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CLV NOTES ON TRUSTS August 2010

I INTRODUCTION page 2
II EXPRESS TRUSTS page 15
III IMPLIED TRUSTS page 66

I INTRODUCTION
[Updated: 06 August 2010]
I INTRODUCTION

1. Trusts under the New Civil Code

Title V in the New Civil Code on TRUSTS has no counterpart in the
old Civil Code. On this matter, the Code Commission reported as
follows
The law on trusts is comprehensive in American law. Trusts are
divided into express and implied. The former are constituted by the
intention of the trustor or of the parties. Implied trusts come into
being by operation of law.
The doctrine of implied trust is founded upon equity. The principle is
applied in the American legal system to numerous cases where an
injustice would result if the legal estate or title were to prevail over
the equitable right of the beneficiary. A number of instances of
implied trusts are specified in the Project of Civil Code, but this
enumeration does not exclude other cases established by the
general law on trust.
In article 1462 [now Article 1442 of the New Civil Code] the
principle of the general law on trusts insofar as they are not in
conflict with the proposed Civil Code, the Code of Commerce, the
Rules of Court and special laws are adopted. This article
incorporates a large part of the American Law on trusts and thereby
the Philippine legal system will be amplified and will be rendered
more suited to a just and equitable solution of many questions. (at
p. 60, Malolos and Martin, Report of the Code Commission, Domerte
Book Supply, 2116 Azcarraga, Manila, Philippines, 1951 ed.)
Other than the foregoing, the Code Commission provided for no
further explanations or amplifications on the Law on Trusts, and
most of what is commented, found expression in the few provisions
of the New Civil Code.

What is clear from the brief comments of the Code Commission is

that the growth of Philippine Law on Trusts will find its impetus from
common law from where it was derived, and expressed in
jurisprudential rulings of the Supreme Court.
a. Philippine Trusts Rooted on American Law on Trusts
Trusts, the doctrines and principles that arise from their
establishment, are rooted in the Philippine legal system based on
American Law principles on Trusts. Thus, Article 1442 of the New
Civil Code now provides:
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.
The foundation of Article 1442 may be drawn from the decision
inGovernment v. Abadilla, 46 Phil. 642 (1924), where the Court held

As the law of trusts has been much more frequently applied in

England and in the United States than it has in Spain, we may draw
freely upon American precedents in determining the effect of the
testamentary trust here under consideration, especially so as the
trusts known to American and English equity jurisprudence are
derived from the fidei commissa of the Roman law and are based
entirely upon Civil Law principles. (at pp. 646-647.)

2. The Equity Essence of Implied Trusts

Express trusts are founded on the intention of the trustor or the
intentions of the parties to the trust which bring about the
application of principles applicable to contractual relationships
(i.e., consensuality, mutuality, and relativity). On the other hand,
implied trusts, are created by operation of law based on equity

principles. Nonetheless, both types of trusts are deemed to be

vested with equitable considerations.
When it comes to express trusts, for example, equity consideration
is expressed in Article 1445 of the Civil Code when it provides that
No trust shall fail because the trustee appointed declines the
designation, unless the contrary should appear in the instrument
constituting the trust.
Under the aegis of the New Civil Code, the Court reiterated the
equity basis of trusts when it held in Deluao v. Casteel, 22 SCRA
231 (1962), that as a legal consequence of trust being essentially
founded on equity principles, is that no trust, whether express or
implied, can be held valid and enforceable when it is violative of the
law, morals or public policy.
In Miguel v. Court of Appeals, 29 SCRA 760 (1969), the Court held
that
Furthermore, because the case presents problems not directly
covered by statutory provisions or by Spanish or local precedents,
resort for their solution must be had to the underlying principles of
the law on the subject. Besides, our Civil Code itself [Article 1442]
directs the adoption of the principles of the general law of trust,
insofar as they are not in conflict with said Code, the Code of
Commerce, the Rules of Court and special laws. (at pp. 775-776).
In other words, application of implied trusts principles on given
transactions covering proprietary relations are mandated not by
specific reference to statutory provisions, but by seeking equitable
solutions to render justice to the parties involved or affected by the
transaction.
Later, in Salao v. Salao, 70 SCRA 65 (1976),
characterized the equity nature of trusts, as follows

the

Court

In its technical legal sense, a trust is defined as the right,

enforceable solely in equity, to the beneficial enjoyment of property,
the legal title to which is vested in another, but the word trust is

frequently
employed to
indicate duties,
relations,
and
responsibilities which are not strictly technical trusts (89 C.J.S.
712).
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 (Art.
1440, Civil Code). There is a fiduciary relation between the trustee
and the cestui que trust as regards certain property, real, personal,
money or choses in action. Pacheco v. Arro, 85 Phil. 505 (at p. 80).
The equity nature of a trust supports the proposition that the
intention of the trustor to create a trust for the benefit of intended
beneficiary should as much as possible be realized. Thus, Article
1444 provides that No particular words are required for the
creation of an express trust, it being sufficient that a trust is clearly
intended. An application of this doctrine (not the article) can be
found in Government v. Abadilla, 46 Phil. 642 (1924), where after
holding that the testamentary trust was very unskillfully drawn; its
language is ungrammatical and at first blush seems to somewhat
obscure, the Court nonetheless held: but on closer examination it
sufficiently reveals the purpose of the testator. And if its provisions
are not in contravention of some established rule of laws or public
policy, they must be respected and given effect. (at p. 646.)
In applying the equity nature of trusts, Abadilla held that the
intention of the trustor is the more essential consideration, and that

In regard to private trusts it is not always necessary that thecestui

que trust should be named, or even be in esse at the time the trust
is created in his favor. (Citing Flint on Trusts and Trustees, section
25; citing Frazier v. Frazier, 2 Hill Ch., 305;Ashurst v. Given, 5
Watts & S., 329; Carson v. Carson, 1 Wins [N.C.], 24.) . . . Thus a
devise to a father in trust for accumulation for his children lawfully
begotten at the time of his death has been held to be good although
the father had no children at the time of the vesting of the funds in
him as trustee. In charitable trusts such as the one here under

discussion, the rule is still further relaxed. (Citing Perry on Trusts,

5th ed., section 66.) (at p.647.)
In Ramos v. Court of Appeals, 232 SCRA 348 (1994), where the
payor of the purchase price of the property had intended that it be
held by purported trustee for her because she was not qualified to
hold such parcel of land, although a resulting trust should have
arisen under the provisions of Article 1448 of the Civil Code,
nonetheless, the Court refused to grant to the payor the relief of
compelling the purported trustee to convey the land to her, ruling
that
However, if the purpose of the payor of the consideration in having
title title placed in the name of another was to evade some rule of
the common or statute law, the courts will not assist the payor in
achieving his improper purpose by enforcing a resulting trust for
him in accordance with the clean hands doctrine. The courts
generally refuses to give aid to claims from rights arising out of an
illegal transaction, such as where the payor could not lawfully take
title to land in his own name and he used the grantee as a mere
dummy to hold for him and enable him to evade the land
laws, i.e., an alien who is ineligible to hold title to land, who pays
for it and has the title put in the name of a citizen. Otherwise
stated, as an exception to the law on trust, [a] trust or a provision
in the terms of a trust is invalid if the enforcement of the trust or
provision would be against public policy, even though its
performance does not involve the commission of a criminal or
tortious act by the trustee. (at p. 361, quoting from Restatement
(Second) of Trusts 62 [1959].)

3. Trusts Do Not Create a Separate Juridical Entity, But the

Naked Title of the Trustee Divorces the Trust Properties from
the Rest of the Trustees Estate
It should be noted that there is no statutory provision or case-law
which recognizes a trust relationship as creating a separate juridical
entity. Indeed, the essence of what constitute a trust is the

recognition that the trustee holds directly legal or naked title to the
trust properties. Nevertheless, the naked or legal title held by the
trustee should be looked upon as held in his official capacity as
trustee and cannot be deemed included in his estate to which he
has full ownership and by which he owes no fiduciary duties.
These principles are best exemplified in Development Bank of the
Philippines v. COA, 422 SCRA 465 (2004), where the DBP
contributed funds into a retirement plan for its officers and
employees, and constituted a board of trustees vesting it with the
control and administration of the fund. Augmentation to the
retirement fund were made through loans extended to the qualified
officers and employees, which were invested in shares of stocks and
other marketable securities, and the earnings from which were
directed to be distributed to the beneficiaries even before they have
retired.
The COA objected to the distribution of the earnings from the
investments made through the retirement fund on the ground that
is was contrary to an express provision of law which prohibits the
distribution of retirement benefits to government employees prior to
their actual retirement. COA also directed that the earnings from
the investment be included in DBPs books of account as part of its
own earnings, since the retirement and its income were actually
owned by DBP having made the contributions thereto. DBP objected
to the COA resolution on the ground the express trust created for
the benefit of qualified DBP employees under the Trust Agreement .
. . gave the Fund a separate legal personality, (at p. 467) and
therefore the earnings pertained to the employees and should be
credited as income of DBP.
While DBP v. COA characterized an employees trust as a trust
maintained by an employer to provide retirement, pension or other
benefits to its employees . . . [and ] is a separate taxable entity
established for the exclusive benefit of the employees, (at p. 473)
still the Court did not consider the such employees trust as a
separate juridical person. The Court ruled that The principal and
income of the Fund [of employees trust] would be separate and
distinct from the funds of DBP, on the ground that DBP as trustor

already conveyed legal title thereto to the Board of Trustees of the

employees trust, and with DBP officers and employees having
beneficial title thereto, thus:
In a trust, one person has an equitable ownership in the property
while another person owns 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. . .
In the present case, DBP, as the trustor, vested in the trustees of
the Fund legal title over the Fund as well as control over the
investment of the money and assets of the Fund. The powers and
duties granted to the trustees of the Fund under the Agreement
were plainly more than just administrative [but included the power
of control, the right to hold legal title, and the power to invest and
reinvest] . . . (at p. 474.)
xxx.
Clearly, the trustees received and collected any income and profit
derived from the Fund, and they maintained separate books of
account for this purpose. The principal and income of the Fund will
not revert to DBP even if the trust is subsequently modified or
terminated. The Agreement states that the principal and income
must be used to satisfy all of the liabilities to the beneficiary officials
and employees under the Gratuity Plan . . . (at p. 475.)
On the issue that the DBP officials and employees had no right to
the fund nor to the income earned until they actually retire, which
therefore did not qualify them to be considered cestui que trust or
beneficiary, and therefore the same should still accrue to DBP, the
Court ruled
The beneficiaries or cestui que trust of the Fund are the DBP
officials and employees who will retire x x x .
As COA correctly observed, the right of the employees to claim their
gratuities from the Fund is still inchoate. [The law], does not allow
employees to receive their gratutities until they retire. However,

this does not invalidate the trust created by DBP or the concomitant
transfer of legal title to the trustees. As far back as in Government
v. Abadilla, the Court held that it is not always necessary that
the cestui que trust should be named, or even be in esse at the time
the trust is created in his favor. It is enough that the beneficiaries
are sufficiently certain or identifiable. (at pp. 476-477.)
The Court resolved in DBP v. COA, that The Agreement
indisputably transferred legal title over the income and properties of
the Fund to the Funds trustees. Thus, COAs directive to recored
the income of the Fund in DBPs books of account as the
miscellaneous income of DBP constitutes grave abuse of discretion.
The income of the Fund does not form part of the revenues or
profits of DBP, and DBP may not use such income for its own
benefit. The principal and income of the Fund together constitute
the res or subject matter of the trust. The Agreement established
the Fund precisely so that it would eventually be sufficient to pay for
the retirement benefits of DBP employees under [the law] without
additional outlay from DBP. COA itself acknowledged the authority
of DBP to set up the Fund. However, COAs subsequent directive
would divest the Fund of income, and defeat the purpose for the
Funds creation. (at p. 477.)
4. Essence of Trust Is Anchored on Splitting or Intention to
Split the Naked Title and Beneficial Title of the Res or
Trust Property
The essence of trusts, whether express or resulting, is that the
fiduciary relationship or the enforcement of equity principles is built
upon property relations; unless, the dispute involved claims arising
from property rights, then trusts principles do not apply. In other
words, there is no real trust relationship based only on the meeting
of the minds, and that the trustee does not even begin to assume
fiduciary duties towards the beneficiary, unless and until title to the
res is transferred to him in either of three ways:
(a) When only naked title is given to him (i.e., he is registered as
the naked or legal title holder or trustee for the benefit of an

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identified beneficiary), then an express trust has been constituted;

or
(b) When full title has been registered in his name, but with a clear
undertaking to hold it for the benefit of another person or pursuant
to a clear arrangement with another person as the beneficiary, then
an express trust at best, or resulting trust at least, has been
constituted; or
(c) When full title to the property has been acquired by a person
under circumstances that the law or equity imposes upon him the
obligation to convey it to another person who has a better claim to
such property, in which case a constructive trust is deemed
constituted by force of law.
This has been confirmed by the Supreme Court in Caezo v.
Rojas, 538 SCRA 242 (2007), where it held
What distinguishes a trust from other relations is the separation of
the legal title and equitable ownership of the property. In a trust
relation, legal title is vested in the fiduciary while equitable
ownership is vest in a cestui que trust. Such is not true in this case.
The petitioner alleged in her complaint that the tax declaration of
the land was transferred to the name of [the purported trustee]
Crispulos without her consent. Had it been her intention to create a
trust and make Crispulo her trustee, she would not have made an
issue out of this because in a trust agreement, legal title is vested in
the trustee. The trustee would necessarily have the right to transfer
the tax declaration in his name and to pay the taxes on the
property. These acts would be treated as beneficial to the cestui que
trust and would not amount to an adverse possession. (at p. 255.)

The existence of valid title in the person of the trustee for the
benefit of thecestui que trust is so essential that in cases where the
title of the purported trustee was void, the Supreme Court has
refused to apply trust principles at all. Thus, in Ferrer v. Bautista,
231 SCRA 257 (1994), where the free patent and original certificate

11

of title issued in the name of the occupant of a strip of land that had
arisen by accretion was held to be void, the Court refused to apply
the principle that an action for reconveyance on an implied trust
prescribes in ten years after the issuance of the title, on the ground
that no implied trust could arise from a void title held by the
purported trustee, and hence the action to reconvey was deemed
imprescriptible.
Likewise, in Macababbad, Jr. V. Masirag, 576 SCRA 70 (2009),
where the title to the registered land was obtained through forging
the signatures of the heirs in the purported extrajudicial settlement
of estate, the Court held title by the heir who exercised fraud, was
void and the rules on implied trust to limit the period to file an
action for reconveyance to ten (10) years was deemed inapplicable.

5. Kinds of 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.
Article 1441 of the Civil Code expressly recognizes the following
kinds of trust, thus:
Express Trust which is created by the intention of the trustor or
of the parties;
Implied Trust which comes into being by operation of law.
In turn, jurisprudence has distinguished between two types of
implied trusts, namely: (a) Resulting Trusts; and (b)
Constructive Trusts.
Express trusts are the product of contractual intents; they are
essentially creatures of Contract Law, and therefore are animated
by the agreed intentions of the parties under the principle
of autonomy or the freedom to contract doctrine.

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Ramos v. Ramos, 61 SCRA 284 (1974), defined express

trusts as those which are created by the direct and positive acts of
the parties, by some writing or deed, or will, or by words either
expressly or impliedly evincing an intention to create a trust
(quoting from 89 C.J.S. 122.)
Lately, in Heirs of Tranquilino Labiste v. Heirs of Jose Labiste, 587
SCRA 417 (2009), the Court held that Trust is the right to the
beneficial enjoyment of property, the legal title to which is vested in
another. It is a fiduciary relationship that obliges the trustee to deal
with the property for the benefit of the beneficiary. Trust relations
between parties may either be express or implied. An express trust
is created by the intention of the trustor or of the parties. An
implied trust comes into being by operation of law. (at p. 418.)
On the other hand, implied trusts, particularly constructive trusts,
are creatures of the law; they exist in circumstances where the law
mandates it so, and in all similar situations where justice or equity
has to be achieved. Implied trusts are essentially a product of
equitable consideration.
Ramos defined implied trusts as those which, without being
expressed, 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. (quoting from 89 C.J.S. 724.)
The difference in legal effects between an express trust and an
implied trust, according to Ramos, was that the former is not
susceptible to charges of prescription or laches, whereas in the
latter, it is possible that the cause of action of the cestui que
trust may be extinguished by prescription or laches.
In Philippine National Bank v. Court of Appeals, 217 SCRA 347
(1993), the Court applied the principles of constructive trust under
Article 1456 of the Civil Code to rule on a situation where a bank
had mistakenly credited to the account of a person an amount not
due to the depositor (although the Court held that the primary
resolution of the issues was under quasi-contract on solutio

13

indebiti). Although money or other forms of legal tender do not

constitute property for the holder thereof can claim ownership, the
commercial value they represent is a proprietary interest where
trust principles can be made to apply. Indeed, it is not unusual that
trust agreements are executed with the trust departments of banks,
where a good part of the corpus would constitute large sum of
money.
Earlier, under the old Civil Code, in Diaz v. Gorricho and Aguado,
103 Phil. 261 (1958), the Court held that
The reason for the difference in treatment is obvious. In express
trusts, the delay of the beneficiary is directly attributable to the
trustee who undertakes to hold the property for the former, or who
is linked to the beneficiary by confidential or fiduciary relations. The
trustees possession is, therefore, not adverse to the beneficiary,
until and unless the latter is made aware that the trust has been
repudiated. But in constructive trusts (that are imposed by law),
there is neither promise nor fiduciary relation; the so-called trustee
does not recognize any trust and has no intent to hold for the
beneficiary; therefore, the latter is not justified in delaying action to
recover his property. It is his fault if he delays; hence, he may be
estopped by his own laches. (at p. 266.)
As will be discussed in the last chapter, it used to be the judicial
position that under an express trust arrangement, the trustee can
never claim either acquisitive prescription in his favor to obtain title
to the property held in trust, or the benefit of extinctive prescription
in order to defeat the right of the beneficiary to demand the
exercise of his rights. The reason was that in an express trust
arrangement, which is created only by the express or implied
acceptance by the trustee that he holds the trust property for the
benefit of the beneficiary, his possession thereof is not adverse to,
nor in repudiation of, the rights and beneficial title of the
beneficiary. Consequently, the long passage of time cannot give rise
to either prescription, much less laches; there must be an express
repudiation of the trust arrangement by the trustee, and notice to
the beneficiary that he now holds title adverse to the beneficiary,
for prescription or laches to begin commencing.

