TRUST

A legal relationship between one person having an equitable ownership in property and another
owning the legal title to such property.

CLASSIFICATION
1. Effectivity – from the viewpoint of whether they become effective after the death of the
trustor or during his life, it may be either:
a. Testamentary trusts;
b. Trusts inter vivos (sometimes called "living trusts")
2. Creative – from the viewpoint of the creative force bringin them into existence, it may
either:
a. Express trust – created by the intention of the trustor or of the parties;
b. Implied trust – one which comes into being by operation of law. This may be either;
i. Resulting trust – one in which the intention to create a trust is presumed by
law to exist from the transaction and facts of the case;
ii. Constructive trust – one imposed by law irrespective of and even contrary to
the intention of the parties. It is designed to promote justice, frustrate fraud
and prevent unjust enrichment.

TRUST
Always involves owner-ship, embracing a set of
rights and duties fiduciary in character which
may be created by a declaration without
consideration;
CONTRACT
A legal obligation based on an undertaking
supported by a consideration, which obligation
may or may not be fiduciary in character;

TRUST DONATION
An existing legal relationship and involves the There is a transfer of property as well as the
separation of legal and equitable title ; disposition of both legal and equitable
ownership except in cases of gifts in trust;
The beneficiary of a trust may demand The donee must comply with the legal
performance of the obligation without having requirements in accepting donations.
formally accepted the benefit of the trust in
public document, upon mere acquiescence in the
formation of the trust and acceptance under the
second paragraph of article 1311(stipulations
pour autrui).

PERSONS INVOLVED IN THE CREATION OF A TRUST:

1. Trustor – the one who intentionally creates a trust;
2. Trustee – the person who holds the legal title to the trust property for the benefit of another
and with certain powers and subject to certain duties;
3. Beneficiary or the cestui que trust – the one who has the equitable interest in the property
and enjoys the benefit of administration by the trustee. He may be a natural person or a
legal entity. The trustor may establish a trust with himself as the beneficiary (usual case).

ELEMENTS OF EXPRESS TRUST

1. Competent trustor and trustee;
 2. Ascertainable trust res;
3. Sufficiently certain beneficiaries.

TRUST PROPERTY
The concept of a trust arises from or is the result of a fiduciary relation between the trustee
and the cestui que trust as regards certain property- real, personal, funds or money, choses in action
held by the trustee (Pacheco vs. Arro, 85 PHIL 505 ).
The trust property is owned by two or more persons at the same time, the relation between
the two owners being such that one of them is under an obligation to use his ownership for the
benefit of the other.
The trustee is not a mere agent but an owner. But his ownership is a mere matter of form
rather than substance, and nominal rather than real.

PROOF OF TRUST
General Rule: Trust whether express or implied may be proved by parol or oral evidence.
Exception: An express trust over an immovable property or any interest therein. This latter
requirement however is not for validity but only for purposes of proof.

NOTE: Trusts cannot be established in violation of law. Trust is founded in equity such that it
cannot result from a contract formed for an illegal purpose.

NOTE: Neither may a trust be created for the purpose of evading a legal prohibition. Example: there
cannot be a trust created for the purpose of obtaining homestead patents, in favor of a person
already disqualified to obtain additional homesteads.

NECESSITY OF ACCEPTANCE TO THE CREATION AND VALIDITY OF TRUST RELATIOSHIP

1. Acceptance of the trustee – the acceptance of the trustee is not necessary to its existence
and validity since if he declines, the courts will appoint a trustee to fill the office that he
declines (see Sec.3 Rule 98 of the Rules of Court).
NOTE: But a trustee’s acceptance of the trust is necessary to chrge him with the
office of the trustee and the administration of the trust and to vest the legal title in him.
2. Acceptance of the beneficiary – The acceptance by the beneficiary is essential to the
creation and validity of a trust. However, such acceptance is presumed if there is no proof to
the contrary and the trust does not impose any onerous condition upon the beneficiary.

REQUISITES FOR A TRUSTEE TO CLAIM TITLE BY PRESCRIPTION

1. He has performed open and unequivocal acts of repudiation;
2. Such positive acts of repudiation have been made known to the beneficiary or the cestui que
trust;
3. The evidence thereon should be clear and convincing
4. The period fixed by law has expired. (10 years from the time that the repudiation is made
known to the beneficiary in cases of express trust or resulting trust while 10 years from the
time a constructive trust arises).
NOTE: In order that a trustee may sue or be sued alone, it is essential that his trust should be
express, that is a trust created by the direct and positive acts of the parties, by some writing deed or
will, or by proceedings in court. Rule 3, sec 3 does not apply in cases of implied trust that is, a trust
which may be inferred merely by the acts of the parties or from other circumstances. (PAL vs. Heald
Lumber Co.)

NOTE: the 10-year prescriptive period in case of implied trust begins to run from the date the
trustee repudiates the express trust. In the case Sps. Pascual, et al. vs. CA, et al. GR 115925, August
15, 2003, it was held that repudiation takes place when the adverse party registers the land. the 4-
year prescriptive period under Article 1391 applies only if the fraud does not give rise to an implied
trust, and the action is to annul a voidable contract under Article 1390.

