has no le#al capacit$, li(e an insane person% Aecause the trustee is obli#ed to ana#e the trust propert$ for the benefit of the beneficiar$, he is bound to e+ercise due dili#ence in his dealin#s in relation to the trust% Bhile both a trust and a#enc$ relationships are fiduciar$ in nature" the a#enc$ relation is essentiall$ revocable "at the will of the principal," bein# based pri aril$ on willin#ness of the principal to be represented b$ another person% ,n the other hand, a trust bein# essentiall$ based on a propert$ relationship, is not revocable at will" and althou#h "revocation of trust" is the ter used, it is not at the will of the trustor or the beneficiar$, unless that is so stated in the trust instru ent, but can onl$ be based on a "breach of trust," or onl$ upon showin# that the trustee has breached his dut$ of lo$alt$ or dut$ of dili#ence% 0n other words, a trustee cannot #enerall$ be stripped of the le#al title unless it is shown that he is unfit for the position of trustee, or he has breached his trust obli#ations% Thus, in De Leon v. Molo-Peckson, 5 4C;A C6= (16 !, the Court held that in the absence of an$ reservation of the power to revo(e, an e+press trust (referred to as "voluntar$ trust"!, is irrevocable without the consent of the beneficiar$% ,. ESSENTIAL CHARACTERISTICS OF TRUST The essential characteristics of a trust are as follows: (a! A Method of Disposition of Property - ,ne based on propert$ relationship, whereb$ le#al or na(ed title in trust propert$ is held b$ one (the trustee!, and the e)uitable or beneficial title pertains to another person (the beneficiar$! (Art% 1440!" (b! Constitutin !iduciary "#li ation - The splittin# in the ain aspects of the full do inion of the sub@ect propert$ is e+pressl$ and i plied constituted under a fiduciar$ obli#ation on the part of the holder of the le#al title to hold the trust properties for the benefit of the person to who e)uitable title pertains" and (c! $ssentially an $quita#le %elation - Trusts relations ust be based and construed on principles in e)uit$ (Art% 144<!% -1. Trust as a Method of Property Disposition Bith respect to the essential characteristic that trust relationship is alwa$s based upon a splittin# of do inion over the trust propert$ (a le#al relation based on propert$ ri#hts!, Pacheco v. Arro, =7 &hil% 707 (1670!, held that "DtEhe @uridical concept of a trust, which in a broad sense involves, arises fro , or is the result of, a fiduciar$ relation between the trustee and the cestui que trust as re#ards certain propert$-real, personal, funds or one$, or choses in action%" (at p% 714!% 0n ore pinpointed lan#ua#e, &ulio v.

Dalandan, <1 4C;A 74? (165C!, characteri>es "trust" as "a propert$%" (at p% 770!%

ethod of disposition of

4trictl$ spea(in#, there is no le#al trust relationship e+istin#, unless and until the le#al title to the trust properties is transferred to the trustee, who ta(es such title e+pressl$ or i pliedl$ under the obli#ation to hold and ana#e the properties for the benefit of the beneficiar$% Trusts are essentiall$ le#al relationships that arise fro propert$ relations: "A trust is a fiduciar$ relationship with respect to propert$, sub@ectin# the person b$ who the propert$ is held to e)uitable duties to deal with it for the benefit of another%" (A)uino, ;anhilio Callan#an, %esultin Trusts and Pu#lic Policy' <?< 4C;A ?54, ?57, citin C5 A 9ur <d <4=!% -2. Trust Constitutes Fiduciary Obligations on the Part of the Trustee ,ne of the conse)uences of the fiduciar$ relationship e+istin# in a trust relationship, is the inabilit$ of the trustee to invo(e the statute of li itations or prescription a#ainst the beneficiar$% Thus in Pacheco v. Arro, =7 &hil% 707 (1670!, the Court held that a "trustee cannot invo(e the statute of li itations to bar the action and defeat the ri#ht of the cestui que trustent. 0f the pretense of counsel for the petitioners that the pro ise above adverted to cannot prevail over the final decree of the cadastral court holdin# the predecessor-in-interest of the petitioners to be the owner of the lots clai ed b$ the respondents were to be sustained and upheld, then actions to co pel a part$ to assi#n or conve$ the undivided share in a parcel of land re#istered in his na e to his co-owner or co-heir could no lon#er be brou#ht and could no lon#er succeed and prosper%" (at p% 717!% 0n the sa e anner, in the earlier decision of $sco#ar v. Locsin, C4 &hil% =5 (164?!, where the plaintiff was the owner of a parcel of land, but bein# illiterate, as(ed the defendant's predecessor-in-interest to clai the sa e for her" but that instead he co itted a breach of trust b$ clai in# the lot for hi self" the trial court, while reco#ni>in# that the plaintiff had the e)uitable title and the defendant the le#al title, nevertheless dis issed the co plaint because the period of one $ear provided for under the Torrens s$ste for the review of a decree had elapsed, and the plaintiff had not availed herself of that re ed$% 0n overturnin# the trial courtFs decision, the Court held A trust--such as that which was created between the plaintiff and Ddefendant's predecessor-in-interestEis sacred and inviolable% The Courts have therefore shielded fiduciar$ relations a#ainst ever$ anner of chicaner$ or detestable desi#n cloa(ed b$ le#al technicalities% The Torrens s$ste was never calculated to fo ent betra$al in the perfor ance of a trust% (at p% =C!% The uch earlier decision in Barretto v. Tua(on' 70 &hil% === (16<5!, characteri>ed the old institution of mayora( o -- a fiduciar$ char#e ade to the first-born, as the usufructuar$ possessor, to preserve the entailed propert$ in the fa il$ and to deliver the at the proper ti e to the succeedin# first-born, who shall possess and en@o$ the -- as a species of the #enus trust, "the essence of which, in concise ter s, is nothin# ore than the confidin# of a thin# to one in order that he a$ preserve it and deliver it to another%" (at p% 61=!% Thus, the cause of action of the successors-in-interest who were entitled to benefits of the mayora( o could not be defeated b$ clai s of prescription or failure to fail an$ clai s in the proceedin#s for the settle ent of the estate of the

deceased% 0n )u Tion v. )u, 5 4C;A 670 (165<!, the Court held that in view of the fiduciar$ nature of the le#al relation that e+ists between the trustee and the cestui que trust , the statute of li itations or prescription and the principle of laches cannot bei invo(ed b$ the trustee with respect to the ri#ht of action of the latter% ( %eiterated in De Buencamino v. De Matias, 15 4C;A =46 D1655!" -,. The Essence of Trust Founded on Equity Principles Bith respect to the e)uit$ nature of trust relations, Article 144< of the Civil Code provides that "The principles of the #eneral law of trusts, insofar as the$ are not in conflict with this Code, the Code of Co erce, the ;ules of Court and special laws, are hereb$ adopted%" The foundation of Article 144< a$ be drawn fro the decision in *overnment v. A#adilla, 45 &hil% 54< (16<4!, where the Court held -As the law of trusts has been uch ore fre)uentl$ applied in .n#land and in the :nited 4tates that it has in 4pain, we a$ draw freel$ upon A erican precedents in deter inin# the effect of the testa entar$ trust here under consideration, especiall$ so as the trusts (nown to A erican and .n#lish e)uit$ @urisprudence are derived fro the fidei commissa of the ;o an law and are based entirel$ upon Civil -aw principles% (at pp% 545-54C!% :nder the ae#is of the /ew Civil Code, the Court reiterated the e)uit$ basis of trust in Mi uel v. Court of Appeals, <6 4C;A C50 (1656!, and held "2urther ore, because the case presents proble s not directl$ covered b$ statutor$ provisions or b$ 4panish or local precedents, resort for their solution ust be had to the underl$in# principles of the law on the sub@ect% Aesides, our Civil Code itself DArticle 144<E directs the adoption of the principles of the #eneral law of trust, insofar as the$ are not in conflict with said Code, the Code of Co erce, the ;ules of Court and special laws%" (at pp% CC7-CC5% %eiterated in Pere( v. Araneta, 4 4C;A 4?0 D165<E!% -ater, in in +alao v. +alao, C0 4C;A 57 (16C5!, the Court characteri>ed the e)uit$ nature of trust, thus -"0n its technical le#al sense, a trust is defined as the ri#ht, enforceable solel$ in e)uit$, to the beneficial en@o$ ent of propert$, the le#al title to which is vested in another, bu the word 'trust' is fre)uentl$ e plo$ed to indicate duties, relations, and responsibilities which are not strictl$ technical trusts" (=6 C%9%4% C1<!% "A person who establishes a trust is called the trustor" one in who confidence is reposed as re#ards propert$ for the benefit of another person is (nown as the trustee" and the person for whose benefit the trust has been created is referred to as the beneficiar$" (Art% 1440, Civil Code!% There is a fiduciar$ relation between the trustee and the cestui que trust as re#ards certain propert$, real, personal, one$ or choses in action (&acheco vs% Arro, =7 &hil% 707!% (at p% =0!% The e)uit$ nature of a trust supports the proposition that the intention of the trustor to create a trust for the benefit of intended beneficiar$ should as uch as possible be reali>ed% Thus, Article 1444 provides that "/o particular words are re)uired for the creation of an e+press trust, it bein# sufficient that a trust is clearl$ intended%" An application of this doctrine (not the article! can be found in *overnment v. A#adilla, 45 &hil% 54< (16<4!, where after holdin# that the testa entar$ trust was "ver$ uns(illfull$ drawn" its lan#ua#e is un#ra atical and at first blush see s to so ewhat obscure,"

the Court nonetheless held: "but on closer e+a ination it sufficientl$ reveals the purpose of the testator% And if its provisions are not in contravention of so e established rule of laws or public polic$, the$ ust be respected and #iven effect%" (at p% 545!% 0n application of the e)uit$ nature of trusts, A#adilla held that the intention of the trustor is the ore essential consideration, and that "DiEn re#ard to private trusts it is not alwa$s necessar$ that the cestui que trust should be na ed, or even be in esse at the ti e the trust is created in his favor%D1E % % % Thus a devise to a father in trust for accu ulation for his children lawfull$ be#otten at the ti e of his death has been held to be #ood althou#h the father had no children at the ti e of the vestin# of the funds in hi as trustee% 0n charitable trusts such as the one here under discussion, the rule is still further rela+ed%D<E" Another le#al conse)uence of trust bein# essentiall$ founded on e)uit$ principles, is that no trust, whether e+press or i plied, can be held valid and enforceable when it is violative of the law, orals or public polic$% Deluao v. Casteel' << 4C;A <?1 (165<!% Ta(e the situation in %amos v. Court of Appeals, <?< 4C;A ?4= (1664!, where the pa$or of the purchase price of the propert$ had intended that it be held b$ purported trustee for her because she was not )ualified to hold such parcel of land, althou#h a resultin# trust should have arisen under the provisions of Article 144= of the Civil Code, nonetheless, the Court refused to #rant to the pa$or the relief of co pellin# the purported trustee to conve$ the land to her, rulin#: "3owever, if the purpose of the paor of the consideration in havin# title title placed in the na e of another was to evade so e rule of the co on or statute law, the courts will not assist the pa$or in achievin# his i proper purpose b$ enforcin# a resultin# trust for hi in accordance with the 'clean hands' doctrine% The courts #enerall$ refuses to #ive aid to clai s fro ri#hts arisin# out of an ille#al transaction, such as where the pa$or could not lawfull$ ta(e title to land in his own na e and he used the #rantee as a ere du $ to hold for hi and enable hi to evade the land laws, i.e.' an alien who is ineli#ible to hold title to land, who pa$s for it and has the title put in the na e of a citi>en% ,therwise stated, as an e+ception to the law on trust, 'Da' trust or a provision in the ter s of a trust is invalid if the enforce ent of the trust or provision would be a#ainst public polic$, even thou#h its perfor ance does not involve the co issionof a cri inal or tortious act b$ the trustee%'" (at p% ?51, quotin from ;estate ent (4econd! of Trusts 5< D1676E!% A$ wa$ of leaveta(in#, it should be noted that there is no statutor$ provision or case-law which reco#ni>es a trust relationship as creatin# a separate @uridical entit$% 0ndeed, the essence of what constitute a trust is the reco#nition that the trustee holds directl$ le#al or na(ed title to the trust properties% /. 0INDS OF TRUST Article 1441 e+presses reco#ni>es the followin# (inds of trust: E1PRESS TRUST - which is created b$ the intention of the trustor or of the parties" and IMPLIED TRUST - which co es into bein# b$ operation of law% %amos v. %amos, 51 4C;A <=4 (16C4!, defined e+press trusts as "those which are created b$ the direct and positive acts of the parties, b$ so e writin# or deed, or will, or b$ words either e+pressl$ or i pliedl$ evincin# an intention to create a trust" (quotin from =6 C%9%4% 1<<!%

,n the other hand, %amos defined i plied trusts as "those which, without bein# e+pressed, are deducible fro the nature of the transaction as atters of intent, or which are superinduced on the transaction b$ operation of law as atters of e)uit$, independentl$ of the particular intention of the parties" ( quotin from =6 C%9%4% C<4!% The difference in le#al effects between an e+press trust and an i plied trust, accordin# to %amos, was that the for er is not susceptible to char#es of prescription or laches, whereas in the latter, it is possible that the cause of action of the cestui que trust a$ be e+tin#uished b$ prescription or laches% 0n Dia( v. *orricho and A uado, 10? &hil% <51 (167=!, the Court held that "DtEhe reason for the difference in treat ent is obvious% 0n e+press trusts, the dela$ of the beneficiar$ is directl$ attributable to the trustee who underta(es to hold the propert$ for the for er, or who is lin(ed to the beneficiar$ b$ confidential or fiduciar$ relations% The trustee's possession is, therefore, not adverse to the beneficiar$, until and unless the latter is ade aware that the trust has been repudiated% Aut in constructive trusts (that are i posed b$ law!, there is neither pro ise nor fiduciar$ relation" the so-called trustee does not reco#ni>e an$ trust and has no intent to hold for the beneficiar$" therefore, the latter is not @ustified in dela$in# action to recover his propert$% 0t is his fault if he dela$s" hence, he a$ be estopped b$ his own laches%" (at p% <55!% As will be discussed hereunder, under an e+press trust arran#e ent, the trustee can never clai either ac)uisitive prescription in his favor to obtain title to the propert$ held in trust, nor the benefit of e+tinctive prescription in order to defeat the ri#ht of the beneficiar$ to de and the e+ercise of his ri#hts% This is because in an e+press trust arran#e ent, which is created onl$ b$ the e+press or i plied acceptance b$ the trustee that he holds the trust propert$ for the benefit of the beneficiar$, his posession thereof is not adverse to, nor in repudiation of, the ri#hts and beneficial title of the beneficiar$% Conse)uentl$, the lon# passa#e of ti e cannot #ive rise to either prescription, uch less laches" there ust be an e+press repudiation of the trust arran#e ent b$ the trustee, and notice to the beneficiar$ that he now holds title adverse to the beneficiar$, for prescription or laches to be#in co encin#% ,n the other hand, under an i plied trust arran#e ent, where there is reall$ no i plied acceptance of a trust obli#ation on the purported trustee, the ere fact that title has been re#istered in the na e of the purported trustee and he holds possession thereof for his own benefit is constituted as a repudiation of an$ trust arran#e ent that the purported beneficiar$ a$ e+pect fro the arran#e ent% Conse)uentl$, the ere passa#e of ti e with the purported trustee e+ercisin# do inion over the purported trust properties for his own benefit, without need of e+press repudiation could eventuall$ lead to successfull$ clai in# the effects of prescription or laches on the part of the trustee, to the detri ent of the beneficiar$% 2inall$, one of the ain distinction between an e+press trust and an i plied trust, is that an e+press trust over an i ovable propert$ cannot be enforced b$ parol evidence, but ust be properl$ supported b$ a written instru ent, whereas, an i plied trust, re#ardless of the nature of the trust propert$, a$ alwa$s be enforced even when constituted orall$% 0n other words, i plied trusts are not within the operative cover of the

4tatute of 2rauds, as e+pressed succintctl$ in Article 147C: "An i plied trust proved b$ oral evidence%"

a$ be

D1ECitin 2-0/T ,/ T;:4T4 A/1 T;:4T..4' section <7" citin !ra(ier v. !ra(ier, < 3ill Ch%, ?07" Ashurst v. *iven, 7 Batts G
4%, ?<6" Carson v. Carson, 1 Bins D/%C%E, <4% D<ECitin &.;;H ,/ T;:4T4, 7th ed%, section 55%!