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On the other hand, under an implied trust arrangement, where

there is really no implied acceptance of a trust obligation on the
purported trustee, the mere fact that title has been registered in the
name of the purported trustee and he holds possession thereof for
his own benefit is constituted as a repudiation of any trust
arrangement that the purported beneficiary may expect from the
arrangement. Consequently, the mere passage of time with the
purported trustee exercising dominion over the purported trust
properties for his own benefit, without need of express repudiation
could eventually lead to successfully claiming the effects of
prescription or laches on the part of the trustee, to the detriment of
the beneficiary.
This critical distinction has been blurred in the years since
the Ramosdecision, with both kinds of trusts being considered
capable of being subject to the defense of prescription or laches,
with the difference remaining on whether there is a need for
express repudiation, and the nature required for any of such
repudiation to take effect. The matter is better discussed in the last
chapter.
One other distinction between express trusts and implied trusts, is
that express trusts over an immovable property cannot be enforced
by parol evidence, but must be properly supported by a written
instrument, whereas, implied trusts, regardless of the nature of the
trust property, may always be enforced even when constituted
orally. In other words, implied trusts are not within the operative
cover of the Statute of Frauds, as expressed succinctly in Article
1457: An implied trust may be proved by oral evidence.
Although express trusts and implied trusts are governed by different
principles, the common denominator between them is that they are
legal relationships built upon property rights; there can be no
express or implied trusts among individuals unless some property
lies in the middle of such relationship.
oOo

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II EXPRESS TRUSTS
[Updated: 16 August 2010]

II. THE LAW ON EXPRESS TRUSTS

1. Definition and Nature of Express Trusts
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.
Art. 1441. Trusts are either express or implied. Express
trust are created by the intention of the trustors or of the
parties. Implied trusts come into being by operation of law.
Title V of the New Civil Code does not contain a particular definition
of Trust, but its first article Article 1440 defines the persons
who constitute the parties in a trust relationship, thus:
Trustor the person who establishes a trust (referred to as
grantor, settlor, or founder in common-law parlance);
Trustee the person in whom confidence is reposed as regards the
property placed in trust (referred to as the corpus); it is the
trustee who assumes certain duties relating to the the res with
respect to the person for whose benefit the trust is created; and
Beneficiary the person for whose benefit the trust has been
created (the cestui que trust).
We can therefore define trust under the terms of Article 1440 as a
legal relationship based primarily on the parties relationship to the
property that constitutes the corpus or the trust estate, whereby a

16

person, called the trustor, conveys the naked or legal title to a

property to another person, called the trustee, who takes title
thereto under a fiduciary obligation to administer, manage and
dispose of the property for the benefit of another person, called the
beneficiary, to whom therefore beneficial or equitable title
pertains.
Quoting from American legal literature, Tolentino defines trust as
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. (Tolentino, Civil Code of the Philippines, Vol. IV, at p.
669, citing 54 Am. Jur. 21, hereinafter referred to as
Tolentino; reiterated in Morales v. Court of Appeals, 274 SCRA
282, 297 [1997].)
In Barretto v. Tuason, 50 Phil. 888 (1926), the Supreme Court
noted that trust is known as fideicomiso under Spanish legal
system, with the trustee being designated as the fiduciario, and the
beneficiary referred to as thefidecomisario or the cestui que
trustant.
In Philippine National Bank v. Court of Appeals, 217 SCRA 347
(1993), the Court described a typical trust (as distinguished from
a constructive trust under Article 1456 of the Civil Code) as one
wherein confidence is reposed in one person who is named a
trustee for the benefit of another who is called the cestui que
trust, respecting property which is held by the trustee for the
benefit of the cestui que trust. A constructive trust, unlike an
express trust, does not emanate from, or generate a fiduciary
relation. While in an express trust, a beneficiary and a trustee are
linked by confidential or fiduciary relations; in a constructive trust,
there is neither a promise nor any fiduciary relation to speak of and
the so-called trustee neither accepts any trust or intends holding
the property for the beneficiary. (at pp. 353-354;italics supplied.)
In addition, PNB distinguished between the obligations of the
trustee in an express trust from that in a constructive trust: Under

17

American Law, a court of equity does not consider a constructive

trustee for all purposes as though he were in reality a trustee;
although it will force him to return the property, it will not impose
upon him the numerous fiduciary obligations ordinarily demanded
from a trustee of an express trust. It must be borne in mind that in
an express trust, the trustee has active duties of management while
in a constructive trust, the duty is merely to surrender the
property. (at p. 356.)

2. Essential Characteristics of Express Trusts

In Morales v. Court of Appeals, 274 SCRA 282 (1997), after
adopting Tolentinos definition of trusts, the Court enumerated the
following essential characteristics of trust as enumerated in the
esteemed authors book:
(a) It is a relationship;
(b) It is a relationship of fiduciary character;
(c) It is a relationship with respect to property, not one involving
merely personal duties;
(d) It involves the existence of equitable duties imposed upon the
holder of the title to the property to deal with it for the benefit of
another; and
(e) It arises as a result of a manifestation of intention to create the
relationship. (at p. 298)
Morales actually involved an application of the principles pertaining
to implied trusts (particularly the application of Article 1448 of the
Civil Code), and although one gets the impression that the
characteristics pertain to all forms of trusts, both express and
implied, the above enumerated essential characteristics actually
pertain to express trusts, and perhaps even to resulting trusts, but
not to constructive trust arrangements, since it has already been
held by the Supreme Court that technically speaking, the purported

18

trustee in a constructive trust actually owes no fiduciary duty or

obligation to the cestui que trust, and certainly a constructive trust
arises by operation of law and not as a result of a manifestation
of intention to create the relationship.
a. Express Trusts Are Essentially Contractual in Character
Art. 1445. No trust shall fail because the trustee
appointed declines the designation, unless the contrary
should appear in the instrument constituting the trust.
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.
Generally speaking, an express trust is essentially contractual in
characterbecause it can only be constituted through contractual
intention on the part of the trustor to dispose of his property by
dividing its full ownership between the trustee and the beneficiary,
and requires generally the full acceptance of the naked title and
fiduciary obligations on the part of the trustee, and the concomitant
obligations that go with it. This is the reason why Morales indicates
that one of the essential characteristic of a trust that it arises as a
result of a manifestation of intention to create the relationship. (at
p. 298.)
Thus, Article 1441 of the Civil Code provides that Express
trusts are created by the intention of the trustor or of the parties,
and Article 1444 provides that No particular words are required for
the creation of an express trust, it being sufficient that a trust is
clearly intended.
While Article 1441 of the Civil Code defines an express trust as
created by the intention . . . of the parties, which clearly supports
the proposition that the nexus of every express trust arrangement is
a contractual relationship, nonetheless, it also defines an express
trust as created by the intention of the trustor alone, which seems
to defy the essence of mutual consent as a necessary element in

19

bringing about a contractual relationship. Yet it cannot be denied

that no person may find himself bound to the fiduciary duties and
obligations of a trustee, unless he previously consented thereto, or
expresses his consent by voluntarily assuming such relationship to
the trust property which necessarily brings about the duties and
obligations of a trustee.
On the other hand, Article 1445 of the Civil Code provides that No
trust shall fail because the trustee appointed declines the
designation, unless the contrary should appear in the instrument
constituting the trust. Read plainly, Article 1445 seems to imply
that the element of consent or meeting of minds, so essential for
a valid contract to arise, does not pertain to express trust and thus
may lead to the conclusion that express trusts are not necessarily
contractual relationships. Such impression would be wrong, as will
be explained in the sections below discussing the characteristic of
express trust as being a real and preparatory contract.
In other words, there can be no denying the legal truism that an
express trust constitutes essentially a contractual relationship
between and among the parties thereto. This is supported by Article
1446 which states that Acceptance by the beneficiary is
necessary, and that if the trust does not impose any onerous
condition upon the beneficiary, then his acceptance shall be
presumed, if there is no proof to the contrary.
It should be noted, however, that the nexus of the contractual
meeting of the minds in an express trust is that between the trustor
and the trustee, and the acceptance of the benefits by the
beneficiary under the trust arrangement would constitute normally
merely stipulation pour autrui.Although the proper identification of
the beneficiary constitutes an essential element of a valid trust, as it
determines the nature and extent of the fiduciary duties and
obligations of the trustee, acceptance of the benefits by the
beneficiary is generally not an essential element of a valid
trust. This is the reason why the lack of acceptance by the
beneficiary does not generally render the trust void. The provisions
of the law mandating acceptance by the beneficiary, whether
express or implied, or presumed, are meant to cover the principle of

20

law that nobody can be compelled to accept the gift or charity of

another person without his consent.
Express trusts are essentially the product of contractual intent, and
most express trust relationships are overtly contractual in
nature since they are executed in a formal Deed of Trust.
An express trust may also be constituted in a will, it which case it
becomes atestamentary trust, and the validity of the trust
arrangement would be depended on the validity of the testamentary
disposition. In such case, the issues as to the validity of the trust
arrangements would have to be resolved under the Laws on
Succession.
An express trust may also be constituted in the form of a donation,
in which case it is embodied in a solemn contract, and many of the
issues on validity would have to be resolved under the Law on
Donations.
It should be noted, however, that when the beneficiary constituted
in a trust is other than the trustor, then the deed of trust actually
provides for stipulation pour autrui in favor of the designated
beneficiary, and under Article 1446 of the Civil Code, acceptance by
the beneficiary is deemed presumed. More importantly, a
designation of a beneficiary which does no impose onerous
conditions, partakes essentially of a gift or a donation in favor of the
beneficiary, and strictly speaking is governed by the Law on
Donation which makes the disposition a solemn contract. Likewise,
in the Law on Taxation, the same constitute taxable gift or donation
for which the proper gift tax should be paid. Nonetheless, the noncompliance with the solemnities required of donation in the realm of
trust does not render the trust void. Indeed, under Article 1444 of
the Civil Code No particular words are required for the creation of
an express trust, it being sufficient that a trust is clearly intended;
and under Article 1457, it is provided that An implied trust may be
proved by oral evidence.
Thus, in practice, many trust dispositions are constituted in a
manner that the trustor seeks to gift the designated beneficiary

21

with all the beneficial title to the estate property held in the hands
of the trustee. In such cases, what is executed is merely a Deed of
Trust, the solemnities of which do not fall under the Law on
Donations, and generally would comply with the formalities of an
ordinary deed of conveyance.
b. Essential Elements of Express Trusts
Much of the discussions hereunder, unless otherwise indicated,
cover essentially contractual trusts arrangementsthose that are
created by the intention of the trustor or of the parties, without
taking the form of donation or testamentary disposition. Therefore,
we will discuss immediately hereunder the essential characteristics
of express trusts as contractual relationship of being: (a) nominate
and principal; (b) unilateral; (c)primarily gratuitous; (d) real;
(e) preparatory; and (f) fiduciary. The essential characteristic of an
express trust being a real contract will be discussed in the next
section on The Rules of Enforcement of Express Trusts.
It should be noted that Title V of the New Civil Code does not
expressly state under any of its article that express trusts
are contractual relationships. However, as explained above, it would
be more useful on our part to consider express trusts, as
distinguished from implied trusts, to be essentially contractual in
nature, i.e., of being created under contractual intents, and with the
rights, duties and responsibilities arising from contractual
relationship.
In Mindanao Development Authority v. Court of Appeals, 113 SCRA
429 (1982), the Supreme Court held that It is fundamental in the
law of trusts that certain requirements must exist before an express
trust will be recognized, (at p. 436), and it affirmed the following to
be the essential elements of an express trust, enumerated earlier
in Francisco v. Leyco, 3 C.A.R. 2s 1384, citing Rous, Florimond
C., The Trust Relationship, 96 SCRA 186, 191, thus:
(a) The Trustee: who holds the trust property and is subject to
equitable duties to deal with it for anothers benefit;

22

(b) The Beneficiary: to whom the trustee owes equitable duties to

deal with the trust property for his; and
(c) The Res: which is the trust property which the trustee manages
for the sake or the interest of the beneficiary, which can be created
in anything that the law recognizes to be property.
[See also Aquino, Ranhilio Callangan, Resulting Trusts and Public
Policy, 232 SCRA 364, 366, citing Dukeminier at 128.]
The enumeration of the essential elements of every express trust
indicates that every trust relationship is truly a legal relationship
built on property rights, and without the res or the corpus, there is
really no obligation upon the trustee who cannot be expected to
manage the property for the benefit of the beneficiary, simply
because he has no control over property that has not been
transferred to his name.
(1) Express Trusts Establish Contractual Relationships Built
Around Property Relation
Morales enumerates that one of the essential characteristic of trusts
is that it is a relationship with respect to property, not one
involving merely personal duties. (at p. 298; italics supplied). On
this matter, Mindanao Development Authority held that
Stilted formalities are unnecessary, but nevertheless each of the
above elements is required to be established, and, if any one of
them is missing, it is fatal to the trusts. Furthermore, there must
be a present and complete disposition of the trust property,
notwithstanding that the enjoyment in the beneficiary will
take place in the future. It is essential, too, that the purpose be
an active one to prevent trust from being executed into a legal
estate or interest, and one that is not in contravention of some
prohibition of statute or rule of public policy. There must also be
some power of administration other than a mere duty to perform a
contract although the contract is for a third-party beneficiary. A
declaration of terms is essential, and these must be stated with
reasonable certainty in order that the trustee may administer, and

23

that the court, if called upon so to do, may enforce the trust. (at p.
437, citing 76 Am Jur 2d, Sec. 31, pp. 278-279; emphasis
supplied.)
Thus, when the deed of sale upon which an express trust was
sought to be established in Mindanao Development Authority merely
provided that the seller agree[s] to work for the titling of the
entire area of my land under my own expense and the expenses for
the titling of the portion sold to me shall be under the expenses of
the said Juan Cruz Yap Chuy, the Court held that no express trust
was constituted, since other than undertaking to pay for the
expenses of titling of the property, The stipulation does not
categorically create an obligation on the part of [the seller] to hold
the property in trust for Juan Cruz. Hence there is no express trust.
It is essential to the creation of an express trust that the settlor
[trustor] presently and unequivocally make a disposition of property
and make himself the trustee of the property for the benefit of
another. (at p. 437,citing 76 Am Jur 2d, sec. 35, p. 281.)
Finally,
the
Court
also
noted
in Mindanao
Development
Authority that the provision in the deed of sale that the buyer will
work for the titling of the entire area of my land under my own
expense, it was not clear what particular property of the seller was
referred to, and thus no express trust could be validly constituted
since A failure on the part of the settlor definitely to describe the
subject-matter of the supposed trust or the beneficiaries or object
thereof is strong evidence that he intended no trust. (at p. 438.)
In Caezo v. Rojas, 538 SCRA 242 (2007), reiterating the ruling
in Morales v. Court of Appeals, 274 SCRA 282 (1997), on what
constitutes the essential elements of an express trust, the Court
held:
. . . The presence of the following elements must be proved: (1) a
trustor or settlor who executes the instrument creating the trust;
(2) a trustee, who is the person expressly deisgnated to carry out
the trust; (3) the trust res, consisting of duly identified and definite
real property; and (4) thecestui que trusts, or beneficiaries whose
identity must be clear. . . (at p. 253.)

24

Note that in Caezo, aside from reiterating that among the

essential elements of an express trust is the trust res, consisting of
duly identified and definite real property, it merely requires that
the beneficiaries whose identity must be clear, and not that there
must be prior acceptance by the beneficiary of the trust benefits for
the contractual trust relationship between the trustor and the
trustee can come into existence.

c. Nominate and Principal, Yet Governed by Equity Principles

As a contract, an express trust is nominate and principal, having
been given particular name and essentially defined by the Civil
Code, and not needing another contract to be valid and binding.
Usually the essential characteristics of nominate and principal
bring about the application of the doctrine that when a legal
relationship is created between the parties that embodies the
essence of a trust, then in spite of the intention or nomenclature
used by the contracting parties, it would still be characterized by the
law, and governed by the Law on Trusts. Unfortunately, under the
New Civil Code, the Law on Trusts is not complete set of law and
has a general reference under Article 1442 to the principles of the
general law of trusts, which are invoked as part of the Philippine
Law on Trusts. In fact, many of the obligations and duties of the
trustee prevail on the basis of equity and not necessarily upon the
contractual intentions of the parties.

d. Unilateral and Gratuitous

An express trust is a unilateral contract since only the trustee
assumes obligations to carry on the trust for the benefit of the
beneficiary.
Article 1446, which provides that acceptance by the beneficiary is
necessary, not only confirms the contractual nature of every trust

25

contract, but supports the position that an express trust is

essentially a gratuitous contract, supported by the consideration of
liberality, especially when the article provides that the beneficiarys
acceptance is presumed if the trust imposes no onerous condition
upon the beneficiary, unless there is proof that he has not accepted
the benefits of the trust arrangement. Generally, therefore, a trust
relationship imposes no obligation or burden upon the beneficiary.
e. Express Trust as a Preparatory Contract
Express trust is preparatory contract because it is not constituted
for its own sake in that the trust relationship is essentially a
medium established by the trustor to allow full authority and
discretion on the part of the trustee to enter into various juridical
acts on the corpus to earn income or achieve other goals given for
the benefit of the beneficiary.
An express trust may create of a form of contract pour autrui, in the
sense that if the trustor does not make himself the beneficiary, but
constitutes the trust for the benefit of another person, the transfer
of the naked or legal title of the property to the trustee who accepts
the fiduciary obligations, creates the trust, even if the beneficiary
does not formally accept the beneficial titled conveyed under the
trust arrangement. In such a manner, an express trust relationship
creates no obligation on the part of the trustor to the designated
beneficiary, nor does the beneficiary have any right against the
trustor, except those voluntarily assumed by the trustor under the
terms of the deed of trust. Generally, the fiduciary duties under an
express trust are imposed on the trustee, and the rights of the
beneficiary are exercisable against the trustee.
One would therefore arrive at the conclusion that insofar as the
trustor is concerned, the act of establishing an express trust for the
benefit of the beneficiary, is an act of donation or a gift, which often
is taxable under the Tax Code for donors or gift tax. Yet, the
constitution of an express trust, is not considered to be a form
of solemn contract. This is clear under Article 1444 of the Civil Code
that provides that No particular words are required for the creation

26

of an express trust, it being sufficient that a trust is clearly

intended.
Nonetheless, being essentially an act of liberality, and under the
premise that no person can be obliged to accept the
kindheartedness of others, Article 1446 expressly provides that
Acceptance by the beneficiary is necessary. But since the
constitution of an express trust is usually for the benefit of the
designated beneficiary, Article 1446 presumes the acceptance
thereof by the designated beneficiary, thus: Nevertheless, if the
trust imposes no onerous condition upon the beneficiary, his
acceptance shall be presumed, if there is no proof to the contrary.
What happens when the designated beneficiary expressly refuses to
accept the benefits of the trust arrangement, and yet the naked or
legal title to the corpus has already been transferred to the trustee?
Does the express trustee therefore fail?
The essential characteristic of express trust being a preparatory
contract would mean that with the purpose of the trust no longer
availing, since the designated beneficiary has refused the trust
relationship, the trust ceases to have an objective. But since the
naked or legal title remains with the trustee, his obligations is to
comply with the instructions of the trustor, and dispose of the
properties in accordance with the instructions of the trustor.

f. Trust Constitutes Fiduciary Duties on the Trustee

Article 1440 defines the trustee as one in whom confidence is
reposed as regards property for the benefit of another person is
known as the trustee. In other words, express trust creates a
fiduciary relationship in the trustee by virtue of his having assumed
naked or legal title to the properties constituting the corpus, under
express provisions to use, control, administer and management
them for the benefit of the trustee. An express trust constitute the
trustee as a fiduciary for the benefit of the beneficiary, since both
by contractual stipulations and by the fact that the trustee accepts

27

title to the properties for the benefit of the beneficiary, constitutes

necessary the duties of diligence and fidelity.
(1) Acquisitive Prescription on the Corpus Unavailing to the
Trustee
One of the consequences of the fiduciary relationship existing in a
trust relationship is the inability of the trustee to invoke the statute
of limitations or prescription against the beneficiary. Thus
in Pacheco v. Arro, 85 Phil. 505 (1950), the Court held that a
trustee cannot invoke the statute of limitations to bar the action
and defeat the right of the cestui que trustent. If the pretense of
counsel for the petitioners that the promise above adverted to
cannot prevail over the final decree of the cadastral court holding
the predecessor-in-interest of the petitioners to be the owner of the
lots claimed by the respondents were to be sustained and upheld,
then actions to compel a party to assign or convey the undivided
share in a parcel of land registered in his name to his co-owner or
co-heir could no longer be brought and could no longer succeed and
prosper. (at p. 515.)
In the same manner, in the earlier decision of Escobar v. Locsin, 74
Phil. 86 (1943), where the plaintiff was the owner of a parcel of
land, but being illiterate, asked the defendants predecessor-ininterest to claim the same for her; but that instead he committed a
breach of trust by claiming the lot for himself; the trial court, while
recognizing that the plaintiff had the equitable title and the
defendant the legal title, nevertheless dismissed the complaint
because the period of one year provided for under the Torrens
system for the review of a decree had elapsed, and the plaintiff had
not availed herself of that remedy. In overturning the trial courts
decision, the Court held A trust such as that which was created between the plaintiff and
[defendants predecessor-in-interest]is sacred and inviolable. The
Courts have therefore shielded fiduciary relations against every
manner of chicanery or detestable design cloaked by legal
technicalities. The Torrens system was never calculated to foment
betrayal in the performance of a trust. (at p. 87.)

