TRUST

Legal 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 for the benefit of the owner. DISTINGUISHED FROM BAILMENT A delivery of property in trust necessarily involves a transfer of legal title, or at least a separation of equitable interest and legal title, with the legal title in the trustee, whereas it is a characteristic of a bailment that the bailee has possession of, without legal title to the property subject to the bailment. &. DISTINGUISHED FROM AGENCY A trust and an agency are distinguishable on the basis of the non% representative role of the trustee and the representative role of the agent. PARTIES TO A TRUST 1. Trustor or the person who creates or established the trust$ Trustee or the person who ta"es and holds the legal tile to the trust property, for the benefit of another, with certain powers and subject to certain duties$ 'eneficiary or cestui que trust or the person has an equitable interest in the property and enjoys the benefit of the administration of the trust by the trustee

DISTINGUISHED FROM DONATION A trust is an existing legal relationship and involves the separation of legal and equitable title, whereas a gift is a transfer of property and, except in the case of a gift in trust, involves a disposition of both legal and equitable ownership. A trust constituted between two contracting parties for the benefit of a third person is not subject to the rules governing donations of real property. The beneficiary of a trust may demand performance of the obligation without having formally accepted the benefit of the trust in a public document, upon mere acquiescence in the formation of the trust and acceptance under the second paragraph of Article 1 11 of the !ivil !ode. 1.

CHARACTER OF OFFICE OF TRUSTEE As principal ( The trustee is not an agent of the trust estate or of the cestui que trust, but he acts for himself in the administration of the trust estate, although subject to the terms of the trust and law of trusts. As agent ( #n some cases, however, a trustee has been regarded as an agent of beneficiaries of the trust at least for certain purposes, such as for the purpose of imputing to the beneficiaries of the trust notice given to the trustee. As fiduciary ( A trustee, li"e an executor or administrator, holds an office of trust. The duties of the latter are, however, fixed and)or limited by law, whereas those of trustee of an express trust are usually governed by the intention of the trustor or of the parties, if established by contract.

&.

DISTINGUISHED FROM CONTRACT A trust always involves an ownership, embracing a set of rights and duties fiduciary in character which may be created by a declaration without consideration, whereas a contract is a legal obligation based on an underta"ing supported by a consideration, which obligation may or may not be fiduciary in character.

&**+ ,-T./0A co%ownership is a form of a trust, with each co%owner being a trustee for each of the others. Art. 111 . ,o express trusts concerning an immovable or any interest therein may be proved by parol evidence.

DISTINGUISHED EXECUTORSHIP

FROM

GUARDIANSHIP

OR

Art. 1111. ,o particular words are required for the creation of an express trust, it being sufficient that a trust is clearly intended. Art. 1112. ,o trust shall fail because the trustee appointed declines the designation, unless the contrary should appear in the instrument constituting the trust. Art. 111+. Acceptance by the beneficiary is necessary. ,evertheless, if the trust imposes no onerous condition upon the beneficiary, his acceptance shall be presumed, if there is no proof to the contrary.

#n trust, the trustee or holder has the legal title to the property$ a guardian, administrator, or executor does not have legal title to the property.

DISTINGUISHED FROM STIPULATION POUR AUTRUI A trust may exist because of a legal provision or because of an agreement$ a stipulation pour autrui can arise only in the case of contracts. A trust refers to specific property$ a stipulation pour autrui refers to specific property or to other things.

CLASSIFICATION OF TRUST From the viewpoi t o! whether it "e#ome$ e!!e#tive %!ter the &e%th o! the tr'$tor or &'ri ( hi$ )i!e*

1. &.