II. EXPRESS TRUSTS

II. E1PRESS TRUSTS

1. ESSENCE AND DEFINITION OF E1PRESS TRUST a. E2p)%++ T)"+t E++%ntiall* C nt)a't"al in Nat")% Bhile Article 1441 defines an e+press trust as "created b$ the intention % % % of the parties," which clearl$ supports the proposition that the ne+us of ever$ e+press trust arran#e ent is a contractual relationship" nonetheless, the sa e article also defines an e+press trust as "created b$ the intention of the trustor" alone, which see s to def$ the essence of utual consent as a necessar$ ele ent in brin#in# about a contractual relationship% Het it cannot be denied that no person a$ find hi self bound to the fiduciar$ duties and obli#ations of a trustee unless he previousl$ consents thereto, or voluntaril$ assu es a relationship to the trust propert$ that necessaril$ brin#s about the duties and obli#ations of a trustee% 0n other words, there can be no den$in# the le#al truis that an e+press trust constitutes essentiall$ a contractual relationship between and a on# the parties thereto% This is supported b$ Article 1445 which states that "DaEcceptance b$ the beneficiar$ is necessar$," and that if the trust does not i pose an$ onerous condition upon the beneficiar$, then "his acceptance shall be presu ed, if there is no proof to the contrar$%" 9urisprudence supports the contractual basis of e+press trusts as "those which are created b$ the direct and positive acts of the parties, b$ so e writin# or deed, or will or b$ words either espressl$ or i pliedl$ evincin# an action to create a trust%" &ulio v. Dalandan, <1 4C;A 74? (165C!" Cuaycon v. Cuaycon , <1 4C;A 116< (165C!" %amos v. %amos, 51 4C;A <=4 (16C4!" +otto v. Teves, =5 4C;A 174 (16C=!" Philippine ,ational Bank v. Court of Appeals, <1C 4C;A ?4C (166?!% %i(al +urety - .ns. Co. v. Court of Appeals, <51 4C;A 56 (1665!% (. El%#%nt+ ! an E2p)%++ T)"+t 0n a decision of the Court of Appeals, the followin# have been declared as the necessar$ ele ents of ever$ e+press trust, apart fro the fact that it results of the eetin# of inds between and a on# the parties, thus: (a! The Trustee: who holds the trust propert$ and is sub@ect to e)uitable duties to deal with it for another's benefit" (b! The Beneficiary: to who the trustee owes e)uitable duties to deal with the trust propert$ for his" and (c! The %es: which is the trust propert$ which the trustee ana#es for the sa(e or the interest of the beneficiar$, which can be created in an$thinb# that the law reco#ni>es

to be "propert$%" D!rancisco v. Leyco, ? C%A%;% <s 1?=4, cited b$ ;ous, 2lori ond C%, The Trust %elationship, 65 4C;A 1=5, 161% +ee also A)uino, ;anhilio Callan#an, %esultin Trusts and Pu#lic Policy, <?< 4C;A ?54, ?55, citin 1u(e inier at 1<=%E The enu eration of the "necessar$ ele ents" of ever$ e+press trust indicates that ever$ trust relationship is trul$ a le#al relationship built on propert$ ri#hts, and withouth the res or the corpus, there is reall$ no obli#ation upon the trustee who cannot be e+pected to ana#e the propert$ for the benefit of the beneficiar$, si pl$ because he has no control over propert$ that has not been transferred to his na e% '. E++%ntial C3a)a't%)i+ti'+ ! E2p)%++ T)"+t 0f one where to define the essential characteristics of a contract of trust ( i.e., an e+press trust!, it would be the followin#: nominate, principal, unilateral, ratuitous, and real% -1. Nominate and Principal As a contract, an e+press trust is no inate and principal, havin# been #iven particular na e and defined b$ the Civil Code, and not needin# another contract to be valid and bindin#% -2. Unilateral and ratuitous An e+press trust is a unilateral contract since onl$ the trustee assu es obli#ations to carr$ on the trust for the benefit of the beneficiar$% Article 1445, which provides that "acceptance b$ the beneficiar$ is necessar$," not onl$ confir s the contractual nature of ever$ trust contract, but supports the position that an e+press trust is essentiall$ a #ratuitous contract, supported b$ the consideration of liberalit$, especiall$ when the article provides that the beneficiar$"s acceptance is presu ed "if the trust i poses no onerous condition upon the beneficiar$," unless there is proof that he has not accepted the benefits of the trust arran#e ent% Ienerall$, therefore, a trust relationship i poses no obli#ation or burden upon the beneficiar$% -,. E!press Trust is Necessarily a "eal Contract /onetheless, so e of the provisions of the Civil Code on e+press trust a$ islead one to acceptin# that an e+press trust is a consensual contract, rather than that of bein# real contract% Article 144? provides that "/o e+press trusts concernin# an i ovable or an$ interest therein a$ be proved b$ parol evidence%" This provision has been interpreted to constitute a sort-of-4tatute of 2rauds provision applicable to e+press trusts, in that when an e+press trust over i ovable is constituted orall$, then it is not void but erel$ unenforceable /see *am#oa v. *am#oa , 7< &hil% 70? D16 E" $reneta v. Be(ore, 74 4C;A 1? D16 E!0 and that it is sub@ect to ratification or a$ be proved b$ the re)uisite e orandu re)uired under the 4tatute of 2rauds% 0n addition, the clear le#al i plication of the lan#ua#e of Article 144? is that an e+press trust concernin# ovables or an$ interests therein a$ be proved b$ parol evidence" which eans that the ere eetin# of inds over the creation of an e+press trust over ovables creates a valid and enforceable contract of trust%

Article 1444 also see s to support the proposition that an e+press trust is a consensual, in that it provides that "/o particular words are re)uired for the creation of an e+press trust, it bein# sufficient that a trust is clearl$ intended%" And $et, no contract of e+press trust is constituted b$ ere eetin# of inds of the parties, unless and until there has been a transfer of the na(ed title of the trust propert$ for the benefit of the desi#nated beneficiar$% 0n other words, an e+press trust is a real contract, not perfected b$ ere consent alone on the propert$ that is to constitute the corpus of the trust and the a#ree ent b$ the trustee to ana#e the sa e for the interest of the beneficiar$, unless and until le#al title is transferred to the trustee% :nless and until le#al title to the trust propert$ is placed in the na e of the trustee, he assu es no obli#ation towards the beneficiar$% 0f the fourth ele ent of deliver$, i.e., transfer of le#al title over the trust propert$ to the trustee, is necessar$ in order that a contract of e+press trust is constituted% Bhat is the status of a 1eed of Trust, dul$ e+ecuted b$ the trustor and the trustee and accepted in the sa e instru ent b$ the beneficiar$, before title to the desi#nated trust propert$ is actuall$ placed in the na e of the trusteeJ ,ne answer to this issue is that before deliver$ of title over the trust estate to the trustee, there is no valid contract of trust, but onl$ a no inate contract of do ut facia, that is that the trustor has contractuall$ bound hi self to deliver$ and transfer title over the trust propert$ to the trustee (essentiall$ a real obli#ation to #ive!, and the trustee has bound hi self to accept deliver$ and to ana#e the properties to be delivered for the interests of the beneficiar$ (essentiall$ a personal obli#ation to do!% 0f the so-called "contract of trust" is valid at this point (i%e%, upon ere eetin# of the inds!, then in order to be a real contract, it ust ean that it creates a bindin# obli#ation% Aut the onl$ enforceable obli#ation so far created b$ eetin# of the inds is that of the trustor to deliver le#al title to the trust propert$ to the trustee and beneficial title to the beneficiar$, which does not fall within the essence of a trust which is supposed to create an obli#ation on the part of the trustee to ana#e the trust propert$ for the benefit of the beneficiar$% The trustor of a true trust does not assu e an$ obli#ation" he is the creator of the trust% ,n the other hand, there bein# no valuable consideration to support the contractual relationship, or ore properl$ spea(in# bein# supported b$ liberalit$, the contract is essentiall$ a donation, and would be void, unless it co plies with the sole nities andated under the -aw on 1onations% 0f that were the case, then the lan#ua#e of Article 144? that "/o e+press trust concernin# an i ovable or an$ interest therein a$ be proved b$ parol evidence," would have no application to a wholl$ e+ecutor$ contract of trust involvin# i ovable properties" for whether it be oral or in writin#, if there is no co pliance with the re)uire ents of public instru ents in the -aw on 1onations, the contract would be void, not erel$ unenforceable% .ven if Article 144? were to be construed as referrin# to an e+press trust that has been constituted not onl$ b$ the eetin# of the inds of the parties, but coupled with deliver$ of the i ovable trust propert$ to the trustee, it would also lead to the absurd conse)uence of declarin# as unenforceable an oral e+press trust contract, where there

has been e+ecution% 0t is an established doctrine that the 4tatute of 2rauds has no application to full$ or partiall$ e+ecuted contracts% 2inall$, Article 1447 supports the proposition that a contract of e+press trust is not an consensual contract, but essentiall$ re)uires transfer of title to the trust properties for its valid constitution, when it provides that "/o trust shall fail because the trustee appointed declines the desi#nation, unless the contrar$ should appear in the instru ent constitutin# the trust%" :nder Article 1441, an e+press can be "created b$ the intention of the trustor" alone, and that Article 1447 follows up b$ statin# that ones that intention has created the e+press trust, it cannot fail si pl$ "because the trustee appointed declines the desi#nation," which can onl$ ean that the intention of the trustor to create the trust can onl$ be anifested b$ the act of placin# title in the trust properties in the na e of the desi#nated trustee for the benefit of the desi#nated beneficiar$% The refusal b$ the desi#nated trustee (i.e.' non-#ivin# of his consent!, does not a(e the e+press trust contract void for lac( of consent, for indeed the transfer of title to the propert$ has been effected, ost especiall$ of the beneficial or e)uitable title to the beneficiar$, whose acceptance of the #rant of the trustor is dee ed to have ta(en place when no onerous condition has been placed upon hi under the ter s of the trust a#ree ent% &. E2p)%++ T)"+t M"+t N%4%)t3%l%++ B% S3 5n t Ha4% B%%n Int%n&%& Althou#h the rule under Article 1444 is that "/o particular words are re)uired for the creation of an e+press trust, it bein# sufficient that a trust is clearl$ intended," ( +ee also Tuason de Pere( v. Calua , 65 &hil% 6=1 D16 E" &ulio v. Dalandan, <1 4C;A 74?, 745 D165CE!, nonetheless %amos v. %amos, 51 4C;A <=4 (16C4!, still re inds us that an e+press trust will never be presu ed to e+ist" that the part$ who clai s are ri#ht under a trust arran#e ent ust prove the e+istence thereof, thus: "A trust ust be proven b$ clear, satisfactor$, and convincin# evidence% 0t cannot rest on va#ue and uncertain evidence or on loose, e)uivocal or indefinite declarations% As alread$ noted, an e+press trust cannot be proven b$ parol evidence% D1E" (at pp% ?00-?01!% %. E2p)%++ T)"+t+ N t S"+'%pti(l% t P)%+')ipti n 0n *eronimo and .sidro v. ,ava and Aquino, 107 &hil% 147 (1676!, the Court declared that when title and possession of the propert$ is held b$ a person as trustee under an e+press trust, the ri#hts of the cestui qui trust are not sub@ect to prescription to favor the trustee: "The e+press trusts disable the trustee fro ac)uirin# for hiw own benefit the propert$ co itted to his ana#e ent or custod$, at least while he does not openl$ repudiate the trust, and a(es such repudiation (nown to the beneficiar$ or cestui que trust.1% (at p% 17?!% The principle was reiterated in *erona v. De *u(man, 11 4C;A 17? (1654!" &ulio v. Dalandan, <1 4C;A 74? (165C!% %amos v. %amos, 51 4C;A <=4 (16C4!, su ari>ed the prevailin# rule a#ainst prescription when it co es to e+press trust, thus: There is a rule that a trustee cannot ac)uire b$ prescription the ownership of propert$ entrusted to hi ,D<E or that an action to co pel a trustee to conve$ propert$ re#istered in his na e in trust for the benefit of the cestui qui trust does not prescribe, D?E or that the defense of prescription cannot be set up in an action to recover propert$ held b$ a person in trust for the benefit of another, D4Eor that propert$ held in trust can be recovered b$ the beneficiar$ re#ardless of the lapse of ti e% D7E

That rule applies s)uarel$ to e+press trusts% The basis of the rule is that the possession of a trustee is not adverse% /ot bein# adverse, he does not ac)uire b$ prescription the propert$ held in trust% Thus, section ?= of Act 160 provides that the law of prescription does not appl$ "in the case of a continuin# and subsistin# trust%" D5E (at p% <66! /onetheless, %amos reco#ni>ed that @urisprudence has accepted that ac)uisitive prescription a$ appl$ under certain conditions even in an e+press trust, thus: "Ac)uisitive prescription a$ bar the action of the beneficiar$ a#ainst the trustee in an e+press trust for the recover$ of the propert$ held in trust where (a! the trustee has perfor ed une)uivocal acts of repudiation a ountin# to an ouster of the cestui )ui trust" (b! such positive acts of repudiation have been ade (nown to the cestui que trust and (c! the evidence thereon is clear and conclusive (-a#una vs% -evantino, supra" 4alinas vs% Tuason, 77 &hil% C<6% Co pare with the rule re#ardin# co-owners found in the last para#raph of article 464, Civil Code" Casanas vs% ;osello, 70 &hil% 6C" Ierona vs% 1e Iu> an, --16050, 8a$ <6, 1654, 11 4C;A 17?, 17C!%" (at p% ?00!% Dia( v. *orricho and A uado, 10? &hil% <51 (167=!, held that "The A erican law on trusts has alwa$s aintained a distinction between e+press trusts created b$ intention of the parties, and the i plied or constructive trusts that are e+clusivel$ created b$ law, the latter not bein# trusts in their technical sense% DCE The e+press trusts disable the trustee fro ac)uirin# for his own benefit the propert$ co itted to his ana#e ent or custod$, at least while he does not openl$ repudiate the trust, and a(es such repudiation (nown to the beneficiar$ or cestui que trust% 2or this reason, the old Code of Civil &rocedure (Act 160! declared that the rules on adverse possession do not appl$ to 'continuin# and subsistin#' (i%e%, unrepudiated! trusts%" (at p% <54! -1. #hat Constitutes "epudiation in E!press Trust .n +iumira v. 2ista, C4 &hil% 1?= (164?!, the Court held that in an e+press trust, an open disavowal of the trust ust be ade b$ positive acts a ountin# to an ouster of, and ade (nown to, the cestui que trust' in order that the latter a$ be affected" prescirption or laches do not co e into effect b$ the ere passa#e of ti e% Thus, in the case of co-ownership, ere possession of one co-owner does not constitute disavowal for possession b$ an$ co-owner is consistent with the co-ownership interest of other coowners% Corte( v. "liva, ?? &hil% 4=0 (1615!% The Court held that the trustee who is in adverse possession in an e+press trust a$ clai title b$ prescription where it appears: (a! that the trustee has perfor ed une)uivocal acts of repudication a ountin# to an ouster of the cestui que trust0 (b! that such positive acts of repudiation have been ade (nown to the cestui que trust" and (c! that the evidence thereon is clear and conclusive% 0n Lope( v. *on(a a, --1=C==, ?1 9anuar$ 1654, the Court held that "the issuance of the certificate of title to Donl$ one of the co-ownersE na e in 16?5 would constitute an open and clear repudication of an$ trust, and the lapse of ore than twent$ $ears, open, and adverse possession as owner would certainl$ suffice to vest title b$ prescription in the appellee, since appellants, who (new the death of 4oleda (the ori#inal re#istered owner! in 16?7, never ade an$ ove to recover the propert$%" (at p%1C6!

2. 0INDS OF E1PRESS TRUSTS 0t has been held that the develop ent of trust, as a ethod of disposition of propert$ is to a lar#e part due to its freedo fro for al re)uire ents% Lucenario' Domin o' Parol $vidence of $3press Trust' 106 4C;A 471, 47?, citin# 74 A % 9ur% 70% Thus, Article 1444 of the Civil Code provides that "/o particular words are re)uired for the creatio of an e+press trust, it bein# sufficient that a trust is clearl$ intended%" Trust 0n +alao v. +alao, C0 4C;A 57 (16C5!, the Court held andator$ the provisions of Article 144?, which re)uires that an e+press trust involvin# i ovable propert$ ust be covered in a written instru ent, thus /ot a scintilla of docu entar$ evidence was presented b$ the plaintiffs to prove that there was an e+press trust over the Calunuran fishpond in favor of Valentin 4alao% &urel$ parol evidence was offered b$ the to prove the alle#ed trust% Their clai that in the oral partition in 1616 of the two fishponds the Calunuran fishpond was assi#ned to Valentin 4alao is le#all$ untenable% 0t is le#all$ indefensible because the ter s of article 144? of the Civil Code (alread$ in force when the action herein was instituted! are pere ptor$ and un ista(able: parol evidence cannot be used to prove an e+press trust concernin# realt$% (at p% =1! Althou#h Article 1444 provides that "DnEo particular words are re)uired for the creation of an e+press trust," it still re)uires that the circu stances indicate that "a trust is clearl$ intended"% Bhen it co es to i ovable propert$, that "a trust is clearl$ intended" ta(es onl$ one for : a written instru ent as andated under Article 144?% 0n the absence of such written instru ent then public polic$ e+pressed under Article 144? is that no such intent to create a trust e+ists, and conse)uentl$, there are not trust obli#ations on the part of the purported trustee% Bhen it co es to other for s of trust properties, the ele ent of "intention to create trust" ust still co e into pla$, which is an$ evidence tendin# to show that the trustor had transferred title to the trust propert$ with intention to have the ana#ed for the benefit of the beneficiar$, coupled with an intention on the part of the trutee to have accepted title to the trust propert$ with the obli#ation to ana#e the for the benefit of the beneficiar$% A e+press trust is never presu ed to e+ist erel$ on the basis that title to propert$ has been transferred to another person" in the absence of written evidence, the intention to create a trust ust be proved b$ clear and convincin# evidence% Thus, De Leon v. Molo-Peckson, 5 4C;A C6= (165<!, held -"The re)uire ent to establish a trust the proof ust be clear, satisfactor$ and convincin#, is sufficientl$ co plied with b$ the docu ent in )uestion, which clearl$ and une)uivocall$ declares the e+istence of the trust even if the sa e was e+ecuted subse)uent to the death of the trustor%" (at p% ! 0n De Leon, the instru ent showed that the appellants a#reed to sell to the appellee the lots at a no inal price of &1%00 per lot, which to the Court represented a reco#nition of a pre-e+istin# trust or a declaration of an e+press trust, based on the provision in the donor's will to the effect that the titles to the land should be conve$ed to appellants with the dut$ to hold the in trust for the appellee%