28

The much earlier decision in Barretto v. Tuazon, 50 Phil. 888

(1926), characterized the old institution of mayorazgo a fiduciary
charge made to the first-born, as the usufructuary possessor, to
preserve the entailed property in the family and to deliver them at
the proper time to the succeeding first-born, who shall possess and
enjoy them as a species of the genus trust, the essence of which,
in concise terms, is nothing more than the confiding of a thing to
one in order that he may preserve it and deliver it to another. (at
p. 918). Thus, the cause of action of the successors-in-interest who
were entitled to benefits of the mayorazgo could not be defeated by
claims of prescription or failure to fail any claims in the proceedings
for the settlement of the estate of the deceased.
In Yu Tiong v. Yu, 6 SCRA 950 (1962), the Court held that in view
of the fiduciary nature of the legal relation that exists between the
trustee and thecestui que trust , the statute of limitations or
prescription and the principle of laches cannot being invoked by the
trustee with respect to the right of action of the latter. The principle
was reiterated in De Buencamino v. De Matias, 16 SCRA 849
(1966).
4. Rules of Enforceability of Express Trusts
Art. 1443. No express trusts concerning an immovable
or any interst 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.

a. Express Trust Is Essentially a Real Contract, Not Merely

Consensual
Discussions on the rules governing the enforceabilityof an express
trust may imply that as a contractual relationship between the
trustor and the trustee, it has the essential characteristic of
being consensual (i.e.,perfected, valid and binding upon mere

29

meeting on the minds on the subject matter and the consideration),

as contrasted from the characteristics of real (i.e., requiring the
fourth element of delivery), and solemn (i.e., requiring the fourth
element of form or solemnity, for validity). After all, Article 1444 of
the Civil Code, which applies particularly to express trusts, provides
that No particular words are required for the creation of an express
trust, it being sufficient that a trust is clearly intended. Yet by its
very definition, an express trusts constitute a real contract, that is,
it is not merely perfected by a mere meeting of minds between the
trustor and trustee to constitute a trust. Indeed, no trust
relationship exists, until and unless, the property constituting
the res is conveyed to the trustee.
Trusteeship is essentially a proprietary relationship, not merely from
acceptance of the duties and responsibilities of a trustee. Indeed, a
designated trustee may formally accept the duties and
responsibilities laid out in the deed of trust, but no fiduciary
obligation arises without the properties being transferred to his
name. Without naked or legal title in the properties of the corpus
being transferred in the name of the trustee, there is no moral or
legal basis upon which his fiduciary obligations can arise.
Thus, when Article 1445 of the Civil Code provides that No trust
shall fail because the trustee appointed declines the designation, it
can only mean two things. No contractual relationship has been
established yet because the actual transfer of naked or legal title to
the designated trustee has been effected, and the trust could not be
said to fail because its final establishment may still be effected by
another persons who accepts the trust and to whom the naked or
legal title to the corpus may be instituted. It may also mean that
naked or legal title has been effected by the trustor in the name of
the trustee before the latter has expressly accepted the
designation; but his refusal of the trust designation cannot also
work to fail the trust, because it is then possible to transfer naked
or legal title to the corpus in another person who accepts the trust
designation.
Article 1445 of the Civil Code recognizes that unless the contrary
should appear in the instrument constituting the trust, that the

30

designation of the particular individual was primordial in the

establishment of the trust (which by contractual intent made the
express trust as personality-centered relationship), trusteeship is
essentially a property-based relationship, that the transfer of naked
or legal title of the trust estate to the trustee-as-a-professionalfiduciary for the benefit of another person, is the moving spirit
behind the trust relationship.
With respect to the essential characteristic that trust relationship is
always based upon a splitting of dominion over the trust property (a
legal relation based on property rights), Pacheco v. Arro, 85 Phil.
505 (1950), held that [t]he juridical concept of a trust, which in a
broad sense involves, arises from, or is the result of, a fiduciary
relation between the trustee and thecestui que trust as regards
certain property-real, personal, funds or money, or choses in
action. (at p. 514). In more pinpointed language, Julio v.
Dalandan, 21 SCRA 543 (1967), characterizes trust as a method
of disposition of property. (at p. 550.)
There is no doubt that the ideal form of an express trust is
constituted pursuant to a written Deed of Trust whereby naked or
legal title to the trust property is conveyed to the specified trustee
under clear terms and conditions providing for his duties and
responsibilities towards the indicated beneficiary of the res. In this
case, it must be remembered that the execution of the Deed of
Trust as a public document which has the effect, as between the
trustor and the trustee, of constructive delivery of the covered trust
properties.
When it comes to immovables, especially registered land or any
interest therein, express trusts take the ideal form of legal or naked
title being registered in the name of trustee who holds the property
for the benefit of the indicated beneficiary. In other words, the best
form of an express trust is when the trustee is expressly registered
as naked title owner.
Do we presume then that when the purported trustee holds title
as full owner of the res, the underlying trust relationship is no
longer express trust, but rather resulting trust? The answer do this

31

is that it is legally possible to still have an express trust even when

the registered title in the name of the trustee is full ownership as
distinguished from naked or legal title. This is clear from both
statutory provisions and jurisprudence.
Firstly, apart from the lone requirement under Article 1443 that No
express trusts concerning an immovable or any interest therein may
be proved by parol evidence; the controling principle is actually
found in Article 1444 which provides that No particular words are
required for the creation of an express trust, it being sufficient that
a trust is clearly intended.
Jurisprudence supports the contractual basis of express trusts as
those which are created by the direct and positive acts of the
parties, by some writing or deed, or will or by words either
expressly or impliedly evincing an action to create a trust. In Julio
v. Dalandan, 21 SCRA 543 (1967), the Supreme Court observed
that In reality, the development of the trust as a method of
disposition of propery, so jurisprudence teaches, seems in large
part due to its freedom from formal requirements. This principle
perhaps accounts for the provision in Article 1444. . . (at p. 550,
quoting from 54 Am.Jr., p. 50.)
In Julio, the evidence of an express trust was in the form of an
affidavit subscribed and sworn to by [purported trustee] Clemente
Dalandan . . . By the terms of this writing, Clemente Dalandan,
deceased father of defendants Emiliano and Maria Dalandan,
acknowledged that a four-hectare piece of riceland in Las Pinas,
Rizal belonging to Victoriana Dalandan, whose only child and heir is
plaintiff Victoria Julio, was posted as security for an obligation which
he, Clemente Dalandan, assumed but, however, failed to fulfill The
result was that Victorianas said land was foreclosed. . . (at pp.
545-546). The trial court had dismissed on the complaint seeking
reconveyance of the property to the heir of Victoriana Julio on the
ground of prescription: the lower court ruled that plaintiffs suit,
viewed either as an action for specific performance or for the fixing
of a term, had prescribed. Reason: the 10-year period from the date
of the document had elapsed. (at p. 548). In ruling that the
document embodied an express trust, and that prescription could

32

not commence unless there was an express repudiation of the

trust, the Court further held
. . . For, technical or particular forms of words or phrases are not
essential to the manifestation of intention to create a trust or to
such words as trust or trustee essential to the constitution of a
trust as we have held in Lorenzo vs. Posadas, 64 Phil. 353, 368.
Conversely, the mere fact that the word trust or trustee was
employed would not necessarily prove an intention to creat a trust.
what is important is whether the trustor manifested an intention to
create the kind of relationship which in law is known as a trust. It is
unimportant that the trustor should know that the relationship
which he indends to create is called a trust, and whether or not he
knows the precise characteristics of the relationship which is called
a trust. Here, that trust is effective as against defendants and in
favor of the beneficiary thereof, plaintiff Victoria Julio, who accepted
it in the document itself. (at pp. 550-551.)
In Cuaycong v. Cuaycong, 21 SCRA 1192 (1967), the Supreme
Court held that Our 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.
[Article 1441] 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. . . .We find it clear
that the plaintiffs alleged an express trust over an immovable,
especially since it is alleged that the trustor expressly told the
defendants of his intention to establish the trust. Such a situation
definitely falls under Article 1443 of the Civil Code.
Ramos v. Ramos, 61 SCRA 284 (1974), held that Express trusts
are those which are created by the direct and positive acts of the
parties, by some writing or deed, or will, or by words either
expressly or impliedly evincing an intention to create a trust. (at p.
298, quoting from 89 C.J.S. 722).
The principle that an express trust may still be constituted outside
of formal designation of the trustee as naked or legal titleholder of
the corpus, and can be deduced from the words or actuations of the

33

party has been consistently upheld in decisions of the Supreme

Court. Sotto v. Teves, 86 SCRA 154 (1978); Philippine National
Bank v. Court of Appeals, 217 SCRA 347 (1993); Rizal Surety &
Ins. Co. v. Court of Appeals, 261 SCRA 69 (1996); DBP v. COA, 422
SCRA 459 (2004); Spouses Rosario v. Court of Appeals, 310 SCRA
464 (1999); Caezo v. Rojas, 538 SCRA 242 (2007);Pealber v.
Ramos, 577 SCRA 509 (2009).
Only recently, in Heirs of Tranquilino Labiste v. Heirs of Jose
Labiste, 587 SCRA 417 (2009), the Court held that since under
Article 1444 of the Civil Code, [n]o particular words are required
for the creation of an express trust, it being sufficient that a trust is
clearly intended, then an affidavit executed by eventual registered
owner of a registered land that the lot brought in his name was coowned by him, as one of the heirs of Jose, and his uncle
Tranquilino. And by agreement, each of them has been in
possession of half of the property, qualifies it to be as an express
trust, and consequently, prescription and laches will run only from
the time the express trust is repudiated. (at p. 426.)

b. Express Trust Must Nevertheless Be Clearly Shown to Have

Been Intended
Although the rule under Article 1444 is that No particular words are
required for the creation of an express trust, it being sufficient that
a trust is clearly intended, (See also Tuason de Perez v. Caluag, 96
Phil. 981 [1955]; Julio v. Dalandan, 21 SCRA 543, 546 [1967]),
nonetheless Ramos v. Ramos, 61 SCRA 284 (1974), reminds us
that an express trust will never be presumed to exist; that the party
who claims are right under a trust arrangement must prove the
existence thereof, thus: A trust must be proven by clear,
satisfactory, and convincing evidence. It cannot rest on vague and
uncertain evidence or on loose, equivocal or indefinite declarations.
As already noted, an express trust cannot be proven by parol
evidence. (at pp. 300-301;Citing De Leon v. Peckson, 62 O. G.
994; Pascual v. Meneses, 20 SCRA 219, 228 [1967]; Cuaycong vs.
Cuaycong, 21 SCRA 1192 [1967]).

34

De Leon v. Molo-Peckson, 6 SCRA 978 (1962), reiterated the

principle that to establish a trust the proof must be clear,
satisfactory and convincing. It cannot rest on vague, uncertain
evidence, or on a loose, equivocal or indefinite declaration. (at p.
984). However, when the trustees themselves (i.e., the donees in a
donation inter vivos), themselves have executed a declaration of
trust (which is defined as an act by which a person acknowledges
that the property, title to which he holds is held by him for the use
of another), constituted clearly and unequivocally the trust even if
the same was executed subsequent to the death of the trustor,
Juana Juan, for it has been held that the right creating or declaring
a trust need not be contemporaneous or inter-parties (Stephenson
v. Stephenson, 171 S.W. 2d Rec. 201). It was even held that an
express trust may be declcared by a writing made after the legal
estate has been vested in the trustee (Kurtz v. Robinson, Tex. Civ.
App. 256 S.W. 2d 1003). (at p. 984.)
Lately, in Canezo v. Rojas, 538 SCRA 242 (2007), in reiterating the
essential elements of an express trust, held that As a rule,
however, the burden of proving rleafter
c. What Is the Essence of the Relationship Between the
Trustor and the Trustee Pri0r to the Conveyance of the Res to
the Trustee?
A deed of trust setting-up the trust relationship, constituting the
trustee, providing for his duties and responsibilities and designating
the beneficiary would not give rise to a true trust relationship even
with the formal acceptance of the designated trustee, unless and
until the property that would constitute the corpus of the trust
relationship is actually conveyed to the trust relationship.
If the fourth element of delivery, i.e., transfer of legal title over the
trust property to the trustee, is necessary in order that a contract of
express trust is constituted, then the proper question that ought to
be ask is: What is the status of a Deed of Trust, duly executed by
the trustor and the trustee and accepted in the same instrument by
the beneficiary, before title to the designated trust property is
actually placed in the name of the trustee?

35

One answer to this issue is that before delivery of title over the
trust estate to the trustee, there is no valid contract of trust, but
only a nominate contract of do ut facia, that is that the trustor has
contractually bound himself to delivery and transfer title over the
trust property to the trustee (essentially a real obligation to give),
and the trustee has bound himself to accept delivery and to manage
the properties to be delivered for the interests of the beneficiary
(essentially a personal obligation to do).
If the so-called contract of trust is valid at this point (i.e., upon
mere meeting of the minds), then in order to be a real contract, it
must mean that it creates a binding obligation. But the only
enforceable obligation so far created by meeting of the minds is that
of the trustor to deliver legal title to the trust property to the
trustee and beneficial title to the beneficiary, which does not fall
within the essence of a trust which is supposed to create an
obligation on the part of the trustee to manage the trust property
for the benefit of the beneficiary. The trustor of a true trust does
not assume any obligation; he is the creator of the trust.
d. Express Trusts Over Immovables Must Be in Writing
Article 1443 of the Civil Code provides that No express trusts
converning an immovable or any interest therein may be proved by
parol evidence. The clear legal implication of the language of
Article 1443 is that an express trust concerning movables or any
interests therein may be proved by parol evidence; which means
that the mere meeting of minds over the creation of an express
trust over movables creates a valid and enforceable contract of trust
once the movable is delivered to the trustee.
It is my submission that Article 1443 is a lame provision, and really
serves no useful purpose in the realm of true express trusts
arrangements involving immovables or any interest therein.
Firstly, Article 1443 does not render the express trusts over
immovables void when it is not effected in writing, it merely renders
the contractual relationship unenforceable. Since it is only the
grantor or the accepting beneficiary who have rights to enforce

36

under the terms of the contractual relationship, it is they who are

unfavorably affected by the provisions of Article 1443: they cannot
adduce parol evidence in order to enforce the fiduciary duties and
obligations of the trustee through court action. This means that
Article 1443 constitutes a mere species of the Statute of Frauds.
Thus, in Pealber v. Ramos, 577 SCRA 509 (2009), the Supreme
Court confirmed that The requirement in Article 1443 that the
express trust concerning an immovable or an interest therein be in
writing is merely for purposes of proof, not for the validity of the
trust agreement, (at p. 528) and it went on to rule
. . . Therefore, the said article is in the nature of a statute of
frauds. The term statute of frauds is descriptive of statutes which
require certain classes of contracts to be in writing. The statute
does not deprive the parties of the right to contract with respect to
the matters therein involved, but merely regulates the formalities of
the contract necessary to render it inforceable. The effect of noncompliance is simply that no action can be proved unless the
requirement is complied with. Oral evidence of the contract will be
excluded upon timely objection. But if the parties to the action,
during the trial, make no objection to the admissibility of the oral
evidence to support the contract covered by the statute, and
thereby permit such contract to be proved orally, it will be just as
binding upon the parties as if it had been reduced to writing. (at p.
528.)
Nonetheless, Pealbar did not find for the establishment of an
express trust from the oral testimony given, on the ground that the
parol evidence failed to prove clearly that an express trust had been
constituted, thus
A careful perusal of the records of the case reveals that respondent
spouses Ramos did indeed fail to interpose their objections
regarding the admissibility of the afore-mentioned testimonies when
the same were offered to prove the alleged verbal trust agreement
between them and petitioner. Consequently, these testimonies were
rendered
admissible
in
evidence. Nevertheless,
while
admissibility of evidence is an affair of logic and law,

37

determined as it is by its relevance and competence, the

weight given to such evidence, once admitted, still depends
on judicial evaluation. Thus, despite the admissibility of the said
testimonies, the Court holds that the same carried little weight in
proving the alleged verbal trust agreement between petitioner and
respondent. (at pp. 529-530.)
Civil Law provides that the Statute of Frauds, which is meant to
prevent fraud and cannot be used to perpetuate fraud, has no
application to contracts that have either been partially or fully
executed. If that were so, and Article 1443 is merely a species of
the Statute of Frauds, then it would have no application to a true
express trust over an immovable, since by definition an express
trust exists by virtue of the trustor having conveyed the res or
the corpus to the trustee who assumes naked or legal title to it. In
other words, since express trust over an immovable presents a real
contract where ownership has in fact been conveyed to the
purported trustee, then it is exempted from the coverage of the
Statute of Frauds, and parol evidence may now be adduced to prove
the existence of such express trust.
Secondly, considering that express trust over immovables are
necessarily covered by the characteristic of being a real contract,
ineluctably no express trust over immovables can be constituted by
mere meeting of the minds, and that to even be validly constituted,
an express trust over immovable requires the fourth requisite of
delivery to have taken placethat naked or legal title over the
properties constituting the corpus have been transferred in the
name of the designated trustee. And under current legislation, no
title to registered land or any interest therein may be registered
with the Register of Deeds and title transferred in the name of a
trustee, unless the deeds are in a public instrument, and all taxes
thereto have been paid and certified to have been paid.
Even if Article 1443 were to be construed as referring to an express
trust that has been constituted not only by the meeting of the
minds of the parties, but coupled with delivery of the immovable
trust property to the trustee, it would also lead to the absurd
consequence of declaring as unenforceable an oral express trust

38

contract, where there has been execution. It is an established

doctrine that the Statute of Frauds consideration has no application
to fully or partially executed contracts. In any event, registration of
naked or legal title in the registered land in the name of the trustee
is certainly equivalent to the trust being in writing.
Finally, Article 1445 supports the proposition that a contract of
express trust is not a consensual contract, but essentially requires
transfer of title to the trust properties for its valid constitution, when
it provides that No trust shall fail because the trustee appointed
declines the designation, unless the contrary should appear in the
instrument constituting the trust. Under Article 1441, an express
can be created by the intention of the trustor alone, and that
Article 1445 follows up by stating that ones that intention has
created the express trust, it cannot fail simply because the trustee
appointed declines the designation, which can only mean that the
intention of the trustor to create the trust can only be manifested by
the act of placing title in the trust properties in the name of the
designated trustee for the benefit of the designated beneficiary. The
refusal by the designated trustee (i.e.,non-giving of his consent),
does not make the express trust contract involving immovables to
be void for lack of consent, for indeed the transfer of title to the
property has been effected, most especially of the beneficial or
equitable title to the beneficiary, whose acceptance of the grant of
the trustor is deemed to have taken place when no onerous
condition has been placed upon him under the terms of the trust
agreement.
Thirdly, it is now well-settled in Philippine jurisprudence that when
an express trust over immovable is not in writing, nonetheless, it
can still be proven by clear and convincing parol evidence to be a
resulting trust, under the aegis of Article 1457 that provides that
An implied trust may be proved by oral evidence. This matter is
thoroughly covered in the next chapter on the section on Resulting
Trusts.
Even under the terms of the public instrument creating an express
trust over immovables, the mere actual or physical delivery of
possession or control over land and any interest therein to the

39

designated trustee would not create a valid and binding express

trust yet because naked or legal title has not yet been constituted in
the name of the trustee by which he is therefore able to exercise
the prerogatives of title holder for the benefit of the designated
beneficiary.
Thus, when an express trust has been constituted over land or any
interest therein, especially those registered under the Torrens
system, but there has been no effective transfer of naked or legal
title to the properties constituting the corpus, there is as yet no real
express trust that has arisen. Lacking the fourth requisite
of delivery, the purported express trust over immovables cannot
even be said to be unenforceable, for it is as yet non-existent.
It may further be argued that the foregoing discussions are really
for academic purposes, since even when the express trust has not
been legally constituted by non-transfer of naked or legal title to the
trustee, the intentions of the parties may still be pursued to
equitable ends under the principles of implied trusts. Yet even for
implied trust, particularly resulting trusts as discussed in the next
chapter, no fiduciary relationship will arise in the person of the
trustee unless and until title to the property in dispute is transferred
in his name.
Perhaps, if Article 1443 is to have any legal significance at all, its
provisions must be understood to apply to an agreement to create
an express trust over an immovable or any interest therein (which
is the innominate contract do ut facia referred to earlier ). In
other words, an oral agreement between the trustor and the trustee
to constitute a trust over an immovable or any interest therein
which is not followed-up with an actual conveyance of the
covered res is not enforceable by parol evidence.