Testamentary trust Trust inter vivos 3sometimes called 4living trusts56

From the viewpoi t o! the #re%tive !or#e "ri (i ( it i to e+i$te #e* .xpress or #mplied EXPRESS TRUST 3created by intention of trustor or parties6

Cestui que trust is entitled to rely upon the fidelity of the trustee. Laches applies from the trustee openly denies or repudiates the trust and the beneficiary is notified thereof, or is otherwise plainly put on guard against the trustee. -n the other hand, when it does not appear when the trustee repudiated existence of the fiduciary relation, the same shall be ta"en to have been made only upon the filing of his answer to the complaint. ACCEPTANCE OF TRUST BY THE BENEFICIARY This is essential to the creation and validity of a trust. Acceptance is presumed if the granting of benefit is purely gratuitous 3no onerous condition6 EXCEPT if there is proof that he really did not accept. Acceptance by the beneficiary of a gratuitous trust is not subject to the rules for the formalities of donations.

111 % #f concerns immovables or any interest therein, may ,-T be proved by parol evidence. 7riting is necessary to prove an express trust concerning immovables or any interest therein To affect rd persons, trust must be embodies in a public instrument registered in the 8egistry of 9roperty ,o particular words are necessary to create express trust as long as trust is clearly intended 311116 E)eme t$ 1.A competent trustor and trustee &.An ascertainable trust res 3./ufficiently certain beneficiaries

<.,.8AL 8;L.0 Acceptance by beneficiary is necessary .=!.9T#-,0 #f trust imposes no onerous condition on beneficiary, acceptance is presumed if there is no contrary proof 3111+6 <eneral 8ule0 Action to enforce shall not prescribe .xception0 ;nless trustee repudiates the trust and this is made "nown to the beneficiary then prescription will apply 3 Diaz v. Gorricho, 103 Phil 2616

ACCEPTANCE, DECLINATION, OR RENUNCIATION BY THE TRUSTEE #n the case of an express trust, acceptance of trust by a trustee is necessary to charge him with the office of the trustee and the administration of the trust and to vest the legal title in him. :owever, his acceptance of the trust is not necessary to its existence and validity, since if he declines the trust, the courts will appoint a trustee to fill the office that he declines. -ne designated or appointed as trustee may decline the responsibility and thereby be free from any legal or equitable duty or liability in the matter. ;nless a contrary intention appears in the instrument constituting the trust, declination or refusal or disqualification of a trustee does not operate to defeat or void the trust, nor does it operate to vest legal as well as equitable title in the beneficiary. 8enunciation of a trust after its acceptance can only be by resignation or retirement with court approval, with agreement of beneficiaries, and on satisfaction of all legal liabilities growing out of the acceptance of the trust. 7hen a person administering property in the character of a trustee inconsistently assumes to be holding in his own right, this operates as renunciation of the trust and the beneficiaries of the property are entitled to maintain an action to declare their right and remove the unfaithful trustee.

'A8 31>>?6@anuary 1, 1>A*, A and ' entered into an agreement wherein A will register parcel of land in the name of ' under an explicit covenant to reconvey land to !, ABs son upon graduation in college. #n 1>A1, land was registered under the name of '. A died in 1>A&. ! graduated in Carch 1>A . #n Debruary 1>>&, ! found the instrument containing express trust and filed an action against ' for reconveyance. 'Bs defense is prescription. :ow should the matter be decidedE The matter should be decided in favor of ! because the action has not prescribed. The case at bar involves express trust which does not prescribe as long as they have not been repudiated by the trustee and this is made "nown to the beneficiary 3Diaz v. Gorricho6

TERMINATION 1. &. . 1. 2. +. ?. A. Cutual agreement of all the parties .xpiration of the term Dulfillment of the resolutory condition 8escission or annulment 9hysical loss or legal impossibility of the subject matter of the trust -rder of the court Cerger Accomplishment of the purpose of the trust

EFFECT OF LACHES

'eneficiary ( :eir

Co3ow er$ p'r#h%$e propert/ "'t tit)e ' &er o e #o3ow er 0-1496

IMPLIED TRUST 3'y operation of law6 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 Cay be proved by oral evidence 3112?6 An action for reconveyance to enforce an implied trust in oneBs favor pre$#ri"e$ i -. /e%r$ !rom the time the ri(ht o! %#tio %##r'e$, the action being based on an obligation created by law 3 uan! v. C", 236 #C$" %20

