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Trust(Obligations and Contracts)

A. What is Trust?

It is the legal relationship between one person having an equitable ownership in property

and another person owning the legal title to such property, the equitable ownership of the former

entitling him to the performance of certain duties and exercise of certain powers by the latter.

What are the characteristics of Trust?

1. It is a fiduciary relationship.

2. Created by law or by agreement.

3. Where the legal title is held by one, and the equitable title or beneficial title is held by

another.

B. Who are the parties to a Trust?

1. Trustor or settler- he establishes the trust

2. Trustee- holds the property in trust for the benefit of another

3. Beneficiary or cestui que trust- the person whose benefit the trust has been created

May the trustor be at the same time the beneficiary?

Yes!

What are the elements of a Trust?

The (1)parties to the trust and the (2)trust property/trust estate/subject matter of the trust

C. What are the kinds of Trust?

There are two kinds: 1. Express- It is created by the parties, or by the intention of the

trustor

2. Implied- It is created by operation of law.

D-1. How is express trust established?

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Clear intention to create trust. (No particular words are required for the creation of an

express trust, it being sufficient that a trust is clearly intended. Art 1444)

D-2. In the absence of a trustee or if trustee declines the designation, who shall appoint for a

new one?

The trust ordinarily continues even if the trustee declines. In the absence of a trustee(where

a trustee dies, resigns, suffers any legal incapacity), the trust does not fail but a new trustee will

be appointed by the proper court, unless by the terms of the trust other provision is made for the

appointment of successor trustee.(Art 1445)

D-3. Is the acceptance of the beneficiary necessary?

Yes, it is necessary that the beneficiary accept the trust for the trust to be effective. If the

trust imposes no onerous(meaning: no interchange of equivalent valuable consideration)

conditions, his acceptance shall be presumed, if there is no proof to the contrary(Art 1446)

D-4. How is an express trust proven?

The requirement that the express trust must be written is only for enforceability, not for

validity between parties. No express trust concerning an immovable or any interest therein may

be proved by parol(oral) evidence(Art 1443)

An oral agreement is valid for a trust over personal property. But one which affects third

party, the trust must be in public document, registered in the Registry of Property(if it concernsreal property)

D-5. In what way may an express trust be repudiated or ended?

1. By mutual agreements by ALL the parties.

2. Upon expiration of the term.

3. Upon fulfillment of the resolutory condition

4. Through rescission or annulment

5.If the subject matter of trust is lost(physical loss or legal impossibility)

6. By order of the court

7. Through merger

8. Upon accomplishment of the purpose of the trust

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D-6. Does prescription and laches apply to express trust?

No. In view of the creation of the express trust, it is clear that no period of prescription is

involved.

E. What are the kinds of Implied Trust?

There are two(2) kinds: 1. Resulting trust(RT)- where there is an intent to create a trust but it

is not effective as an express trust. Presumed to have been contemplated by the parties, but not

so expressed in the instrument of conveyance. Imprescriptible except if repudiated expressly by

the trustee.

2. Constructive trust(CT)- where there is no intention to create a trust

but a trust is nevertheless created by law to prevent unjust enrichment or oppression. Justified

merely by equity to satisfy the demands of justice, and therefore are not really trust in the

technical sense.

E-1. How is an implied trust established?

Implied trust is created by operation of law("trust by operation of law")

E-2. What are the examples of Implied Trust?

1. 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

and the latter is the beneficiary(Art 1448)-> resulting trust

Note: If the title is conveyed to a child, it is not an implied trust as it its presumed a gift in

favor of the child(Art 1448)

2. 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 beneficial interest or only a part

thereof.(Art 1449) --> resulting trust

3. If the price of a sale of property is loaned or paid by one person(say A) for the benefit of

another(say B) and the conveyance is made to the lender or payor(A) to secure the payment of

the debt(of B), a trust arises in favor of the lender(A). B may redeem the property and compel a

conveyance thereof to him(Art 1450) --> constructive trust

4. 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 for the benefit of the true owner(Art 1451) --> resulting

trust

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5. If two or more persons agree to purchase a property and by common consent the legal title

is taken in the name of one of them for the benefit of all, a trust is created in favor of the others

in proportion to the interest of each(Art 1452)--> resulting trust

6. When property is conveyed to a person in reliance upon his declarationof intention to hold it

for, or to transfer it to another or the grantor, a trust is created in favor of the beneficiary(Art

1453) -->resulting trust

7. If an absolute conveyance of property is made in order to secure the performance of anobligation of the grantor toward the grantee, a trust 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 1454) --> constructive trust

8. If any trustee, guardian or other person holding a fiduciary relationship uses the Trust fund

and causes the cinveyance to be made to him or to a third person, a trust is established in favor

of the person to whom the funds belong.(Art 1455) --> constructive trust

9. If the property is acquired through mistake or fraud, the person obtaining it is considered a

trustee for the benefit of the person from whom the property comes. (Art 1456) --> constructive

trust

Note: Resulting and Constructive trusts, if enforced, may be barred by LACHES

Laches is unreasonable delay in the bringing of a cause of action before the courts of justice.

E-3. How is an Implied Trust proven?

An implied trust may be proven by oral evidence(Art 1457)

While an implied trust may be proved by oral evidence, still, said evidence must be a

trustworthy oral evidence, for oral evidence may easily be fabricated.(Salao v Salao)

E-4. Since implied constructive trust and repudiated resulting trust prescribe, what are the

prescriptive periods of action to enforce it?

1. In annullable/voidable contracts( those contracts entered into by minors or other

incapacitated persons), within 4 years from the time the guardianship ceases.(Art 1391,4)

2. In case of fraud in registration, within 10 years upon an obligation created by law(Art

1144, 2)

3. In void contracts(Art 1410), imprescriptible.

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4. in Actions to Quiet Title: Art. 478. There may also be an action to quiet title or remove a

cloud therefrom when the contract, instrument or other obligation has been extinguished or has

terminated, or has been barred by extinctive prescription.