8 Sept 2020

TRUSTS
It is a legal arrangement whereby a person transfers his legal title to property to another
to be administered by the latter for the benefit of a third party. It is a right of property
held by one party for the benefit of another.

1. PARTIES
A. Trustor (creator/settlor/grantor)
▪ A person who establishes a trust
• Transfers legal ownership of property to a person for the benefit of a
third party, who owns the equitable title
▪ May establish a trust with him as the trustee or the beneficiary
▪ Cannot be the sole trustee and the sole beneficiary of a single trust
• Both the legal and equitable titles of the trust property would be merged I
the trustee and he would hold the property free of any trust.
▪ Not all cases have a trustor
B. Trustee
▪ Whom confidence is reposed as regards property for the benefit of another
person
• Person who takes and holds the legal title to the property in trust solely
for the benefit of another, with certain powers and subject to certain
duties

C. Beneficiary (ceste qui trust)

▪ Person for whose benefit the trust has been created
• person who has the equitable title or interest in the property and enjoys
the benefit of the administration of the trust by the trustee.
▪ May be a natural person or a legal entity
▪ May be more than one
▪ Not necessary to the creation of a trust that the beneficiary be named or
identified or even be in existence at the time of its creation (esp. in charitable
trust)
▪ Can be a class of persons
2. NATURE OF OWNERSHIP OF TRUSTEE AND BENEFICIARY
A. Ownership by two persons at the same time.
B. Ownership of trustee, a mere matter of form and nominal.
C. Trustee, not mere agent
D. Transfer of equitable title
E. Rights of beneficiary
▪ Depending on the terms of the trust instrument, the beneficiary may receive the
income from the assets of the trust, the asset themselves, or both.

3. CLASSIFICATION OF TRUSTS
A. Creation
▪ Express trust/ contractual trust
• Can come into existence only by the execution of an intention to create it
by the trustor or the parties
• Elements:
 A competent trustor and trustee
 An ascertainable trust res
 Sufficiently certain beneficiaries
 Note:
v Trustee must also have some power of administration other than
a mere duty to perform a contract although the contract is for
some third-party beneficiary
v A declaration of terms is essential and these must be stated
with reasonable certainty in order that the trustee may
administer, and that the court, if called upon so to do, may
enforce the trust
v Trustee must be capable of owning property
v Consideration is not required
• Creation:
 No particular words are required or essential for the creation of
an express trust, it being sufficient that a trust is clearly
intended.
 Created by direct and positive act of the trustor, by some writing, will,
or oral declaration envincing an intention to create the trust.
 What is important is whether the trustor or the party manifested an
intention to create the kind of relationship which in law is known as a

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 trust. It is immaterial whether or not he knows that the relationship
which he intends to create is called a trust, and whether or not he
knows the precise characteristic of the relationship which is called a
trust
• Kinds:
 Charitable trust
 one designed for the benefit of a segment of the public or of the
public in general.
 Accumulation trust
 One that will accumulate income to be reinvested by the trustee in
the trust for the period of time specified
 Spendthrift trust
 One established when the beneficiary need to be protected,
because of his inexperience or immaturity from his imprudent
spending habits or simply because the beneficiary is spendrift.
 Sprinkling trust
 one that gives the trustee the right to determine the income
beneficiaries who should receive income each year and the
amount thereof.
 It is a discretionary trust
• Termination:
 Expiration of period fixed
 Accomplishment of purpose
 Mutual agreement of beneficiaries
 Exercise of power to terminate (depends on the terms of the trust
deed.
• Evidence to prove express trust
 GR: Burden of proof is on the party alleging its existence (Proof must
be clear, satisfactory, and convincing)
 Trust concerns immovable- writing is necessary to prove an express
trust concerning an immovable or any interest therein.
 Cannot be proved by oral evidence
 the defense that express trusts cannot be proved by parol evidence
may be waived, either by failure to interpose timely objections against
the presentation of oral evidence not admissible under the law or by
cross-examining the adverse party and his witnesses along the
prohibited lines.

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  To affect third persons, a trust considering an immovable or any
interest therein must be embodied in a public instrument and
registered in the Registry of Property
 An express trust over personal property or any interest therein, and
an implied trust, whether the property subject to the trust is real or
personal, may be proved by oral evidence.
• Trust may be sue or be sued alone----when trust is express
• If a property is insured and the owner received the indemnity from the
insurer, it is provided in Article 2207 2 of the Civil Code that the insurer is
deemed subrogated to the rights of the insured against the wrongdoer.
• Acceptance of trust by a trustee is necessary to charge him with the
office,
 His acceptance is not necessary to its existence or validity, court
will appoint to fill the office
 Designated or appointed as trustee may decline the responsibility
and is free from any legal or equitable duty of liability in the
matter
 Unless a contrary intention appears in the instrument
constituting the trust, declination or refusal or disqualification of
a trustee does not operate to defeat or void the trust; nor does it
operate to vest legal as well as equitable title in the beneficiary.
 Renunciation after acceptance can only be by resignation or
retirement with court approval or at least, with agreement of
beneficiaries and on satisfaction of all legal liabilities growing out of
the acceptance of the trust.
• Acceptance of or assent to the trust by the beneficiary is essential to
the creation and validity of a trust.
 Presumed if there is no proof to the contrary
 If trust imposes onerous condition, acceptance must be shown.
 Acceptance may be express or implied.

