TYPES OF TRUSTS IN THE PHILIPPINES
subject to probate.
There are many types of trusts that can be
used to accomplish a variety of objectives. In
the Philippines the four main types of trusts
that are most useful are the family trust, the
assets protection trust, the insurance trust and
the business trust. The following is an
overview these trusts.
FAMILY TRUST:
A Family Trust is an exceptionally useful device
that can give considerable flexibility to estate
planning and may save money at the same
time. Typically, a Family Trust is created to
avoid probate, provide asset management and
in some cases, asset protection.
The three parties to the Family Trust are the
grantor, trustee and beneficiary.
The grantor (sometimes referred to as the
settlor or the creator) is the person who
creates the Family Trust; the Trustee (which can
be the grantor), is the person who is
responsible for managing the Family Trust
assets and carrying out the Family Trust’s
objectives; and the beneficiary(who can also be
the grantor) is the party for whom the Family
Trust was created.
In the case of the typical Family Trust, the
grantor would name himself or herself as the
income beneficiary, sometimes as the trustee,
while their heirs are named as the remainder
beneficiaries.
One big advantage of a Family Trust is that it
can protect the grantor by allowing the grantor
to appoint a co-trustee or to provide for a
successor trustee to manage the Trust’s
investments in the event of incapacity .
Managing one’s own property while you are
well and vigorous may be the most attractive
option for most individuals. However, how do
you ensure continuity in the management of
your assets if illness or injury were to strike,
leaving you unable to continue the
management your assets. This question is
answered by having a family trust that
continues to manage trust assets and most
often avoid the need for a guardianship.
Another advantage of a Family Trust is
avoidance of probate. If you own property in
your own name such as real estate, bank
accounts, etc., in the Philippines, the U.S. or
elsewhere in the world, these assets will be
This represents extra cost and delay to settle
your estate. Fortunately, a probate proceeding
would not be required where these assets are
held by a Family Trust. This, in turn, reduces
the expense to settle the trust estate and
delays in distributing assets to distributees of
the estate.
The Family Trust can be designed to distribute
assets directly to beneficiaries or to continue to
hold these assets in trust for the beneficiaries
for a stated period of time or the life of the
beneficiary.
A common feature of many Family Trusts is for
the assets to be held for the life of the grantor,
then for the life of the grantor’s children and
then distributed to grandchildren.
If the grantor so desires, the children could be
giving the power to have the trust assets to
continue be held in trust for their children.
ASSET PROTECTION TRUSTS:
Asset protection Trusts come in many forms.
They can be domestic or foreign, self-settle or
third-party trust. All are irrevocable.
It is the language used in the drafting of the
trust that gives it the asset protection feature.
Typically the trust will contain a spendthrift
clause and a discretionary clause for
distribution of income and/or principal, plus
additional provisions that will make it difficult
for a creditor to reach the trust’s income and
corpus.
This type of trust is popular with individuals
that wish to protect themselves or their
children from creditors, lawsuits, claims of ex-
spouses and just plain bad judgement or luck.
For business persons, an asset protection trust
is often used to protect their personal assets
from business debt or a business deal gone
bad.
In the case of the grantor’s children, an asset
protection trust is most often used to protect
their children from the three D’s – divorce,
death, and disaster.
Two important clauses to include in an asset
protection trust are the spendthrift clause and
the discretionary distribution clause.
The spendthrift clause does not limit the
beneficiary rights to income and/or principal,
pursuant to the terms of the trust agreement,
but it does explicitly prevent the trust
beneficiary from assigning the future payments
of income or distributions of principal.
Because beneficiaries can’t assign their
interest in trust income and assets, creditors
are prohibited from reaching the trust’s income
and/or principal.
The discretionary distribution clause protects
trust assets by giving the beneficiary no direct
rights in the trust income or assets that can be
assigned or attached.
Distributions from the trust are subject to the
sole discretion of a trustee to or not distribute
income and/or principal.
The protection from creditor’s claims afforded
by the discretionary clause derives from the
widely recognized rule of law, that where a
beneficiary has no right to compel distribution,
a creditor has no right to compel a distribution
of the beneficiary’s interest in the trust.
One way to look at an asset protection trust, is
to think it as an insurance policy.
