CHAPTER 1

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.

Definition of Trust
Trust is the fiduciary relationship
between one person having equitable
ownership in property and another owning
the legal title to such property, the
equitable ownership of the former entitling
him to perform certain duties and the
exercise of certain powers by the latter for
the benefit of the former.
(Page 628; Comments and Cases on Partnership, Agency,
and Trusts; De Leon; 2014 Edition)

Definition of Trust
It is a legal arrangement whereby a
person (Trustor) transfers his legal
title to property to another (Trustee)
to be administered by the latter for
the benefit of a third party
(Beneficiary).
It is the right to the beneficial use
and enjoyment of property the legal
title to which is vested in another.
(Page 628; Comments and Cases on Partnership,

Trust cannot be established in

violation of Law
Trust is founded on equity and can
never result from acts violative of law.
Ex. Thus, no trust can result from a
contract of partnership formed for an
illegal purpose.

(Page 629; Comments and Cases on Partnership,

Agency, and Trusts; De Leon; 2014 Edition)

Trust vs Bailment
BAILMENT

TRUST

The bailee has

possession of,
without legal title
to, the property
subject of bailment.

Delivery of property
necessarily involves
a transfer of legal
title, or at least
separation of
equitable interest
and legal title, with
the legal title with
the trustee.

Trust vs Donation
DONATION
A transfer of
property (except in
case of gift in trust),
which involves a
disposition of both
legal and equitable
ownership.

TRUST
An existing legal
relationship and
involves the
separation of legal
or equitable.

Trust vs Contract
CONTRACT
Is a legal obligation
based on an
undertaking
supported by a
consideration, which
obligation may or
may not be
fiduciary in
character.

TRUST
Always involves
ownership,
embracing a set of
rights and duties
fiduciary in
character which
may be created by
a declaration
without
consideration.

Trust vs Debt
DEBT

TRUST

Creditor merely has Beneficiary of a

a personal claim
trust has a
against the debtor. beneficial interest in
the trust property.
No fiduciary
relationship
Fiduciary
relationship
Implies merely an
obligation to pay a Refers to a duty to
certain sum of
deal with a specific
money
property for the

Persons Involved in the Creation of

an Express trust
1. TRUSTOR
The person who intentionally creates
or establishes the trust.
Transfers legal ownership of property
or assets to a person for the benefit
of a third party, who owns the
equitable title.

Persons Involved in the Creation of

an Express trust
2. TRUSTEE
The person who takes and holds the
legal title to the property in trust and
manages it solely for the benefit of
another, with certain powers and
subject to certain duties.
The trustee may be natural or a legal
entity

Persons Involved in the Creation of

an Express trust
3. BENEFICIARY
The person who has the equitable title
or interest in the property and enjoys
the benefit of the administration of the
trust by the trustee.
He is the recipient of the trust.
May be natural or a legal entity.
Trust may provide for more than one
beneficiary

Trust Property
The subject matter of a trust may be any
property of value real, personal, funds or
money, etc.
The trust res must consist of property
actually in existence in which the trustor
has a transferable interest or title;
It may, as a rule be any kind of
transferable property either realty or
personal including undivided, future or
contingent interest.

Nature of Ownership of Trustee and

Beneficiary

Ownership by two persons

Ownership of trustee, a mere
matter of form and nominal
Trustee, not a mere agent
Transfer of equitable title
Rights of beneficiary

Character of Office of
Trustee
1.As Principal

2.As Agent
3.As fiduciary

CHAPTER 1
GENERAL PROVISIONS
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.

Article 1441

Classification of Trust
EXPRESS TRUST- one which can come into existence only by the
execution of an intention to create it by the trustor or the parties.
IMPLIED TRUST- one which comes into being by operation of law;
this latter trust being either:
Resulting trust- one in which the intention to create a trust is
implied or presumed in law.
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.