#f two or more persons agree to purchase property and by common consent legal title is ta"en in the name of one of them for the benefit of all

Trustee ( one who has legal title

'eneficiary ( other co%owners Co ve/% #e "%$e& o promi$e to ho)& !or or tr% $!er to % other 0-14:6 9roperty is conveyed to a person who promises to hold a property or to transfer it to another or the conveyor Trustee ( one who has the property 'eneficiary ( one whose benefit is contemplated

Co ve/% #e to $e#'re % o")i(%tio 0-1416

7hen property is conveyed to a person to secure the performance of obligation by the grantor to the grantee. #f grantor fulfills his obligation, he can as" for reconveyance I $t% #e$ o! Imp)ie& Tr'$t$ 0-1123-1456 .numeration from 111A%112+ is NOT exclusive 3111?6 S%)e % & )e(%) tit)e to % per$o "'t % other p%/$ the pri#e 0-1126 7hen property is sold and legal estate is given to a person but another person pays the price for the purpose of having beneficial interest. Trustee ( one who has legal title 'eneficiary ( one who paid the price

Trustee ( grantee 'eneficiary ( grantor

P'r#h%$e o! propert/ with tr'$t !' &$ 0-1446

Trustee, guardian or person holding fiduciary relationship purchases property with trust funds and legal title is under said trustee or a rd person.

Trustee ( one who has legal title 'eneficiary ( one who owns funds

E+#eptio 0 Fonation, ,-T trust if one who has legal title is the legitimate or illegitimate child of the one who paid Do %tio to o e "'t "e e!i#i%) i tere$t to % other 0-1176

A#;'i$itio o! propert/ thro'(h mi$t%<e or !r%'& 0-1456

9roperty is acquired through mista"e or fraud. Trustee % person obtaining the property 'eneficiary % person where property came from

Fonation is made to a person and he has legal title but he has no or only partial beneficial interest thereof. Trustee ( Fonee 'eneficiary % person who enjoys beneficial interest of

the /C P'r#h%$e with "orrowe& !' &$ 0-14.6 'A8 31>>260 #n 1>A*, A purchased & lots in a subdivision. Lot 1 was under her name and Lot & was placed under the name of ', her brother, with 'Bs consent to circumvent a prohibition against purchase of more than 1 lot. A constructed a house in lot 1 which extended to lot &. #n 1>A?, ' demanded that A remove the part of the house in lot & claiming he is the owner. #n 1>>&, A sued for reconveyance asserting the creation of trust when she paid for lot & even if title was under 'Bs name. ' asserts that the action has prescribed since 1* years have elapsed from the time the lot was registered under his name. F.!#F.. ' is wrong. This is a case of implied trust where the prescriptive period to enforce the trust is 1* years from the time the right of action accrues. #n this case, the 1*%year period should be rec"oned from the time ' ordered A to remove the house in lot & or from 1>A?. /uch demand to remove amounts to a repudiation of the trust which was made "nown to A. :ence, since the case for

9erson purchases property with funds borrowed from another person and title passes to the lender Trustee ( lender 'eneficiary ( person who purchased property

Heir i herit$ )% & "'t tit)e i$ p)%#e& i % other per$o 8$ %me 0-14-6

Land passes by succession to an heir and heir causes legal title to be put in the name of another. Trustee ( one who has legal title

reconveyance was filed in 1>>& or only 2 years from repudiation, the action is not barred by prescription. &**+ notes0 #n order to give rise to a purchase money resulting trust, it is essential that there be0 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 .numeration from 111A%112+ is NOT exclusive 3111?6 An action for reconveyance to enforce an implied trust in oneBs favor pre$#ri"e$ i -. /e%r$ !rom the time the ri(ht o! %#tio %##r'e$, the action being based on an obligation created by law 3 uan! v. C", 236 #C$" %206

1.actual payment of money, property or services, or an equivalent ,consisting of valuable consideration &.such consideration must be furnished by the alleged beneficiary of a resulting trust.