There are many types of insurance you
can buy:
But you can’t buy insurance to protect your
assets from such events as a business deal
gone bad, just plain bad luck, claims of
creditors that exceed your liability insurance
coverage and ex-spouses. No matter how
careful you are, events beyond your control
can expose your assets to claims that can wipe
you out financially.
An asset protection trust may not prevent the
claim against you, but it can prevent a creditor
from taking the assets held by your asset
protection trust to satisfy the creditor’s claim.
LIFE INSURANCE TRUST:
Under U.S. tax law if you own, have an interest
in, or control over an life insurance policy, the
death proceeds of the policy are subject to
estate taxes.
Philippine tax law is a little more liberal.
Under Philippine estate tax rules, life insurance
proceeds are included in the taxable estate to
the extent of the amount receivable by the
estate of the deceased, his executor, or
administrator, as insurance under policies
taken out by the decedent upon his own life,
irrespective of whether or not the insured
retained the power of revocation, or to the
extent of the amount receivable by any
beneficiary designated in the policy of
insurance, except when it is expressly
stipulated that the designation for the
beneficiary is irrevocable.
A popular planning technique to avoid life
insurance proceeds from being subject to
estate taxes is to have a trust own the life
insurance policy that receives life insurance
proceeds upon the death of the insured.
This removes the life insurance proceeds from
the deceased insured’s taxable estate and can
be extremely useful planning technique for
providing estate liquidity
For example, assume an estate consists mainly
of assets of a family business, such as land,
buildings, equipment, etc. that are necessary
to continue the family business.
Not all of the decedent’s children are interested
in being part of the family business.
An insurance trust could be designed to
provide the cash to buy out the children not
interested in the business, while the children
interested in the business receive the business
assets.
Typically, the children that want to continue the
business are the beneficiaries of the insurance
trust.
Upon the insured’s death, the insurance trust
would receive the insurance proceeds, which
would be used to buy the business assets from
the estate (which could be a family trust).
The end result, the children that want to run
the family business will own the business
assets in trust (think asset protection) for their
benefit, which they can continue to use in the
business, while the children not interested in
the business would receive cash.
This technique can also be used to provide a
surviving spouse with cash, while the children
get the property.
There are many variations of how an insurance
trust can be used to provide liquidity for
business succession planning or the needs of
heirs.
BUSINESS TRUST:
All trusts that hold assets are in a sense, a
business trust due to the management and
investment of trust assets.
However, some trusts are specifically designed
to create or acquire a business. Whatever the
purpose, business trusts have been around
long before corporations became the common
business entity format.
Trusts were being used prior to 1571 when the
Statute of Elizabeth was passed in England.
The Statute of Elizabeth forms the basis of
much of the trust law found around the world
in English speaking countries today.
In New York, large sections of New York’s trust
law is taken word for word from the Statute of
Elizabeth. So, it can be said,Trusts are not the
new kid on the bloc
The business trust made its debut in
Massachusetts, USA, in 1827. As a result,
many business trusts are referred to as a
Massachusetts Trust.
The U.S. Supreme Court has defined the
Massachusetts Trust as a form of business
organization where property is conveyed to the
trustee in accordance with the terms of the
trust agreement, to be managed for the
beneficiaries of the trust.
In essence, a business trust is your typical trust
with a different label identifying it as a
business trust due to its main purpose to carry
on a business.
The business trust originated in Massachusetts
as a result of negative laws prohibiting the
development of real estate without a special
act (permission) of the State.
As the laws became more liberal and it was
easier to form a corporation, the corporation
replaced the business trust as the business
entity of choice for most business, but not all.
For example, many mutual funds, money
market accounts, IRAs are operated as trusts.
It is also common for family business assets to
be held in trust and leased to the family
members operating the business.
In the Philippines, the business trust is a useful
vehicle that allows a group of individuals to
pool their money to start or acquire a business
similar to the partnership or corporate format
for pooling money for an investment.
However, the business trust is still a trust with
the features associated with trusts in general.
As in the days of old, before corporations
became the common business entity, business
trusts can still be an effective means of
conducting a business.
Types of Trusts
A trust can be created during a person's
lifetime and survive the person's death. A trust
can also be created by a will and formed after
death. Once assets are put into the trust they
belong to the trust itself, not the trustee, and
remain subject to the rules and instructions of
the trust contract. Most basically, a trust is a
right in property, which is held in a fiduciary
relationship by one party for the benefit of
another. The trustee is the one who holds title
to the trust property, and the beneficiary is the
person who receives the benefits of the trust.