Aut in+alao, after it was held that no e+press trust could have been constituted over i ovables without a written trust, the Court went on to deter ine whether a trust over i ovable propert$, which cannot be enforced in the absence of written evidence thereof, can still be pursued under the provisions of i plied trust: " .s plaintiffs4 massive oral evidence sufficient to prove an implied trust' resultin or constructive' re ardin the t5o fishponds61 (at p% =1" italic format supplied!% The atter will be covered under the section below on i plied trusts% a. C nt)a't"al T)"+t+

(. $nter %i%os T)"+t+ '. T%+ta#%nta)* T)"+t Palad v. Province of 7ue(on, 45 4C;A ?74 (16 !, shows where an e+press trust was e bodied in a holo#raphic will containin# testa entar$ dispositions, throu#h which the testator created a trust for the establish ent and aintenance of a hi#h school to be financed with tie inco e of certain specified properties for the benefit of the inhabitants of a town, na in# as trustee who soever a$ be the #overnor of the province% 0n Pere( v. Araneta, 4 4C;A 4?0 (16 !, the Court held that the provisions of the will of the decedent e+plicit$l$ authori>in# the trustee constituted therein to sell the propert$ held in trust and to ac)uired, with the proceeds of the sale, other properties, leaves no roo for doubt about the intent of the testatri+ to (eep, as part of the trust estate, said proceeds of sale, and not turn the sa e over to the beneficiar$ as net rental or inco e% 0n De Leon v. Molo-Pecson, 5 4C;A C6= (16 !, the Court held that the e+ecution b$ the appellants of the a#ree ent to sell the parcels of land at a no inal price of &1%00 per lot, represent a reco#nition of a pre-e+istin# trust or a declaration of an e+press trust, based on the provisions in the donor's will to the effect that the titles to the parcels of land covered should be conve$ed to appellants with the dut$ to hold the in trust for the appellee% &. El%%# +*na)* ) C3a)ita(l% T)"+t+ '. P"(li'l*6R%g"lat%& T)"+t+ ,. THE TRUSTOR a. T)"+t ) a+ t3% C)%at ) ! t3% T)"+t :nder Article 1440, the "trustor" is defined as the "person who establishes a trust"" and under Article 1441, an e+press trust a$ be "created b$ the intention of the trustor%"

The trustor therefore, disposes of his full ownership of the desi#nated trust properties in favor of the trustee who assu es le#al title thereto, and the beneficiar$, to who beneficial or e)uitable title shall pertain% (. T)"+t ) M"+t Ha4% L%gal Capa'it* t C n4%* T)"+t P) p%)t* *ayondato v. Treasurer of the P..., 46 &hil% <44 (16<5!, distin#uishes an e+press trust fro an i plied trust in the sense that in an e+press trust, the trustor ust have le#al capacit$ to create the trust, which effectivel$ re)uires the abilit$ to conve$ le#al or na(ed title in the trust propert$ to the trustee to be held b$ the latter for the benefit of the beneficiar$% The Court heldAouvier defines a trust in its technical sense as "a ri#ht of propert$, real or personal, held b$ one part$ for the benefit of another%" 0n the present case we have this situation: The plaintiff was a inor at the ti e of the re#istration of the land and had no le#al #uardian% 0t is true that her other in whose na e the land was re#istered was the natural #uardian of her person, but that #uardianship did not e+tend to the propert$ of the inor and conferred no ri#ht to the ad inistration of the sa e % % % and the plaintiff, bein# a inor and under disabilit$, could not create a technical trust of an$ (ind% Appl$in# Aouvier's definition to this state of facts, it is clear that there was no trust in its technical si#nification% The other had no ri#ht of propert$ or ad inistration in her dau#hter's estate and was nothin# but a ere trespasser% % % % (at p% <70! 0n effect, capacit$ of the parties is not essential in i plied trusts, because the arran#e ent is i posed b$ operation of law" whereas, in an e+press trust, capacit$ to transfer title on the trust properties, in order to have le#al title held b$ the trustee, is crucial% /. THE TRUSTEE a. T)"+t%% I+ t3% Pa)t* P)i#a)il* B "n& :nder Article 1440, the "trustee" is the person in the trust relation in who confidence is reposed as re#ards propert$ for the benefit of another person% 0t is the trustee therefore who is the part$ pri aril$ bound under the trust relation, and bein# possessed of the le#al title to the trust propert$ held for the benefit of another person, he is bound b$ the fiduciar$ duties of dili#ence and lo$alt$% (. T)"+t%% M"+t Ha4% L%gal Capa'it* t A''%pt t3% T)"+t 0t is to the trustee that na(ed or le#al title to the trust properties is transferred% Conse)uentl$, the trustee ust also have le#al capacit$ to accept the trust, especiall$ when upon acceptance of the trust, he binds hi self to certain obli#ations% '. O(ligati n+ ! t3% T)"+t%% -1. Contractually &tated Duties and Obligations of the Trustee An e+press trust constituted under a trust a#ree ent nor all$ provides for the powers and functions of the trustee, and would enu erate such powers which under the law need to be covered b$ a special power of attorne$ to re ove an$ doubt as to the duties of the trustee, and provide for the para eters of his obli#ations as well% -2. Common 'a( Duties of the Trustee The position of trustee bein# fiduciar$ in nature, a trustee is e+pected to carr$ out the trust usin# the dili#ence of a #ood father of a fa il$% The trustee beco es personall$ liable for #ross ne#li#ence co itted even when it is in the pursuit of the trust arran#e ent" for ne#li#ence which causes da a#e to another person constitutes a

wron# co itted b$ the tortfeasor for which he can be held personall$ liable% .ver$ trustee has the co on law dut$ of dili#ence% 0n addition, the trustee is e+pected to be lo$al to the affairs and interest of the beneficiar$% 3e cannot appropriate for hi self an$ opportunit$ which in the course of his functions as trustee should pertain to the beneficiar$% 3e has the dut$ to account t the beneficiar$ for the affairs of the trust% And he cannot convert the use of the trust properties, and the inco es, fruits and proceeds for his own benefit% .ver$ trustee has the co on law dut$ of lo$alt$% Althou#h the beneficiaries a$ be entitled to receive the inco e flowin# fro the trust estate, the profits reali>ed in the sale of trust properties are part of the capital held in trust, to which the beneficiaries are entitled to receive as inco e% (Pere( v. Araneta, 4 4C;A 4?4 D165<E!% The other duties of the trustee, which flow out of the ain dut$ of lo$alt$, would be the dut$ to account to the beneficiar$ of the trust estate% 0t would be the dut$ of the trustee also to deliver the propert$ in trust to the cestui que trust , when it is ti e to so do it, free all liens and encu brances% (De Leon v. Molo-Peckson, 5 4C;A 6C= D165<E! :nder Article 1477, when the trustee uses trust funds for the purchase of propert$ and causes the conve$ance to be ade in his na e or a third person, a trust is established in favor of the beneficiar$% A violation of the duties of the trustee a$ constitute a "breach of trust" that would be the le#al basis b$ which the trustee a$ be re oved, or the trust revo(ed entirel$% -,. Trustee is Prohibited from Donating Trust Property :ndert Article C?5 of the Civil Code, "trustees cannot donate the propert$ entrusted to the %" 4uch prohibition is in accordance with the fiduciar$ dut$ of lo$alt$ of a trustee, that the holds the trust propert$ for the benefit of the beneficiar$% 3e therefore cannot e+ercise acts of beneficence e plo$in# the propert$ that he holds for the benefit of another person% (see Araneta v. Pere(, 7 4C;A ??= D165<E! -/. Duties and "esponsibilities of the Trustees under the "ules of Court ;ule 6= of the ;ules of Court #rants the court authorit$ to appoint a trustee when "necessar$ to carr$ into effect the provisions of a will or a written instru ent%" (4ection 1!, and that title to the trust estate will vest in the trustee thus appointed b$ the courts (4ection <!% 0n particular, 4ection ? of ;ule 6=, provides that "Bhen a trustee under a written instru ent declines, resi#ns, dies, or is re oved before the ob@ects of the trust are acco plished, and no ade)uate provision is ade in such instru ent for suppl$in# the vacanc$, the proper D;e#ional Trial CourtE a$, after due notice to all persons interested, appoint a new trustee to act alone or @ointl$ with the others, as the case a$ be% 4uch new trustee shall have and e+ercise the sa e powers, ri#hts, and duties as if he had been ori#inall$ appointed, and the trust estate shall vest in hi in li(e anner as it had vested or would have vested, in the trustee in whose place he is substituted" and

the court a$ order such conve$ance to be ade b$ the for er trustee or his representatives, or b$ the other re ainin# trustees, as a$ be necessar$ or proper to vest the trust estate in the new trustee, either alone or @ointl$ with others%" The provisions of ;ule ?= of the ;ules of Court are eant to i ple ent the rule in this @urisdiction that the non-acceptance, death, civil interdiction, insanit$, insolvenc$, or even the resi#nation of a desi#nated trustee, shall not of itself prevent a trust fro co in# into fruition or e+tin#uish one that has been alread$ constituted% The doctrine flows fro the e)uit$ nature of the trust as a le#al institution in the &hilippines% An e+a ple of the application of this principle is in the decision in Loren(o v. Pasadas, 54 &hil% ?7? (16?C!, where the will of the decedent never used the ter "trust", but nevertheless the intention to create one was dee ed i plicit to the Court, thus: "The appoint ent of &%9%8% 8oore as trustee was ade b$ the trial court in confor it$ with the wishes of the testator as e+pressed in his will% 0t is true that the word 'trust' is not entioned or used in the will but the intention to create one is clear% /o particular or technical words are re)uired to create a testa entar$ trust (56 C%9%, p% C11!% The words 'trust' and 'trustee', thou#h apt for the purpose, are not necessar$% 0n fact, the use of these two words is not conclusive on the )uestion that a trust is created (56 C%9%, p% C14!% 'To create a trust b$ will the testator ust indicate in the will his intention so to do b$ usin# lan#ua#e sufficient to separate the le#al fro the e)uitable estate, and with sufficient certaint$ desi#nate the beneficiaries, their interest in the trust, the purpose or ob@ect of the trust, and the propert$ or sub@ect atter thereof% 4tated otherwise, to constitute a valid testa entar$ trust there ust be concurrence of three circu stances: (1! 4ufficient words to raise a trust" (<! a definite sub@ect" (?! a certain or ascertained ob@ect" statutes in so e @urisdictions e+pressl$ or in effect so providin#%' (56 C% 9%, pp% C07, C07%! There is no doubt that the testator intended to create a trust% 3e ordered in his will that certain of this properties be (ept to#ether undisposed durin# a fi+ed period, for a stated purpose% The probate court certainl$ e+ercised sound @ud# ent in appointin# a trustee to carr$ into effect the provisions of the will% ( see sec% 7=<, Code of Civil &rocedure!%" (at pp% ?5=-?56!% 2ollowin# up on this principle, in &ulio v. Dalandan, <1 4C;A 74? (165C!, the Court held that "2or, Ktechnical or particular for s of words or phrases are not essential to the anifestation of intention to create a trust or to the establish ent there%F /or would the use of so e such words as KtrustF or KtrusteeF essential to the constitution of a trust as we have held in Loren(o v. Posadas' 54 &hil% 47?, ?5=% Conversel$, the ere fact that the word KtrustF or KtrusteeF was e plo$ed would not necessaril$ prove an intention to create a trust% Bhat is i portant is whether the trustor anifested an intention to create the (ind of relationship which in law is (nown as a trust% 0s it i portant that the trustor should (now that the relationship Kwhich intents to create is called a trust, and whether or not he (nows the precise characteristics of the relationship which is called a tust%F 3ere, that trust is effective as a#ainst defendants and in favor of the beneficiar$ thereof, plaintiff Victoria 9ulio, who accepted it in the docu ent itself%" (at pp% 770-771! :nder 4ections 7 and 5 of ;ule 6=, the followin# are the duties and responsibilities of the trustee appointed b$ the courts: (a! Aefore enterin# on the duties of his trust, a trustee shall file a bond with the court conditioned upon co pliance with his duties"

(b! To a(e and return to the court, at such ti e as it a$ order, a true inventor$ of all the real and personal estate belon#in# to hi as trustee, which at the ti e of the a(in# of such inventor$ shall have co e to his possession or (nowled#e" (c! To ana#e and dispose of all such estate, and faithfull$ dischar#e his trust in relation thereto, accordin# to law and the will of the testator or the provisions of the instru ent or order under which he is appointed" (d! To render upon oath at least once a $ear until his trust is fulfilled, unless he is e+cused therefro in an$ $ear b$ the court, a true account of the propert$ in his hands and of the ana#e ent and disposition thereof, and will render such other account as the court a$ order" and (e! :pon the e+piration of his trust, he will settle his accounts in court and pa$ over and deliver all the estate re ainin# in his hands, or due fro hi on such settle ent, to the person or persons entitled thereto% -7. Proper Proceedings for &ale or Encumbrance of Trust Estate :nder 4ection 6 of ;ule 6= of the ;ules of Court, when the sale or encu brance of an$ real or personal estate held in trust is necessar$ or e+pedient, the ;TC havin# proper @urisdiction of the trust a$, on petition and after due notice and hearin#, order such sale or encu brance to be ade, and the reinvest ent and application of the proceeds thereof in such anner as will best effect the ob@ects of the trust% &. T)"+t%% D %+ N t A++"#% G%n%)all* P%)+ nal Lia(ilit* n t3% T)"+t Althou#h a trustee enters upon the fulfill ent of his duties b$ his own na e, and not in the na e of the trustor or the beneficiar$, nonetheless, it should be understood that the perfor ance of the functions of the trustee and the contracts entered into in pursuit of the trust, as perfor ed under Lofficial capacit$" as a trustee% Conse)uentl$, the liabilities assu ed b$ the trustee is such capacit$ can onl$ be enforced to the e+tent of the trust properties% 0n other words, the trustee, unless he so stipulates, does not beco e personall$ liable to his separate properties outside of the trust properties, for contracts and transactions arisin# fro the trust and entered into in his official capacit$ as trustee% Thus, in Tan +en uan and Co. v. Phil. Trust Co.' 7= &hil% C00 (16??!, where the properties for which the trust co pan$ had entered into transaction were received not in a trustee capacit$, the Court held that the trustee would be liable for such transactions in its personal capacit$, and not as a trustee% A trustee who acts within the scope of the trust therefore, has a ri#ht to char#e to the trust estate the e+penses incurred b$ reason thereof% ,n the other hand, a trustee is e+pected to e+ercise due dili#ence in the pursuit of the trust, and when he acts with fraud or #ross ne#li#ence, he beco es personall$ liable for his own separate properties, as to all persons who suffer da a#e b$ reason of such fraud or ne#li#ence% A trustee, who acts wi %. T)"+t%% i+ Entitl%& t C #p%n+ati n ! ) Manag%#%nt ! t3% T)"+t E+tat%

0n Loren(o v. Pasadas, 54 &hil% ?7? (16?C!, the Court held that as a atter of #eneral proposition, "A trustee, no doubt, is entitled to receive a fair co pensation for his services%D=E" (at p% ?57!% :nder 4ection C of ;ule 6= of the ;ules of Court, if the co pensation of the trustee is not deter ined in the instru ent creatin# the trust, his co pensation shall be fi+ed b$ the court that appointed hi % 0n Araneta v. Pere(, C 4C;A <7= (16 !, the Court held that the reasonableness of fees of a trustees should be deter ined in advance, but ust be deter ined at the ti e he files a clai for the sa e, since reasonableness depends upon variable circu stances, such as the character and powers of the trusteeship, the ris( and responsibilit$ assu ed, the ti e and labor and s(ill re)uired in the ad inistration of the trust, as well as the care and ana#e ent of the estate% The Court also held that the trustee a$ be inde nified out of the trust estate for the e+penses incurred in renderin# and provin# his accounts and for the costs and counsel's fees in connection therewith% !. R%# 4al ) R%+ignati n ! T)"+t%% :nder 4ection = of ;ule 6= of the ;ules of Court, the proper ;e#ional Trial Court (;TC! a$, upon petition of the parties beneficiall$ interested and after due notice to the trustee and hearin#, re ove a trustee if such re oval appears essential in the interests of the petitioners% The ;TC a$ also, after due notice to all persons interested, re ove a trustee who is insane or otherwise incapable of dischar#in# his trust or evidentl$ unsuitable therefor% The section also reco#ni>es that a trustee, whether appointed b$ the court or under a written instru ent, a$ resi#n his trust if it appears to the court that is it proper to allow such resi#nation% 7. THE BENEFICIARY a. B%n%!i'ia)* I+ t3% Pa++i4% R%'ipi%nt ! B%n%!it+ Fl 5ing !) # t3% T)"+t :nder Article 1440, the "beneficiar$" is the person for whose benefit the trust has been created% As a #eneral rule, the desi#nation of the beneficiar$, is a #ratuitous act, essentiall$ an act of donation b$ which beneficial or e)uitable title to the trust propert$ is #iven to the beneficiar$% 3owever, when the trustor creates the trust b$ desi#natin# a trustee to hold the trust properties for the benefit of the trustor, there is no act of beneficense in this case, but constitutes ore as a sense of estate plannin#% :nder Article 1445, acceptance b$ the beneficiar$ of the e+press trust is necessar$% /evertheless, if the trust i poses no onerous condition upon the beneficiar$, his acceptance shall be presu ed, if there is no proof to the contrar$% The situation does not cover the case when the trustor desi#nates hi self as the beneficiar$% Article C<7 of the Civil Code defines donation as "an act of liberalit$ whereb$ a person disposes #ratuitousl$ of a thin# or ri#ht in favor of another, who accepts it%" 4ince a person cannot be co pelled to accept the #enerosit$ of another, it is provided under Article 1445 that "DaEcceptance b$ the beneficiar$ is necessar$%" Althou#h the -aw on 1onations provides for sole nities for the act of donation and its acceptance, D6E it has been held in Cristo#al v. *ome(, 70 &hil% =10 (16<C!, that the acceptance b$ the