5.
Distinguishing
Arrangements

Express

Trusts

from

Other

Similar

We can learn more of the essence and characteristics of express

trusts by comparing them with other similar contracts.
a. Splitting of Full Dominion Into Naked or Legal Title and
Beneficial or Equitable Title

40

The state whereby there is a split of the full dominion of a particular

property between legal title in one person and beneficial ownership
in another, does not necessarily create the trust relationship.
(1) Compared with Usufruct
For example a usufruct is a property arrangement recognized under
Articles 562 and 563 of the Civil Code, whereby a usufructuary
enjoys the property of another (the naked title owner), and may be
constituted on the whole or a part of the fruits of the thing.
Consequently, it is the usufructuary who directly possess and enjoys
the fruits and benefits of on the subject property.
In fact under Articles 566 and 589 of the Civil Code, it is the
usufructuary who is obliged to preserve the form and substance of
the property held in usufruct, and to take care of its with the
diligence of a good father of a family for the benefit of the naked
title holder at the end of the usufruct. In contrast, under a trust
relationship, it is the trustee, the naked title holder, who actively
manages and administers the trust property, and the beneficiary
mainly is a passive receiver of the fruits and benefits arising from
the trust property.
(2) Compared with Lease
Another example would be a lease agreement, whereby the lessor
retains not only naked title to the property leased and many other
beneficial titles, and what is contracted out to the lessee is the
narrow enjoyment of the possession and use of the leased property,
and only for a limited period provided in the lease agreement. In
contradistinction, in a trust relationship, full beneficial ownership
over the trust property is for the account of the beneficiary, and
really what is assumed by the trustee is the obligation to manage
the trust property as the legal title holder for the benefit and
interest of the beneficiary. In addition, unlike in a lease
arrangement where the benefits enjoyed by lessee are only for a
limited contracted period, those of the beneficiary in a trust
arrangement are usually of a permanent nature.

41

(3) Compared with Sale

Express trusts therefore belong to those genre of contracts which
involve the disposition of title to property. However, unlike a
contract of sale which is defined under Article 1458 of the Civil Code
as one whereby the seller obliges himself to transfer ownership and
deliver possession to the buyer, an express trust is not perfected by
mere consent, but requires the actual delivery of the naked or legal
title to the trustee for the relationship to arise. Likewise, unlike sale
where the buyer takes full ownership of the subject matter for his
sole benefit, the trustee in an express trust only takes naked or
legal title and for the benefit of another person, the beneficiary.
Thus, a contract of sale is entered into for its own end, the acquiring
of title of the subject matter by the buyer, an express trust is
constituted merely as a preparatory arrangement, a medium, by
which the trustee is expected to pursue other juridical acts for the
benefit of the beneficiary.
b. On Being Bound to Fiduciary Duties and Obligations
(1) Compared with Agency
The essence of what makes a party in a trust arrangement the
trustee is by reason of the fact that he receives naked or legal title
to the property to be held in trust; and the reason why the office of
the trustee is fiduciary in character is because he holds title to the
property for the benefit of another person, the beneficiary. Thus,
there is no trust relationship merely because the trustor stipulates
in a contract that he reposes trust and confidence in the person
denominated as trustee; trust relationship is essentially borne out of
a property relationship whereby full dominion over a property is
split between naked title in the name of the trustee where he would
manage and administer the property for the benefit of the another
person in whom beneficial ownership is given.
In the case of an agent, the fiduciary relationship is strictly based
on a personal level: that he has been commissioned by the principal
to represent him and his interest in dealings with third parties. The
agent is therefore bound by the duties of obedience, diligence and

42

loyalty by reason of his contractual commitment to act for and

represent the principal and the latters interest with third parties; he
does not purport to act for himself or upon his own powers, but by
the principals authority, and therefore the agent does not have any
title to the property placed in his custody. An agent therefore is
bound to act in accordance with the instructions of the principal,
and in the name of the principal; consequently, the agent is not a
party to the contracts entered into by him in the name of the
principal, and has no rights, or assumes no obligations, under such
contracts.
On the other hand, the trustee is given naked title to the property
to be held in trust, and he transacts business with third parties
under the trust in his own behalf as a trustee and legal title holder
and not in the name of the beneficiary. Although a trustee is bound
by the duty of loyalty, i.e., he must act for the best interest of the
beneficiary, and that in a conflict-of-interests situation, he must
prefer the interest of the beneficiary over that of his own estate;
nonetheless, he is not bound by any duty of obedience, for indeed
he has been given legal title to the trust property precisely because
he is expected to use his discretion and best judgment in pursuing
transactions under the trust arrangement. He is not expected to be
bound by the instructions of the beneficiary, who often is an infant,
or who has no legal capacity, like an insane person. Since the
trustee is obliged to manage the trust property for the benefit of the
beneficiary, he is bound to exercise due diligence in his dealings in
relation to the trust.
While both trust and agency relationships are fiduciary in nature,
the agency relation is essentially revocable at the will of the
principal, being based primarily on willingness of the principal to be
represented by another person. On the other hand, a trust being
essentially based on a property relationship, is not revocable at will;
and although revocation of trust is the term used, it is not at the
will of the trustor or the beneficiary, unless that is so stated in the
trust instrument, but can only be based on a breach of trust, or
only upon showing that the trustee has breached his duty of loyalty
or duty of diligence. In other words, a trustee cannot generally be

43

stripped of the legal title unless it is shown that he is unfit for the
position of trustee, or he has breached his trust obligations. Thus,
in De Leon v. Molo-Peckson, 6 SCRA 798 (1962), the Court held
that in the absence of any reservation of the power to revoke, an
express trust (referred to as voluntary trust), is irrevocable
without the consent of the beneficiary.

6. Kinds of Express Trusts

It has been held that the development of trust as a method of
disposition of property is to a large part due to its freedom from
formal requirements.Lucenario, Domingo, Parol Evidence of Express
Trust, 109 SCRA 451, 453,citing 54 Am. Jur. 50; also Julio v.
Dalandan, 21 SCRA 543, 550 (1967). Thus, Article 1444 of the Civil
Code provides that No particular words are required for the
creation of an express trust, it being sufficient that a trust is clearly
intended.
In the early case of Gamboa v. Gamboa, 52 Phil. 503 (1928), the
Supreme Court demonstrated how mere oral assertions of trustee
obligations against the registered owner of a parcel of land was held
unavailing, the Court holding a person who has held legal title to
land, coupled with possession and beneficial use of the property for
more than ten years, will not be declared to have been holding such
title as trustee for himself and his brothers and sisters upon
doubtful oral proof tending to show a recognition by such owner of
the alleged rights of his brother and sisters to share in the produce
of the land. In other words, the best evidence to show a trust
relationship is written admission of the purported trustee that he or
she has agreed to hold title to the property in question for the
benefit of the claimants.
In Salao v. Salao, 70 SCRA 65 (1976), the Court held mandatory
the provisions of Article 1443, which requires that an express trust
involving immovable property must be covered in a written
instrument, thus

44

Not a scintilla of documentary evidence was presented by the

plaintiffs to prove that there was an express trust over the
Calunuran fishpond in favor of Valentin Salao.
Purely parol evidence was offered by them to prove the alleged
trust. Their claim that in the oral partition in 1919 of the two
fishponds the Calunuran fishpond was assigned to Valentin Salao is
legally untenable.
It is legally indefensible because the terms of article 1443 of the
Civil Code (already in force when the action herein was instituted)
are peremptory and unmistakable: parol evidence cannot be used to
prove an express trust concerning realty. (at p. 81.)

Although Article 1444 provides that No particular words are

required for the creation of an express trust, it still requires that
the circumstances indicate that a trust is clearly intended. When it
comes to immovable property, that a trust is clearly intended
takes only one form: a written instrument as mandated under
Article 1443. In the absence of such written instrument then public
policy expressed under Article 1443 is that no such intent to create
a trust exists, and consequently, there are not trust obligations on
the part of the purported trustee.
When it comes to other forms of trust properties, the element of
intention to create trust must still come into play, which is any
evidence tending to show that the trustor had transferred title to
the trust property with intention to have them managed for the
benefit of the beneficiary, coupled with an intention on the part of
the trutee to have accepted title to the trust property with the
obligation to manage them for the benefit of the beneficiary. An
express trust is never presumed to exist merely on the basis that
title to property has been transferred to another person; in the
absence of written evidence, the intention to create a trust must be
proved by clear and convincing evidence. Thus, De Leon v. MoloPeckson, 6 SCRA 978 (1962), held

45

True, it is that to establish a trust the proof must be clear,

satisfactory and convincing. It cannot rest on vague, uncertain
evidence, or on a loose, equivocal or indefinite declaration . . . but
here the document in question clearly and unequivocally declares
the existence of the trust even if the same was executed
subsequent to the death of the trustor, Juana Juan, for it has been
held that the right creating or declaring a trust need not be
contemporaneous or inter-parties . . It was even held that an
express trust may be declared by a writing made after the legal
estate has been vested in the trustee. . . (at p. 984.)
In De Leon, the instrument showed that the appellants agreed to
sell to the appellee the lots at a nominal price of P1.00 per lot,
which to the Court represented a recognition of a pre-existing trust
or a declaration of an express trust, based on the provision in the
donors will to the effect that the titles to the land should be
conveyed to appellants with the duty to hold them in trust for the
appellee.
But in Salao, after it was held that no express trust could have been
constituted over immovables without a written trust, the Court went
on to determine whether a trust over immovable property, which
cannot be enforced in the absence of written evidence thereof, can
still be pursued under the provisions of implied trust: Is plaintiffs
massive oral evidence sufficient to prove an implied trust, resulting
or constructive, regarding the two fishponds? (at p. 81; italic
format supplied). The matter will be covered under the chapter on
implied trusts.

a. Contractual Trusts
The manner of splitting the legal title and beneficial ownership over
the property (i.e., the corpus) to be held in trust may be done in
several ways. For example, the situation covered under Article 1440
would involve a situation where the full owner of a property, defined
as the trustor, conveys the naked title to one person, say a banking
institution, as trustee, under the terms of the trust agreement for

46

the benefit of another person called the beneficiary, say the

retarded child of the trustor. In this case, you would have three
parties to the trust arrangement.
Another mode would be for the trustor to convey the naked title of
the trust property to a trustee, say a banking institution, with
trustor himself to become the beneficiary of the trust. In this case
you would only have two parties to the trust agreement, the
trustor-beneficiary and the trustee.
A third mode would be for the trustor to convey the title to the
property to himself merely as trustee for the benefit of a
beneficiary, such as when a father donates a property to his son by
constituting himself as the trustee during the infancy of the son. In
this case, there are essentially only two parties, the trustor-turnedtrustee and the beneficiary. Such an arrangement essentially covers
a gift by the trustor to the beneficiary.
What is clear from the foregoing illustrations is that express trust
relationship is the product of contractual intentions. Express trusts
therefore are the creature of what we term in Contract Law as the
freedom to contract or the doctrine of autonomy, and the right of
every owner to deal with proprietary arrangements over property
owned by him in a manner that serves his purpose, provided it is
not contrary to laws, moral or public policy.
In order to complete the definition of terms, it should be noted that
the properties that are covered by the trust relationship are referred
to collectively as the corpus, and should be distinguished from
the fruits, earning and interests that are earned from the trustees
management of the corpus.
b. Inter Vivos Trusts
As discussed previously, inter vivos trusts are expressed trust
pursued in the form of donations, and which therefore become
solemn contracts which must comply with the solemnities mandated
by the Law on Donations.

47

A good example of an express trust created through a donation is

found in the decision in De Leon v. Molo-Peckson, 6 SCRA 978
(1962), where the husband, Mariano Molo y Legaspi died leaving a
will wherein he bequeathed his entire estate to his wife, Juana Juan,
who in turn executed a will naming therein many devisees and
legatees, including Guillermo San Rafael. Subsequently, Juana Juan
executed a donation inter vivos in favor of her two daughters for
almost the entire property, which included the ten parcels of land
located in Pasay City and subject of the suit. Six months after the
mother died, the donees-daughters executed a Mutual Agreement
whereby the bound themselves to sell for P1.00 each the ten lots to
the issues of Guillermo San Rafael under the express purpose That
this agreement is made in conformity with the verbal wish of the
late Don Mariano Molo y Legaspi and the later Doa Juana Francisco
Juan y Molo. These obligations were repeatedly told to [the doneesdaughters] before their death and that the same should be fulfilled
after their death.
Although the donees-daughter subsequently tried to revoke the
Mutual Agreement, the Court held that an express trust had been
duly constituted, since the instrument, wherein the appellants
[donees-daughters] agreed to sell to the appellee the lots at a
nominal price of P1.00 pler lot, represents a recognition of a preexisting trust or a declaration of an express trust, based on the
provision in the donors will to the effect that the titles to the land
should be conveyed to appellants with the duty to hold them in trust
for the appellee. (at p. 984.)
c. Testamentary Trust
When an express trust is created under the terms of the last will
and testament of the testator, it is a testmentary trust and is
governed by the Law on Succession. Unless the will conforms with
the solemnities and conditions set by law, it will be void together
with the testmentary trust sought to be created therein.
Palad v. Province of Quezon, 46 SCRA 354 (1972), shows where an
express trust was embodied in a holographic will containing
testamentary dispositions, through which the testator created a

48

trust for the establishment and maintenance of a high school to be

financed with tie income of certain specified properties for the
benefit of the inhabitants of a town, naming as trustee whomsoever
may be the governor of the province.
In Perez v. Araneta, 4 SCRA 430 (1962), the Court held that the
provisions of the will of the decedent explicitly authorizing the
trustee constituted therein to sell the property held in trust and to
acquired, with the proceeds of the sale, other properties, leaves no
room for doubt about the intent of the testatrix to keep, as part of
the trust estate, said proceeds of sale, and not turn the same over
to the beneficiary as net rental or income.
In De Leon v. Molo-Pecson, 6 SCRA 798 (1962), the Court held that
the execution by the appellants of the agreement to sell the parcels
of land at a nominal price of P1.00 per lot, represent a recognition
of a pre-existing trust or a declaration of an express trust, based on
the provisions in the donors will to the effect that the titles to the
parcels of land covered should be conveyed to appellants with the
duty to hold them in trust for the appellee.
d. Eleemosynary or Charitable Trusts
A description of a charitable trusts is found in Lopez v. Court of
Appeals, 574 SCRA 26 (2008), where in the notarial will, the
testator expressed that she wished to constitute a trust fund for
her paraphernal properties, denominated as Fideicomiso de Juliana
Lopez Manzano (Fideicomiso), to be administered by her husband. .
. Two-thirds (2/3) of the income from rentals over theses properties
were to answer for the education of deserving but needy honor
students, while one-third (1/3) was to shoulder the expenses and
fees of the administrator.
However, the properties designated for the Fideicomiso were
excluded and instead adjudicated to the husband (Jose) as sole
heir. Consequently, the Court ruled that On the premise that the
disputed properties ere the paraphernal properties of Juliana which
should have been included in theFideiocomiso, their registration in
the name of Jose would be erroneous and Joses possession wuld be

49

that of a trustee in an implied trust . . . [which from] the factual

milieu of this case is provided in Article 1456 of the Civil Code. (at
p. 36.)
e. Publicly-Regulated Trusts
Publicly-regulated trusts would be those where the State provides
the vehicle by which institutions are allowed to administer large
funds for the benefit of the public. Among such funds created under
the law would be the pension and benefits funds administered by
the GSIS, the SSS and the Pag-Ibig Fund. Tax laws provide for
incentives to the setting-up of retirement funds for employees. All
such funds are really being administered for the beneficiaries
thereof through the medium of trust.
A good example of a retirement trust is that discussed
in Development Bank of the Philippines v. Commission on Audit, 422
SCRA 459 (2004), which the Court described as follows:
In the present case, the DBP Board of Governors (now Board of
Directors) Resolution No. 794 and the agreement executed by
former DBP Chairman Rafael Sison and the trustees of the Plan
created an express trust, specifically, an employees trust. An
employees trust is a trust maintained by an employer to provide
retirement, prson or other benefits to its employees. It is a separate
taxable entity established for the exclsuivse benefit of the
employees. Resolution No. 794 shows that DBP intended to
establish a trust fund to cover the retirement benefits of certain
employees under Republic Act No. 1616 (RA 1616). The principal
and income of the Fund would be separate and distinct from the
funds of DBP. . . (at p. 473.)
Although the Supreme Court held that the principal and income of
the fund no longer pertained in ownership to DBP, since naked title
has been devolved to the trustees of the Fund, and that beneficial
interest was with the qualified officers and employees of DBP,
nonetheless it found that DBP, as trustor, has legal standing to sue
on matters relating to the Fund, thus:

50

As a party to the Agreement and a trustor of the Fund, DBP has a

material interest in the implementation of the Agreement, and in
the operation of the Gratuity Plan and the Fund as prescribed in the
Agreement. The DBP also possesses a real interest in upholding the
legitimacy of the policies and programs approved by its Board of
Directors for the benefit of DBP employees. . . (at p. 472.)
7. Capacities, Rights, Duties and Obligations of the Parties
to the Express Trust
a. The Trustor
(1) Trustor as the Creator of the Trust
Under Article 1440, the trustor is defined as the person who
establishes a trust; and under Article 1441, an express trust may
be created by the intention of the trustor. The trustor therefore,
disposes of his full ownership of the designated trust properties in
favor of the trustee who assumes legal title thereto, and the
beneficiary, to whom beneficial or equitable title shall pertain.
It is possible that under an express trust, the trustor transfers
naked or legal title to properties to the trustee, but with the trustor
designated as the beneficiary.
(2) Trustor Must Have Legal Capacity to Convey Trust
Property
Gayondato v. Treasurer of the P.I., 49 Phil. 244 (1926),
distinguishes an express trust from an implied trust in the sense
that in an express trust, the trustor must have legal capacity to
create the trust, which effectively requires the ability to convey
naked or legal title in the trust property to the trustee to be held by
the latter for the benefit of the beneficiary. The Court held
Bouvier defines a trust in its technical sense as a right of property,
real or personal, held by one party for the benefit of another. In
the present case we have this situation: The plaintiff was a minor at
the time of the registration of the land and had no legal guardian. It

51

is true that her mother in whose name the land was registered was
the natural guardian of her person, but that guardianship did not
extend to the property of the minor and conferred no right to the
administration of the same . . . and the plaintiff, being a minor and
under disability, could not create a technical trust of any kind.
Applying Bouviers definition to this state of facts, it is clear that
there was no trust in its technical signification. The mother had no
right of property or administration in her daughters estate and was
nothing but a mere trespasser. . . . (at p. 250)
In effect, capacity of the parties is not essential in implied trusts,
because the arrangement is imposed by operation of law; whereas,
in an express trust, capacity to transfer title on the trust properties,
in order to have legal title held by the trustee, is critical.
b. The Trustee
(1) Trustee Is the Party Primarily Bound
Under Article 1440, the trustee is the person in the trust relation
in whom confidence is reposed as regards property for the benefit of
another person. It is the trustee therefore who is the party primarily
bound under the trust relation, and being possessed of the legal
title to the trust property held for the benefit of another person, he
is bound by the fiduciary duties of diligence and loyalty.