Article 1441

Effectivity
Testamentary Trusts
A testamentary trust or one which take effect upon the
trustors death. It is usually included as part of the will.
All testamentary trusts are irrevocable
Inter vivos or Living Trusts
A living trust, also referred to as an "inter vivos trust"one established effective during the owners life.

CHAPTER 1
GENERAL PROVISIONS
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 Court and special laws are hereby
adopted.

Article 1442

Principles
Similar to Article 1432 which adopts the
principle of estoppel.
Proceeds from the sale of property held in
trust= profit within the purview of the internal
revenue laws?
Answer: Depends upon the provisions of the IR Laws
( Perez vs Araneta, 4 SCRA 430)

Enforcement is invalid if it is against the law.

(Heirs of L. Yap vs. CA, 312 SCRA 603)

Article 1442

Modes of Termination of
Express
Expiration Trust
of period fixed
Accomplishment of purpose
Mutual agreement of beneficiaries
Exercise of power to terminate

CHAPTER 2
EXPRESS TRUSTS
Art. 1443. No express trusts concerning an
immovable or any interest therein may be
proved by parol evidence.

CHAPTER 2
EXPRESS TRUSTS
Art. 1444. No particular words are required for
the creation of an express trust, it being
sufficient that a trust is clearly intended.

Article 1444

Creation of Express Trust

*Geronimo and Isidro v. Nava and Aquino
*terminology used not controlling
TEST: "whether the trustor or the party
manifested an intention to create the kind of
relationship which in law in known as a trust
*Julio v. Dalandan
*Vda. de Mapa v. CA

Article 1444

Kinds of Express Trust

1.
2.
3.
4.

Charitable Trust
Accumulation Trust
Spendthrift Trust
Sprinkling Trust

CHAPTER 2
EXPRESS TRUSTS
Art. 1445. No trust shall fail because the
trustee appointed declines the designation,
unless the contrary should appear in the
instrument constituting the trust.

CHAPTER 2
EXPRESS TRUSTS
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.

CHAPTER 3
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
These 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 parties.

Implied trust
Not created voluntarily, but imposed by
law or inferred from the conduct or
dealings of the parties.
Created by operation of law based on
owners presumed intention.
Founded upon on Equity.

Kinds of Implied Trust

Resulting trust

Constructive trust

Intention enforcing trust

Equitable remedy against unjust

enrichment.
Not a trust in technical sense.

By implication of the law

and raised or created by the act
or construction of law.

Raised or created by the act or

construction of law

Presumed to have been

contemplated by the parties

Not created by any words ,either

expressly or impliedly, but by
construction of equity in order to
satisfy the demands of justice
and prevent unjust enrichment.

Enumeration of cases of implied trust not exclusive

Other cases just need to comply with Article 1442,

New Civil Code

Examples:
1.

Registration of land under the Torrens Systems in the name of another.

2.Certificate of Registration of a vehicle is placed in the name of a person

although the price thereof was not paid by him.
3. Mortgagee as a custodian relating to the surplus of the proceeds for the
foreclosure sale and regarded as a trustee for the benefit of the
mortgagor.
4. Contract of Partnership, if the agent willfully violated the trust reposed to him
by buying the property he was supposed to buy for the principal

5. Trust fund Doctrine in Corporation law

6. Insurance commissioner as holder of the security deposits for the
benefit of all policy holders.
Thus, as long as they meet the standards for the creation of implied
trust, law on Implied trust may be applied.

Express trust vs. Implied Trust

Express Trust

Implied Trust

Creation

Intention of the parties/ trustor

Operation of law

Proof of trust as to
immovable

Cannot be proved by parol

evidence

Can be proved by parol

evidence

Repudiation of trust
(Acquisition of
property through
Prescription)

Express repudiation made

known to the beneficiary is
required to bar an action based
on laches or acquisitive
prescription

Laches constitutes a bar to

actions to enforce constructive
trust,even without repudiation,
unless there is concealment of
the fact giving rise to the trust.
*In resulting trust, rule on
Express trust applies

Existence of
fiduciary relation

Yes

In Constructive trust, None.