beneficiar$ of #ratuitous e+press trust is not sub@ect to the rules for the for alities of donations% (. B%n%!i'ia)* N%%& N t Ha4% L%gal Capa'it* 0t is posited that the beneficiar$ of an e+press trust need not have le#al capacit$ to be constituted as such in a trust a#ree ent, especiall$ so when the desi#nation is an act of pure liberalit$% :nder Article C?= of the Civil Code, "All those who are not speciall$ dis)ualified b$ law therefore a$ accept donations," which eans that all persons re#ardless of le#al capacit$, a$ be donees e+cept onl$ in those specific cases where the donation to the cannot be ade% Article C41 provides that inors and others who cannot enter into a contract a$ beco e donees but acceptance shall be done throu#h their parents or le#al representatives% :nder Article C4<, donations a$ even be ade to conceived and unborn children and a$ be accepted b$ those persons who would le#all$ represent the if the$ were alread$ born% 0n the case of e+press trust, Article 1445 provides that if the trust i poses no onerous condition upon the beneficiar$, his acceptance shall be presu ed, if there is no proof to the contrar$% The provisions do not cover also charitable trusts, or those constituted upon a trustee who holds le#al title to the trust properties for the benefit of a #eneral #roup of beneficiaries% 8. HO9 E1PRESS TRUST TERMINATED -i(e an$ other le#al relationship, a trust a$ be ter inated b$ reason provided for in the trust instru ent itself, or upon #rounds provided for b$ law or e)uit$% a. D%+t)"'ti n ! t3% C )p"+ Bhen the entire trust estate is loss or destro$ed, the trust is e+tin#uished since the underl$in# proprietar$ basis no lon#er e+ists to warrant an$ le#al relationship between the trustee and the beneficiar$% (. R%4 'ati n (* t3% T)"+t ) ! t3% 0n an e+pressl$ revocable e+press trust, the trustee a$ si pl$ invo(e the happenin# of the suspensive condition upon which the trust was created, b$ thereb$ revo(in# the trust and conve$in# notice thereof to the trustee% '. A'3i%4%#%nt ! O(:%'ti4%, ) Happ%ning ! t3% C n&iti n P) 4i&%& ! ) in t3% T)"+t In+t)"#%nt Bhen the trust instru ent provides the ob@ective or the condition upon which the trust shall be e+tin#uished, sa$ when the trust instru ent provides that full ownership in the trust properties shall be consolidated in the person of the beneficiar$ once he reaches the a#e of a@orit$, the happenin# of the condition shall ter inate the trust% &. D%at3 ) L%gal In'apa'it* ! t3% T)"+t%% :nless otherwise e+pressl$ stipulated in the trust instru ent, the death, civil interdiction, insanit$ or insolvenc$ of the trustee does not necessaril$ ter inate the trust% Thus, Tolentino writes: "The principle that e)uit$ will no allow a trust to fail for want of a trustee is clearl$ established% Bhere a trust has once been created and the trustee

dies, beco es insane or sub@ect to so e other le#al incapacit$, or resi#ns or is re oved, the trust does not fail, but a new trustee will be appointed% 4uch an appoint ent will be ade b$ the propert$ court unless b$ the ter s of the trust other provision is ade for the appoint ent of a successor trustee% The reason wh$ a trust does not fail for want of a trustee is that to per it it to fail for this reason would be contrar$ to the intention of the trustor in creatin# the trust% The trustor is pri aril$ interested in the disposition of the beneficial interest in the propert$, and the atter of its ad inistration is a subsidiar$ consideration%" ( +upra, at p% 5C5!% %. C n!"+i n ) M%)g%) ! L%gal Titl% an& B%n%!i'ial Titl% in t3% Sa#% P%)+ n Bhen the trustee of an e+istin# trust beco es the beneficiar$ thereof, or vice versa, the trust relation is ipso 8ure e+tin#uished, for it is difficult to see how a person can owe fiduciar$ duties to hi self% !. B)%a'3 ! T)"+t Bhen a trustee breaches his dut$ of lo$alt$, it would constitute le#al basis b$ which to ter inate the trust% Thus, in Martine( v. Granno, 4< &hil% ?7 (16<1!, the Court held that when a person ad inisterin# the propert$ in the character of a trustee inconsistentl$ assu es to be holdin# it in his own ri#ht, this operates as a renunciation of the trust and the persons interested as beneficiaries in the propert$ are entitled to aintain an action to declare their ri#ht and re ove the unfaithful trustee%

D1E Citin De Leon v. Peckson, 5< ,% I% 664" Pascual v. Meneses, <0 4C;A <16, <<= (165C!" Cuaycon vs. Cuaycon , <1 4C;A 116< (165C!% D<E Citin Palma v. Cristo#al, CC &hil% C1< (1645!% D?E Citin Manalan v. Canlas, 64 &hil% CC5" Cristo#al v. *ome(, 70 &hil% =10 (16<C!% D4E Citin +evilla v. De los An eles, 6C &hil% =C7(1677!% D7E Citin Mara#illes v. 7uito, 100 &hil% 54" Bancairen v. Diones, 6= &hil% 1<<, 1<5" &uan v. 9u:i a, 4 4C;A 1<<1"
&acinto v. &acinto, --1C67C, 8a$ ?1, 165<" and Tamayo v. Calle8o, 14C &hil% ?1, ?C (16C<!%

D5E Citin Dia( v. *orricho and A uado, 10? &hil% <51, <55 (167=!" La una v. Levantino, C1 &hil% 755 (1641!" +umira
v. 2istan, C4 &hil% 1?= (164?!" *olfeo v. Court of Appeals, 1< 4C;A 166 (1654!" Caladiao v. +antos, 10 4C;A 561 (1654!%

DCE Citin *ayondato v. .nsular Treasurer of P..., 46 &hil% <44 (16<5!% D=E Citin Barney v. +aunders, 15 3ow%, 7?7, 14 -aw% .d%, 104C% D6E :nder Article C4=, the donation of a ovable a$ be ade orall$ or in writin#% An oral donation re)uires the si ultaneous deliver$ of the thin# or the docu ent representin# the ri#ht donated% 0f the value of he personal propert$ donated e+ceeds five thousand pesos, the donation and the acceptance shall be ade in writin#% ,therwise, the donation shall be void%

:nder Article C46, in order that the donation of an i ovable a$ be valid, it ust e ade in a public docu ent, specif$in# therein the propert$ donated and the value of the char#es which the donee ust satisf$% The acceptance a$ be ade in the sa e deed of donation or in a separate public docu ent, but it shall not ta(e effect unless it is done durin# the lifeti e of the donor% 0f the acceptance is ade in a separate instru ent, the donor shall be notified thereof in an authentic for , and this step shall be noted in both instru ents%

III. IMPLIED TRUSTS

III. IMPLIED TRUSTS

1. NATURE OF IMPLIED TRUSTS The Code Co ission in its ;eport e+plained that the doctrine on i plied trust is founded on e)uit$, derived fro A erican decisions under a le#al s$ste where in@ustice would result in which the le#al estate or title were to prevail over the e)uitable ri#ht of the beneficiar$% (%eport of the Code Commission' p% 50!% 0n +alao v. +alao, C0 4C;A 57 (16C5!, the Court characteri>ed "i plied trusts" as "'those which, without bein# e+pressed, are deductible fro the nature of the transaction as matters of intent or which are superinduced on the transaction b$ operation of la5 as matters of equity' independentl$ of the particualt intention of the parties' (=6 C%9%4% C<4!% The$ are ordinaril$ subdivided into resultin# and constructive trusts (=6 C%9%4% C<<!%" (at p% =0!% 0n Philippine ,ational Bank v. Court of Appeals , <1C 4C;A ?4C (166?!, the Court held that "The fra ers of our present Civil Code incorporated i plied trust, which includes constructive trusts, on top of )uasi-contracts, both of which e bod$ the principle of e)uit$ above strict le#alis %" (at p% !% a. Li+ting ! I#pli%& T)"+t+ N t E2'l"+i4% Article 144C e+pressl$ provides that the enu eration in the subse)uent articles of the cases of i plied trust does not e+clude others established b$ the #eneral law of trust, but the li itation laid down in Article 144< shall be applicable, eanin# so lon# as those principles do not conflict with the Civil Code, the Code of Co erce, the ;ules of Court and special laws% (. C nt)a+t%& !) # E2p)%++ T)"+t :nli(e an e+press trust, which essentiall$ proceeds fro a contractual intention to dispose of trust propert$ to a trustee for the benefit of the beneficiar$, an i plied trust is a relationship i posed b$ law or e)uit$% 0n addition, since the trust relationship in i plied trust is i posed b$ law, then there is reall$ no fiduciar$ relationship e+istin# between the purported trustee and the purported cestui que trust , especiall$ in a constructive trust% '. R%+"lting t)"+t+ 0n %amos v. %amos, 51 4C;A <=4 (16C4!, the Court held that "'A resultin# trust is broadl$ defined as a trust which is raised or created b$ the act or construction of law, but in its ore restricted sense it is a trust raised b$ i plication of law and presu ed alwa$s to have been conte plated b$ the parties, the intention as to which is to he found in the nature of their transaction, but not e+pressed in the deed or instru ent of conve$anceF (quotin from =6 C%9%4% C<7!% .+a ples of resultin# trusts are found in article 144=, D1446, andE 1477 of the Civil Code% % % " (at p% <6=, reiterated in +alao v. +alao, C0 4C;A 57, =0-=1 D16C5E!%

The essence of resultin# trusts is the i plication drawn out b$ law fro the nature of the transactions covered" and necessaril$, the enu erated cases, bein# erel$ i plied trust fro the lawFs perceived intentions of the parties, constitute erel$ disputable presu ptions of trust, and evidence a$ thus be adduced to show that no trust was intended nor conte plated b$ the parties% Martine( v. *rano' 4< &hil% ?7 (16<5!% &. C n+t)"'ti4% t)"+t+ ,n the other hand, %amos characteri>ed Lconstructive trustM as a trust L'raised b$ construction of law, or arisin# b$ operation of lawF% 0n a ore restricted sense and as contradistin#uished fro a resultin# trust, a constructive trust is Ka trust not created b$ an$ words, either e+pressl$ or i pliedl$ evincin# a direct intention to create a trust, but b$ the construction of equity in order to satisfy the demands of 8ustice % 0t does not arise b$ a#ree ent or intention, but b$ operation of law%F (=6 C%9%4% C<5-C<C!% K0f a person obtains le#al title to propert$ b$ fraud or conceal ent, courts of e)uit$ will i press upon the title a so-called constructive trust in favor of the defrauded part$%F A constructive trust is not a trust in the technical sense% (Ia$ondato vs% Treasurer of the &%0%, 46 &hil% <44" 4ee Art% 1475, Civil Code!%M (at p% <6=-<66" reiterated in +alao v. +alao, C0 4C;A 57, =1 D16C5E!% .+a ples of constructive trust are those covered under Article 1470 to 1474 and 1475 of the Civil Code% :nli(e resultin# trusts that draw their essence fro the perceived intention of the parties as drawn out of the structure of the transactions covered, constructive trusts draw their essence fro the need to i pose a fiduciar$ dut$ on a person who ta(es title to a propert$ to achieve @ustice or e)uit$ on behalf of another person who would otherwise be adversel$ affected b$ the fact that such title re ains with, or has been conve$ed to, another person% 0n Carantes v. Court of Appeals, C5 4C;A 714 (16CC!, the Court characteri>ed constructive trust as one Lwhich is i posed b$ law % % % DandE there is neither pro ise nor fiduciar$ relations" the so-called trustee does not reco#ni>e an$ trust and has no intent to hold the propert$ for the beneficiar$%M (at p% 7<4! A constructive trust was held to have arisen in *eronimo and .sidoro v. ,ava and Aquino, 107 &hil% 147 (1676!, upon a trial courtFs decision beco e final and e+ecutor$ which held that defendants-spousesF ri#ht to redee the propert$ in liti#ation and order the plaintiffs-spouses to a(e the resale, in the sense that althou#h the plaintiffsspouses were the re#istered owners of the propert$ the$ possessed onl$ na(ed title thereto which the$ were to hold in trust for the defendants-spouses to redee , sub@ect to the pa$ ent of the rede ption price% %.H 5 t P) 4% I#pli%& T)"+t+ :nder Article 147C, an i plied trust a$ be proved b$ oral evidence, and there is no distinction whether it involves a ovable or an i ovable propert$% 0n +alao v. +alao, C0 4C;A 57 (16C5!, where the Court refused to enforce the clai s of the plaintiffs under an e+press trust over i ovable propert$ unsupported b$ a written instru ent, ne+t proceeded to answer the issue L .s plaintiffs4 massive oral evidence sufficient to prove an implied trust' resultin or constructive' re ardin the t5o

fishponds6M (at p% =1!% The Court held that an i plied trust in order to be reco#ni>ed ust L easure up to the $ardstic( that a trust ust be proven b$ clear, satisfactor$ and convincin# evidence,M and Lcannot rest on va#ue and uncertain evidence or on loose, e)uivocal or indefinite declarations%M (at p% =?, citin De Leon v. Molo-Peckson, 115 &hil% 1<5C D165<!% The Court continued as follows: "Trusts0 Trust and trustee0 esta#lishment of trust #y parol evidence0 certainty of proof.; Bhere a trust is to be established b$ oral proof, the testi on$ supportin# it ust be sufficientl$ stron# to prove the ri#ht of the alle#ed beneficiar$ with as uch certaint$ as if a docu ent provin# the trust were shown% A trust cannot be established, contrar$ to the recitals of a Torrens title, upon va#ue and inconclusive proof%" (4$llabus, 4uare> vs% Tira bulo, 76 &hil% ?0?!% 1Trust evidence needed to esta#lish trust on parol testimony %N0n order to establish a trust in real propert$ b$ parol evidence, the proof should be as full$ convincin# as if the act #ivin# rise to the trust obli#ation were proven b$ an authentic docu ent% 4uch a trust cannot be established upon testi on$ consistin# in lar#e part of insecure sur ises based on ancient hearsa$%" (4$llabus, 4anta 9uana vs% 1el ;osario, 70 &hil% 110!% The fore#oin# rulin#s are #ood under article 147C of the Civil Code which, as alread$ noted, allows an i plied trust to be proven b$ oral evidence% Trustworth$ oral evidence is re)uired to prove an i plied trust because oral evidence can be easil$ fabricated% ,n the other hand, a Torrens title is #enerall$ a conclusive evidence of the ownership of the land referred to therein (4ec% 4C, Act 465!% A stron# presu ption e+ists that Torrens titles were re#ularl$ issued and that the$ are valid% 0n order to aintain an action for reconve$ance, proof as to the fiduciar$ relation of the parties ust be clear and convincin# (Hu ul vs% ;ivera and 1i>on, 54 &hil% 1?, 1C-1=!% The real purpose of the Torrens s$ste is to )uiet title to land% ",nce a title is re#istered, the owner a$ rest secure, without the necessit$ of waitin# in the portals of the court, or sittin# in the irador de su casa, to avoid the possibilit$ of losin# his land" (-e#arda and &rieto vs% 4aleeb$, ?1 &hil% 760, 76?!% (at pp% =?-=4!% The Court then concluded in +alao that LDtEhere was no resultin# trust in this case because there never was an$ intention on the partM of the parties involved Lto create an$ trust% There was no constructive trust because the re#istration of the two fishponds % % % was not vitiated b$ fraud or ista(e% This is not a case where to satisf$ the de ands of @ustice it is necessar$ to consider the % % % fishponds as bein# held in trust%M (at p% =4!% The conclusion one #ets fro +alao is that faced with a Torrens title that shows no trust relationship assu ed b$ the re#istered owner, and there is no other written evidence to show an intention to create a trust, then assive oral evidence is #enerall$ unavailable to overco e the re#istered title of the purported trustee who denies the e+istence of an$ trust% Thus, the s$llabus appearin# at the be#innin# in the decision in *am#oa v. *am#oa, 7< &hil% 70? (16<=!, affir s the nature of proof that ust be satisfied in order to prove the an i plied trust, thus: 1% T;:4T4" &;,,2 0/4:220C0./T T, 43,B T0T-. ,2 -A/1 T, 3AV. A../ 3.-1 0/ T:;4T%NA person who has held le#al title to land, couples with possession and beneficial use of