(2) Trustee Must Have Legal Capacity to Accept the Trust

It is to the trustee that naked or legal title to the trust properties is
transferred. Consequently, the trustee must also have legal capacity
to accept the trust, especially when upon acceptance of the trust,
he binds himself to certain obligations.
(3) When Trustee Declines the Designation
Article 1445 of the Civil Code provides that No trust shall fail
because the trustee appointed declines the designation, unless the

52

contrary should appear in the instrument constituting the trust. On

this matter, Tolentino wrote
Want of Trustee. The principle that equity will not allow a trust
to fail for want of a trustee is clearly established. Where a trust has
once been created and the trustee dies, becomes insane or subject
to some other legal incapacity, or resigns or is removed, the trust
does not fail, but a new trustee will be appointed. Such an
appointment will be made by the proper court unless by the terms
of the trust other provision is made for the appointment of a
successor trustee. The reason why a trust does not fail for want of a
trustee is that to permit it to fail for this reason would be contrary
to the intention of the trustor in creating the trust. The trustor is
primarily interested in the disposition of the beneficial interest in the
property, and the matter of its administration is a subsidiary
consideration.
x x x.
There are cases, however, in which it may appear that the trustor
intended the trust to continue only so long as the person designated
by him as trustee should continue as such. It may be so provided by
the terms of the trust, or it may appear that the purposes of the
trust cannot be carried out unless the person named as trustee
continues to act. In such a case, the trust will fail, if the trustee
resigns, dies, is removed, or otherwise ceased to be a trustee.
(Tolentino, Civil Code of the Philippines, Vol. IV, at pp. 676-677
[1991 ed.].)
Want of Trustee. The principle that equity will not allow a trust to fail for want
of a trustee is clearly established. Where a trust has once been created and the
trustee dies, becomes insane or subject to some other legal incapacity, or resigns or
is removed, the trust does not fail, but a new trustee will be appointed. Such an
appointment will be made by the proper court unless by the terms of the trust other
provision is made for the appointment of a successor trustee. The reason why a trust
does not fail for want of a trustee is that to permit it to fail for this reason would be
contrary to the intention of the trustor in creating the trust. The trustor is primarily
interested in the disposition of the beneficial interest in the property, and the matter of
its administration is a subsidiary consideration.
x x x.

53

There are cases, however, in which it may appear that the trustor intended the trust to continue only so
long as the person designated by him as trustee should continue as such. It may be so provided by the
terms of the trust, or it may appear that the purposes of the trust cannot be carried out unless the person
named as trustee continues to act. In such a case, the trust will fail, if the trustee resigns, dies, is
removed, or otherwise ceased to be a trustee. (Tolentino, Civil Code of the Philippines, Vol. IV, at pp.
676-677 [1991 ed.].)

The principle that the law will not allow a trust to fail due nonacceptance, resignation, incapacity or death of the designated
trustee in recognized under our Rules of Court which provide for the
duties of the trustee and the manner of appointment or
replacement, as discussed hereunder.
(4) Obligations of the Trustee
(i) Contractually Stated Duties and Obligations of the Trustee
An express trust constituted under a trust agreement normally
provides for the powers and functions of the trustee, and would
enumerate such powers which under the law need to be covered by
a special power of attorney to remove any doubt as to the duties of
the trustee, and provide for the parameters of his obligations as
well.
(ii) Common Law Duties of the Trustee
The position of trustee being fiduciary in nature, a trustee is
expected to carry out the trust using the diligence of a good father
of a family. The trustee becomes personally liable for gross
negligence committed even when it is in the pursuit of the trust
arrangement; for negligence which causes damage to another
person constitutes a wrong committed by the tortfeasor for which
he can be held personally liable. Every trustee has the common law
duty of diligence.
In addition, the trustee is expected to be loyal to the affairs and
interest of the beneficiary. He cannot appropriate for himself any

54

opportunity which in the course of his functions as trustee should

pertain to the beneficiary. He has the duty to account t the
beneficiary for the affairs of the trust. And he cannot convert the
use of the trust properties, and the incomes, fruits and proceeds for
his own benefit. Every trustee has the common law duty of loyalty.
Perez v. Araneta, 4 SCRA 434 (1962), held that although the
beneficiaries may be entitled to receive the income flowing from the
trust estate, the profits realized in the sale of trust properties are
part of the capital held in trust, to which the beneficiaries
are entitled to receive as income.
De Leon v. Molo-Peckson, 6 SCRA 978 (1962), held that the other
duties of the trustee, which flow out of the main duty of loyalty,
would be the duty to account to the beneficiary of the trust estate.
It would be the duty of the trustee also to deliver the property in
trust to the cestui que trust , when it is time to so do it, free all
liens and encumbrances.
Under Article 1455, when the trustee uses trust funds for the
purchase of property and causes the conveyance to be made in his
name or a third person, a trust is established in favor of the
beneficiary.
A violation of the duties of the trustee may constitute a breach of
trust that would be the legal basis by which the trustee may be
removed, or the trust revoked entirely.
(iii) Trustee is Prohibited from Donating Trust Property
Under Article 736 of the Civil Code, trustees cannot donate the
property entrusted to them. Such prohibition is in accordance with
the fiduciary duty of loyalty of a trustee, that the holds the trust
property for the benefit of the beneficiary. He therefore cannot
exercise acts of beneficence employing the property that he holds
for the benefit of another person. (see Araneta v. Perez, 5 SCRA
338 [1962].)

55

(iv) Trustee Cannot Use Funds of the Trust to Acquire

Property for Himself
Under Article 1455 of the Civil Code (on implied trusts), When any
trustee . . . 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. Article 1455 actually establishes the
parameters of the duty of loyalty that every trustee owes to the
beneficiarythat the trustee is obliged to use the funds of the trust
estate for the sole benefit of the beneficiary.
Every trustee in express trust, being the naked title holder, of
course has the power to use funds of the trust estate to acquire
properties to be placed in his name, but that would have to be
officially as trustee. Article 1455 applies in a situation where the
property is placed in the name of the trustee without indicating that
he holds it as trustee. That would then later authorize him to claim
the property as his own, in breach of his duties of loyalty.
(v) Duties and Responsibilities of the Trustees under the
Rules of Court
Rule 98 of the Rules of Court grants the court authority to appoint a
trustee when necessary to carry into effect the provisions of a will
or a written instrument. (Section 1), and that title to the trust
estate will vest in the trustee thus appointed by the courts (Section
2).
In particular, Section 3 of Rule 98, provides that
When a trustee under a written instrument declines, resigns, dies,
or is removed before the objects of the trust are accomplished, and
no adequate provision is made in such instrument for supplying the
vacancy, the proper [Regional Trial Court] may, after due notice to
all persons interested, appoint a new trustee to act alone or jointly
with the others, as the case may be. Such new trustee shall have
and exercise the same powers, rights, and duties as if he had been
originally appointed, and the trust estate shall vest in him in like

56

manner as it had vested or would have vested, in the trustee in

whose place he is substituted; and the court may order such
conveyance to be made by the former trustee or his
representatives, or by the other remaining trustees, as may be
necessary or proper to vest the trust estate in the new trustee,
either alone or jointly with others.
The provisions of Rule 38 of the Rules of Court are meant to
implement the rule in this jurisdiction that the non-acceptance,
death, civil interdiction, insanity, insolvency, or even the resignation
of a designated trustee, shall not of itself prevent a trust from
coming into fruition or extinguish one that has been already
constituted. The doctrine flows from the equity nature of the trust
as a legal institution in the Philippines.
An example of the application of this principle is in the decision
in Lorenzo v. Pasadas, 64 Phil. 353 (1937), where the will of the
decedent never used the term trust, but nevertheless the
intention to create one was deemed implicit to the Court, thus
The appointment of P.J.M. Moore as trustee was made by the trial
court in conformity with the wishes of the testator as expressed in
his will. It is true that the word trust is not mentioned or used in
the will but the intention to create one is clear. No particular or
technical words are required to create a testamentary trust (69 C.J.,
p. 711). The words trust and trustee, though apt for the purpose,
are not necessary. In fact, the use of these two words is not
conclusive on the question that a trust is created (69 C.J., p. 714).
To create a trust by will the testator must indicate in the will his
intention so to do by using language sufficient to separate the legal
from the equitable estate, and with sufficient certainty designate the
beneficiaries, their interest in the trust, the purpose or object of the
trust, and the property or subject matter thereof. Stated otherwise,
to constitute a valid testamentary trust there must be concurrence
of three circumstances: (1) Sufficient words to raise a trust; (2) a
definite subject; (3) a certain or ascertained object; statutes in
some jurisdictions expressly or in effect so providing. (69 C. J., pp.
705, 705.) There is no doubt that the testator intended to create a
trust. He ordered in his will that certain of this properties be kept

57

together undisposed during a fixed period, for a stated purpose. The

probate court certainly exercised sound judgment in appointing a
trustee to carry into effect the provisions of the will. (see sec. 582,
Code of Civil Procedure). (at pp. 368-369).
Following up on this principle, the Supreme Court held in Julio v.
Dalandan, 21 SCRA 543 (1967), that
For, technical or particular forms of words or phrases are not
essential to the manifestation of intention to create a trust or to the
establishment thereof. Nor would the use of some such words as
trust or trustee essential to the constitution of a trust as we have
held in Lorenzo v. Posadas, 64 Phil. 453, 368. Conversely, the mere
fact that the word trust or trustee was employed would not
necessarily prove an intention to create a trust. What is important is
whether the trustor manifested an intention to create the kind of
relationship which in law is known as a trust. Is it important that the
trustor should know that the relationship which intents to create is
called a trust, and whether or not he knows the precise
characteristics of the relationship which is called a trust. Here, that
trust is effective as against defendants and in favor of the
beneficiary thereof, plaintiff Victoria Julio, who accepted it in the
document itself. (at pp. 550-551)
Under Sections 5 and 6 of Rule 98, the following are the duties and
responsibilities of the trustee appointed by the courts:
(a) Before entering on the duties of his trust, a trustee shall file a
bond with the court conditioned upon compliance with his duties;
(b) To make and return to the court, at such time as it may order, a
true inventory of all the real and personal estate belonging to him
as trustee, which at the time of the making of such inventory shall
have come to his possession or knowledge;
(c) To manage and dispose of all such estate, and faithfully
discharge his trust in relation thereto, according to law and the will
of the testator or the provisions of the instrument or order under
which he is appointed;

58

(d) To render upon oath at least once a year until his trust is
fulfilled, unless he is excused therefrom in any year by the court, a
true account of the property in his hands and of the management
and disposition thereof, and will render such other account as the
court may order; and
(e) Upon the expiration of his trust, he will settle his accounts in
court and pay over and deliver all the estate remaining in his hands,
or due from him on such settlement, to the person or persons
entitled thereto.
(vi) Proper Proceedings for Sale or Encumbrance of Trust
Estate
Under Section 9 of Rule 98 of the Rules of Court, when the sale or
encumbrance of any real or personal estate held in trust is
necessary or expedient, the Regional Trial Court (RTC) having
proper jurisdiction of the trust may, on petition and after due notice
and hearing, order such sale or encumbrance to be made, and the
reinvestment and application of the proceeds thereof in such
manner as will best effect the objects of the trust.
(vii) Trustee Does Not Assume Generally Personal Liability
on the Trust
Although a trustee enters upon the fulfillment of his duties by his
own name, and not in the name of the trustor or the beneficiary,
nonetheless, it should be understood that the performance of the
functions of the trustee and the contracts entered into in pursuit of
the trust, as performed under official capacity as a trustee.
Consequently, the liabilities assumed by the trustee is such capacity
can only be enforced to the extent of the trust properties. In other
words, the trustee, unless he so stipulates, does not become
personally liable to his separate properties outside of the trust
properties, for contracts and transactions arising from the trust and
entered into in his official capacity as trustee.
Thus, in Tan Senguan and Co. v. Phil. Trust Co., 58 Phil. 700
(1933), where the properties for which the trust company had

59

entered into transaction were received not in a trustee capacity, the

Court held that the trustee would be liable for such transactions in
its personal capacity, and not as a trustee.
A trustee who acts within the scope of the trust therefore, has a
right to charge to the trust estate the expenses incurred by reason
thereof.
On the other hand, a trustee is expected to exercise due diligence in
the pursuit of the trust, and when he acts with fraud or gross
negligence, he becomes personally liable for his own separate
properties, as to all persons who suffer damage by reason of such
fraud or negligence.
(viii) Trustee is Entitled to Compensation for Management of
the Trust Estate
In Lorenzo v. Pasadas, 64 Phil. 353 (1937), the Court held that as
a matter of general proposition, A trustee, no doubt, is entitled to
receive a fair compensation for his services. (at p. 365, citing
Barney v. Saunders, 16 How., 535, 14 Law. Ed., 1047.)
Under Section 7 of Rule 98 of the Rules of Court, if the
compensation of the trustee is not determined in the instrument
creating the trust, his compensation shall be fixed by the court that
appointed him.
In Araneta v. Perez, 7 SCRA 258 (1962), the Court held that the
reasonableness of fees of a trustees should be determined in
advance, but must be determined at the time he files a claim for the
same, since reasonableness depends upon variable circumstances,
such as the character and powers of the trusteeship, the risk and
responsibility assumed, the time and labor and skill required in the
administration of the trust, as well as the care and management of
the estate. The Court also held that the trustee may be indemnified
out of the trust estate for the expenses incurred in rendering and
proving his accounts and for the costs and counsels fees in
connection therewith.

60

(ix) Removal or Resignation of Trustee

Under Section 8 of Rule 98 of the Rules of Court, the proper RTC
may, upon petition of the parties beneficially interested and after
due notice to the trustee and hearing, remove a trustee if such
removal appears essential in the interests of the petitioners. The
RTC may also, after due notice to all persons interested, remove a
trustee who is insane or otherwise incapable of discharging his trust
or evidently unsuitable therefore.
The section also recognizes that a trustee, whether appointed by
the court or under a written instrument, may resign his trust if it
appears to the court that is it proper to allow such resignation.
c. The Beneficiary
(1) Beneficiary Is the Passive Recipient of Benefits Flowing
from the Trust
Under Article 1440 of the Civil Code, the beneficiary is the person
for whose benefit the trust has been created. As a general rule, the
designation of the beneficiary, is a gratuitous act, essentially an act
of donation by which beneficial or equitable title to the trust
property is given to the beneficiary. However, when the trustor
creates the trust by designating a trustee to hold the trust
properties for the benefit of the trustor, there is no act of
beneficence in this case, but constitutes more as a sense of estate
planning.
Under Article 1446 of the Civil Code, acceptance by the beneficiary
of the express trust 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. The situation does
not cover the case when the trustor designates himself as the
beneficiary.
Article 725 of the Civil Code defines donation as an act of liberality
whereby a person disposes gratuitously of a thing or right in favor
of another, who accepts it. Since a person cannot be compelled to

61

accept the generosity of another, it is provided under Article 1446

that [a]cceptance by the beneficiary is necessary. Although the
Law on Donations provides for solemnities for the act of donation
and its acceptance, it has been held inCristobal v. Gomez, 50 Phil.
810 (1927), that the acceptance by the beneficiary of gratuitous
express trust is not subject to the rules for the formalities of
donations.
Parenthetically, under Article 748, it is provided that the donation
of a movable may be made orally or in writing. An oral donation
requires the simultaneous delivery of the thing or the document
representing the right donated. If the value of he personal property
donated exceeds five thousand pesos, the donation and the
acceptance shall be made in writing. Otherwise, the donation shall
be void.
Under Article 749 of the Civil Code, in order that the donation of an
immovable may be valid, it must e made in a public document,
specifying therein the property donated and the value of the
charges which the donee must satisfy. The acceptance may be
made in the same deed of donation or in a separate public
document, but it shall not take effect unless it is done during the
lifetime of the donor. If the acceptance is made in a separate
instrument, the donor shall be notified thereof in an authentic form,
and this step shall be noted in both instruments.
De Leon v. Molo-Peckson, 6 SCRA 978 (1962), relying upon
American jurisprudence, held that The fact that the beneficiaries
[to a donation inter vivos] were not notified of the existence of the
trust or that the latter have not been given an opportunity to accept
it is of no importance, for it is not essential to the existence of a
valid trust and to the right of the beneficiaries to enforce the same
that they had knowledge thereof at the time of its creation (Soehr
v. Miller, 296 F. 414). Neither is it necessary that the beneficiary
should consent to the creation of the trust (Wockwire-Spencer Steel
Corporation v. United Springs Mfg. Co., 142 N.E. 758, 247 Mass.
565). In fact it has been held that in case of a voluntary trust the
assent of the beneficiary is not necessary to render it valid because
as a general rule acceptance by the beneficiary is presumed (Article

62

1446, new Civil Code; Cristobal v. Gomez, 50 Phil. 810). (at p.

985)

(2) Beneficiary Need Not Have Legal Capacity

It is posited that the beneficiary of an express trust need not have
legal capacity to be constituted as such in a trust agreement,
especially so when the designation is an act of pure liberality.
Under Article 738 of the Civil Code, All those who are not specially
disqualified by law therefore may accept donations, which means
that all persons regardless of legal capacity, may be donees except
only in those specific cases where the donation to them cannot be
made. Article 741 provides that minors and others who cannot enter
into a contract may become donees but acceptance shall be done
through their parents or legal representatives. Under Article 742,
donations may even be made to conceived and unborn children and
may be accepted by those persons who would legally represent
them if they were already born.
In the case of express trust, Article 1446 of the Civil Code provides
that if the trust imposes no onerous condition upon the beneficiary,
his acceptance shall be presumed, if there is no proof to the
contrary.
The provisions do not cover also charitable trusts, or those
constituted upon a trustee who holds legal title to the trust
properties for the benefit of a general group of beneficiaries.
8. How Express Trust Extinguished or Terminated
Like any other legal relationship, express trust relationships may be
terminated by reason provided for in the trust instrument itself, or
upon grounds provided for by law or equity.
a. Destruction of the Corpus

63

When the entire trust estate is loss or destroyed, the trust is

extinguished since the underlying proprietary basis no longer exists
to warrant any legal relationship between the trustee and the
beneficiary.
b. Revocation by the Trustor
In a revocable express trust, the trustee may simply invoke the
revocation or termination clause found in the deed of trust thereby
revoking the trust and conveying notice thereof to the trustee.
Unless there is reserved power to revoke, the general rule is that an
express trust is irrevocable.
In De Leon v. Molo-Peckson, 6 SCRA 978 (1962), the doneedaughters had tried to revoke the Mutual Agreement they
previously executed confirming the desires of the mother who
donated to them that the ten parcels of land donated would be sold
at nominal price to a designated cetui que trust. The Court held that
although It is true, as appellants contend, that the alleged
declaration of trust was revoked, and having been revoked it cannot
be accepted, but the attemted revocation did not have any legal
effect. The rule is that in the absence of any reservation of the
power to revoke a voluntary trust is irrevocable without the consent
of the beneficiary . . . It cannot be revoked by the creator alone,
nor by the trustee. (at p. 985, citing Allen v. Safe Depolsit and
Trust Co., of Balitmore, 7 A.2d 180, 177 Md. 26; Fricke v. Weber,
C.A.A. Ohio, 145 F.2d 737; Hughes v. C.I.R., C.C.A. 9, 104 F.2d
144; Ewing v. Shannahan, 20 S.W. 1065, 113 Mo. 188; italics
supplied)
c. Achievement of Objective, or Happening of the Condition
Provided for in the Trust Instrument
When the trust instrument provides the objective or the condition
upon which the trust shall be extinguished, say when the trust
instrument provides that full ownership in the trust properties shall
be consolidated in the person of the beneficiary once he reaches the
age of majority, the happening of the condition shall terminate the
trust.