While there are a number of different types of
trusts, the basic types are revocable and
irrevocable.
Revocable Trusts
Revocable trusts are created during the
lifetime of the trustmaker and can be altered,
changed, modified or revoked entirely. Often
called a living trust, these are trusts in which
the trustmaker transfers the title of a property
to a trust, serves as the initial trustee, and has
the ability to remove the property from the
trust during his or her lifetime. Revocable
trusts are extremely helpful in avoiding
probate. If ownership of assets is transferred to
a revocable trust during the lifetime of the
trustmaker so that it is owned by the trust at
the time of the trustmaker's death, the assets
will not be subject to probate.
Although useful to avoid probate, a revocable
trust is not an asset protection technique as
assets transferred to the trust during the
trustmaker's lifetime will remain available to
the trustmaker's creditors. It does make it more
somewhat more difficult for creditors to access
these assets since the creditor must petition a
court for an order to enable the creditor to get
to the assets held in the trust. Typically, a
revocable trust evolves into an irrevocable
trust upon the death of the trustmaker.
Irrevocable Trust
An irrevocable trust is one which cannot be
altered, changed, modified or revoked after its
creation. Once a property is transferred to an
irrevocable trust, no one, including the
trustmaker, can take the property out of the
trust. It is possible to purchase survivorship life
insurance, the benefits of which can be held by
an irrevocable trust. This type of survivorship
life insurance can be used for estate tax
planning purposes in large estates, however,
survivorship life insurance held in an
irrevocable trust can have serious negative
consequences.
Asset Protection Trust
An asset protection trust is a type of trust that
is designed to protect a person's assets from
claims of future creditors. These types of trusts
are often set up in countries outside of the
United States, although the assets do not
always need to be transferred to the foreign
jurisdiction. The purpose of an asset protection
trust is to insulate assets from creditor attack.
These trusts are normally structured so that
they are irrevocable for a term of years and so
that the trustmaker is not a current beneficiary.
An asset protection trust is normally structured
so that the undistributed assets of the trust are
returned to the trustmaker upon termination of
the trust provided there is no current risk of
creditor attack, thus permitting the trustmaker
to regain complete control over the formerly
protected assets.
Charitable Trust
Charitable trusts are trusts which benefit a
particular charity or the public in general.
Typically charitable trusts are established as
part of an estate plan to lower or avoid
imposition of estate and gift tax. A charitable
remainder trust (CRT) funded during the
grantor's lifetime can be a financial planning
tool, providing the trustmaker with valuable
lifetime benefits. In addition to the financial
benefits, there is the intangible benefit of
rewarding the trustmaker's altruism as
charities usually immediately honor the donors
who have named the charity as the beneficiary
of a CRT.
Constructive Trust
A constructive trust is an implied trust. An
implied trust is established by a court and is
determined from certain facts and
circumstances. The court may decide that,
even though there was never a formal
declaration of a trust, there was an intention on
the part of the property owner that the
property be used for a particular purpose or go
to a particular person. While a person may take
legal title to property, equitable considerations
sometimes require that the equitable title of
such property really belongs to someone else.
Special Needs Trust
A special needs trust is one which is set up for
a person who receives government benefits so
as not to disqualify the beneficiary from such
government benefits. This is completely legal
and permitted under the Social Security rules
provided that the disabled beneficiary cannot
control the amount or the frequency of trust
distributions and cannot revoke the trust.
Ordinarily when a person is receiving
government benefits, an inheritance or receipt
of a gift could reduce or eliminate the person's
eligibility for such benefits.
By establishing a trust, which provides for
luxuries or other benefits which otherwise
could not be obtained by the beneficiary, the
beneficiary can obtain the benefits from the
trust without defeating his or her eligibility for
government benefits. Usually, a special needs
trust has a provision which terminates the trust
in the event that it could be used to make the
beneficiary ineligible for government benefits.
Special needs has a specific legal definition
and is defined as the requisites for maintaining
the comfort and happiness of a disabled
person, when such requisites are not being
provided by any public or private agency.
Special needs can include medical and dental
expenses, equipment, education, treatment,
rehabilitation, eye glasses, transportation
(including vehicle purchase), maintenance,
insurance (including payment of premiums of
insurance on the life of the beneficiary),
essential dietary needs, spending money,
electronic and computer equipment, vacations,
athletic contests, movies, trips, money with
which to purchase gifts, payments for a
companion, and other items to enhance self-
esteem. The list is quite extensive.