the propert$ for ore than ten $ears, will not be declared to have been holdin# such title as trustee for hi self and his brothers and sisters upon doubtful oral proof tendin# to show a reco#nition b$ such owner of the alle#ed ri#hts of his brothers and sisters to share in the produce of the land% (at pp% 70?-704! 0n Municipality of 2ictorias v. Court of Appeals, 146 4C;A ?< (16=C!, it was held that the e+istence of public records other than the Torrens title indicatin# a proper description of the land, and not the technical description thereof, and clearl$ indicatin# the intention to create a trust, was considered sufficient proof to support the clai of the cestui que trust% &erhaps the best wa$ to end this section is to invo(e the decision in "n Chin Po v. Court of Appeals, <?6 4C;A ?41 (1664!, where the Court held that althou#h an i plied trust a$ be proved orall$, "the evidence to prove it ust be trust5orthy and received b$ the courts with e+tre e caution, and should not be ade to rest on loose, e)uivocal and indefinite declarations%" (at p% " italics supplied! 2. PARTICULAR CASES 9HEN IMPLIED TRUST CONSTITUTED BY LA9 a. P")'3a+% ! P) p%)t* 93%)% B%n%!i'ial Titl% in On% P%)+ n, B"t P)i'% Pai& (* An t3%) P%)+ n :nder Article 144=, there is an i plied trust when propert$ is sold, and the le#al estate is #ranted to one part$ but the price is paid b$ another for the purpose of havin# the beneficial interest of the propert$% The person in whose na e the propert$ is re#istered is the trustee, while the person who paid for the price shall be the beneficiar$% The reason wh$ the situation described under Article 144= is an i plied trust is because unli(e in the e+press trust, the person who ta(es title to the propert$ bou#ht has not e+pressl$ bound hi self to ad inister the sa e for the benefit of an$ person% The situation covered under Article 144= is eant to address the observation in the ver$ earl$ decision in Martine( v. Martine(, 1 &hil% 54C (160?!, where the facts showed that it was the father who e+pended the su s for the purchase of two vessels which were re#istered in the na e of his son, who was then of le#al a#e, where the Court held: L0t a$ be true that the laws in so e of the :nited 4tates would in this case raise a resultin# trust in favor of the plaintiff Dthe fatherE% Aut such laws are not in force here" and whatever other ri#ht the plaintiff a$ have a#ainst the defendant DsonE, either for the recover$ of the one$ paid or for da a#es, it is clear that such pa$ ent #ave hi no title either le#al or e)uitable to these vessels%M (at p% 546! Article 144= e+pressl$ provides that there is no presu ption of i plied trust, if the person to who the title is conve$ed is a child, le#iti ate or ille#iti ate, of the one pa$in# the price of the sale, it bein# disputabl$ presu ed that there is a #ift in favor of the child% As a #eneral rule, it cannot be e+pected that a parent placin# propert$ he bou#ht in the na e of the child intended to an$ for of trust, since it cannot be nor all$ e+pected that a child would ad inister propert$ for the benefit of the parents% 4hould Article 144= be interpreted to ean when it uses the word LchildM to cover a situation where title to the propert$ is placed b$ the parent in the na e of a child who then was a inorJ 0n De los +antos v. %eyes, <07 4C;A 4?C (166<!, the Court held that if the

person to who the title is conve$ed is a child, le#iti ate or ille#iti ate, of the one pa$in# the price of the sale, no trust is i plied b$ law, it bein# disputabl$ presu ed that there is a #ift in favor of the child% 0n Martine(, the Court alluded to the provision of then Article 151 of the old Civil Code, relatin# to inors, that Lthe ownership or en@o$ ent of propert$ ac)uired b$ a inor child with funds of his parents, pertain to the latter DparentsEM, which the Court observed was Lthe onl$ provision which we have found an$where in the laws now in force that declares the propert$ to belon# to the person who paid the one$%M (at p% 546!% Althou#h the e+ception rule under Article 144= is erel$ a disputable presu ption, which eans that it can still be shown that indeed the parents had placed propert$ bou#ht b$ the in the na e of their child to i pose an obli#ation on the part of the child to ad inister the sa e for the benefit of the parents, especiall$ when the child is no lon#er a inor% -i(ewise, if it is shown that the person who paid for the a ount of the purchase price did so as a loan or an advance to the person in whose na e the title to the propert$ is transferred, then no i plied trust should also result% 0n Padilla v. Court of Appeals, 7? 4C;A 15= (16C?!, the Court applied the provisions of Article 144= to i pute a resultin# trust where pursuant to a special arran#e ent with I404 which had foreclosed the ort#a#ed propert$ and the ri#ht of rede ption had alread$ e+pired, where the ort#a#ees-spouses had effected the sale thereof to the trustee with the underta(in# that he would use funds supplied b$ the spouses to bu$-bac( the propert$ on behalf of the spouses% The Court observed: LThe concept of i plied trusts is that fro the facts and circu stances of a #iven case the e+istence of a trust relationship is inferred in order to effect the presu ed (in this case it is even e+pressed! intention of the parties or to satisf$ the de ands of @ustice or to protect a#ainst fraud%M (at p% 1C6!% <eirs of Candelaria v. %omero, 106 &hil% 700 (1650!% (. P")'3a+% ! P) p%)t* 93%)% Titl% I+ Pla'%& in t3% Na#% ! P%)+ n 93 L an%& t3% P")'3a+% P)i'% :nder Article 1470, if the price of a propert$ bou#ht is loaned or paid b$ one person for the benefit of another and the conve$ance is ade to the lender or pa$or to secure the pa$ ent of the debt, a trust arises b$ operation of law in favor of the person to who the one$ is loaned or for who it is paid% The latter a$ redee the propert$ and co pel a conve$ance thereof to hi % The situation covered under Article 1470 is in actuall$ an e)uitable ort#a#e arran#e ent, since title to the propert$ intended for the borrower is placed in the na e of the lender Lto secure the pa$ ent of the debt%M That is wh$ the article e+pressl$ provides that the borrower a$ redee the propert$ and co pel the lender to conve$ the propert$ to hi % The characteri>ation of the situation as an i plied trust, would i pose upon the lender-re#istered owner the fiduciar$ obli#ations of the a trustee, and would then dis)ualif$ hi to ta(e actions that would protect his interest, such as to effect for al foreclosure of the e)uitable ort#a#e% Bhen the borrower-beneficiar$ fails or refuses to redee the propert$ (i.e., pa$ the principal obli#ation!, and the lender brin#s an action

for collection, can the estate propert$ be levied upon for the pa$ ent of the @ud# ent debt, contrar$ to his dut$ of lo$alt$ as a i plied trusteeJ The situation is a constructive trust, and therefore there is reall$ no fiduciar$ dut$ e+istin# between the parties% Trinidad v. %icafort, C &hil% 446 (16 !% +evilla v. De los An eles, 6C &hil% =C7 (1677!% '. T5 ) M )% P%)+ n+ P")'3a+% P) p%)t* ; intl*, B"t Pla'%+ Titl% In On% ! T3%# :nder Article 147<, if two or ore persons a#ree to purchase propert$ and b$ co on consent the le#al title is ta(en in the na e of one of the for the benefit of all, a trust is created b$ force of law in favor of the others in proportion to the interest of each% An application of the principle covered in Article 147< can be found in De la Cru( v. ,ino, 1= &hil% <=4 (16 !, where the title to certain parcels of land appear to have been drawn up onl$ in the na e of one of the two parties who for ed a partnership and co bined their capital to ac)uire the properties% /onetheless, there was drawn up between the a private docu ent that describe their arran#e ents, which has never been i pu#ned b$ the part$ in whose na es the titles to the land had been placed% The Court held that the parties were reall$ co-owners, and the part$ in whose na es appear the titles to the land, bein# in possession of onl$ half of the parcels of land, was not entitled to clai possession of the other half held b$ the heirs of the deceased coowner% 0n=y Aloc v. Cho &an &in , 16 &hil% <0< (1611!, where a nu ber of Chinese erchants raised a fund b$ voluntar$ subscription with which the$ purchased a valuable tract of land and erected a lar#e buildin# to be used as a sort of club house for the utual benefit of the subscribers to the fund" but since the association was not re#istered as a @uridical person, it was a#reed to have the title to the propert$ placed in the na e of one of their e bers, who accepted the trust, and a#reed to hold the propert$ as a#ent and trustee of the e bers of the association% Bhen the title holder refused to account for the rentals earned fro the propert$, and in fact set up title in hi self, the e bers brou#ht suit to have title conve$ed to the % The Court held in =y Aloc that there was an i plied trust constituted and the re#istered owner Lholds it under an obli#ation, both e+press and i plied, to deal with it e+clusivel$ for the benefit of the e bers of the association and sub@ect to their will%M (at p% <05! &. Lan& Pa++%+ B* S"''%++i n B"t H%i) Pla'%+ Titl% int a T)"+t%% :nder Article 1471, when land passes b$ succession to an$ person and he causes the le#al title to be placed in the na e of another, a trust is established b$ i plication of law for the benefit of the true owner% The lan#ua#e of Article 1471, as it li its its application to land, would ean that no such i plied trust arises when it co es to other t$pes of propert$, and certainl$ not to ovable properties, when the prevailin# doctrine is that he who possess ovable is presu ed to be the ri#htful owner% The doctrine covered in Article 1471 has its basis decisions of the 4upre e Court under the old Civil Code that did not contain provisions on trusts% Thus, in Bar ayo v.

Camumot, 40 &hil% =7C (16<0!, the Court held that that the co-owner or co-heir who is in possession of an inheritance pro indiviso for hi self and in representation of his coowners or co-heirs, if, as such owner, he ad inisters or ta(es care of the rest thereof with the obli#ation of deliver$ it to his co-owners or co-heirs, is under the sa e situation as a trustee% Bar ayo however earlier reco#ni>ed the principle that when a co-owner or co-heir refutes the co-ownership and ta(es adverse possession of the propert$ for hi self alone, then ac)uisitive prescription a$ arise in his favor to the detri ent of the other co-heirs or co-owners% Bar ayo distin#uished between the rule of i prescriptibilit$ of the action for partition a on# co-owners, fro the doctrine of ac)uisitive prescription that allows a person to obtain title to propert$ b$ open, adverse possession% 0n +everino v. +everino, 44 &hil% ?4? (16<?!, where the uncle who was actin# as a#ent or ad inistrator of the propert$ belon#in# to a niece, have procured a Torrens title over said propert$ in his na e, it was held that the uncle was obli#ed to surrender the propert$ to the niece and transfer title to her% 0n Castro v. Castro, 7C &hil% 5C7 (16?<!, the Court held that one who ac)uires a Torrens title in his own na e to propert$ which he is ad inisterin# for hi self and his siblin#s as heirs in co on b$ descent fro a co on ancestor a$ be co pelled to surrender to each of his co-heirs his appropriate share, and a proceedin#s for partition is an appropriate re ed$ b$ which to enforce such ri#ht% Bith respect to the le#al position ta(en b$ the brother who had title re#istered in his na e posited that he had repudiated the trust ore than ten $ears before the action for partition had been filed b$ his siblin#s, and thus had ac)uired title b$ adverse possession, the Court did not dispute the theor$ of ac)uisitive prescription bein# available in such a situation but held that it could not be applied on the basis Lthat this supposed repudiation of the trust first too( place before Dbrother cestui que trustE had reached his a@orit$, and we are unable to see how a inor with who another is in trust relation can be pre@udiced b$ repudiation of the trust addressed to hi b$ the person who is sub@ect to the trust obli#ation% The defendant in our opinion is not entitled to the benefit of prescription fro his supposed repudiation of the trust%M (at p% 5=7! Custodia v. Casiano, 6 4C;A =41 (165?!% The decision in Mariano v. &ud e De 2eyra, 14= 4C;A ?4< (16=C!, re inds us that the principles of i plied trust under Article 1471 do not appl$ when the real propert$ is unre#istered land and no title has been issued in the na e of one of the co-owners, and the situation onl$ shows that he has possession and en@o$ ent of the propert$ sub@ect of the co-ownership% /o i plied trust could be ascribed to the situation accordin# to the Court in that: LThe e+istence of the co-ownership here ar#ues a#ainst theor$ of i plied trust, for then a co-owner possesses co-owned propert$ not in behalf of the other co-owners but in his own behalf,M (at p% ?45! in accordance with the truis that possession b$ a co-owner of the propert$ owned in co on is not necessaril$ adverse possession a#ainst the other co-owners for LDaEfter all, co-owners are entitlted to be in possession of the pre ises,M and it would not also constitute a clear repudiation of the co-ownership itself% $state of <ilario M. %ui( v. Court of Appeals, <7< 4C;A 741 (1665!% %. D nati n ! P) p%)t* t a D n%% 93 S3all Ha4% N B%n%!i'ial Titl%

:nder Article 1446, there is an i plied trust when a donation is ade to a person but it appears that althou#h the le#al estate is trans itted to the donee, he nevertheless is either to have no beneficial interest or onl$ a part thereof% 0n has been observed that the i plied trust conte plated under Article 1446 is analo#ous to, but should not be confused with, the fideicommissary substitution under Article =5? of the Civil Code, wherein the testator desi#nates a person as an heir char#in# hi to deliver to another person the whole or part of the inheritance% (Co)uia, 9or#e ;%, The Doctrine of .mplied Trust, ?10 4C;A 4=5, 46<!% 0n Pere( v. *architorena and Casimiro, 74 &hil% 4?1(16 !, when the statutor$ provisions of the /ew Civil Code were not $et e+istin#, the Court observed that a fideicoomissary substitution is not e)uivalent to the .n#lish trust% !. P) p%)t* C n4%*%& t P%)+ n M%)%l* a+ H l&%) T3%)% ! :nder Article 147?, when propert$ is conve$ed to a person in reliance upon his declared intention to hold it for, or transfer it to another or the #rantor, there is an i plied trust in favor of the person whose benefit is conte plated% The situation covered b$ Article 147? covers reall$ an e+press trust, because title to propert$ is ta(en b$ the trustee under a clear a#ree ent to hold it for another person% The onl$ difference is that there has been no for al acceptance b$ the person desi#nated to be a beneficiar$, or perhaps the desi#nated beneficiar$ does not $et e+ists, such as an unborn child% An e+a ple of the situation covered b$ Article 147? a$ be found in the decision in Pacheco v. Arro, =7 &hil% 707 (1670!, where the clai s of respondents in cadastral case were withdrawn rel$in# upon the assurance and pro ise ade in open court b$ petitionersF predecessor-in-interests that upon obtainin# title to the properties sub@ect to the petition, he would conve$ and assi#n the lots to the respondents in accordance with their respective clai s% 0n an action for specific perfor ance filed to co pel the petitioners to assi#n and conve$ the lots covered, the Court held: LBhen the clai to the lots in the cadastral case was withdrawn b$ the respondents rel$in# upon the assurance and pro ise ade in open court b$ % % % the predecessor-in-interests of the petitioners, a trust or a fiduciar$ relation between the arose, or resulted therefro , or was created thereb$%M (at pp% 714-717!% 0n Martine( vs. *ra:o, 4< &hil% ?7 (16<1!, the Court held that a person who, before consolidation of propert$ in the purchaser under a contract of sale with pacto de retro, a#rees with the vendors to bu$ the propert$ and ad inister it till all debts constitutin# an encu brance thereon shall be paid, after which the propert$ shall be turned bac( to the ori#inal owner, is bound b$ such a#ree ent" and upon bu$in# in the propert$ under these circu stances such person beco es in effect a trustee and is bound to ad inister the propert$ in this character% The principle was reiterated in Cristo#al v. *ome(, 70 &hil% =10 (16<C!% 0n <eirs of $milio Candelaria v. %omero, 106 &hil% 700 (1650!, the Court held: LThe trust alle#ed to have been created, in our opinion, is an i plied trust% As held, in effect, b$ this Court in the case of 8artine> vs% IraOo (4< &hil%, ?7!, where propert$ is ta(en b$ a person under an a#ree ent to hold it for, or conve$ it to another or the #rantor, a resultin# or i plied trust arises in favor of the person for whose benefit the propert$ was intended% This rule, which has been incorporated in the new Civil Code in

Art% 147? thereof, is founded upon e)uit$% The rule is the sa e in the :nited 4tates, particularl$ where, on the faith of the a#ree ent or understandin#, the #rantee is enabled to #ain an advanta#e in the purchase of the propert$ or where the consideration or part thereof has been furnished b$ or for such other% Thus, it has been held that where the #rantee ta(es the propert$ under an a#ree ent to conve$ to another on certain conditions, a trust results for the benefit of such other or his heirs, which e)uit$ will enforce accordin# to the a#ree ent% (1=6 C%9%4% 650!% 0t is also the rule there that an i plied trust arises where a person purchases land with his own one$ and ta(es a conve$ance thereof in the na e of another% 0n such a case, the propert$ is held on a resultin# trust in favor of the one furnishin# the consideration for the transfer, unless a different intention or understandin# appears% The trust which results under such circu stances does not arise fro contract or a#ree ent of the parties, but fro the facts and circu stances, that is to sa$, it results because of e)uit$ and arises b$ i plication or operation of law% (4ee =6 C%9%4% 654-65=%!%M (at pp% 70<-70?! Ma allon v. Monte8o, 145 4C;A <=< (16=5! g. 93%n A(+ l"t% C n4%*an'% ! P) p%)t* E!!%'t%& Onl* a+ a M%an+ t S%'")% P%)! )#an'% ! O(ligati n ! t3% G)ant ) :nder Article 1474, if an absolute conve$ance of propert$ is ade in order to secure the perfor ance of an obli#ation of the #rantor toward the #rantee, a trust b$ virtue of law is established% 0f the fulfill ent of the obli#ation is offered b$ the #rantor when it beco es due, he a$ de and the reconve$ance of the propert$ to hi % A#ain, the situation covered under Article 1474 reall$ constitutes an e)uitable ort#a#e situation, and since propert$ #iven as securit$ has in fact been placed in the na e of the lender, this would be contrar$ to the public polic$ a#ainst pactum commissorium under Article <0== of the Civil Code which provides: LThe creditor cannot appropriate the thin#s #iven b$ wa$ of pled#e or ort#a#e, or dispose of the % An$ stipulation to the contrar$ is null and void%M 0n the situation covered b$ Article 1477, the title held b$ the lender in his na e is considered void and the action to recover such title is i prescriptible% 3. 93%n T)"+t F"n& U+%& t P")'3a+% P) p%)t* 93i'3 i+ R%gi+t%)%& in T)"+t%%<+ Na#% :nder Article 1477, when an$ trustee, #uardian or other person holdin# a fiduciar$ relationship uses trust funds for the purchase of propert$ and causes the conve$ance to be ade to hi or to a third person, a trust is established b$ operation of law in favor of the person to who the funds belon#% Article 1477 reall$ is the operative provision #overnin# the dut$ of lo$alt$ of the trustee to the beneficiar$% A trustee is dut$-bound to handle the affairs of the trust and to appl$ all the properties in the trust estate for the sole benefit of the beneficiar$% 0n a situation where there is a conflict between the interests of the trustee and the beneficiar$, it is the dut$ of the trustee to prefer that of the beneficiar$% A violation of the dut$ of lo$alt$ a(es the trustee personall$ liable to the beneficiar$ for the resultin# da a#es% An appropriation of an$ business or interest that should be for the account of the beneficiar$, would re)uire that the trustee to rei burse the profits or turn-over the benefits to the estate trust%