64

d. Death or Legal Incapacity of the Trustee

Unless otherwise expressly stipulated in the trust instrument, the
death, civil interdiction, insanity or insolvency of the trustee does
not necessarily terminate the trust. Thus, Tolentino writes:
The principle that equity will no allow a trust to fail for want of a
trustee is clearly established. Where a trust has once been created
and the trustee dies, becomes insane or subject to some other legal
incapacity, or resigns or is removed, the trust does not fail, but a
new trustee will be appointed. Such an appointment will be made by
the property court unless by the terms of the trust other provision is
made for the appointment of a successor trustee. The reason why a
trust does not fail for want of a trustee is that to permit it to fail for
this reason would be contrary to the intention of the trustor in
creating the trust. The trustor is primarily interested in the
disposition of the beneficial interest in the property, and the matter
of its administration is a subsidiary consideration. (Tolentino, at p.
676.)
In Canezo v. Rojas, 538 SCRA 242 (2007), where the daughter
alleged that he had entrusted possession and title to the property to
her father Crispulo when she left Mindanao based on either an
express trust or a resulting trust, the Supreme Court laid down the
following legal effect on the death of the trustee:
Assuming that such a relation existed, it terminated upon Crispulos
death in 1978. A trust terminates upon the death of the trustee
where the trust is personal to the trustee in the sense that the
trustor intended no other person to administer it. If Crispulo was
indeed appointed as trustee of the property, it cannot be said that
such appointment was intedned to be conveyed to the respondents
or any of Cripulos other heirs. Hence, after Crispulos death, the
respondent had no right to retain possession of the property. At
such point, a constructive trust would be created over the property
by operation of law. Where one mistakenly retains property which
rightfully belongs to another, a constructive trust is the proper
remedial device to correct the situation. (at p. 257.

65

e. Confusion or Merger of Legal Title and Beneficial Title in

the Same Person
When the trustee of an existing trust becomes the beneficiary
thereof, orvice versa, the trust relation is ipso jure extinguished, for
it is difficult to see how a person can owe fiduciary duties to
himself.
f. Breach of Trust
When a trustee breaches his duty of loyalty, it would constitute
legal basis by which to terminate the trust.
Thus, in Martinez v. Grao, 42 Phil. 35 (1921), the Court held that
when a person administering the property in the character of a
trustee inconsistently assumes to be holding it in his own right, this
operates as a renunciation of the trust and the persons interested
as beneficiaries in the property are entitled to maintain an action to
declare their right and remove the unfaithful trustee.
oOo

66

III IMPLIED TRUSTS

[Updated: 06 August 2010]

III. IMPLIED TRUSTS

1. Nature and Types of Implied Trusts
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.
Art. 1442. The principles of the general law of trusts,
insofar as they are not in conflict with this [Civil] Code, the
Code of Commerce, the Rules of Court and special laws are
hereby adopted.
Art. 1445. 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.

According to the Report of the Code Commission, the underlying

doctrine of implied trusts is founded on equity, derived from
American decisions under a legal system where injustice would
result in which the legal estate or title were to prevail over the

67

equitable right of the beneficiary. (Report of the Code Commission,

p. 60)
Under Article 1441 of the New Civil Code, as distinguished from
express trust which are created by the intention of the trustor or of
the parties, implied trusts come into being by operation of law.
This may imply that implied trusts are essentially creatures of the
law, and do not arise from the intentions of the parties bound by
the trust relationship. Although such an implication may be true of
constructive trusts, it does not accurately apply to resulting trusts,
as explained hereunder.

a. Two Types of Implied

Constructive Trusts

Trusts:

Resulting

Trusts

and

In Ramos v. Ramos, 61 SCRA 284 (1974), the Supreme Court

defined and characterized implied trusts as those which, without
being expressed, are deducible from the nature of the transactions
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 (89 C.J.S. 724). (at p. 298; italics
supplied) Ramos distinguishing principles were reiterated in Salao
v. Salao, 70 SCRA 65, 80 (1976).
Morales v. Court of Appeals, 274 SCRA 282 (1997) defined implied
trusts as those that come into being by operation of law, either
through implication of an intention to create a trust as a matter of
law or through the imposition of the trust irrespective of, and even
contrary to, any such intention. (at p. 298)
Therefore, implied trust which are deductible from the nature of
the transactions as matters of intent, are referred to as resulting
trusts; and those which are superinduced by operation of law as
matters of equity areconstructive trusts.
Morales gave the rationale for resulting trusts as being based on
the equitable doctrine that valuable consideration and not legal title

68

determines the equitable title or interest and are presumed to

always to have been contemplated by the parties. They arise from
the nature or circumstances of the consideration involved in a
transaction whereby one person thereby becomes invested with
legal title but is obligation in equity to hold his legal title for the
benefit of another. (at p. 298)
On the other hand, Morales defines constructive trusts as those
which are created by the construction of equity in order to satisfy
the demands of justice and prevent unjust enrichment. They arise
contrary to intention against one who, by fraud, duress or abuse of
confience, obtains or holds the legal right to property which he
ought not, in equity and good conscience, to hold. (at p. 298, citing
Huang v. Court of Appeals, 236 SCRA 420 [1994]; Vda. De Esconde
v. Court of Appeals, 253 SCRA 66 [1996].Reiterated in Caezo v.
Rojas, 538 SCRA 242 [2007]; Pealber v. Ramos, 577
SCRA 509 [2009]).
In Philippine National Bank v. Court of Appeals, 217 SCRA 347
(1993), the Court held that the framers of our present Civil Code
incorporated implied trusts, which includes constructive trusts, on
top of quasi-contracts, both of which embody the principle of equity
above strict legalism. (at p. 356, italics supplied)
b. Two Types of Implied Trusts Distinguished from Express
Trusts
Unlike an express trust, which essentially proceeds from a clear or
direct contractual intention to dispose of trust property to a trustee
for the benefit of the beneficiary, in a resulting trust, no such
intention is apparent, but merely presumed by law from the nature
of the transaction. In essence, express trusts are creatures of the
parties express intent usually manifested by devolving naked or
legal title to the trustee of the res, whereas resulting trusts
are implied by law from the implied intentions of the parties as
derived from the nature of their transactions.
When it comes to constructive trusts, no such intention at all is
drawn from the nature of the transaction, and the purpose of the

69

law in imbuing the relationship with trust characteristics is to

achieve equity demanded by the situation. In fact, Ramos holds
that constructive trust may be constituted by force of law
independently of the particular intentions of the parties.
Express trusts over immovables can be proved by parol evidence,
in both types of implied trusts, they may be proved and enforced by
parol evidence.
Since the trust relationship in constructive trusts is imposed by law,
then there is really no fiduciary relationship existing between the
purported trustee and the purported cestui que trust; whereas, in
both express trusts and resulting trusts, the trustee assumes
fiduciary duties to the cestui que trust.
Consequently, while express trusts (also in resulting trusts) may be
subject to laches or defenses of prescription only when there has
been a previous clear repudiation by the trustee made known to the
beneficiary; in constructive trusts, no such repudiation need be
made for prescription to begin to run.

2. Rules of Enforceability of Implied Trusts

Art. 1457. An implied trust may be proved by oral
evidence.
The discussions hereunder are based on the legal premise that
trusts relationships, whether express or implied, are built
on existing property relations and that at the center of the legal
issue involves property that has been transferred in the name of, or
in ownership to, the purported trustee. Issues pertaining to the
enforceability of trusts relations, and the nature of the evidence that
is legally allowed to prove such trust relations, are pursued only
when such property relations are in place. Morales has in fact
considered as one of the essential characteristics of every trust that
it is a relationship with respect to property, not one involving
merely personal duties. (at p. 298) Such a legal premise follows

70

the principle that trusts contracts (i.e., express and resulting trusts)
have
the
essential
characteristic
of real as
distinguished
from consensual or formal.
Under the old Civil Code, the syllabus appearing at the beginning in
the decision in Gamboa v. Gamboa, 52 Phil. 503 (1928), affirmed
the nature of proof that must be satisfied in order to prove implied
trusts, thus
1. Trusts; Proof Insufficient to Show Title of Land to Have Been Held
in Trust.A person who has held legal title to land, coupled with
possession and beneficial use of the property for more than ten
years, will not be declared to have been holding such title as trustee
for himself and his brothers and sisters upon doubtful oral proof
tending to show a recognition by such owner of the alleged rights of
his brothers and sisters to share in the produce of the land. (at pp.
503-504)
Under Article 1457 of the New Civil Code, an implied trust, whether
resulting or constructive, may be proved by oral evidence, without
distinction on whether it involves a movable or an immovable
property. Article 1457 therefore contains the rationale for implied
trusts as reported by the Code Commission that the underlying
doctrine of implied trusts is founded on equity . . . under a legal
system where injustice would result in which the legal estate or title
were to prevail over the equitable right of the beneficiary. This is
in contrast to Article 1443, which provides that an express trust
over immovables or any interest therein can only be constituted in
writing, and cannot be proved by parol evidence, which embodies
the public policy that when it comes to registered land, generally
parol evidence cannot derogate the title of the registered owner.
In Salao v. Salao, 70 SCRA 65 (1976), where the Court refused to
enforce the claims of the plaintiffs under a cause of action based on
an express trust over immovable property unsupported by a written
instrument, next proceeded to address the issue Is plaintiffs
massive oral evidence sufficient to prove an implied trust, resulting
or constructive, regarding the two fishponds? (at p. 81). The Court
held that indeed if the principles of express trust cannot be applied

71

for lack of written evidence to sustain a trust over immovables, then

the oral evidence can be accepted by the courts to support a claim
of implied trusts.
But the Court in Salao also held that although oral evidence may be
adduced to prove an implied trust over immovables, it held that in
order to be recognized such oral evidence must measure up to the
yardstick that a trust must be proven by clear, satisfactory and
convincing evidence, and cannot rest on vague and uncertain
evidence or on loose, equivocal or indefinite declarations. (at p.
83, citing De Leon v. Molo-Peckson, 116 Phil. 1267 [1962]) The
Court quoted the following authorities
Trusts; Trust and trustee; establishment of trust by parol evidence;
certainty of proof. Where a trust is to be established by oral proof,
the testimony supporting it must be sufficiently strong to prove the
right of the alleged beneficiary with as much certainty as if a
document proving the trust were shown. A trust cannot be
established, contrary to the recitals of a Torrens title, upon vague
and inconclusive proof. (Syllabus, Suarez vs. Tirambulo, 59 Phil.
303).
Trust evidence needed to establish trust on parol testimony. In
order to establish a trust in real property by parol evidence, the
proof should be as fully convincing as if the act giving rise to the
trust obligation were proven by an authentic document. Such a trust
cannot be established upon testimony consisting in large part of
insecure surmises based on ancient hearsay. (Syllabus, Santa
Juana vs. Del Rosario, 50 Phil. 110).
In Salao, the Court noted its earlier decision in Yumul v. Rivera and
Dizon, 64 Phil. 13 (1937), where it held that when it comes to
registered land, A certificate of title is conclusive evidence of the
ownership of the land referred to therein (sec. 47, Act No. 496). x
x x. But a strong presumption exists that Torrens certificates of
title have been regularly issued and are valid and, in order to
maintain an action in personam for reconveyance, proof as to the
fiduciary relation of the parties and of the breach of trust must be
clear and convincing. (at pp. 17-18) It also referred to its decision

72

in Legarda and Prieto v. Saleeby, 31 Phil. 590, 593 (1915), where it

held that the purpose of the Torrens system is to quiet title to land:
Once a title is registered, the owner may rest secure, without the
necessity of waiting in the portals of the court, or sitting in
the mirador de su casa, to avoid the possibility of losing his land.
(at pp. 83-84)
The Court in Salao also referred to its decision in Legarda and Prieto
v. Saleeby, 31 Phil. 590, 593 (1915), where it held that the purpose
of the Torrens system is to quiet title to land: Once a title is
registered, the owner may rest secure, without the necessity of
waiting in the portals of the court, or sitting in the mirador de su
casa, to avoid the possibility of losing his land. (at pp. 83-84)
The Court then concluded in Salao that There was no resulting
trust in this case because there never was any intention on the part
of the parties involved to create any trust. There was [also] no
constructive trust because the registration of the two fishponds . . .
was not vitiated by fraud or mistake. This is not a case where to
satisfy the demands of justice it is necessary to consider the . . .
fishponds as being held in trust. (at p. 84).
The Salao doctrines therefore show the close kinship between
express trusts and resulting trusts and that treatment can move
from one to the other in order to achieve equity.
In Municipality of Victorias v. Court of Appeals, 149 SCRA 32
(1987), it was held that the existence of public records other than
the Torrens title indicating a proper description of the land, and not
the technical description thereof, and clearly indicating the intention
to create a trust, was considered sufficient proof to support the
claim of the cestui que trust.
In Ong Ching Po v. Court of Appeals, 239 SCRA 341 (1994), where
the Court held that although an implied trust may be proved orally,
the evidence to prove it must be trustworthy and received by the
courts with extreme caution, and should not be made to rest on
loose, equivocal and indefinite declarations. (at p. 347)

73

Lately, in Booc v. Five Stars Marketing Co., Inc., 538 SCRA 42

(2007), the Court reiterated the doctrine it laid down in Morales v.
Court of Appeals, 274 SCRA 282 (1997), and Tigno v. Court of
Appeals, 280 SCRA 262 (1997), that As a rule, the burden of
proving the existence of a trust is on the party asserting its
existence and such proof must be clear and satisfactorily show the
existence of the trust and its elements. Booc held that an affidavit
of the fact of resulting trust against contrary affidavits presented by
other witnesses, as well as the transfer certificates of title and tax
declarations to the contrary, do not support clearly the existence of
trust.
The conclusion one gets from reading the foregoing decisions is
that, faced with a Torrens title that shows no trust relationship
assumed by the registered owner, and there is no other
written evidence to show an intention to create a trust, then
generally oral evidence is unavailable to overcome the registered
title of the purported trustee who denies the existence of any trust.
The reliable evidence to indicate a resulting trust relationship
against a clean title registered in the name of the purported trustee
can only be a written document signed by said purported trustee
acknowledging that he holds title for the benefit of another party, or
from the nature of the transaction duly proven indicating how title
was acquired by the registered owner, and shows that there was a
clear agreement or intention to hold it for the benefit of another
person.
Perhaps the best way to end this section is to invoke the decision
in Caezo v. Rojas, 538 SCRA 242 (2007), which held that
While implied trust may be proved by oral evidence, the evidence
must be trustworthy and received by the courts with extreme
caution, and should not be made to rest on loose, equivocal or
indefinite declarations. Trustworthy evidence is required because
oral evidence can easily be fabricated. In order to establish an
implied trust in real property by parol evidence, the proof should be
as fully convincing as if the acts giving rise to the trust obligation
are proven by an authentic document. An implied trust, in fine,
cannot be established upon vague and inconclusive proof. In the

74

present case, there was no evidence of any transaction between the

petitioner and her father form which it can be inferred that a
resulting trust was intended. (at p. 256)

3. Resulting Trusts
In Ramos v. Ramos, 61 SCRA 284 (1974), the Court held that A
resulting trust is broadly defined as a trust which is raised or
created by the act or construction of law, but in its more restricted
sense it is a trust raised by implication of law and presumed always
to have been contemplated by the parties, the intention as to which
is to be found in the nature of their transaction, but not expressed
in the deed or instrument of conveyance (quoting from 89 C.J.S.
725; italics supplied). Examples of resulting trusts are found in
article 1448, [1449, and] 1455 of the Civil Code. (at p. 298).
This characterization of resulting trust was reiterated in Salao v.
Salao, 70 SCRA 65, 80-81 (1976).

a. Burden of Proof in Resulting Trusts

The essence of resulting trusts is the implication drawn out by law
from the nature of the transactions covered; and necessarily, the
enumerated cases, being merely implied trust from the laws
perceived intentions of the parties, constitute disputable
presumptions of trust, and evidence may thus be adduced to show
that no trust was intended nor contemplated by the
parties. Correctly interpreted, since it is the law that imbues certain
transactions with the characteristics of resulting trusts, the cestui
que trustneed only prove the facts that would constitute the
covered transaction and the legal presumption that there exists a
resulting trust would arise from the very nature of the transaction
proven; immediately, the burden of proof would be on the part of
the purported trustee to show that no such trust relationship was
intended.

75

b. Blurring of the Distinction Between Express Trusts and

Resulting Trusts
If we go by the jurisprudential definition of resulting trust, the
presumed intention of the parties bounded by the trust relationship
is drawn from the nature of the transaction, and not from the
words, acts or omissions of the parties. Thus, when the intention is
derived, not only from the nature of the transactions, but from the
verbal expressions of the parties, then the relationship is one of
express trust, not resulting trust, since under Article 1441 of the
Civil Code, express trust are created by the intention of the trustor
or of the parties. Only recently, in Caezo v. Rojas, 538 SCRA 242
(2007), the Court characterized express trusts as those which are
createdby the direct and positive acts of the parties, by some
writing or deed, or will, or by words evincing an intention to create
a trust, (at pp. 251-252,italics supplied, citing Buan Vda. De
Esconde v. Court of Appeals, 253 SCRA 66, 73 [1996]), as
distinguished from implied trusts (which would include resulting
trusts) which, without being expressed, are deducible from the
nature of the transaction as matters of intent or, independently, of
the particular intention of the parties, as being superinduced on the
transaction by operation of law basically by reason of equity. (at p.
252)
Yet, as shown by the discussions hereunder, the rules on implied
trusts (particularly resulting trusts) have been made to apply to
situations which are considered as express trusts because the
intentions of the parties are deducible by the direct and positive
acts of the parties, by some writing or deed, or will, or by words
evincing an intention to create a trust.
Discussions on this issue will start with the early decision
in Martinez v. Grao, 42 Phil. 35 (1921), were the facts showed that
previously the heirs of the deceased spouses Martinez had sold
under a sale a retro the parcels of land inherited from the deceased
spouses in order to cover the debts of the estates; and that in order
to expedite the obtaining of a large loan from a savings association
to prevent the consolidation of title to the buyer a retro , the heirs

76

had agreed to allow one of their own to effect redemption and deal
directly with the savings association.
Martinez decision narrated that The person chosen as the
repository of this trust was Clemencia Grao, (at p. 39) who
executed a notarial declaration in which she states, among other
things, that she had intervened in the aforementioned transactions
in behalf of all the Martinez heirs. (at p. 40) But [i]n
consideration of the responsibility thus to be assumed by Clemencia
Grao, as borrower, all of the adult Martinez heirs personally and
the guardians of the minor heirs executed a document jointly with
Clemencia Grao . . . in which it was agreed that Clemencia Grao
should have exclusive possession of all the land pertaining to the
Martinez estate and administer the same for the purpose of raising
the necessary revenue to meet her obligations (at p. 40) to the
lending savings association. Years later, Clemencia Grao asserted
that she was the absolute owner of all the property obtained by her
from the original buyer a retro and denied that the other Martinez
heirs had any interest whatsoever therein.
The Supreme Court held in Martinez that the properties redeemed
from the buyer a retro and mortgaged with the savings
associations were held in trust by the said Clemencia Grao for the
benefit of the said heirs . . . subject, however, to the mortgage in
favor of the savings association. The Court did not characterize
what type of trust was created by the transaction since the decision
was rendered under the Spanish Civil Code, but it held that the
Martinez heirs were entitled to accounting from the said Clemencia
Grao of all the proceeds obtained from her administration of the
properties, that any amount appropriated by her for her own benefit
and not applied to the payment of the mortgage loan would have to
be reimbursed; and that it being manifestly improper that a person
in the hostile attitude occupied by Clemencia Grao towards the
Martinez heirs should be allowed to administer the property in
question, it results that the receivership [previously ordered by the
trial court] should be reinstated. (at p. 49).Martinez is a prime
example of the application of trusts principles under the old Civil