Parents of a disabled child can establish a
special needs trust as part of their general
estate plan and not worry that their child will
be prevented from receiving benefits when
they are not there to care for the child.
Disabled persons who expect an inheritance or
other large sum of money may establish a
special needs trust themselves, provided that
another person or entity is named as trustee.
Spendthrift Trust
A trust that is established for a beneficiary
which does not allow the beneficiary to sell or
pledge away interests in the trust is known as a
spendthrift trust. It is protected from the
beneficiaries' creditors, until such time as the
trust property is distributed out of the trust and
given to the beneficiaries.
Tax By-Pass Trust
A tax by-pass trust is a type of trust that is
created to allow one spouse to leave money to
the other, while limiting the amount of federal
estate tax that would be payable on the death
of the second spouse. While assets can pass to
a spouse tax-free, when the surviving spouse
dies, the remaining assets over and above the
exempt limit would be taxable to the children
of the couple, potentially at a rate of 55
percent. A tax by-pass trust avoids this
situation and saves the children perhaps
hundreds of thousands of dollars in federal
taxes, depending upon the value of the estate.
Totten Trust
A Totten trust is one that is created during the
lifetime of the grantor by depositing money
into an account at a financial institution in his
or her name as the trustee for another. This is
a type of revocable trust in which the gift is not
completed until the grantor's death or an
unequivocal act reflecting the gift during the
grantor's lifetime. An individual or an entity can
be named as the beneficiary. Upon death,
Totten trust assets avoid probate. A totten trust
is used primarily with accounts and securities
in financial institutions such as savings
accounts, bank accounts, and certificates of
deposit. A Totten trust cannot be used with real
property. A Totten Trust provides a safer
method to pass assets on to family than using
joint ownership.
To create a totten trust, the title on the account
should include identifying language, such as "In
Trust For," "Payable on Death To," "As Trustee
For," or the identifying initials for each, "IFF,"
"POD," "ATF." If this language is not included,
the beneficiary may not be identifiable. A
Totten trust has been called a "poor man's"
trust because a written trust document is
typically not involved and it often costs the
trustmaker nothing to establish.
Trust
Distinguish between express trust and
implied trust (1993).
Answer:
Express trust and implied trust may be
distinguished from each other in the following
ways:
(1) Our New Civil Code defines an
express trust as one created by the
intention of the trustor or of the
parties, and an implied trust as one
that comes into being by operation
of law.
(2) Express trusts are those created by
the direct and positive acts of the
parties, by some writing or deed or
will or by words evidencing an
intention to create a trust. On the
other hand, implied trusts are
those which, without being
expressed, are deducible from the
nature of the transaction by
operation of law as matters of
equity, in dependently of the
particular intention of the parties.
(3) Thus, if the intention to establish a
trust is clear, the trust is express; if
the intent to establish a trust is to
be taken from circumstances or
other matters indicative of such
intent, then the trust is implied.
(Cuayong v. Cuayong, 21 SCRA
1192).
(4) No express trust concerning an
immovable or any interest therein
may be proved by parol evidence
(Art.1443, NCC.), while the
existence of an implied trust may
be proved by parol evidence
(5) Laches and prescription do not
constitute a bar to enforce an
express trust, at least while the
trustee does not openly repudiate
the trust, and make known such
repudiation to the beneficiary,
while laches and prescription may
constitute a bar to enforce an
implied trust, and no repudiation is
required unless there is
concealment of the facts giving rise
to the trust. (Fabian v. Fabian, 21
SCRA 213).
Express Trust; Prescription (1997)
On 01 January 1980, Redentor and Remedies
entered into an agreement by virtue of which
the former was to register a parcel of land in
the name of Remedies under the explicit
covenant to reconvey the land to Remigio, son
of Redentor, upon the son's graduation from
college. In 1981, the land was registered in the
name of Remedies.
Redentor died a year later or in 1982. In March
1983, Remigio graduated from college. In
February 1992, Remigio accidentally found a
copy of the document so constituting Remedies
as the trustee of the land. In May 1994,
Remigio filed a case against Remedies for the
reconveyance of the land to him. Remedies, in
her answer, averred that the action already
prescribed. How should the matter be decided?