0n Camacho v. Municipality of Bali5a , <= &hil% 455 (1614!, where evidence showed that a unicipal officer receive funds fro the e bers of the co unit$ to bid on behalf of the unicipalit$ at a public auction of the land that was ta(en over b$ the national #overn ent, and who after an$ $ears now clai title in his own na e, the Court held: Lhere have been a nu ber of cases before this court in which a title to real propert$ was ac)uired b$ a person in his own na e while actin# in a fiduciar$ capacit$, and who afterwards sou#ht to ta(e advanta#e of the confidence reposed in hi b$ clai in# the ownership of the propert$ for hi self% This court has invariabl$ held such evidence co petent as between the fiduciar$ and the cestui )ue trust%M (at pp% 45=-456!% The Court went further to su ari>e the develop ent of the doctrine, thus: 0n :$ Aloc vs% Cho 9an -in# (16 &hil% ;ep%, <0<!, the e bers of a Chinese club a#reed to purchase so e real propert$ and for that purpose subscribed a fund and placed it in the hands of the defendant, who ade the purchase in his own na e% 4ubse)uentl$, he refused to account for the rents on the propert$ and clai ed it as his own% This court held parol proof of the trust sufficient to overco e the case in favor of the defendant b$ reason of his re#istered docu ents of title, and decreed that a conve$ance be ade b$ the defendant to the e bers of the association% 0n Ta#uinot vs% 8unicipalit$ of Tana$ (6 &hil% ;ep%, ?65!, the plaintiffs, as heirs of their father, sou#ht to recover possession of a parcel of land held b$ the unicipalit$ on the stren#th of a 4panish patent issued to hi % 0t was proved (lar#el$ b$ parol evidence! that their father acted on behalf and at the e+pense of the unicipalit$ in securin# the patent% The patent was retained b$ the #obernadorcillo, a cop$ onl$ bein# issued to the patentee% The latter also drew up a private docu ent en#a#in# to e+ecute a conve$ance to the unicipalit$, the sa e bein# offered in evidence% The unicipalit$ had continuousl$ occupied the land since the issuance of the title% The @ud# ent of the court below dis issin# the co plaint was affir ed% 0n the followin# cases of a si ilar character, parol evidence was held not sufficient to overco e the case ade out b$ the holder of the re#istered title: Aelen vs% Aelen (1? &hil% ;ep%, <0<!" Iaren vs% &ilar (1C &hil% ;ep%, 1?<!" Aalatian vs% A#ra (1C &hil% ;ep%, 701!% A#ono$ vs% ;ui> (11 &hil% ;ep%, <04!, and 8adaria#a vs% Castro (<0 &hil% ;ep%, 75?!, were both cases wherein one person was dele#ated b$ a co unit$ of propert$ owners to secure in his own na e a patent fro the 4panish Iovern ent coverin# all their lands, the ob@ect bein# to save the e+pense of obtainin# individual patents in the na e of each% After securin# these patents, the therein #rantees e@ected their nei#hbors fro the land covered b$ the patents and respectivel$ clai ed the land as their own% The evidence tendin# to establish these facts was considered b$ the court in both cases ;elief b$ refor ation of the patent or a co pulsor$ conve$ance to the in@ured persons was denied in each case, because the ri#hts of an innocent third purchaser intervened% Aut in the first case the in@ured persons were held entitled to da a#es, provided the$ were able to establish the sa e% 0n the second case, however, the court presu ed a waiver of their clai s b$ reason of other evidence of record% The fact that the parol evidence relied upon in the cases cited in this para#raph to defeat the docu ents of title was carefull$ considered b$ the court, i pliedl$ ad its its co petenc$% 0t failed in its purpose in these cases erel$ because it was not sufficientl$ stron# to overco e the case in favor of the holders of the re#istered titles%

The Court then concluded in Camacho as follows: LBe hold, therefore, that the parol evidence introduced b$ the defendant unicipalit$ was co petent to defeat the ter s of the plaintiff's deed% 0t need onl$ be added that in all such cases as the present we have re)uired and shall continue to re)uire that the proof contradictin# such docu ents ust be clear and convincin#% These )ualities are apparent in the proof offered b$ the defendant unicipalit$ in the case at bar%M 0n +everino v. +everino, 44 &hil% ?4? (16<?!, the Court held N The relations of an a#ent to his principal are fiduciar$ and it is an ele entar$ and ver$ old rule that in re#ard to propert$ for in# the sub@ect- atter of the a#enc$, he is estopped fro ac)uirin# or assertin# a title adverse to that of the principal% 3is position is analo#ous to that of a trustee and he cannot consistentl$, with the principles of #ood faith, be allowed to create in hi self an interest in opposition to that of his principal or cestui )ue trust% :pon this #round, and substantiall$ in har on$ with the principles of the Civil -aw (see sentence of the supre e court of 4pain of 8a$ 1, 1600!, the .n#lish Chancellors held that in #eneral whatever a trustee does for the advanta#e of the trust estate inures to the benefit of the cestui )ue trust% (Ireenlaw vs% Pin#, 7 9ur%, 1=" .+ parte Aurnell, C 9ur%, 115" .+ parte 3u#hes, 5 Ves%, 51C" .+ parte 9a es, = Ves%, ??C" ,liver vs% Court, = price, 1<C%! The sa e principle has been consistentl$ adhered to in so an$ A erican cases and is so well established that e+haustive citations of authorities are superfluous and we shall therefore li it ourselves to )uotin# a few of the nu erous @udicial e+pressions upon the sub@ect% The principle is well stated in the case of Iilber vs% 3ewetson (C6 8inn%, ?<5!: "A receiver, trustee, attorne$, a#ent, or an$ other person occup$in# fiduciar$ relations respectin# propert$ or persons, is utterl$ disabled fro ac)uirin# for his own benefit the propert$ co itted to his custod$ for ana#e ent% This rule is entirel$ independent of the fact whether an$ fraud has intervened% /o fraud in fact need be shown, and no e+cuse will be heard fro the trustee% 0t is to avoid the necessit$ of an$ such in)uir$ that the rule ta(es so #eneral a for % The rule stands on the oral obli#ation to refrain fro placin# one's self in positions which ordinaril$ e+cite conflicts between self-interest and inte#rit$% 0t see(s to re ove the te ptation that i#ht arise out of such a relation to serve one's self-interest at the e+pense of one's inte#rit$ and dut$ to another, b$ a(in# it i possible to profit b$ $ieldin# to te ptation% 0t applies universall$ to all who co e within its principle%" (at pp% ?70-?71! i. 93%n P) p%)t* i+ A'="i)%& T3) "g3 Mi+ta$% ) F)a"& :nder Article 1475, if propert$ is ac)uired throu#h ista(e or fraud, the person obtainin# it is, b$ force of law, considered a trustee of an i plied trust for the benefit of the person fro who the propert$ co es% The article covers a for of constructive trust, and b$ its lan#ua#e covers all t$pes of propert$, whether ovable or i ovable% Het the cases that have applied the principle in Article 1475 have often involved i ovable, speciall$ re#istered real estate, where the public polic$ is that the operative (e$ to deter ine who has title to the propert$ is re#istration% Bhen it co es to ovable propert$, the operation of an i plied trust under Article 1475 ust contend with the public polic$ that possession in #ood faith under a clai of ownership constitute b$ itself title, as it is e+pressed under Article 776 of the Civil Code%D1E The doctrine in Article 1475 can be found in the pre-/ew Civil Code decision in +in &oco v. +unyantun , 4? &hil% 7=6 (16<<!, where a trusted e plo$ee of the

co pan$ directl$ e plo$ed fraud to induce the co pan$ to forfeit it option to purchase a valuable lar#e tract of land, and thereafter hi self purchased the sa e% The Court, in affir in# the decision of the trial court that decreed the reconve$ance of the propert$ to the co pan$, ad itted that fro statutor$ law onl$ a recover of da a#es a#ainst the e plo$ee was allowed, thus: LThis reparation provided for in the Civil Code and applied to the case of bar see s to be li ited to the inde nification of da a#es, as we are not aware of an$ e+press provision in said Code which i poses upon the person thus held liable, an$ obli#ation, such as that of transferrin# to plaintiffs the estate in )uestion%M (at p% 76?!% /onetheless, the Court affir ed that LThis specific relief Dreconve$anceE, however, has alread$ co e to be applied in this @urisdiction in si ilar cases, a on# which can be cited that of Ca acho vs% 8unicipalit$ of Aaliu# (<= &hil%, 455%! And in the /orth A erican law such sanction is e+pressl$ reco#ni>ed, and a transaction of this nature i#ht be re#arded as an e plo$ee is dee ed not to have been ac)uired for his own benefit or that of an$ other person but for his principal, and held in trust for the latter (at p% 76?, citin <1 ;% C% -%, =<7" < C,;&:4 9:;04, ?7?!% 0n @ustif$in# such a resolution, the Court held N 4uch an act of infidelit$ co itted b$ a trusted e plo$ee calculated to redound to his own benefit and to the detri ent of his e plo$ers cannot pass without le#al sanction% ,emo de#et aliena 8actura locupletari0 nemo e3 suo delicto meliorem suam conditionem facera potest% 0t is an illicit act co itted with culpa and therefore, its a#ent is liable (art% 10=6, Civil Code!, for the da a#e caused (art% 160<, ibide !% /ot identical, but si ilar, to this infidelit$ is the abuse of confidence sanctioned in our &enal Code as a #eneric circu stance, na$ as specific a##ravatin# one, and even as an essential ele ent of certain cri es% 4uch principle, however, in case of this nature is #enerall$ reco#ni>ed in our laws, since in the case of co ercial a#ents (factores! it is e+pressl$ established% :ndoubtedl$, for erl$ under the circu stances then prevailin# such sanction was not necessar$ in the in the field of civil law, because its sphere of action is the #eneral relations of societ$" but even then it was dee ed necessar$ e+pressl$ to protect with such sanction the co ercial relations wherein the )uestion of #ain was involved, which is so eti es so i perative as to i#nore ever$thin#, even the ver$ principles of lo$alt$, honest$, and fidelit$% (at pp% 76<-76?! Dia( v. *orricho and A uado , 10? &hil% <51 (167=!, reco#ni>ed that Article 1475 " erel$ e+presses a rule alread$ reco#ni>ed b$ our courts Dfirst enunciated in *ayondato v. .nsular Treasurer, 46 &hil% <44 (16<50E prior to the D/ew CivilE Code's pro ul#ation" (at p% <54! 0n the application of the underl$in# e)uit$ principle now contained in Article 1475, the Court has alwa$s e phasi>ed that in spite of the proceedin#s under the Torrens s$ste of re#istration bein# in rem, and the title issued thereto bein# considered i prescriptible and indefeasible, the Torrens s$ste does not prevent the cestui que trust under an i plied trust to sue for the recover$ of the land in the action for reconve$ance, whenever the propert$ is ac)uired throu#h ista(e or fraud, since the person obtainin# the re#istered title is, b$ force of law, considered a trustee of an i plied trust for the benefit of the person fro who the propert$ co es%

0n Laureano v. +tevenson, 47 &hil% <7< (16<?!, a certificate of title under the Torrens s$ste was ista(enl$ issued in favor of petitioner Pila$(o coverin# not onl$ the parcel of land he bou#ht fro -aureano, but includin# another ad@acent land which re ained with his seller% Bhen the creditors of Pila$(o had levied upon all the properties covered b$ the title to enforce a @ud# ent debt obtained a#ainst Pila$(o, -aureano then learned of the ista(e co itted durin# the re#istration proceedin#s which had beco e final and e+ecutor$% 0n deter inin# whether -aureano can le#all$ prevent the public sale of properties re#istered under the Torrens s$ste in the na e of Pila$(o, the Court held N The funda ental principles #overnin# the Torrens s$ste are well (nown% ,rdinaril$ if one tas(s no steps to protect his propert$ interests at the ti e of the cadastral surve$, he is estopped to dispute the title% 3e has one $ear fro the issuance of the decree to alle#ed and prove fraud% Aut he a$ not wait lon#er than this period to assert his ri#hts% And were this an ordinar$ re#istration case, we would reach a conclusion satisfactor$ to the appellants% Aut we thin( that there is ore to the case than this% 0t ust not be for#otten that Pila$co never laid clai to this propert$" that the two lots /os% 4<5C and 4<=6 covered b$ the certificate of title /o% =?0 were ista(enl$ re#istered in the na e of .u#enio Pila$co" that the court did not have @urisdiction to confir the title of said two lots either in favor of .u#enio Pila$co or of an$bod$ else, for the reason that no petition for title was filed, no trial was held, no evidence was presented, and no @ud# ent was rendered re#ardin# these two lots in the land re#istration proceedin#s" that Pila$co never asserted an$ ri#ht of ownership over the propert$" that the rent was paid to -aureano" and that @ud# ent was obtained in the courts in favor of -aureano throu#h the ac)uiescence and consent of Pila$co% Pila$co was, in effect, erel$ holdin# the title of the propert$ in trust for -aureano% The creditors of Pila$co had in the propert$, which, in this case, was nothin#% (at pp% <74-<77! 0n De "campo v. 9aporte(a' 7? &hil% 44< (16<6!, where it was deter ined that an instru ent, which did not e+press the true contract between the parties, but which nevertheless beca e the basis upon which the defendants obtained the a end ent of the decree of ad@udication b$ which the$ received a certificate of transfer of title coverin# ore than the nu ber of lots due the , the Court held that Lapplication ust here be ade of the doctrines upheld in the cases of :$ Aloc vs% Cho 9an -in# (16 &hil%, <0<!" Ca acho vs% 8unicipalit$ of Aaliua# (<= &hil%, 455!" and 4everino vs% 4everino (44 &hil%, ?4?!, to the effect that the defendants onl$ hold the certificate of transfer in trust for the plaintiffs with respect to the portion of the lot planted with 1,?00 coconut trees" and the$ are therefore bound to e+ecute a deed in favor of the plaintiff, transferrin# to the said portion planted with 1,?00 coconut trees%M (at p% 447! 0n $sco#ar v. Locsin, C4 &hil% =5 (164?!, where the illiterate owner of a land that was sub@ect of a cadastral proceedin# had as(ed defendant to clai the sa e for her, but it turned out that the defendant had clai ed the lot for hi self and caused title to be issued in his na e, the Court held a trust had been created between the and directed that the plaintiff directed to conve$ the propert$ to the cestui que trust as the ri#htful owner% Bhen Article 1475 beca e operative as a statutor$ rule, in Avecilla v. )atco, 10? &hil% 555 (167=!, the Court held that the i plied trust arran#e ent i posed under

Article 1475, which allows the a##rieved part$ a re ed$ to see( reconve$ance, is a re ed$ that can be enforced a#ainst the part$ who has e plo$ed fraud, thus: LAut the ri#ht of action in this constructive trust should be e+ercised a#ainst the trustee, who caused the fraud, and not a#ainst an innocent purchaser for value, as the 4usana ;ealt$, 0nc% This ri#ht a$ also be e+ercised a#ainst 4antia#o Cru> who also obtained title to the land with (nowled#e of the fraud, but not with re#ard to 4usana ;ealt$, 0nc% which, as alread$ stated, has bou#ht the propert$ in #ood faith% The re ed$ in this case of the defrauded heirs is to brin# an action for da a#es a#ainst those who caused the fraud or were instru ental in deprivin# the of the propert$% Their action cannot reach an innocent purchaser for value who is protected b$ law%M (at p% 5C0! -i(ewise, under the /ew Civil Code, the Court reiterated the principle that LDpEublic polic$ de ands that a person #uilt$ of fraud or at least, of breach of trust, should not be allowed to use a Torrens title as a shield a#ainst the conse)uences of his own wron#doin#%M 2da. de &acinto v. 2da. de &acinto, 7 4C;A ?C0 (165<!" reiterated in Pa8arillo v. .ntermediate Appellate Court, 1C5 4C;A ?40 (16=6!% :nder the ae#is of Article 1475, the Court li(ewise reiterated the principle that re#istration of propert$ b$ one person in his na e, whether b$ ista(e or fraud, the real owner bein# another person, i presses upon the title so ac)uired the character of a constructive trust for the real owner, which would @ustif$ an action for reconve$ance: Q 0n *on(ales v. &imene(' 1? 4C;A =0 (1657!, where unre#istered land was sold b$ the father to a bu$er who too( possession thereof, but subse)uentl$, the father ana#ed to obtain a free patent over the sa e propert$ in the na e of the son to who an ori#inal certificate of title was issued" Q 0n !a#ian v. !a#ian, << 4C;A <?1 (165=!, where co-heirs entered into an e+tra@udicial settle ent of the estate of the decedent, e+cludin# therefro so e of the other forced heirs, and subse)uentl$ obtainin# ori#inal and transfer certificates of title in their na es% The Court held that such co-heirs who obtained title throu#h fraud were considered trustees under an i plied trust for the benefit of the other co-heirs% Q 0n Buena v. %eyes, <C 4C;A 11C6 (1656!, where the husband of one of the co-heirs was desi#nated b$ all the heirs of the decedent to file an answer in the cadastral proceedin#s and to obtain title to the propert$ left b$ the decedent in behalf of all heirs, but instead onl$ obtained title in his na e and his two brothers, the Court ruled the creation of an constructive trust% 0n Municipality of 2ictorias v. Court of Appeals' 146 4C;A ?< (16=C!, where re#istered land previousl$ sold to the unicipal corporation, but which failed to dul$ re#ister the sale, was erroneousl$ passed b$ intestate succession to the heirs of the seller% The Court held that Lwhere the land is decreed in the na e of a person throu#h fraud or ista(e, such person is b$ operation of law considered a trustee of an i plied trust for the benefit of the persons fro who the propert$ co es% The beneficiar$ shall have the ri#ht to enforce the trust, notwithstandin# the irrevocabilit$ of the Torrens title and the trustee and his successors-in-interest are bound to e+ecute the deed of reconve$ance%M (at p% 47, citin Pacheco v. Arro, =7 &hil% 707 D1670E" and $sco#ar v. Locsin, C4 &hil% =5 D164?E!% The Court then ruled that LAs the land in dispute is held b$ private respondents in trust for the 8unicipalit$ of Victorias, it is lo#ical to conclude that the latter can neither be deprived of its possession nor be ade to pa$ rentals thereof% &rivate respondent is in e)uit$ bound to reconve$ the sub@ect land to the cestui que