▪ Implied trust
• One which comes into being by operation of law
• To prevent injustice
• The doctrine of implied trusts is founded upon equity
• Doctrine of implied trust if based on an illegal contract cannot be invoked
• consequences of an implied trust are, principally, that the implied trustee
shall deliver the possession and reconvey title to the property to the
beneficiary of the trust, and to pay to the latter the fruits and other net

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 profits received from such property during the period of wrongful holding
and otherwise, to adjust the equities between the trustee holding the legal
title and the beneficiary of the trust.
• Enumeration is not exclusive
 Resulting trust/bare/passive
 One which the intention to create a trust is implied or
presumed in law
 1448,1449,1451, 1452, 1453
 Constructive trust
 one imposed by law irrespective of, and even contrary to, any such
intention for the purpose of promoting justice, frustrating fraud,
or preventing unjust enrichment.
 Trust ex maleficio, trust ex delicto, and de son tort
 1450, 1454, 1455, 1456
▪ Implied trust converted to express trust
• An implied trust may be converted to an express trust by the recognition
by the implied trustee of the right to the property of the owner.
 Trustee acknowledged in a public instrument sale of land by his
parents to beneficiary
 Trustee directed his tenant to pay rentals to beneficiary and allowed
latter to take possession
• Acquisition of property through prescription
 The rule that a trustee cannot acquire by prescription ownership over
property entrusted to him until and unless he repudiates the trust,
applies to express trusts and resulting implied trusts.
 in constructive implied trusts is that prescription may supervene even
if the trustee does not repudiate the relationship
 In resulting trusts, the rule of imprescriptibility may apply for as long
as the trustee has not repudiated the trust. Once the resulting trust is
repudiated, however, it is converted into a constructive trust and is
subject to prescription.
 It is a well-settled rule that the possession of a trustee is, in law,
possession of the cestui que trust and, therefore, it cannot be a good
ground for title by prescription.
 express trusts disable the trustee from acquiring for his own benefit
the property committed to his management or custody, at least while
he does not openly repudiate the trust and makes such repudiation
known to the beneficiary.

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  trustee may claim title by prescription founded on adverse possession
where it appears that:
 he has performed open and unequivocal acts of repudiation
amounting to an ouster of the cestui que trust or the other co-
owners;
 such positive acts of repudiation have been made known to the
cestui que trust or the other co-owners;
 he evidence thereon should be clear and conclusive or convincing (
 he period fixed by law has prescribed. The period will commence
to run from and after said repudiation and the knowledge thereof
by the cestui que trust.
 a third person who holds actual, open, public, and continuous
possession of a land, adversely to the trust, acquires title to the land
by prescription as against such trust.
 an action for reconveyance to enforce an implied trust in one’s favor
prescribes in ten (10) years (when not in possession)
 when in possession it does not prescribe
 prescription starts running from the moment the law creates the
trust
 where the rights of the beneficiary are recognized by the
trustee--- commences to run from the time the trustee begins to
assert his title or repudiate the trust, or to hold adversely, as
when the trustee files an ejectment suit against the beneficiary
 or when he registers the deed of assignment and secure
cancellation of the cert. Of title
 Continuous recognition of a resulting trust precludes any defense
of prescription or laches in a suit to declare and enforce the trust.

▪ Express trust v. Implied trust

Express Trust Implied Trust
Creation of trust Created by the Come into being by
intention of the trustor operation of law
or parties
Created by the direct Deducible from the
and positive acts of the nature of the
parties by some transaction or
writing or deed or will imposed by operation
or by words of law, independently
evidencing an of the particular
intention to create a intention of the parties
trust
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 Intention to establish a Intention is to be
trust is clear taken from the
circumstances or
other matters
indicative of such
intent
If concerning an If concerning an
immovable or any immovable or any
Proof of trust interest therein cannot interest therein may
be proved by parol be proved by oral
evidence evidence
Repudiation of In order that laches or aches constitutes a bar
trust acquisitive to actions to enforce
prescription may bar an implied trust even
an action to enforce an where there is no
express trust, an repudiation, unless
express repudiation there is concealment
made known to the of the fact giving rise
beneficiary is to the trust.
required,
An express trust does
not prescribe except
when the trustee
repudiates the trust.
While no time limit is
imposed for the
enforcement of rights
under an express
trust, prescription
may, however, bar a
beneficiary’s action for
recovery, if a
repudiation of the
trust is proven by
clear and convincing
evidence and made
known to the
beneficiary.

B. Effectivity
▪ Testamentary trust
• One which is to take effect upon the trustor’s death
▪ Trust inter vivos (living trust)
• Effective during the owner’s life

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C. Revocability
▪ Revocable trust
• One which can be revoked or cancelled by the trustor or another
individual given the power
▪ Irrevocable trust
• One which may not be terminated during the specified term of the trust
▪ Presumption of revocability unless the creator has expressed a contrary
intention.
D. Laches in action to enforce a trust
▪ In case of express trusts
• Laches applies from the time the trustee openly denies or repudiates the
trust and the beneficiary is notified thereof, or is otherwise plainly put on
guard against the trustee.
▪ In case of implied trust
• trustee in a constructive or implied trust does not recognize any trust,
and has no intent to hold for the beneficiary, the latter is not justified in
delaying action to recover his property. It is his fault if he delays. If he so
delays, his action may be barred by laches or extinctive prescription.
• Less strictly applied between near relatives.