77

Code, purely based on equity principles and without statutory

support.
The principle was reiterated under the aegis of the New Civil Code
in Heirs of Candelaria v. Romero, 109 Phil. 500 (1960), where the
proven facts showed that one brother (Emilio) had taken over the
installment payments over a purchased subdivision lot of another
brother (Lucas) who had fallen ill, until the whole purchase price
had been fully satisfied under the arrangement that although Lucas
Candelaria had no more interest over the lot, the subsequent
payments made by Emilio Candelaria until fully paid were made in
the name of Lucas Candelaria, with the understanding that the
necessary documents of transfer will be made later, the reason that
the transaction being from brother to brother. (at p. 501). Years
later, when the certificate of title was issued in the name of Lucas,
his heirs refused to reconvey the property to the heirs of Emilio. In
an action for reconveyance filed by the heirs of Emilio, the trial
court dismissed the complaint holding that an express and
not an implied trust was created as may be gleaned from the facts
alleged in the complaint, which in unenforceable without any
writing, and that since [the title] covering the land in question had
been issued to Lucas Cadelaria way-back in 1918 or 38 years before
the filing of the complaint, the action has already prescribed. (at p.
502) On appeal, the Supreme Court held that
The trust alleged to have been created, in our opinion, is an implied
trust. As held, in effect, by this Court in the case of
Martinez vs. Grao (42 Phil., 35), where real property is taken by a
person under an agreement to hold it for, or convey it to another or
the grantor, a resulting or implied trust arises in favor of the person
for whose benefit the property was intended. Such implied trust is
enforceable even when the agreement is not in writing, and is not
an express trust which requires that it be in writing to be
enforceable. This rule, which has been incorporated in the new Civil
Code in Art. 1453 thereof, is founded upon equity. The rule is the
same in the United States, particularly where, on the faith of the
agreement or understanding, the grantee is enable to gain an
advantage in the purchase of the property or where the

78

consideration or part thereof has been furnished by or for such

other. . . . It is also the rule there that an implied trust arises where
a person purchases land with his own money and takes a
conveyance thereof in the name of another. In such a case, the
property is held on a resulting trust in favor of the one furnishing
the consideration for the transfer, unless a different intention or
understanding appears. The trust which results under such
circumstances does not arise from contract or agreement of the
parties, but from the facts and circumstances, that is to say, it
results because of equity and arises by implication or operation of
law. (at pp. 502-503; italics supplied)
Finding that a resulting trust was duly constituted, the Court applied
the principle that Continuous recognition of a resulting trust,
however, precludes any defense of laches in a suit to declare and
enforce the trust. . . . The beneficiary of a resulting trust may,
therefore, without prejudice to his right to enforce the trust, prefer
the trust to persist and demand a conveyance from the trustee. (at
p. 504) The Court also ruled that It being alleged in the complaint
that Lucas held the title to the lot in question merely in trust for
Emilio and that this fact was acknowledged not only by him but also
by his heirs, herein defendantswhich allegation is hypothetically
admittedwe are not prepared to rule that plaintiffs action is
already barred by lapse of time. On the contrary, we think the
interest of justice would be better served if she and her alleged coheirs were to be given an opportunity to be heard and allowed to
present proof in support of their claim. (at p. 504)
Although Candelaria refers to the ruling in Martinez to have
recognized the constitution of a resulting trust even though
in Martinez the agreement was covered in three notarized
documents, what may be learned fromCandelaria is that when the
arrangement is covered merely by verbal agreement, the trust
relationship constituted over immovables would then be
characterized as being a resulting trust in order to achieve equity
and be able to move around the requirement under Article 1443 of
the Civl Code that No express trusts concerning an immovable or
any interest therein may be proved by parol evidence. Thus,

79

in Candelaria, having resolved that what was constituted was a

resulting trust, the Court directed the case to be remanded to the
trial court to allow the heirs of the cestui que trust to prove their
allegations which would include parol evidence.
In Padilla v. Court of Appeals, 53 SCRA 168 (1973), the Court held
that The concept of implied trusts is that from the facts and
circumstances of a given case the existence of a trust relationship is
inferred in order to effect the presumed (in this case it is even
expressed) intention of the parties or to satisfy the demands of
justice or to protect against fraud. (at p. 179)
Only lately, in Caezo v. Rojas, 538 SCRA 242 (2007), the Court
held that
A resulting trust is a species of implied trust that is presumed
always to have been contemplated by the parties, the intention as
to which can be found in the nature of their transaction although not
expressed in a deed or instrument of conveyance. A resulting trust
is based on the equitable doctrine that it is the more valuable
consideration than the legal title that determines the equitable
interests in property. (at p. 256; italics supplied.)
It seems therefore that when the intention of the parties bound by
the trust relationship is found expressed in a deed or instrument, it
covers an express trust; whereas, when the same intention is
merely verbal or can be proved by parol evidence, it may be
considered as a resulting trust.
In the chapter on express trusts, the question has been asked
whether for express trust to exist, as distinguished from resulting
trust, it is necessary that naked title is formally registered in the
name of the trustee who expressly assumes fiduciary obligations to
an identified beneficiary. The implication is that a written
undertaking by the title holder of a property, especially registered
land, holding the property for the benefit of another only creates a
resulting trust and not an express trust.

80

The latest decision on the matter, Heirs of Tranquilino Labiste v.

Heirs of Jose Labieste, 587 SCRA 417 (2009), is to the effect that a
written undertaking by the registered owner to hold the property for
the benefit of another would constitute an express trust, even when
title registered in the name of the purported trustee is full title.
In Labiste, Epifanio Labiste, representing the heirs of Jose
Labiste, and his uncle, Tranquilino Labiste, obtained joint
registration as co-owners of a large tract of land which they bought
from
the
Bureau
of
Lands.
Subsequently,
the
heirs
of Tranquilino also bought the one-half interest of the Jose heirs and
took over full possession of the property. After the war, the Jose
heirs filed a petition for the reconstitution of title to the property
with a agreement with the Tranquilino heirs that the latters claims
would be litigated after the reconstitution of the title. The
reconstituted title was issued over the property in the name
of Epifanio Labiste as representing the Jose heirs, who thereafter
refused to honor the rights of the Tranquilino heirs. When suit was
filed seeking reconveyance of the title to the property to
the Tranquilinoheirs, it was ruled by the trial court that the action
had prescribed having been filed beyond the 10-year period from
the registration of title as mandated for a resulting trust.
The Supreme Court ruled that the situation constituted an express
trust, and not a resulting trust, and that consequently prescription
and laches will run only from the time the express trust is
repudiated, continuing that
. . . The Court has held that for acquisitive prescription to bar the
action of the beneficiary against the trustee in an express trust for
the recovery of the property held in trust it must be shown that: (a)
the trustee has performed unequivocal acts of repudiation
amounting to an ouster of the cestui que trust; (b) such positive
acts of repudiation have been made known to the cestui que trust,
and (c) the evidence thereon is clear and conclusive. Respondents
cannot rely on the fact that the Torrens title was issued in the name
of Epifanio and the other heirs of Jose. It has been held that a
trustee who obtains a Torrens title over property held in trust by
him for another cannot repudiate the trust by relying on the

81

registration. The rule requires a clear repudiation of the trust duly

communicated to the beneficiary. The only act that can be
construed as repudiation was when respondents filed the petition for
reconstitution in October 1993. And since petitioners filed their
complaint in January 1995, their cause of action has not yet
prescribed, laches cannot be attributed to them. (at p. 426)
The Court noted in Labiste that Under Article 1444 of the Civil
Code, [n]o particular words are required for the creation of an
express trust, it being sufficient that a trust is clearly intended. (at
pp. 425-426) It therefore concluded, that what was involved was
not an implied trust, but rather an express trust since The Affidavit
of Epifanio is in the nature of a trust agreement. Epifanio affirmed
that the lot brought in his name was co-owned by him, as one of
the heirs of Jose, and his uncle Tranquilino. And by agreement, each
of them has been in possession of half of the property. Their
arrangement was corroborated by the subdivision plan prepared by
Engr. Bunagan and approved by Jose P. Dans, Acting Director of
Lands. (at p. 426).
Compare the ruling in Labiste, with that in Caezo v. Rojas, 538
SCRA 242 (2007), where the petitioning daughter sought to recover
a parcel of land from her stepmother which the latter inherited from
the deceased husband. The daughter alleged that she was the one
who purchased the unregistered land from the Bureau of Lands, but
that when she had to leave Mindanao, she placed it in the care of
her father who verbally agreed to hold title on her behalf. The father
eventually obtained a tax declaration to the land in his name and
paid the real property taxes thereon also in his name. After the
father died, the stepmother took over the title to the land. The
daughter sought a reconveyance of title to the land on the ground
of a trust was created thereon in her favor. The daughter executed
a sworn statement to prove the existence of an express trusts or a
resulting trusts on the theory that prescription or laches cannot be
poised against her claims on the property. The Court ruled against
the daughter as follows:

82

It is true that in express trusts and resulting trusts, a trustee cannot

acquire by prescription a property entrusted to him unless he
repudiates the trust. x x x . (at p. 252)
As a rule, however, the burden of proving the existence of a trust is
on the party asserting its existence, and such proof must be clear
and satisfactorily show the existence of the trust and its elements. .
. . Accordingly, it was incumbent upon petitioner [daughter] to
prove the existence of the trust relationship. And petitioner sadly
failed to discharge that burden.
The existence of express trust concerning real property may not be
established by parol evidence. It must be proven by some writing or
deed. In this case, the only evidence to support the claim that an
express trust existed between the petitioner and her father was the
self-serving testimony of the petitioner. Bare allegations do not
constitute evidence adequate to support a conclusion. They are not
equivalent to proof under the Rules of Court. (at p. 253)
The best evidence of an express trust, would be a Deed of Trust,
which describes the trust properties, and conveys naked or legal
title thereto to the trustee under terms and conditions that indicate
the powers, duties and responsibilities of the trustee to the
indicated beneficiary. A deed of trusts is usually acknowledged and
subscribed by both the trustor and the trustee. InLabiste, where
there was no such deed of trust, but the Court allowed sworn
statements to constitute as the written evidence to prove the
existence of an express trust; whereas, in Caezo, such sworn
statement was deemed to be insufficient to prove either an express
or a resulting trust. The lesson learned from a comparison of
the Labiste and the Caezo rulings is that, outside of a formal deed
of trust, written or sworn statements narrating the purported trust,
in order to support the conclusion that there is such a trust
relationship, must contain the signature of the party sought to be
bound (a term used for the requisite memorandum under the
Statute of Frauds),i.e., the signature of the trustee, who under any
trust relationship, is really the party who assumes obligations and
fiduciary duties relative to the property held in trust.

83

b. Rule of Prescriptibility of Resulting Trusts

Since a resulting trust is much akin to an express trust under the
consideration that it arises from the presumed or sometimes merely
orally expressed intention of the parties, the Supreme Court has
held in Ramos v. Ramos, 61 SCRA 284 (1974), that the rule of
imprescriptibility of an action to recover property held in express
trust, may possible apply to a resulting trust as long as the trustee
has not repudiated the trust.
Therefore, the rules on acquisitive prescription when it comes to
resulting trusts, would be the same rules pertaining to express
trusts. The matter is dealt more in detail in the last chapter.

4. Constructive Trusts
In Diaz v. Gorricho and Aguado, 103 Phil. 261, 266 (1958),
and Carantes v. Court of Appeals, 76 SCRA 514, 524 (1977), the
Court characterized constructive trust as one which is imposed by
law . . . [and] there is neither promise nor fiduciary relations; the
so-called trustee does not recognize any trust and has no intent to
hold the property for the beneficiary.
In Geronimo and Isidoro v. Nava and Aquino, 105 Phil. 145 (1959),
a constructive trust was held to have arisen upon a trial courts
decision becoming final and executory which held that defendantsspouses right to redeem the property in litigation and ordered the
plaintiffs-spouses to make the resale, in the sense that although the
plaintiffs-spouses were the registered owners of the property they
possessed only naked title thereto which they were to hold in trust
for the defendants-spouses to redeem, subject to the payment of
the redemption price. However, the Court held in that decision that
In the latter instance of constructive trust, prescription may apply
only where the trustee asserts a right adverse to that of thecestui
que trust, such as, asserting acts of ownership over the property

84

being held in trust, (at p. 153), which is contrary to its ruling that
in a constructive trust, since there is really no fiduciary relationship,
no act of repudiation need to be made by the trustee for
prescription to run.
Ramos v. Ramos, 61 SCRA 284 (1974), characterized constructive
trust as
. . . a trust raised by construction of law, or arising by operation of
law. In a more restricted sense and as contradistinguished from a
resulting trust, a constructive trust is a trust not created by any
words, either expressly or impliedly evincing a direct intention to
create a trust, but by the construction of equity in order to satisfy
the demands of justice. It does not arise by agreement or intention,
but by operation of law. (89 C.J.S. 726-727). If a person obtains
legal title to property by fraud or concealment, courts of equity will
impress upon the title a so-called constructive trust in favor of the
defrauded party. A constructive trust is not a trust in the technical
sense. (at p. 298-299; citing Article 1456 of the Civil Code;
and Gayondato v. Treasurer of the P.I., 49 Phil. 244 [1926]).
The ruling has been reiterated in Salao v. Salao, 70 SCRA 65, 81
(1976);Guy v. Court of Appeals, 539 SCRA 584 (2007).

a. Distinguishing from Resulting Trusts

Unlike resulting trusts that draw their essence from the perceived
intention of the parties as taken from the structure of the
transactions covered, constructive trusts draw their essence from
the need to impose a fiduciary duty on a person who takes title to a
property to achieve justice or equity on behalf of another person
who would otherwise be adversely affected by the fact that such
title remains with, or has been conveyed to, another person.
In Philippine National Bank v. Court of Appeals, 217 SCRA 347
(1993), the Court distinguished an express trust from the
constructive trust in the following manner, thus

85

In analyzing the law on trust, it would be instructive to refer to

Anglo-American jurisprudence on the subject. Under American Law,
a court of equity does not consider a constructive trustee for all
purposes as though he were in reality a trustee; although it will
force him to return the property, it will not impose upon him the
numerous fiduciary obligations ordinarily demanded from a trustee
of an express trust. It must be borne in mind that in an express
trust, the trustee has active duties of management while in a
constructive trust, the duty is merely to surrender the property. (at
p. 356)
In Aznar Brothers Realty Company v. Aying, 458 SCRA 496 (2005),
the Court distinguished a resulting trust from a constructive trust,
as follows
Resulting trusts are based on the equitable doctrine that valuable
consideration and not legal title determines the equitable title or
interest and are presumed always to have been contemplated by
the parties. They arise from the nature of circumstances of the
consideration involved in a transaction whereby one person thereby
becomes invested with legal title but is obliged in equity to hold his
legal title for the benefit of another. On the other hand, constructive
trusts are created by the construction of equity in order to satisfy
the demands of justice and prevent unjust enrichment. They arise
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, to hold. (at pp. 508509)
The principle was reiterated in Lopez v. Court of Appeals, 574 SCRA
26 (2008), where the Court further held that
A resulting trust is presumed to have been contemplated by the
parties, the intention as to which is to be found in the nature of
their transaction but not expressed in the deed itself. Specific
examples of resulting trusts may be found in the Civil Code,
particularly Arts. 1448, 1449, 1451, 1452 and 1453.

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A constructive trust is created, not by any word evincing a direct

intention to create a trust, but by operation of law in order to satisfy
the demands of justice and to prevent unjust enrichment. It is
raised by equity in respect of property, which has been acquired by
fraud, or where although acquired originally without fraud, it is
against equity that it should be retained by the person holding it.
Constructive trusts are illustrated in Arts. 1450, 1454, 1455 and
1456. (at p. 27)
Lately, in Caezo v. Rojas, 538 SCRA 242 (2007), the Court held
that
A constructive trust is one created not by any word or phrase, either
expressly or impliedly, evincing a direct intention to create a trust,
but one which arises in order to satisfy the demands of justice. It
does not come about by agreement or intention but in the main by
operation of law, construed as 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. (at p.
258)

b. Constructive Trusts Similar in Purpose to Quasi-Contract

ofSolutio Indebiti
It is quite interesting to note that in Philippine National Bank v.
Court of Appeals, 217 SCRA 347 (1993), the Supreme Court
discussed the similarity in the nature and equity considerations of
constructive trusts and the quasi-contract of solutio indebiti, thus:
Rarely in this Court confronted with a case calling for the delineation
in broad strokes of the distinctions between such closely allied
concepts as the quasi-contract called solutio indebiti under the
venerable Spanish Civil Code and the species of implied trust
denominated constructive trust, commonly regarded as of AngloAmerican origin. Such a case is the one presented to us now which
has highlighted more of the affinity and less of the dissimilarity
between the two concepts as to lead the legal scholar into the error

87

of interchanging the two. Presented below are the factual

circumstances that brought into juxtaposition the twin institutions of
the Civil Law quasi-contract and the Anglo-American trust. (at p.
350)
In PNB, the drawee-bank had mistakenly credited double payments
into the account of the payee Mata, which it discovered only six
years later, at which time it made a formal demand upon the payee
to refund the overpayment. When the payee did not comply with
the demand, the petitioner drawee-bank filed a collection case
based on a constructive trust under Article 1456 of the Civil Code,
it has a right to recover the said amount it erronenously credited to
respondent Mata. (at p. 351).
The drawee-bank did not seek to recover based on solutio
indebiti since under Article 1145(2) of the Civil Code, it has exceed
the statute of limitation of 6 years. The trial court rendered
judgment dismissing the complaint ruling that the instant case falls
squarely under Article 2154 onsolutio indebiti and not under Article
1456 on constructive trust. In affirming the lower court, the
appellate court added in its opinion that under Article 2154
on solutio indebiti, the person who makes the payment is one who
commits the mistake vis-a-vis the recipient who is unaware of such
a mistake. (at p. 351)
The Supreme Court noted that Petitioner [drawee-bank] naturally
opts for an interpretation under constructive trust as its action . . .
can still prosper [i.e, implied trust], as it is well within the
prescriptive period of ten (10) years as provided by Article 1144,
paragraph 2 of the Civil Code. (at p. 352) In contrasting an
express trust from an implied trust, the Court held inPNB
A deeper analysis of Article 1456 reveals that it is not a trust in the
technical sense for in a typical trust, confidence is reposed in one
person who is name a trustee for the benefit of another who is
called the cestui qui trust, respecting property which is held by the
trustee for the benefit of thecestui qui trust. A constructive trust,
unlike an express trust, does not emanate from, or generate a
fiduciary relation. While in an express trust, a beneficiary and a

88

trustee are linked by confidential or fiduciary relations, in a

constructive trust, there is neither a promise nor any fiduciary
relation to speak of and the so-called trustee neither accepts any
trust nor intends holding the property for the beneficiary. (at pp.
353-354)
xxx.
In analyzing the law on trust, it would be instructive to refer to
Anglo-American jurisprudence on the subject. Under American Law,
a court of equity does not consider a constructive trustee for all
purposes as though he were in reality a trustee; although it will
force him to return the property, it will not impose upon him the
numerous fiduciary obligations ordinarily demanded from a trustee
of an express trust. It must be borne in mind that in an express
trust, the trustee has active duties of management while in a
constructive trust, the duty is merely to surrender the property.
Still applying American case law, quasi-contractual obligations give
rise to a personal liability ordinarily enforceable by an action at law,
while constructive trusts are enforceable by a proceeding in equity
to compel the defendant to surrender specific property. To be sure,
the distinction is more procedural than substantive. (at p. 356)
In drawing the parallelism between solutio indebiti and trusts,
the Court noted that While the principle of undue enrichment
or solutio indebiti, is not new, having been incorporated in the
subject on quasi-contracts in Title XVI of Book IV of the Spanish
Civil Code . . . the chapter on Trusts is fairly recent, having been
introduced by the Code Commission in 1949. Although the concept
of trusts is nowhere to be found in the Spanish Civil Code, the
framers of our present Civil Code incorporated implied trusts, which
includes constructive trust, on top of quasi-contracts, both of which
embody the principle of equity above strict legalism. (at pp. 355356, italics supplied). In addition, the Court held
Further reflection on these concepts reveals that constructive trust
is as much a misnomer as a quasi-contract, so far removed are
they from trusts and contracts proper, respectively. In the case of a

89

constructive trust, as in the case of quasi-contract, a relationship is

forced by operation of law upon the parties, not because of any
intention on their part but in order to prevent unjust enrichment,
thus giving rise to certain obligations not within the contemplation
of the parties. (at p. 356)
In ruling that the drawee-bank had a right to invoke the principles
of constructive trust under Article 1456 of the Civil Code, the Court
held that We agree with petitioners stand that under Article 1456,
the law does not make any distinction since mutual mistake is a
possibility on either sideon the side of either the grantor or the
grantee. Thus, it was error to conclude that in a constructive trust,
only the person obtaining the property commits a mistake. This is
because it is also possible that a grantor, like PNB in the case at
hand, may commit the mistake. (at p. 357). Nonetheless, the
drawee-bank lost the case on the ground of laches.