trust, the 8unicipalit$ of Victorias% The Torrens s$ste was never calculated to fo ent betra$al in the perfor ance of a trust%M (at p% 47, citin $sco#ar v. Locsin, C4 &hil% =5 D164?E!% +alomon v. .ntermediate Appellate Court, 1=7 4C;A ?7< (1660!% Tomas v. Court of Appeals, 1=7 4C;A 5<C (1660!% Philippine ,ational Bank v. Court of Appeals , <1C 4C;A ?4C (166?!% !errer v. Bautista, <?1 4C;A <7C (1664!% ,oel v. Court of Appeals, <40 4C;A C= (1667!% ,. ARE IMPLIED TRUST SUB;ECT TO PRESCRIPTION OR CHARGES OF LACHES> &hilippine le#al histor$ on trusts has followed a tortuous path on the issue of whether in a trust relationship, i bued with fiduciar$ and e)uitable characters, there could be applied the principles of prescription and laches, if so what periods would be appropriate, and what co ences the runnin# of an$ of such periods% a. P)%6N%5 Ci4il C &% ;")i+p)"&%n'% The rule that the ri#ht of the cestui que trust a#ainst the trustee in i plied trusts to de and a reconve$ance of the propert$ had its roots on earlier decisions of the 4upre e Court in Consun8i v. Tison, 17 &hi% =1 (1610!" =y Aloc v. Cho &an Lin , 16 &hil% <0< (1611!"Camacho v. Municipality of Baliua , <= &hil% 455 (1614!" +everino v. +everino, 44 &hil% ?4? (16<?!" Castro v. Castro, 7C &hil% 5C7 (16?<!" Palma v. Cristo#al, CC &hil% C1< (1645!" Pacheco v. Arro, =7 &hil% 707 (1670!" and Manalan v. Canlas, 64 &hil% CC5 (1674!% 0n all those decision, the Court refused to sanction a purported trustee's clai of ownership b$ prescription which is base dupon his own breach of trust, on #round of #enerall$ accepted ethical principles, particularl$ the principles of #ood faith and the rule on the oral obli#ation to refrain fro placin# one's self in position which ordinaril$ brin#s about conflicts between self-interest and inte#rit$% (. ;")i+p)"&%n'% "n&%) t3% N%5 Ci4il C &% :nder the /ew Civil Code, the Court for a ti e continued to uphold the doctrine of i prescriptibilit$ of i plied trust in its decisions in +evilla v. De los An eles , 6C &hil% =C7 (1677!" Bancairen v. Diones , 6= &hil% 1<< (1677!" Mara#iles v. 7uito , 100 &hil% 54 (1675!" Cuison v. !ernande(, 107 &hil% 1?7 (1676!" and Ma#ana v. Mendo(a, RR &hil% RR (1676!% .ven then, there were a few decisions that diver#ed fro the ain rule of i prescriptibilit$% 0n Claridad v. Benares, 6C &hil% 6C? (1677!, where the plaintiffs were, throu#h fraud, ade to si#n deeds of sale of the lands in favor of 9ose Aenares, believin# the to be ere lease contracts, and the fraud was discovered in 1640 and the action to declare the sales fictitious and ille#al were brou#ht onl$ in 1647, it was held that such action was barred, since bein# based on fraud it could onl$ be brou#ht

within four years fro the ti e the fraud was discovered% /ote that the action was not brou#ht under the principles of i plied trust% 0t is said that it was in 9ustice 9A- ;e$es' dissentin# opinion in the 1675 decision in Mara#iles v. 7uito , 100 &hil% 54 (1675!, that the seeds on acceptin# prescriptibilit$ for i plied trust be#an to ta(e roots, thus -"0 concur with the reasons of the a@orit$ decision, but consider the state ent to the effect that "propert$ held under constructive trust can be vindicated re#ardless of the lapse of ti e" uch too broad for un)ualified assent% The rule of i prescriptibilit$ is lo#ical in case of e+press trusts, since a part$ who a#rees to hold propert$ for another, and upon whose pro ise confidence is reposed, will naturall$ be held to his a#ree ent, and will not be allowed to set title in hi self without first repudiatin# the trust e+pressl$% The rule can be e+tended to resultin# trusts, since the intent to create a trust e+ists in such case, even if all re)uisites of e+press trust do not concur% Aut in constructive trusts, based on fraud or tort, the ele ent of trust and confidence is not present, and the authorities are Da#reedE that no repudication is re)uired for the application of e+tinctive prescription (?4 A % 9r% pp% ==, 14?" A erican -aw 0nst%, ;estate ent on ;estitution, 4ec% 1C6" ;estate ents on Trusts, 4ec% <16!%" (at p% ! 0n 167=, in Dia( v. *orricho and A uado, 10? &hil% <51 (167=!, 9ustice 9A;e$es wrote the a@orit$ opinion of the Court which held that althou#h Le+press trusts disable the trustee fro ac)uirin# for his own benefit the propert$ co itted to his ana#e ent or custod$, at least while he does not openl$ repudiate the trust, and a(es such repudiation (nown to the beneficiar$ or cestui que trust. % % Aut in constructive trusts % % % the rule is that laches constitutes a bar to actions to enforce the trust, and repudiation is not re)uired, unless there is conceal ent of the facts #ivin# rise to the trust%D<EM (at p% <54!% The Court e+plained N The reason for the difference in treat ent is obvious% 0n e+press trust, the dela$ of the beneficiar$ is directl$ attributable to the trustee who underta(es to hold the propert$ for the for er, or who is lin(ed to the beneficiar$ b$ confidential or fiduciar$ relations% The trusteeFs possession is, therefore, not adverse to the beneficiar$, until and unless the latter is ade aware that the trust has been repudiated% Aut in constructive trusts (that are i posed b$ law!, there is neither pro ise nor fiduciar$ relation" the so-called trustee does not reco#ni>e an$ trust, and has no intent to hold for the beneficiar$" therefore, the latter is not @ustified in dela$in# action to recover his propert$% 0n is his fault if he deals$" hence, he a$ be estopped b$ his own laches% (at p% <55! The Dia( doctrine was followed in <eirs of Candelaria v. %omero , 106 &hil% 700 (1650!" and &.M. Tuas(on - Co.' .nc. v. Ma dan al , 4 4C;A =4 (165<!% /onetheless, in *eronimo and .sidoro v. ,ava and Aquino, 107 &hil% 147 (1676!, where the trial court declared in a decision that had beco e final and e+ecutor$ that appellee had the ri#ht to redee the propert$ in )uestion and ordered appellants to a(e the resale of the propert$ in favor of appellees, the 4upre e Court held that there was created a constructive trust, in the sense that althou#h appellants had the na(ed title issued in their na es, and which the$ retained, nevertheless, the$ were to hold said

title in trust for the appellees to redee , sub@ect to the pa$ ent of the rede ption price" and that prescription would appl$ onl$ where the trustee asserts a ri#ht adverse to that of the cestui que trust, such as, assertin# acts of ownership over the propert$ bein# held in trust% Aut in that case it was held that no prescription could ta(e place since the trial courtFs decision beca e final, the defeated trustee plaintiffs-spouses ac)uiesced in the decision #rantin# the defendants-spouses the ri#ht to redee the propert$ and reco#ni>in# ownership ri#hts in the , such as the collection of rentals due on the propert$, especiall$ when plaintiffs-spouses Ldid not even have the possession of the propert$ in order to e+ercise acts of ownership over the sa e%M (at p% 174!% 0n other words, even in an i plied trust, when the purported trustee actuall$ ta(e co#ni>ance of the trust and holds the propert$ for the benefit of the cestui que trust' no clai s of prescription or laches can find erit% 0n 165<, Al(ona v. Capunitan, 4 4C;A 470 (165<!, the Court declared that since LDtEhe case at bar involves an i plied or constructive trust upon the defendantsappellees% % %The prescripti#ility of an action for reconveyance #ased on implied or constructive trust' is no5 a settled question in this 8urisdiction. .t prescri#es in ten />?@ years%D?EM (at p% 477" emphasis supplied! Het in the sa e $ear, in &uan v. 9u:i a, 4 4C;A 1<<1 (165<!, the Court held: LAe need not reiterate those cases holdin imprescripti#le the action to enforce a trust. A different vie5 could encoura e fraud and permit one person un8ustly to enrich himself at the e3pense of another%D4EM (at p% 1<<5" emphasis supplied! This was followed-up in &acinto v. &acinto, 7 4C;A ?C0 (165<!, where the Court held: L-astl$, the clai of the heirs of &edro 9acinto that the latter had ac)uired ownership of the propert$ in liti#ation b$ prescription, is li(ewise untenable% As we have recentl$ held in 9uan, et al% vs% SuOi#a, I%;% /o% --1C044, April <=, 165<, an action to enforce a trust is imprescripti#le. Consequently' a coheir 5ho' throu h fraud' succeeds in o#tainin a certificate of title in his name of the pre8udice of his coheirs' is deemed to hold the land in trust for the latter' and the action #y them to recover the property does not prescri#e%M (at pp% ?C5-?CC" emphasis supplied!% 0n 1654, the Court be#an to turn awa$ fro the notion of i prescriptibilit$ of the action for reconve$ance under an i plied trust, when in *erona v. De *u(man, 11 4C;A 17? (1654!, it reaffir ed the rule of prescriptibilit$ and e+pressl$ overruled previous decisions to the contrar$, thus N Althou#h, there are so e decisions to the contrar$ (9acinto vs% 8endo>a, 107 &hil%, <50" Cuison vs% 2ernande>, 107 &hil%, 1?7" 8arabiles vs% *uito, 100 &hil%, 54" and 4evilla vs% 1e los An#eles, 6C &hil%, =C7!, it is already settled in this 8urisdiction that an action for reconveyance of real property #ased upon a constructive or implied trust' resultin from fraud' may #e #arred #y the statute of limitations (Candelaria vs% ;o ero, 106 &hil%, 700" Al>ona vs% Capunita, --10<<0, 2ebruar$ <=, 165<!% (at p% 17C" emphasis supplied! Aut *erona returned to the four (4! $ear prescriptive period when the underl$in# basis of the i plied trust is fraud, as well as the rule that the prescriptive period be#ins to run fro the inscription of the title in the na e of the purported trustee, thus N .nasmuch as petitioners seek to annul the aforementioned deed of 1e3tra-8udicial settlement1 upon the round of fraud in the e3ecution thereof' the action therefor may #e filed 5ithin four /B@ years from the discovery of the fraud (8auricio vs% Villanueva, --

110C<, 4epte ber <4, 1676!. +uch discovery is deemed to have taken place . . . 5hen said instrument 5as filed 5ith the %e ister of Deeds and ne5 certificates of title 5ere issued in the name of respondents e3clusively' for the re istration of the deed of e3tra8udicial settlement constitutes constructive notice to 5hole 5orld (1ia> vs% Iorricho, 10? &hil%, <51" Avecilla vs% Hatco, --117C=, 8a$ 14, 167=" 9%8% Tuason G Co%, 0nc% vs% 8a#dan#al, --177?6, 9anuar$ ?0, 165<" -ope> vs% Ion>a#a, --1=C==, 9anuar$ ?1, 1654!% (at p% 17C" emphasis supplied! And $et earlier in the sa e $ear, in Caladiao v. 2da de Blas, 10 4C;A 561 (1654!, the Court held N Appellants also ur#e that the action for reconve$ance has prescribed because ore than twent$ $ears have elapsed since the spouses -i pin obtained a certificate of title in their na e over the fishpond ob@ect of the present liti#ation% This contention is without erit% As alread$ pointed out, the application for re#istration was in bad faith, with the result that the certificate of title issued to the vendor -i pin in 16?4 was in law issued to and held b$ hi in behalf and in trust for the benefit of the bu$ers, 4i eon Alas and his wife, 8a+i a% :nder Act 160 (the old Code of Civil &rocedure!, section ?=, which is the #overnin# statute, prescription does not apply to Ccontinuin and su#sistin trustsD0 so that actions a ainst a trustee to recover trust property held #y him are imprescripti#le. Actions for the reconveyance of property 5ron fully re istered are of this cate ory%D7EM (at p% 567" emphasis supplied! The subse)uent rulin#s in *on(ales v. &imene(' +r., 1? 4C;A =0 (1657!, !a#ian v. !a#ian, << 4C;A <?1 (165=!, and De la Cerna v. De la Cerna, C< 4C;A 714 (16C5!, all upheld the 10-$ear prescriptive period for all t$pes of i plied trusts% 0n particular, in De la Cerna, the Court held: % % % 3is 3onor co itted no error in rulin# Dthat the action has alread$ prescribedE% 0t is idle to bother as to whether the action here is one founded e+clusivel$ on fraud which prescribes in four (4! $ears or one based on constructive trust which is barred after ten $ears, there bein# no )uestion that the appellees secured their title ore than twent$ $ears before the filin# of the co plaint, and it is fro the date of the issuance of such title that the effective assertion of adverse title for purpose of the statute of li itations is counted% (Ierona v% 1e Iu> an, 11 4C;A 17?!% (at p% 71=! Thus, even b$ 1656, the Court observed in Bueno v. %eyes, <C 4C;A 11C6 (1656!, that LBhile there are so e decisions which hold that an action upon a trust is i prescriptible, without distin#uishin# between e+press and i plied trusts, the better rule, as laid down b$ this Court in other decisions, is that prescription does supervene 5here the trust is merely an implied one%D5EM (at p% 11=?" emphasis supplied!% 0n addition, the decision in Bueno provided a different for ula in when the prescriptive period be#ins to run, thus: :pon the #eneral proposition that an action for reconve$ance such as the present is sub@ect to prescription in ten $ears the appellees and the court a quo are correct% The question here' ho5ever' isE from 5hat time should the prescriptive period #e counted' in the li ht of the alle ations in the complaint6 .t should #e remem#ered that the constructive trust arose #y reason of the F#ad faith or mistakeG of the deceased father of the plaintiffs' compounded #y the FconnivanceG of the appellees. Consequently' the cause of action upon such trust must #e deemed to have accrued only upon the discovery of such #ad faith or mistake' or to put it more specifically' upon the discovery

#y the appellants that their father' in violation of their property in his o5n name and in the names of his #rother% 0t would not do not sa$ that the cadastral proceedin# itself, b$ virtue of its nature as a preceedin# in rem' was constructive notice to the appellants, for as far as the$ were concerned the cadastral answer the$ had authori>ed the father of the plaintiffs to file was not adverse to the " and neither he nor the appellees a$ invo(e the constructive-notice rule on the basis of their own breach of the authorit$ thus, #iven% ,n top of all this, it was the appellants and not the appellees who were in possession of the propert$ as owners, continuousl$ up to 165<, when for the first ti e the latter appeared upon the scene and tried to #et such possession, thereb$ revealin# to the the fact of the ista(en or fraudulent re#istration% (at p% 11=4" emphasis supplied! 0n other words, Bueno held that the cause of action' and the >?-year prescriptive period #e in to run from the discovery of #ad faith or mistake. 0nterestin#l$, in the sa e $ear as Bueno, in Mi uel v. Court of Appeals, <6 4C;A C50 (1656!, the Court held that an action for the enforcement of a constructive trust; the ultimate o#8ect of 5hich is the reconveyance of a propert$ lost throu#h breach of fiduciar$ relations andTor fraud, ust be filed within four years fro the discover$ of the fraud%DCE A$ 16C4, the Court could su ari>e in its decision in %amos v. %amos, 51 4C;A <=4 (16C4!, the rules of prescription and laches when it ca e to i plied trusts, thus: The rule of imprescripti#ility of the action to recover property held in trust may possi#ly apply to resultin trusts as lon as the trustee has not repudiated the trust (3eirs of Candelaria vs% ;o ero, 106 &hil% 700, 70<-?" 8artine> vs% IraOo, 4< &hil% ?7" Auenca ino vs% 8atias, 5? ,% I% 110??, 15 4C;A =46!% The rule of imprescripti#ility 5as misapplied to constructive trusts (Ieroni o and 0sidoro vs% /ava and A)uino, 107 &hil% 147, 17?% Co pare with Cuison vs% 2ernande> and Aen#>on, 107 &hil% 1?7, 1?6" 1e &asion vs% 1e &asion, 11< &hil% 40?, 40C!% +++% Aith respect to constructive trusts' the rule is different. The prescripti#ility of an action for reconveyance #ased on constructive trust is no5 settled (Al>ona vs% Capunitan, --10<<=, 2ebruar$ <=, 165<, 4 4C;A 470" Ierona vs% 1e Iu> an, supra" Claridad vs% 3enares, 6C &hil% 6C?" Ion>ales vs% 9i ene>, --160C?, 9anuar$ ?0, 1657, 1? 4C;A =0" AoOa#a vs% 4oler, 11< &hil% 571" 9% 8% Tuason G Co%, vs% 8a#dan#al, -177?6, 9anuar$ ?0, 165<, 4 4C;A =4!% Prescription may supervene in an implied trust (Aueno vs% ;e$es, --<<7=C, April <=, 1656, <C 4C;A 11C6" 2abian vs% 2abian, --<0446, 9anuar$ <6, 165=" 9acinto vs% 9acinto, --1C67C, 8a$ ?1, 165<, 7 4C;A ?C1!% And 5hether the trust is resultin or constructive' its enforcement may #e #arred #y laches (60 C%9%4% ==C-==6" 74 A 9ur% 446-470" 1ia> vs% Iorricho and A#uado, supra% Co pare with 8e@ia vs% Ia pona, 100 &hil% <CC!% (at pp% <66-?00" emphasis supplied!% $scay v. Court of Appeals, 51 4C;A ?56 (16C4!, reiterated the doctrines when it held that -The prescripti#ility of an action for reconveyance #ased on implied or constructive trust' is no5 a settled question in this 8urisdiction. .t prescri#es in ten years % (AoOa#a vs% 4oler, et al%, I%;% /o% --17C1C, 9une ?0, 1651" 9%8% Tuason G Co%, 0nc% vs% 8a#dan#al,