SUGGESTED ANSWER:
The matter should be decided in favor of
Remigio (trustee) because the action has not
prescribed. The case at bar involves an express
trust which does not prescribe as long as they
have not been repudiated by the trustee (Diaz
vs. Gorricho. 103 Phil, 261).
Implied Trust (1998)
Juan and his sister Juana inherited from their
mother two parcels of farmland with exactly
the same areas. For convenience, the Torrens
certificates of title covering both lots were
placed in Juan's name alone. In 1996, Juan sold
to an innocent purchaser one parcel in its
entirety without the knowledge and consent of
Juana, and wrongfully kept for himself the
entire price paid.
1. What rights of action, if any, does Juana
have against and/or the buyer?
2. Since the two lots have the same area,
suppose Juana flies a complaint to have herself
declared sole owner of the entire remaining
second lot, contending that her brother had
forfeited his share thereof by wrongfully
disposing of her undivided share in the first lot.
Will the suit prosper?
SUGGESTED ANSWER:
1. When, for convenience, the Torrens title to
the two parcels of land were placed in Joan's
name alone, there was created an implied trust
(a resulting trust) for the benefit of Juana with
Juan as trustee of one-half undivided or ideal
portion of each of the two lots. Therefore, Juana
can file an action for damages against Joan for
having fraudulently sold one of the two parcels
which he partly held in trust for Juana's benefit.
Juana may claim actual or compensatory
damage for the loss of her share in the land;
moral damages for the mental anguish,
anxiety, moral shock and wounded feelings she
had suffered; exemplary damage by way of
example for the common good, and attorney's
fees.
Juana has no cause of action against the buyer
who acquired the land for value and in good
faith, relying on the transfer certificate of title
showing that Juan is the registered owner of
the land.
ANOTHER ANSWER:
1. Under Article 476 of the Civil Code, Juana
can file an action for quieting of title as there is
a cloud in the title to the subject real property.
Second, Juana can also file an action for
damages against Juan, because the settled rule
is that the proper recourse of the true owner of
the property who was prejudiced and
fraudulently dispossessed of the same is to
bring an action for damages against those who
caused or employed the same. Third, since
Juana had the right to her share in the property
by way of inheritance, she can demand the
partition of the thing owned in common, under
Article
494 of the Civil Code, and ask that the title to
the remaining property be declared as
exclusively hers.
However, since the farmland was sold to an
innocent purchaser for value, then Juana has
no cause of action against the buyer consistent
with the established rule that the rights of an
innocent purchaser for value must be
respected and protected notwithstanding the
fraud employed by the seller in securing his
title. (Eduarte vs. CA, 253 SCRA 391)
ADDITIONAL ANSWER:
1. Juana has the right of action to recover (a)
her one half share in the proceeds of the sale
with legal interest thereof, and (b) such
damages as she may be able to prove as
having been suffered by her, which may
include actual or compensatory damages as
well as moral and exemplary damages due to
the breach of trust and bad faith (Imperial vs.
CA, 259 SCRA 65). Of course, if the buyer knew
of the co-ownership over the lot he was buying,
Juana can seek (c) reconvenyance of her one-
half share instead but she must implead the
buyer as co-defendant and allege his bad faith
in purchasing the entire lot. Finally, consistent
with the ruling in Imperial us. CA. Juana may
seek instead (d) a declaration that she is now
the sole owner of the entire remaining lot on
the theory that Juan has forfeited his one-half
share therein.
ADDITIONAL ANSWER:
1. Juana can file an action for damages against
Juan for having fraudulently sold one of the two
parcels which he partly held in trust for Juana's
benefit. Juana may claim actual or
compensatory damage for the loss of her share
in the land; moral damages for the mental
anguish, anxiety, moral shock and wounded
feelings she had suffered; exemplary damage
by way of example for the common good, and
attorney's fees. Juana has no cause of action
against the buyer who acquired the land for
value and in good faith, relying on the transfer
certificate showing that Juan is the registered
owner of the land.
SUGGESTED ANSWER:
2. Juana's suit to have herself declared as sole
owner of the entire remaining area will not
prosper because while Juan's act in selling the
other lot was wrongful. It did not have the legal
effect of forfeiting his share in the remaining
lot. However, Juana can file an action against
Juan for partition or termination of the co-
ownership with a prayer that the lot sold be
adjudicated to Juan, and the remaining lot be
adjudicated and reconveyed to her.