TRUST PURSUIT RULE

Equity will pursue property that is wrongfully converted by the fiduciary, or otherwise compel
restitution to the beneficiary. A trust will follow the property through all changes in its state and
form, provided its product or proceeds are capable of identification.

IMPLIED TRUST
Are those, without being express, are deducible from the nature of the transaction as matters of
intention, or which are superinduced on the transaction by operation of law, as matters of equity
independently of the particular intention of the parties.

RESULTIING TRUST CONSTRUCTIVE TRUST

Intention to create trust
The intent of the parties to create a trust is The trust is created irrespective of or even
presumed or implied by law from the nature of contrary to the intention of the parties to
their transaction; promote justice, frustrate fraud and to prevent
unjust enrichment;
Prescriptive period
The 10 year prescriptive period shall be counted The 10 year prescriptive period shall be counted
from the time repudiation is made known to from the time that the constructive trust arises;
beneficiary;
Example
Illustrated in Arts. 1448, 1449, 1451, 1452, 1453. Illustrated in Arts. 1450, 1454, 1455, 1456.

EXPRESS TRUST IMPLIED TRUST

As to creation
Created by the intention of the parties; Come into being by operation of law;
As to proof of trust
An express trust over an immovable property or An implied trust over an immovable or any
any interest therein cannot be proved by parol interest therein may be proved by oral evidence;
evidence;
As regards repudiation of trust
An express repudiation made known to the In constructive trusts, even if there is no
beneficiary is necessary in order that laches or repudiation, laches may bar an action to enforce
acquisitive prescription may bar an action to an implied trust.
enforce an express trust.
KINDS OF IMPLIED TRUSTS
1. Purchase money resulting trust (Article 1448) – There is a resulting trust when property is
sold, and the legal estate is granted to one party but the price is paid by another party for
the purpose of having the beneficial interest of the property.
To give rise to a purchase money resulting trust, it is essential that there be:
a. an actual payment of money, property or services or an equivalent, constituting
valuable consideration;
b. and such consideration must be furnished by the alleged beneficiary of a resulting
trust.
EXCEPTIONS
a. Where A pays the purchase money and title is conveyed by absolute deed to A’s child or to a
person to whom A stands in loco parentis and who makes no express promise, a trust does
not result, the presumption being that a gift was intended;
b. Where an actual contrary intention is proved;
c. Where the purchase is made in violation of an existing statute and in evasion of its express
provision, no trust can result in favor of the party who is guilty of fraud. (Tigno vs. Court of
Appeals 280 SCRA 262 [1997])

2. Donations made to a person but the beneficial interest is vested in another. The donee is the
trustee while the designated third person is the beneficiary. (ART 1449);
3. Purchase with borrowed funds and the conveyance is made to lender to secure payment of
debt. ART 1450 );
4. Legal title to land inherited by heir placed in the name of another. (Article 1451);
5. Legal title to property purchased taken in one co-owner. (ART 1452);
6. Conveyance under a promise to hold for, or transfer to another. (ART 1453);
7. Absolute conveyance to a person to secure performance of grantor’s obligation;
8. (ART 1454);
9. Purchase of property with use of trust funds (ART 1455);
10. Acquisition of property through mistake or fraud. (ART 1456).

NOTE: An action for reconveyance of a parcel of land based on an implied or constructive trust
prescribes in ten years, the point of reference being the date of registration of the deed or the date
of the issuance of the certificate of title over the property. BUT, this rule applies only when the
plaintiff (or person enforcing the trust) is not in possession of the property, since if a person claiming
to be the owner thereof is in actual possession of the property, the right to seek reconveyance,
which in effect seeks to quiet title to property, does not prescribe.

REQUISITES BEFORE PERIOD OR PRESCRIPTION MAY START IN REGARD TO AN ATION BASED ON

AN IMPLIED TRUST:
a. the trustee has performed unequivocal acts of repudiation amounting to an ouster of the
cestui que trust;
b. Such positive acts of repudiation have been made know to the cestui que trust; and
c. Evidence thereon is clear and positive. (Vda. De Cabrera vs. Court of Appeals 267 SCRA 339
[1997].)
NOTE: The enumeration is not exclusion.

OTHER EXAMPLES OF IMPLIED TRUST

1. The registration of land under torrens in the name of one person do not bar evidence to
show it was only held in trust for another;
2. Certificate of registration of vehicle placed in the name of a person although the price was
not paid by him but by another;
3. One arising from the agent’s willful violation of the trust reposed in him by the principal by
buying for himself the property he was supposed to buy for the principal who designated
and appointed him to negotiate with the owner;
4. In consonance with the trust fund doctrine in Corporation Law, the assets of the
corporation, as represented by the capital stock, are regarded as “trust fund” to be
maintained unimpaired for the payment of corporate creditors.