Prescriptibility of action for reconveyance based on

implied trust.
A.

Period of Prescription

Reconveyance is a legal remedy granted to a rightful owner of a land

wrongfully or erroneously registered under the Torrens System in the
name of another to compoel the latter to reconvey the land to him even
after 1 year from the issuance of the decree of registration.

Action for reconveyance to enforce an implied trust prescribes in 10 year,

from the right of action accrues and the owner claiming to be the owner is
not in actual possession of the property. (Imprescriptible if in actual
possession)

B. When does it accrues?

.
From the moment the law creates the trust or from the time of actual
notice in case of unregistered deed.

CHAPTER 3
IMPLIED TRUSTS
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.

CHAPTER 3
IMPLIED TRUSTS
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 beneficial interest or only a part thereof.

CHAPTER 3
IMPLIED TRUSTS
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 its is paid. The latter may
redeem the property and compel a
conveyance thereof to him.

CHAPTER 3
IMPLIED TRUSTS
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
benefit of the true owner.

CHAPTER 3
IMPLIED TRUSTS
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 benefit of all, a trust is created
by force of law in favor of the others in
proportion to the interest of each.

CHAPTER 3
IMPLIED TRUSTS
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 benefit is contemplated.

CHAPTER 3
IMPLIED TRUSTS
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.

Article 1454

Absolute Conveyance to a person to secure

performance of grantors obligation

CHAPTER 3
IMPLIED TRUSTS
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.

CHAPTER 3
IMPLIED TRUSTS
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.

SPA
Without
knowledge
Innocent
Purchaser

With knowledge
Buyer in Bad
Faith

mistake fraud

Where a party acquires through

mistake or fraud a legal title to
property to which another has a
better right, a constructive trust is
created in favor of the aggrieved
party who is truly entitled to it
Basis: the primary principle of law and
equity that one should not unjustly
enrich himself at the expense of
another.

 The creation of a constructive trust is

an appropriate remedy against
unjust enrichment
In order to seek reconveyance,
the complaint must allege that:
The plaintiff was the owner of the
property
The defendant had illegally
dispossessed him of the same

Remedies of owner under the Torrens system

Reconveyance- after one year

from date of decree of
registration and respecting it as
incontrovertible
Damages- if the property has
passed into the hands of an
innocent purchaser for value

CHAPTER 3
IMPLIED TRUSTS
Art. 1457. An implied trust may be proved by
oral evidence.

ARTICLE 1457
An IMPLIED TRUST may be
proved by oral evidence.

ARTICLE 1457
Oral or Parol Evidence*
referstoverbalexpressionsor
words
verbalevidence,suchasthe
testimonyofawitnessattrial.
*The Free Dictionary by Farlex
(http://legal-dictionary.thefreedictionary.com/Parol+Evidence)

ARTICLE 1457

As distinguished from an
EXPRESS TRUST under Art.
1443

ARTICLE 1457
IMPLIED TRUST
not dependent upon an
express agreement
nor required to be evidenced
by a writing

ARTICLE 1457
The oral evidence has to be:
TRUSTWORTHY
cannot rest on loose,
equivocal or indefinite
declarations
bec. oral evidence can be
easily fabricated

ARTICLE 1457
FULLY CONVINCING
as if the acts giving rise to
the trust obligation
are proven by an authentic
document

ARTICLE 1457
CANNOT BE ESTABLISHED
CONTRARY TO THE TORRENS
TITLE
In a case where the supposed
trustees are:
Registered owners
Possessors for more than 40
years

their title and possession

ARTICLE 1457
CANNOT BE APPLIED
WHERE NO PROVEN FACTS
TO SUPPORT IT
still there must be proof that
the trustor wanted to grant
one party only the beneficial
ownership of a property

THANK