ANOTHER ANSWER:
2. The suit will prosper, applying the ruling in
Imperial vs. CA cited above. Both law and
equity authorize such result, said the Supreme
Court.
Strictly speaking, Juana's contention that her
brother had forfeited his share in the second lot
is incorrect. Even if the two lots have the same
area, it does not follow that they have the
same value. Since the sale of the first lot on
the Torrens title in the name of Juan was valid,
all that Juana may recover is the value of her
undivided interest therein, plus damages. In
addition, she can ask for partition or
reconveyance of her undivided interest in the
second lot, without prejudice to any agreement
between them that in lieu of the payment of
the value of Juana's share in the first lot and
damages, the second lot be reconveyed to her.
ALTERNATIVE ANSWER:
2. The suit will not prosper, since Juan's
wrongful act of pocketing the entire proceeds
of the sale of the first lot is not a ground for
divesting him of his rights as a co-owner of the
second lot. Indeed, such wrongdoing by Juan
does not constitute, for the benefit of Juana,
any of the modes of acquiring ownership under
Art. 712, Civil Code.
Trust; Implied Resulting Trust (1995)
In 1960, Maureen purchased two lots in a plush
subdivision registering Lot 1 in her name and
Lot 2 in the name of her brother Walter with
the latter's consent. The idea was to
circumvent a subdivision policy against the
acquisition of more than one lot by one buyer.
Maureen constructed a house on Lot 1 with an
extension on Lot 2 to serve as a guest house.
In 1987, Walter who had suffered serious
business losses demanded that Maureen
remove the extension house since the lot on
which the extension was built was his property.
In 1992, Maureen sued for the reconveyance to
her of Lot 2 asserting that a resulting trust was
created when she had the lot registered in
Walter's name even if she paid the purchase
price. Walter opposed the suit arguing that
assuming the existence of a resulting trust the
action of Maureen has already prescribed since
ten years have already elapsed from the
registration of the title in his name. Decide.
Discuss fully.
SUGGESTED ANSWER:
This is a case of an implied resulting trust. If
Walter claims to have acquired ownership of
the land by prescription or if he anchors his
defense on extinctive prescription, the ten year
period must be reckoned from 1987 when he
demanded that Maureen remove the extension
house on Lot No. 2 because such demand
amounts to an express repudiation of the trust
and it was made known to Maureen. The action
for reconveyance filed in 1992 is not yet barred
by prescription. (Spouses Huang v. Court of
Appeals, Sept. 13, 1994).
Trust De Son Tort (2007)
Explain the concept of trust de son tort
(constructive trust) and give an example.
SUGGESTED ANSWER:
A constructive trust is a trust NOT created by
any word or phrase, either expressly or
impliedly, evincing a direct intention to create
a trust, but is one that arises in order to satisfy
the demands of justice. It does not come about
by agreement or intention but mainly operation
of law and construed as a trust against one
who, by fraud, duress or abuse of confidence,
obtains or holds the legal right to property
which he ought not, in equity and good
conscience, to hold (Heirs of Lorenzo Yap v. CA,
371 Phil 523, 1991).
The following are examples of
constructive trust:
1. Art. 1456 NCC which provides: "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 for whom the property
comes."
2. Art 1451 NCC which provides:
"When land passes by succession through 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 benefit of the true
owner."
3. Art 1454 NCC which provides: "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."

4. Art 1455 NCC which provides: "When

any trustee, guardian or any person holding a
fiduciary relationship uses trust funds for the
purchase of property and causes conveyance
to be made to him or to third person, a trust is
established by operation of law in favor of the
person to whom the funds belong."

2011-2014 Bar Questions

An action for reconveyance of a registered
piece of land may be brought against the
owner appearing on the title based on a claim
that the latter merely holds such title in trust
for the plaintiff. The action prescribes,
however, within 10 years from the registration
of the deed or the date of the issuance of the
certificate of title of the property as long as the
trust had not been repudiated. What is the
exception to this 10-year prescriptive period?
(A) When the plaintiff had no notice of
the deed or the issuance of the
certificate of title.
(B) When the title holder concealed the
matter from the plaintiff.
(C) When fortuitous circumstances
prevented the plaintiff from filing the
case sooner.
(D) When the plaintiff is in possession
of the property.