Articles -112, -117, -14- % & -14: are re$')ti ( tr'$t$. Arises where a person ma"es or causes to be made a disposition of property under circumstances which raise an inference that he does not intend that the person ta"ing or holding the property should have the beneficial interest in the property$ is founded on the presumed intention of the parties Art= -14-= >he )% & p%$$e$ "/ $'##e$$io to % / per$o % & he #%'$e$ the )e(%) tit)e to "e p't i the %me o! % other, % tr'$t i$ e$t%")i$he& "/ imp)i#%tio o! )%w !or the "e e!it o! the tr'e ow er= &**+ Coc" bar0 A parcel of land used to be the conjugal property of <regorio Gap and 8osario FieH. The former died, leaving as heirs his wife and children. To facilitate the approval of loan, she executed an extrajudicial settlement of the property signed by the heirs except <regorio @r ,then a minor. Title was cancelled and 8osario exercised the rights of ownership over the property. The judicial settlement was simulated and void but the 8T! dismissed the action which was affirmed by the !A, holding the same was valid. #n fact, both courts ruled the <regorio @r was barred by laches. #s ruling correctE :.LF0 G./, the extrajudicial settlement is valid. 'ut <regorio @r was not barred by laches since he was a minor at the time the extrajudicial settlement was executed. 8egistration of land under 8osario merely created an implied trust in her favor by analogy to Art 1121. A cestui que trust may ma"e a claim under a resulting trust within 1* years from the time the trust is repudiated. Although registration of land in FieHBs name operated as a constructive notice of her claim of ownership", it cannot be ta"en as an act of repudiation adverse to <regorio @r whose share was not included by parties in the petition and it had not been shown whether he had been informed of her exclusive claim over the entire property.

Art= -112 0BAR6= There i$ % imp)ie& tr'$t whe propert/ i$ $o)&, % & the )e(%) e$t%te i$ (r% te& to o e p%rt/ "'t the pri#e i$ p%i& "/ % other !or the p'rpo$e o! h%vi ( the "e e!i#i%) i tere$t o! the propert/= The !ormer i$ the tr'$tee, whi)e the )%tter i$ the "e e!i#i%r/= However, i! the per$o to whom the tit)e i$ #o ve/e& i$ % #hi)&, )e(itim%te or i))e(itim%te, o! the o e p%/i ( the pri#e o! the $%)e, o tr'$t i$ imp)ie& "/ )%w, it "ei ( &i$p't%")/ pre$'me& th%t there i$ % (i!t i !%vor o! the #hi)&= A resulting trust arises in favor of a person from whom a consideration comes for a reconveyance of property 3real or personal6 to another, but the trust is rebuttable by proof of a contrary intention of the persons from whom the consideration comes, and such proof may be by parol evidence. The trust results only in favor of one advancing the consideration, and not in favor of one for whose benefit the purchase may have been made. EXCEPTIONS 1. ,o trust is implied if the person to whom the legal estate is conveyed is a legitimate or illegitimate child of the payor. The reason is there is a presumption that a gift or donation was intended in favor of the child. 7hen an actual contrary intention is proved.

&.

Art. 112 . 7hen 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.

&**+ notes0 #n :uang v !A there was a trust since the money used to purchase the lot was provided by /andoval although it was placed under the name of :uang. ;nder 111A there is an implied trust 3a"a resulting trust6 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. A resulting trust arises due to the presumption that he who pays for the thing intends beneficial interest therein for himself. Other e+%mp)e$ o! Re$')ti ( tr'$t*

Art. 111>. 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. Art. 112&. #f two or more persons agree to purchase property and by common consent the legal title is ta"en 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.

:.LF0 'ased on 1111 as it involved fraud in registration. 9eriod is 1* years.

