Trust the right to the beneficial enjoyment of property, the legal title

to which is vested in another.

Characteristics of a trust:
1.
2.
3.

Fiduciary
Created by law or agreement
Legal title is held by one, equitable title is held by another

Parties to a trust:
1.
2.
3.

Trustor or settler establishes the trust

Trustee holds the property in trust for the benefit of
another
Beneficiary or cestui que trust person for whose benefit
the trust is created

The trustor may at the same time be the beneficiary.

Trustor and trustee must be legally capacitated to convey property or
hold property and enter into contracts, respectively.
Beneficiary need not be capacitated, but must be capacitated to
receive gratuitously from the trustor.
Elements of a trust:
1.
2.

Parties
Subject matter of the trust

How express trusts are ended:

a.
b.
c.
d.
e.
f.
g.
h.

Mutual agreement of all parties

Expiration of term
Fulfilment of a resolutory condition
Rescission or annulment
Loss of subject matter
Order of the court
Merger
Accomplishment of the purpose of the trust

2.

Implied trust created by operation of law (founded on

equity)
Implied trust may prescribe in 10 years from the
repudiation of the trust by the trustee.
Repudiation of resulting implied trust (and
express trust) must be made known to the
beneficiary.
Prescription supervenes in a constructive trust
even if the trustee does not repudiate the
relationship.
The existence of co-ownership argues against
the theory of implied trust (thus no prescription
can be considered).
May be proved by oral evidence, whether subject
matter is real or personal property
a.

Classifications of trusts:
1.

Express trust created by the parties or by the intention

of the trustor
If subject matter is an immovable or right over an
immovable, may not be proved by parol (oral
evidence).
Express trust with immovable or right thereto
must be in writing for enforceability only, not
validity.
As to third persons, the trust must be in public
instrument and registered in the Registry of
Property is the subject matter is a real property.

b.

a.3. Land passes by succession to any person and he

causes the legal title to be put in the name of another,
the former being the beneficiary and the latter the
trustee (Art. 1451)

By conveyance to the trustee by an act inter vivos or mortis

causa
By admission of the trustee that he holds the property only
as trustee

a.4. Two or more persons purchase property, the legal

title of which is under the name of one of them, the
latter is the trustee of others in proportion of the
interest of each (Art. 1452)

Administration of the trust by the trustee:

a.
b.
c.
d.
e.

File a bond
Make an inventory of the real and personal property in trust
Manage and dispose of the estate and faithfully discharge
his trust in relation thereto
Render a true and clear account
Cannot acquire the property held in trust by prescription as
long as the trust is admitted. If he repudiates and this is
made known to the party involved, prescription is permitted.

A trustee may sue or be sued alone as a trustee if the trust is

express.
In the absence of an express stipulation in a contract entered into by
a trustee for a corporation that the trust estate is liable on the
contract, the trustee is liable in its individual capacity.
Acceptance by the beneficiary is necessary, but acceptance is
presumed it the trust imposes no onerous condition.

If the person to whom the title is conveyed is

a child, no trust is implied as it is a gift

a.2. Donation is made a person and although legal

estate is transmitted to him, he has no beneficial
interest or only part thereof (Art. 1449)

How an express trust is created:

a.

Resulting trust intent to create a trust but it is not

effective as an express trust
a.1. Legal estate is granted to one party but the price
is paid by another (Art. 1448). Former is trustee, latter
is beneficiary.

The presumption is that interest of coowners are equal.

a.5. When property is conveyed to a person for him to

hold it or transfer it to another. Former is the trustee of
the property. (Art. 1453)
b.

Constructive trust no intention to create a trust but a

trust is nevertheless created by law to prevent unjust
enrichment or oppression
b.1. Property is loaned or paid by one person for the
benefit of another and conveyance of the property to
the former (i.e. by registering in his name the property)
as security for the loan. Creditor is the trustee and
debtor is the beneficiary who may redeem the property
(Art. 1450).
Example:
Trust receipt a security
transaction intended to aid in financing
importers and retail dealers who do not have

sufficient funds or resources to finance the

importation or purchase of merchandise, and
who may not be able to acquire credit except
thru utilization as collateral of the
merchandise imported or purchased.
b.2. Absolute conveyance of property is made in order to
secure performance (Art. 1454)

b.3. Trustee, guardian or other person holding a fiduciary

relationship uses trust funds for the purchase of property
and causes the conveyance to be made to him or a third
person (Art. 1455)
b.4. Property is acquired through mistake or fraud (Art
1456)

Mistake is made by a third person

Fraud is extra-contractual fraud