TRUST

A trust is the fiduciary relationship between one person having an equitable ownership in property and
another owning the legal title to such property, the equitable ownership of the former entitling him to
the performance of certain duties and the exercise of certain powers by the latter (see 54 Am. Jur. 21.)
for the benefit of the former.
(a) It is a fiduciary relationship. (Pacheco v. Arro, 85 Phil. 505).
(b) Created by law or by agreement. (Art. 1441, Civil Code).
(c) Where the legal title is held by one, and the equitable title or beneficial title is held by
another. (65 C.J. 212).
GENERAL PROVISIONS
ART. 1440. A person who establishes a trust is called the trustor; one in whom confidence is reposed as
regards property for the benefit of another person is known as the trustee; and the person for whose
benefit the trust has been created is referred to as the beneficiary
Parties to a Trust
(1) The trustor (creator/settlor/grantor)
(2) The trustee; and
(3) The beneficiary or cestui que trust
ART. 1441. Trusts are either express or implied. Express trusts are created by the intention of the trustor
or of the parties. Implied trusts come into being by operation of law.
(1) Creation.
(a) express trust
(b) implied trust; this latter trust being either:
1) resulting trust or one
2) constructive trust
(2) Effectivity.
(a) testamentary trust
(b) trust inter vivos (sometimes called living trust)
(3) Revocability.
(a) Revocable trust
(b) Irreovocable trust
ART. 1442. The principles of the general law of trusts, insofar as they are not in conflict with this Code,
the Code of Commerce, the Rules of Court6 and special laws are hereby adopted.
EXPRESS TRUSTS
ART. 1443. No express trusts concerning an immovable or any interest therein may be proved by parol
evidence.
ART. 1444. No particular words are required for the creation of an express trust, it being sufficient that a
trust is clearly intended.
ART. 1445. No trust shall fail because the trustee appointed declines the designation, unless the
contrary should appear in the instrument constituting the trust.
The trust ordinarily continues even if the trustee declines. Reason the court will appoint a
new trustee, unless otherwise provided for in the trust instrument.
ART. 1446. Acceptance by the beneficiary is necessary. Nevertheless, if the trust imposes no onerous
condition upon the beneficiary, his acceptance shall be presumed, if there is no proof to the contrary
For the trust to be effective, the beneficiary must accept:
(a) expressly,
(b) or impliedly,
(c) or presumably.
Termination of express trust
(1) Expiration of period fixed.
(2) Accomplishment of purpose.
(3) Mutual agreement of beneficiaries
(4) Exercise of power to terminate.
IMPLIED TRUSTS
ART. 1447. The enumeration of the following cases of implied trust does not exclude others established
by the general law of trust, but the limitation laid down in Article 1442 shall be applicable.
Implied trusts are those which, without being express, are deducible from the nature of the
transaction as matters of intent, or which are superinduced on the transaction by operation of
law, as matters of equity, independently of the particular intention of the parties.
Kinds of implied trust.
(1) Resulting trust.
(2) Constructive trust.
Note: Enumeration of cases of implied trust not exclusive
Distinctions between express trusts and implied trusts.
Express trusts
created by the intention of the trustor or parties
cannot be proved by parol evidence
express repudiation made known to the benefi ciary is required
Implied trusts
come into being by operation of law
may be proved by oral evidence
no repudiation, unless there is concealment of the fact giving rise to the trust
ART. 1448. There is an implied trust when property is sold, and the legal estate is granted to one party
but the price is paid by another for the purpose of having the beneficial interest of the property. The
former is the trustee, while the latter is the beneficiary. However, if the person to whom the title is
conveyed is a child, legitimate or illegitimate, of the one paying the price of the sale, no trust is implied
by law, it being disputably presumed that there is a gift in favor of the child.
General rule. A resulting trust arises in favor of a person from whom a consideration comes
for a conveyance of property, whether realty or personalty, to another.
Exceptions. However, no trust is implied if the person to whom the legal estate is conveyed is
a child, legitimate or illegitimate, of the payor, because it is presumed that a gift or donation
was intended in favor of the child.
Prescriptibility of action for reconveyance based on implied trust.
It is now well settled that an acion for reconveyance to enforce and implied trust in ones favor
prescribes in ten (10) years from the time the right of action accrues, the action being based
upon an obligation created by law because just as a resulting trust is an offspring of the law, so
is the corresponding obligation to convey the property to the true owner.
The ten-year period of prescription of an action for reconveyance of property based on an implied trust
starts from the moment the law creates the trust because the so-called trustee does not recognize any
trust, and has no intention to hold for the beneficiary. The ten-year period of prescription commences
to run from the time the trustee begins to assert his title r repudiate the trust, or to hold adversely.
Continuous recognition of a resulting trust precludes any defense of prescription or laches in a suit to
declare and enforce the trust.
Laches in action to enforce a trust.
(1) In case of express trusts. A cestui que trust is entitled to rely upon the fidelity of the trustee.
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.
(2) In case of implied trusts. It is well-settled that the negligence or omission to assert a right within a
reasonable time warrants not only a presumption that the party entitled to assert it either had
abandoned it or declined to assert it but also casts doubt on the validity of the claim, since it is human
nature for persons to assert their rights most vigorously when threatened or invaded. The doctrine of
laches, however, is less strictly applied between near relatives than when the parties are strangers to
each other. The existence of a confidential relationship is an important consideration as it tends to
excuse an otherwise unreasonable delay.
ART. 1449. There is also an implied trust when a donation is made to a person but it appears that
although the legal estate is transmitted to the donee, he nevertheless is either to have no benefi cial
interest or only a part thereof.
This is a resulting trust, where the donee becomes the trustee of the real beneficiary.
ART. 1450. If the price of a sale of property is loaned or paid by one person for the benefit of another
and the conveyance is made to the lender or payor to secure the payment of the debt, a trust arises by
operation of law in favor of the person to whom the money is loaned or for whom it is paid. The latter
may redeem the property and compel a conveyance thereof to him.
ART. 1451. When land passes by succession to any person and he causes the legal title to be put in the
name of another, a trust is established by implication of law for the benefi t of the true owner.
ART. 1452. If two or more persons agree to purchase property and by common consent the legal title is
taken in the name of one of them for the benefi t of all, a trust is created by force of law in favor of the
others in proportion to the interest of each.
ART. 1453. When property is conveyed to a person in reliance upon his declared intention to hold it for,
or transfer it to another or the grantor, there is an implied trust in favor of the person whose benefi t is
contemplated.
ART. 1454. If an absolute conveyance of property is made in order to secure the performance of an
obligation of the grantor toward the grantee, a trust by virtue of law is established. If the fulfillment of
the obligation is offered by the grantor when it becomes due, he may demand the reconveyance of the
property to him.
ART. 1455. When any 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 to a third person, a trust
is established by operation of law in favor of the person to whom the funds belong.
Reasons for the Rule
(a) fiduciary or trust relations
(b) estoppel
(c) to remove the temptation to place self-interest above all other things, and at the expense of ones
integrity and duty to another. (Severino v. Severino, 44 Phil. 343).
ART. 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force of law,
considered a trustee of an implied trust for the benefit of the person from whom the property comes.
ART. 1457. An implied trust may be proved by oral evidence.