I%;% /o% --177?6, 9an% ?0, 165<" special attention to footnote /o% 1!% Al>ona vs% Capunitan, /o% --10<<=, 2eb% <=, 165?" Aueno vs% ;e$es, --<<7=C, April <=, 1656" <C 4C;A 11C6% $3press trusts prescri#e >? years from the repudication of the trust (8anuel 1ia>, et a% vs% Car en Iorricho, et al%, 74 ,%I% p% =4<6, 4ec% 40, Code of Civil &rocedure!% (at pp% ?=C-?==" emphasis supplied! 4ince then, the 10-$ear prescriptive period rule for i plied trusts has been affir ed: Q 0n %ui( v. Court of Appeals, C6 4C;A 7<7 (16CC!, the Court held that LThe rules are well-settled that when a person throu#h fraud succeeds in re#isterin# the propert$ in his na e, the law creates what is called a "constructive or i plied trust" in favor of the defrauded part$ and #rants the latter the ri#ht to recover the propert$ fraudulentl$ re#istered within a period of ten $ears%M (at p% 7?C!% Q 0n Armamento v. *uerrero, 65 4C;A 1C= (16=0!, where the plaintiff, the actual occupant and ori#inal ho estead applicant of a lar#e tract of land under his cultivation, was deprived thereof b$ the defendant who obtained a free patent over said propert$ throu#h fraudulent assertion, the Court applied the provisions of Article 1475% Q 0n <eirs of Tanak Pan aaran Pati5ayon v. Martine(, 14< 4C;A <7< (16=5!, where the Court held that LTherefore, it is clear that the prescriptive period which is applicable in this case is ten (10! $ears% Conse)uentl$, the action of petitioner was not $et barred since it was filed on 9ul$ 1, 16C5 while the last da$ for filin# such action was on 9ul$ 16, 16C5, ten $ears after the issuance of the ori#inal certificate of title%M Q 0n *on(ales v. .ntermediate Appellate Court , <04 4C;A 105 (1661!, where propert$ was re#istered in the na e of one 2austo 4o$ with the understandin# that he would hold it for and in behalf of other co-owners, the Court characteri>ed the situation not as an e+press trust, but an i plied trust covered under Article 1475 of the Civil Code which states that Lif propert$ is ac)uired throu#h ista(e or fraud, the person obtainin# it is, b$ force of law, considered a trustee of an i plied trust for the benefit of the person fro who the propert$ co es%M 0t ruled that LDtEhe trust alluded to in this case is a constructive trust arisin# b$ operation of law% 0t is not a trust in the technical sense%M (at p% 114! Q 0n 2arsity <ills v. /avarro, 4? 4C;A 70? (16<<!, where the Court held that Lour decisions a(e it abundantl$ clear that actions on i plied and constructive trusts (as distin#uished fro e+press ones! are e+tin#uished b$ laches or prescription of ten $ears%D=EM (at p% 71<! Q 0n Carantes v. Court of Appeals, C5 4C;A 714 (16CC!, the Court affir ed that prescriptive period under a constructive trust, is ten $ears fro discover$ of the fraud" D6E and that when it co es to re#istered land, the inscription of the title of the purported trust co ences the runnin# of said period, citin# the decisions in Lope( v. *on(a a, 10 4C;A 15C (1654! and *erona v. De *u(man, 11 4C;A 17? (1654!% Q 0n Amerol v. Ba um#ayan, 174 4C;A ?65 (16=C!, 2da de Buncio v. $state of De Leon' 175 4C;A ?7< (16=C!, and Pa8arillo v. .ntermediate Appellate Court, 1C5 4C;A ?40 (16=6!, which all held that the period of prescription to recover the propert$ based on an i plied trust is ten (10! $ears fro the ti e that Torrens title were obtained over the propert$ in the na e of the trustee or his successors-in-interest%

0t see s prett$-well-settled that when it co es to i plied trusts, whether resultin# or constructive trusts, and even those where the underl$in# e)uit$ consideration is based on fraud, that prescription and laches would appl$ to bar recover$ b$ the cestui que trust of the propert$ held in the na e of the purported trustee, and the prescriptive period is ten $ears% The onl$ lin#erin# )uestion is when e+actl$ the 10-$ear prescriptive period be#insJ Bhile the a@orit$ of recent decisions of the 4upre e Court point to the re#istration of title for re#istered land with the appropriate ;e#ister of 1eeds as the rec(onin# ti e, there have been recent decisions that use the actual date of discover$ of fraud, as the rec(onin# ti e, when the i plied trusts is founded on fraud % 0n Ton oy v. Court of Appeals, 1<? 4C;A 66 (16=?!, where the i plied trust resulted fro the si ulated sales which were ade for the purpose of enablin# the transferee to save the properties fro foreclosure for the benefit of the co-owners, the Court refused to appl$ the theor$ of constructive notice resultin# fro the re#istration in the trusteeFs na e, on the #round that durin# that period the subsistin# trust was unrepudiated and the cestui que trustants could not be e+pected to de and transfer of title in their na es, but LDrEather, it should be counted fro the date of recordin# of the release of ort#a#e in the ;e#istr$ of 1eeds % % % the cestui que trust were char#ed with the (nowled#e of the settle ent of the ort#a#e obli#ation, the attain ent of the purpose for which the trust was constituted%M (at p% 1<?! 0n Cara ay-Layno v. Court of Appeals, 1?? 4C;A C1= (16=4!, the Court held that if the le#iti ate owner of a parcel of land has alwa$s been in possession thereof, but which was fraudulentl$ re#istered in the na e of another person, then the constructive notice and 10-$ear prescriptive period rules based on the issuance of title in the na e of the purported trustee will not be applicable on the #round that the action brou#ht b$ the cestui que trustant is reall$ one for )uietin# of title which under the established doctrine under the Civil Code is i prescriptible% 0n Adille v. Court of Appeals, --44745, <6 9anuar$ (16==!, where the petitioner fraudulentl$ isrepresented in his unilateral affidavit of ad@udication that he was the onl$ heir and child of the decedent, when in truth he had half brothers and sisters whose na es were not included in the transfer certificate of title issued on the estate propert$% Althou#h the Court held that a constructive trust ensued under Article 1475, and the facts showed that the title was issued in 1677 while the action for reconve$ance was filed onl$ in 16C4, it could not appl$ strictl$ the 10-$ear prescriptive period thus: LBhile actions to enforce a constructive trust prescribes in ten $ears, rec(oned fro the date of the re#istration of the propert$, we, as we said, are not prepared to count the period fro such a date in this case% Be note the petitionerFs su# rosa efforts to #et hold of the propert$ e+clusivel$ for hi self be#innin# with his fraudulent isrepresentation in his unilateral affidavit of e+tra@udicial settle ent that he is Konl$ heir and childe of his other 2elisa with the conse)uence that he was able to secure title in his na e also%F Accordin#l$, we hold that the ri#ht of private respondents co enced fro the ti e the$ actuall$ discovered the petitionerFs act of defraudation% Accordin# to the respondent Court of Appeals, the$ Kca e to (now apparentl$ onl$ durin# the pro#ress of the liti#ation%F 3ence, prescription is not a bar%M The issue of close-filial relationship was critical in Ada(a v. Court of Appeals, 1C1 4C;A ?56 (16=6!, where the 1eed of 1onation e+ecuted b$ the father in favor of his dau#hter Violeta coverin# a parcel of land had the followin# provision crossed-out LThat

the donee shall share one-half />HI@ of the entire property 5ith one of her #rothers or sisters after the death of the donor0M and title to the propert$ was issued in the sole na e of the dau#hter% Aut an$ $ears later after the death of the father, the dau#hter had for all$ e+ecuted a sworn waiver ac(nowled#in# that the propert$ was re#istered in her na e but with the intention that she would hold one-half of it in favor of the brother 3oracio% The Court applied Article 1446, which provides that LThere is also an i plied trust when a donation is ade to a person but it appears that althou#h the le#al estate is trans itted to the donee, he nevertheless is either to have no beneficial interest or onl$ a part thereof%M 0n rulin# upon the issue of whether the brother was #uilt$ of laches or that his action had prescribed, the Court held N ;espondent Violeta and her husband also contended that the lon# dela$ and inaction on the part of 3oracio in ta(in# an$ steps for reconve$ance of the one-half (1T<! share clai ed b$ hi , indicates lac( of an$ color of ri#ht over the said one-half (1T<! share% 0t was also ar#ued b$ the two (<! that considerin# that twelve (1<! $ears had passed since ,CT /o% &-11111 was issued and ore than nineteen (16! $ears since the 1eed of 1onation was e+ecuted, the counterclai for partition and reconve$ance of 3oracio's alle#ed one-half share was barred b$ laches, if not b$ prescription% A#ain, we rule for the petitioners% .n determinin 5hether delay in seekin to enforce a ri ht constitutes laches' the e3istence of a confidential relationship #ased upon' for instance' consan uinity' is an important circumstance for consideration. Delay in a situation 5here such circumstance e3ists' should not #e as strictly construed as 5here the parties are complete stran ers vis-a-vis each other. The doctrine of laches is not to #e applied mechanically as #et5een near relatives " the fact that the parties in the instant case are brother and sister tends to e+plain and e+cuse what would otherwise appears as lon# dela$% 8oreover, continued reco#nition of the e+istence of the trust precludes the defense of laches% The two (<! letters noted above sent b$ respondent Violeta to petitioner 3oracio, one in 1656 and the other in 16C1, show that Violeta as late as 16C1 had reco#ni>ed the trust i posed on her b$ law% Conversely' <oracio4s reliance upon his #lood relationship 5ith his sister and the trust and confidence normally connoted in our culture #y that relationship' should not #e taken a ainst him. Petitioners4 counterclaim in the trial court for partition and reconveyance cannot he re arded as #arred 5hether #y laches or #y prescription. (at p% ?=0-?=1" emphasis supplied! 0n star( contrast to Ada(a, is the rulin# in *on(ales v. .ntermediate Appellate Court, <04 4C;A 105 (1661!, where propert$ was re#istered in the na e of one 2austo 4o$ with the understandin# that he would hold it for and in behalf of other co-owners, and the Court characteri>ed the situation not as an e+press trust, but an i plied trust covered under Article 1475 of the Civil Code which states that Lif propert$ is ac)uired throu#h ista(e or fraud, the person obtainin# it is, b$ force of law, considered a trustee of an i plied trust for the benefit of the person fro who the propert$ co es%M 0t ruled that LDtEhe trust alluded to in this case is a constructive trust arisin# b$ operation of law% 0t is not a trust in the technical sense%M (at p% 114, citin# *ayondato v. Treasurer of the P..%, 46 &hil% <44 D16<5E!, and therefore sub@ect to prescription% The Court thus ruled N Be hold that after 2austo 4o$, the predecessor-in-interest of herein petitioners, had appeared to be the re#istered owner of the lot for ore than thirt$ $ears, his title had beco e indefeasible and his do inical ri#hts over it could no lon#er be challen#ed% An$ insinuation as to the e+istence of an i plied or constructive trust should not be

allowed% % % % .ven assu in# that there was an i plied trust, private respondents' atte pt at reconve$ance (functionall$, an action for partition is both an action for declaration of co-ownership, and for se#re#ation and conve$ance of a deter inate portion of the sub@ect propert$% 4ee ;o)ue vs% 0AC, I%;% /o% C7==5, Au#ust ?0, 16==, 157 4C;A 11=! was clearl$ barred b$ prescription% +++% 0t is well-settled that an action for reconve$ance of real propert$ to enforce an i plied trust prescribes in ten $ears, the period rec(oned fro the issuance of the adverse title to the propert$ which operates as a constructive notice% 0n the case at bar, that assertion of adverse title, which was in e+plicit indication of repudiation of the trust for the purpose of the statute of li itations, too( place when ,CT /o% 46551 was issued in the na e of 2austo 4o$ in 16?<, to the e+clusion of his three sisters% Aut even if there were no repudiation as private respondent ;osita -ope> would have us believe when she testified in court that while 2austo 4o$ i#ht have succeeded in securin# title in his sole na e, he nonetheless reco#ni>ed the co-ownership between hi and his sisters the rule in this @urisdiction is that an action to enforce an i plied trust a$ be circu scribed not onl$ b$ prescription but also b$ laches, in which case repudiation is not even re)uired% 2ro 16?< to 1657, or a period of thirt$-three $ears, private respondents had literall$ slept on their ri#hts, presu in# the$ had an$% The$ can no lon#er dispute the conclusive and incontrovertible character of 2austo 4o$'s title as the$ are dee ed, b$ their unreasonabl$ lon# inaction, to have ac)uiesced therein% 8oreover, the law protects those who are vi#ilant of their ri#hts% :ndue dela$ in the enforce ent of a ri#ht is stron#l$ indicative of a lac( of erit in the clai , since it is hu an nature for persons to assert their ri#hts ost vi#orousl$ when threatened or invaded% (at pp% 11?-114!% 0n "4Laco v. Co Cho Chit, <<0 4C;A 575 (166?!, the Court applied the rule that when it co es to resultin# trusts, prescription does not be#in to run until there is an e+press repudiation of the trust b$ the purported trustee, and held that the followin# re)uisites ust be present for repudiation to be effective: (a! the trustee has perfor ed une)uivocal acts of repudiation a ountin# to an ouster of the cestui quie trust0 (b! such positive acts of repudiation have been ade (nown to the cestui que trust0 and (c! the evidence thereon is clear and convincin#% 0n effect, "4Laco e)uates a resultin# trust to an e+press trust% Bhat see s to be clear at this point of develop ent of trust in the &hilippines is that the e)uit$ essence of the institution has not ade )uite plain at what point the prescriptive period of 10-$ears be#ins to run for i plied trusts, and in so e instances where it be#ins to run at all when there are special personal considerations involved%

D1]Art. 559, Civil Code: The possession of movable property acquired in good faith in equivalent to a title. Nevertheless, one who has lost any movable or has been unlawfully deprived thereof, may recover it from the person in possession of the same.

If the possessor of a movable lost or of which the owner has been unlawfully deprived, has acquired it in good faith at a public sale, the owner cannot obtain its return without reimbursing the price paid therefore. [2] Citin 74 A8% 9:;%, secs% 7=0, 7=1" 57 C% 9%, secs% 675, 67C, 67=" A8.;% -AB 0/4T0T:T., ;.4TAT.8./T ,/ T;:4T4, sec%
<16" on ;estitution, sec% 1C6" +tianson v. +tianson, 5 A-; <=C" Claridad v. Benares, 6C &hil% 6C? (1677!% [3] Citin Bo:a a vs. +oler, < 4C;A C77 (1651!" &.M. Tuason - Co. .nc. vs. Ma dan al, 4 4C;A =4 (165<!, with special attention to footnote /o% 1% [4] Citin +evilla v. An eles, 6C &hil% =C7 (1677!% [5] Citin Mana#an v. Canlas, 70 ,ff% Ia>%, 16=0% [6] Citin Al(ona v. Capunitan' 4 4C;A 470 (165<!" *erona v. De *u(man' 11 4C;A 17? (1654!" *on(ales v. &imene(, 1? 4C;A =0 (1657!" Cuaycon v. Cuaycon , <1 4C;A 116< (165C!" !a#ian v. !a#ian, << 4C;A <?1 (165=!% [7] Lllanera v. Lopez, 106 Phil. 70 (1959); Gerona v. De Guzman, 11 SCRA 154 (1964); Fabian v. Fabian, 22 SCRA 232 (1968). [8] *on(ales v. &imene(, 1? 4C;A =0 (1657!" Al(ona v. Capunitan, 4 4C;A 47 (165<! and cases cited therein" Tuason - Co. v. Ma dan al, 4 4C;A =4 (165<!" *erona v. De *u(man, 11 4C;A 174 (1654!" 74 A8% 9:;% Trusts, s% 7=0% [9] Citin $scay v. Court of Appeals, 51 4C;A ?56 (16C4!" Bona a v. +oler, --17C1C, ?0 9une 1651" &.M. Tuason Co.' .nc. v. Ma dan al, --177?6, ?0 9anuar$ 165<" Al(ona v. Capunitan, 4 4C;A 47 (165<!" Bueno v. %eyes, <C 4C;A 11C6 (1656!%

POSTED BY Dean Cesar L. Villanueva AT 8 !" #!!8 $%## AM & ! COMMENTS & POST A COMMENT & DI'' IT