&**2 notes0The general rule is that where trust money cannot be applied either immediately or within a short time to the purpose of the trust, it is the duty of the trustee to ma"e the fund productive to the beneficiary by investment of it in some proper security. 'ut trustees must not ma"e investment of funds in their own names but always indicate that they are made in trust capacities. This article applies to any trustee, guardian, or other person holding a fiduciary relationship.

Arti#)e$ -14., -141, -144 % & -145 %re #o $tr'#tive tr'$t$= &**+ notes0 !onstructive trust is created by the construction of equity in order to satisfy the demands of justice and prevent unjust enrichment. #t arises contrary to intention against one who by fraud, duress or abuse of confidence obtains or holds the legal right to property which he ought not in equity and good conscience. Art. 112*. #f the price of a sale of property is loaned or paid by one person for the benefit of another and the conveyance is made to the lender or payor to secure the payment of the debt, a trust arises by operation of law in favor of the person to whom the money is loaned or for whom its is paid. The latter may redeem the property and compel a conveyance thereof to him. Art. 1121. #f an absolute conveyance of property is made in order to secure the performance of an obligation of the grantor toward the grantee, a trust by virtue of law is established. #f the fulfillment of the obligation is offered by the grantor when it becomes due, he may demand the reconveyance of the property to him. Arti#)e -144* >he % / tr'$tee, ('%r&i% or other per$o ho)&i ( % !i&'#i%r/ re)%tio $hip '$e$ tr'$t !' &$ !or the p'r#h%$e o! propert/ % & #%'$e$ the #o ve/% #e to "e m%&e to him or to % thir& per$o , % tr'$t i$ e$t%")i$he& "/ oper%tio o! )%w i !%vor o! the per$o to whom the !' &$ "e)o (= 'A80 = and G are married. They have children0 a,b and c. during their lifetime ,they transferred a real property to F ,their grand daughter. After their death, a, b and c filed an action for partition against F, who interposed the defense of prescription, the same having been based on an implied trust. #s defense properE :.LF0 ,-, while constructive trust prescribes in 1* years, the rule does not apply where the fiduciary relation exists and is recogniHed by trustee. :ere, there was reliance on FBs integrity and fidelity in carrying out the wishes of her grandparents. As long as the trustee recogniHed the trust, the defense of prescription does not apply. DISTINCTION BET>EEN EXPRESS AND IMPLIED TRUSTS .xpress Trust !reated by the intention 3through direct and positive acts6 of the parties !annot be proved by parol evidence when it concerns an immovable or any interest therein #mplied Trust !omes into being by operation of law independent of the particular intention of the parties !an be proved by oral evidence when it concerns an immovable or any interest therein Article 112+ 0#f property is acquired through mista"e 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. &**2 notes0 The mista"e referred to in this article is a mista"e made by a third person, not that made by a party to the contract. Dor if made by a party, no trust is created. /imilarly, the fraud referred to is extra%contractual.

Art. 112?. An implied trust may be proved by oral evidence.

'A80 A * door apartment was leased to several tenants with 8osito ;y as 9resident. :e was designated by the tenantBs association to negotiate for the purchase of the same by the tenants, but it turned out that he bought the property from the owner. Deeling betrayed, they sued for redemption alleging that there was implied trust between them and Cr. ;y. The 8T! held that there was implied trust, but the !A reversed it. :.LF0 there was implied trust. 7ithout being expressed, are deducible from the nature of the transaction by operation of law as matters of equity, independently of the particular intention of the parties. A constructive trust as invo"ed by the tenants can be implied from the nature of the transaction as a matter of equity, regardless of the absence of such intention in the purposes of their association.

'A80 #n 1> *, . died without any issue. :e was survived by his brothers T,',I, C and CA. :e left several properties but it appeared that A registered lot no &+ on his name with evidence of bad faith. The question raised before the /! was the determination of the applicable prescriptive period to file an action, whether based on 1 >1 or 1111.

#n order that laches or acquisitive prescription may bar an action to enforce it, an express repudiation made "nown to the beneficiary is required

Laches constitutes a bar to actions to enforce it, unless there is concealment of the fact giving rise to the trust