5. Implied Trusts Particularly Constituted by Law

Art. 1445. 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.
Article 1447 of the Civil Code expressly provides that the
enumeration in the subsequent articles of the cases of implied trust
does not exclude others established by the general law of trust, but
that the limitation laid down in Article 1442 shall be
applicable, i.e., so long as those principles do not conflict with the
Civil Code, the Code of Commerce, the Rules of Court and special
laws.
The discussions in this section would ultimately show that strictly
speaking the enumerated implied trusts are essentially resulting
trusts (Articles 1448 to 1455), and that the only true constructive
trusts are those covered by Article 1456, which actually embodies
the general principle for constructive trusts.

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a. Purchase of Property Where Title Placed in One Person,

But Price Paid by Another Person
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.
Under Article 1448 of the Civil Code, there is an implied trust when
property is bought, 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 person in whose name the property is
registered is the trustee, while the person who paid for the price
shall be the beneficiary. The presumption of resulting trust arises
from the truism expressed in Uy Aloc v. Cho Jan Jing, 19 Phil. 202
(1911), that one of who pays for something usually does so for his
own benefit.
Truly, Article 1448 covers a resulting trust that bases itself from the
implied intentions of the trustor-beneficiary and the acceptance of
the obligation by the trustee who is fully aware that property is
registered in his name for which he never paid the price. See Ramos
v. Ramos, 61 SCRA 284 (1974),Philippine National Bank v. Court of
Appeals, 217 SCRA 347 (1993), andLopez v. Court of Appeals, 574
SCRA 26 (2008).
In Morales v. Court of Appeals, 274 SCRA 282 (1997), the Court
referred to the implied trust covered under Article 1448 as
purchase money resulting trust. (citing 76 Am.Jur. 2d Trusts
179), thus:

91

The trust is created in order to effectuate what the law presumes to

have been the intention of the parties in the circumstances that the
person to whom the land was conveyed holds it as trustee for the
person who supplied the purchase money. (at p. 299)
The reason why the situation described under Article 1448 is an
implied trust is that unlike in express trust, the person who takes
title to the purchased property does not expressly bound himself to
hold or administer the same for the benefit of any person. The
presumption of a resulting trust arises from the fact of a sale
transaction where the evidence shows that title is placed in the
name of one person, while the purchase price was paid by the
other.
The other reason why there is only an implied or resulting trust is
that full title, not just naked or legal title, is placed in the name of a
person who is not referred to formally as trustee nor is the other
person who paid for the purchase price referred to formally as a
beneficiary. This is to emphasize the point that the most
distinguishing mark between an express trust and a resulting trust
is that in the former the parties bound by the trust are formally
constituted with naked or legal title placed in the trustee and
beneficial title pertains to the beneficiary, or that the trustee
(whatever he may be called) is expressly given title to the property
with obligations to hold it for the benefit of another party (whatever
he may be called).
The situation covered under Article 1448 of the Civil Code is meant
to address the observation made in the early decision in Martinez v.
Martinez, 1 Phil. 647 (1903), where the facts showed that it was the
father who expended the sums for the purchase of two vessels
which were registered in the name of his son, who was then of legal
age, where the Court held
It may be true that the laws in some of the United States would in
this case raise a resulting trust in favor of the plaintiff [the father].
But such laws are not in force here; and whatever other right the
plaintiff may have against the defendant [son], either for the
recovery of the money paid or for damages, it is clear that such

92

payment gave him no title either legal or equitable to these

vessels. (at p. 649)
In Padilla v. Court of Appeals, 53 SCRA 168 (1973), the Court
applied the provisions of Article 1448 to impute a resulting trust
where pursuant to a special arrangement with the GSIS which had
foreclosed the mortgaged property and the right of redemption had
already expired, the mortgagors-spouses had effected the sale
thereof to the purported trustee with the undertaking that the latter
would use funds supplied by the spouses to buy-back the property
on behalf of the spouses. The Court observed that The concept of
implied trusts is that from the facts and circumstances of a given
case the existence of a trust relationship is inferred in order to
effect the presumed (in this case it is even expressed) intention of
the parties or to satisfy the demands of justice or to protect against
fraud. (at p. 179).
One will notice from Padilla, that although there is an express
agreement on the part of the trustee to hold the property for the
benefit of the spouses, it would still constitute an implied or
resulting trust, when by definition under Article 1441, it ought to be
an express trust. Do we hold therefore that when it comes to
registered land, where full title (as contrasted from title registered
as trustee) in placed in the name of the purported trustee, it
cannot be express trust because the Torrens title does not show
naked or legal title in the registered owner, much less does it
indicate the beneficiary? And if the trust relationship was expressed
in an instrument not registered in the Torrens titles, would the
arrangement now be an express trust, rather than an implied trust?

(1) When Title Is Placed in the Name of a Child

Article 1448 expressly provides that there is no presumption of
resulting trust, if the person to whom the title is conveyed is a child,
legitimate or illegitimate, of the one paying the price of the sale, it
being disputably presumed that there is a gift in favor of the child.

93

In De los Santos v. Reyes, 205 SCRA 437 (1992), the Court held
that 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.
As a general rule, it cannot be expected that a parent placing
property he bought in the name of the child intended any form of
trust, since it cannot be normally expected that a child would
administer property for the benefit of the parents. Should Article
1448 be interpreted to mean, when it uses the word child to cover
a situation where title to the property is placed by the parent in the
name of a child who then was a minor? I believe that this is a
reasonable presumption, as bolstered by the decisions discussed
hereunder.
In Martinez v. Martinez, 1 Phil. 647 (1903), the Court alluded to the
provision of then Article 161 of the old Civil Code, relating to
minors, that the ownership or enjoyment of property acquired by a
minor child with funds of his parents, pertain to the latter [parents],
which the Court observed was the only provision which the we
have found anywhere in the laws now in force that declares the
property to belong to the person who paid the money. (at p. 649).
The exception under Article 1448 is merely a disputable
presumption, which means that it can still be shown that indeed the
parents had placed property bought by them in the name of their
child to impose an obligation on the part of the child to administer
the same for the benefit of the parents, especially when the child
reaches the age of majority.
In Morales v. Court of Appeals, 274 SCRA 282 (1997), the Court
recognized three exceptions to the establishment of an implied
resulting trust under Article 1448, The first is stated in the last part
of Article 1448 itself. Thus, where A pays the purchase money and
title is conveyed by absolute deed to As child or to a person to
whom A stands in loco parentis and who makes no express promise,
a trust does not result, the presumption being that a gift was
intended. (at p. 299.) It is only with respect to a minor child that a
parent stands in loco parentis.

94

Only lately in Ty v. Ty, 553 SCRA 306 (2008), where the evidence
showed that the father had paid for the price of the purchase of a
valuable tract of land along EDSA, but where the title was placed in
the name of a son, it was held by the Court that no express trust
could be deemed constituted because there was no writing to prove
the same as required under Article 1443 of the Civil Code when it
comes to trust being constituted over immovable properties.
Although, the Court did concede that it was still possible to prove
the existence of an implied trust, nevertheless, it ruled that the
provisions of Article 1448 expressly provide that no implied trust is
deemed to have been established if the person to whom the title is
conveyed is the child of the one paying the price of the sale, and
instead a donation is disputably presumed in favor of the child.
In Ty, the successors of the deceased father had not shown that no
such donation was intended.
(2) When It Is the Child that Supplies the Purchase Price
A good illustration where no implied trust arises can be found
in Trinidad v. Ricafort, 7 Phil. 449 (1907), where the evidence
showed that the father had repurchased the property he sold to a
third party using the money of his son; yet the implied trust
arrangement imbued by the trial court to justify the taking over of
title by the son after the death of the father, was overturned by the
Supreme Court
It plainly appears from all of the evidence in the case that at the
time of the death of [the father] he was still the owner of whatever
interest was acquired by the repurchase of this property in 1894,
and that if the 2,600 pesos furnished by [the son] to his father for
that purpose it was so furnished by way of a loan and did not
transfer to [the son] any interest in the property. (at p. 452)
In other words, the equity principles under Article 1448 cannot
apply in a situation where property is bought by the father in his
own name, using the money of the child. Resulting trusts under
Article 1448 comes from the presumed intention of the trustor who
supplied the money to have beneficial on trust in the property.

95

In Ty, the presumed intention was coming from the father and could
not be presumed to come from a child.
(3) When a Contrary Intention Is Proved
Morales v. Court of Appeals, 274 SCRA 282 (1997), held that
Another exception [to the establishment of an implied resulting
trust under Article 1448] is, of course, that in which an actual
contrary intention is proved. (at p. 299.) The ruling emphasizes the
fact that the implied trusts superinduced by law under the various
provisions in the Title V in the new Civil Code constitute merely
disputable presumptions, and the burden of proof is on the party
alleging that there is no implied trust constituted on each of the
transactions specifically covered by law. Yet, in Morales, the
immediate ruling of the Court tended to apply the general rule that
the burden of proving the existence of a trust is on the party
asserting its existence, thus:
There are recognized exceptions to the establishment of an implied
resulting trust. . . Another exception is, of course, that in which an
actual contrary intention is proved. . . (at p. 299)
As a rule, the burden of proving the existence of a trust is on the
party asserting its existence, and such proof must be clear and
satisfactorily show the existence of the trust and its elements. While
implied trust may be proved by oral evidence, the evidence must be
trustworthy and received by the courts with extreme caution, and
should not be made to rest on loose, equivocal or indefinite
declarations. Trustworthy evidence is required because oral
evidence can easily be fabricated. (at p. 300)
(4) When Purchase Price Extended as a Loan
If it is shown that the person who paid for the amount of the
purchase price did so as a loan or as an advance to the person in
whose name the title to the property is transferred, then no implied
trust should also result because of the lack of intention on the part
of the person supplying the money to have beneficial interest in the
property bought.

96

Such situation is in contrast with the situation covered in Article

1450 of the Civil Code (discussed immediately hereunder), where
the title to the property is placed in the name of the person who
advanced or loan the amount, which is considered to be a form of
implied trust, but may properly be treated as an equitable
mortgage.
(5) Exception: When the Purchase Is Made in Violation of an
Existing Statute
Morales v. Court of Appeals, 274 SCRA 282 (1997), held that
another exception to the establishment of an implied resulting trust
under Article 1448 is where the purchase is made in violation of an
existing statute and in evasion of its express provision, [since] no
trust can result in favor of the party who is guilty of fraud. (at p.
299, citing 4 Tolentino 679,-680.)\
This particular ruling in Morales reiterates the principle laid down
in Deluao v. Casteel, 22 SCRA 231 (1962), that since implied trusts
are essentially founded on equity principles, no trust can be held
valid and enforceable when it is violative of the law, morals or public
policy.
b. Purchase of Property Where Title Is Placed in the Name of
Person Who Loaned the Purchase Price
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.
Under Article 1450 of the Civil Code, if the price of a property
bought 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, an implied trust arises by operation of law in
favor of the person to whom the money is loaned or for whom it is

97

paid. The beneficiary is expressly empowered to redeem the

property and compel a conveyance thereof to him.
While, Philippine National Bank v. Court of Appeals, 217 SCRA 347
(1993), enumerates the arrangement under Article 1450 as a
resulting trust, Lopez v. Court of Appeals, 574 SCRA 26 (2008,)
holds the implied trust arrangement to be a constructive trust. We
agree with the PNBcharacterization, since it can be deduced from
the very essence of the described transaction that the buyer took
title to the property as security for the loan or advance given to
the cestui que trust, and such trustee therefore holds title subject to
the intention of the cestui que trust to pay for the principal as a
means to secure title to the property that was bought in his behalf
in the first placed.

(1) Akin to an Equitable Mortgage Arrangement

The implied trust situation covered under Article 1450 is akin to
an equitable mortgage arrangement, since title to the property
intended for the borrower is placed in the name of the lender to
secure the payment of the debt.
In Raymundo v. Bandong, 526 SCRA 514 (2007), the Supreme
Court
reiterated
the
long-standing
definition
of equitable
mortgage as one which although lacking in some formality or form
or words, or other requisites demanded by a statute, nevertheless
reveals the intention of the parties to charge real property as
security for a debt, and contains nothing impossible or contrary to
law. (at p. 525.) That is the reason why the Article 1450 expressly
provides that the borrower may redeem the property and compel
the lender to convey the property to him.
It should be noted, however, that the arrangement provided under
Article 1450 is not the typical equitable mortgage arrangement
found in the Law on Sale, since under such arrangement, the
equitable mortgage is constituted between the purported seller
(borrower-mortgagor) and buyer (lender-mortgagee) in the contract

98

of sale with a right of repurchase, where the purpose of the sale is

really to secure a principal obligation, usually a loan, between the
purported seller and purported buyer. Under Article 1450, the
equitable mortgage is constituted by the sale of a third party of his
property to a purported buyer (the lender-mortgagee) who takes
titles to secure his loan or advance made to the cestui que
trust, who is a stranger to the contract of sale.
The characterization of the situation as an implied trust, would
impose upon the lender-buyer the fiduciary obligations of the
trustee. When the borrower fails to pay the loan or obligation, it
would be anomalous for the lender-buyer to bring a collection case,
for indeed he has already in his name the property bought as
security the loan; otherwise, it would amount to unjust enrichment.
But if the lender does nothing because he is deemed to be fully paid
with the property already secured in his name, that would
constitutepactum commissorium prohibited under Article 2088 of
the Civil Code, and the title of the lender would be void ab initio.
Without the right to redeem granted under Article 1450 of the Civil
Code, could the borrower, who is a stranger to the contract of sale
effected between a third-party and the lender seek recovery of the
property by way of redemption? Fortunately, with Article 1450 in
place, there is no doubt that the borrower has the ability to redeem
the property by paying his loan to, or advances from, the lendertrustee.
But even without Article 1450 in the statute books, it is our position
that indeed the borrower may seek redemption of the property
bought by and placed in the name of the lender. It has already been
held by the Supreme Court that in spite of the best evidence rule, a
written contract may be proved by parol evidence to be an equitable
mortgage,
because
the
public
policy
against pactum
commissorium takes precedence. (Cuyugan v. Santos, 34 Phil. 100
[1916]; Mariano v. Court of Appeals, 220 SCRA 716 (1993); Rosales
v. Suba, 408 SCRA 664 [2003]). It is usual in such arrangements
that although the property bought is placed in the name of the
lender, it is the borrower who takes possession and enjoys the
property bought, and pays for the real property taxes due thereon.

99

Such an arrangement would constitute badges of equitable

mortgage under Article 1602 of the Law on Sales under the Civil
Code.
When the borrower-beneficiary fails or refuses to redeem the
property (i.e., pay the principal obligation), and the lender brings an
action for collection, can the trust property be levied upon for the
payment of the judgment debt, contrary to his duty of loyalty as a
implied trustee? The answer would of course be in the affirmative.
Indeed, in an equitable mortgage situation, even when title is
registered in the name of the lender, it is considered void for being
in violation of the public policy against pactum commissorium. In a
situation where the borrower has defaulted on his loan, the remedy
of the lender is not to appropriate title to the property but rather
bring an action for foreclosure (Briones-Vazquez v. Court of
Appeals, 450 SCRA 644 [2005]), or to bring a simple collection suit
(Binga v. Bello, 471 SCRA 653 [2005].).
It should be emphasized, though that when the principal contract
has been extinguished with full payment thereof, then necessarily
the accessory contract of equitable mortgage is also extinguished,
which then allows the borrower to recover any and all properties
given as security for the loan.
c. When Absolute Conveyance of Property Effected Only as a
Means to Secure Performance of Obligation of the Grantor
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.
Under Article 1454 of the Civil Code, 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

100

grantor when it becomes due, he may demand the reconveyance of

the property to him.
The principle embodied in Article 1454 of the New Civil Code were
applied under the old Civil Code in De Ocampo v. Zaporteza, 53
Phil. 442 (1929), where a deed of sale with right of repurchase was
really intended to cover a loan made by the purported seller from
the purported buyer and title to the subject matter was placed in
the name of the buyer. The Supreme Court held that the
application must here be made of the doctrines upheld in the
cases of Uy Aloc vs. Cho Jan Ling (19 Phil., 202); Camacho vs.
Municipality of Baliaug (28 Phil., 46); and Severino vs. Severino (44
Phil., 343), to the effect that the defendants [buyer] only hold the
certificate of transfer in trust for the plaintiffs with respect to the
portion of the lot planted with 1,300 coconut trees, and they are
therefore bound to execute a deed in favor of the plaintiffs,
transferring to them said portion planted with 1,300 coconut trees.
(at p. 445.)
While PNB enumerates the arrangement under Article 1454 as one
of the resulting trusts, Lopez holds the implied trust arrangement to
be
a
constructive
trust.
We
tend
to
agree
with
the PNB characterization.
The situation covered under Article 1454 really constitutes
an equitable mortgage arrangement thoroughly covered under
Article 1602 to 1605 of the Law on Sales in the Civil Code. Indeed,
the absolute conveyance of property described in Article 1454 is
nothing more than a deed of absolute sale; and Article 1604
embodies a doctrine long-established in Philippine jurisprudence
that The provisions of article 1602 [on badges of equitable
mortgage] shall also apply to a contract purporting to be an
absolute sale. (Zamora v. Court of Appeals, 260 SCRA 10
[1996]; Tuazon v. Court of Appeals 341 SCRA 07 [2000].)
If one would wonder why the matter has to be covered by the
principles of implied trusts under Article 1454 of the New Civil Code,
the plausible answer is that Articles 1604 and 1605 in the Law on
Sales, expressly allows the purported seller to ask for the

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reformation of the deed of absolute sale to reflect its true nature as

a mortgage contract, but nowhere expressly grants the right to the
seller to redeem the property sold. The power of the purported
seller in an equitable-mortgage-cum-deed-of-absolute-sale to
redeem the property in the absence of a right of redemption clause
is expressly provided for in Article 1454.
Frankly, it would have been far better to transfer the right to
redeem under Article 1454 to be part of Article 1605 of the Civil
Code, instead of treating the matter under implied trusts. A good
reason we give for this advocacy is that since the contract or
arrangement defined under Article 1454 is considered a constructive
trust, it would be susceptible under current jurisprudence to the
defense of prescription, especially when it comes to registered land.
Under the Law on Sales, the arrangement would clearly be an
equitable mortgage since the disposition contract is really a security
arrangement for a principal obligation. Since property given as
security has in fact been placed in the name of the obligee, this
would be contrary to the public policy against pactum
commissorium under Article 2088 of the Civil Code which provides
that the creditor cannot appropriate the things given by way of
pledge or mortgage, or dispose of them; that any stipulation to the
contrary is null and void; and the right of the borrower-seller to
redeem the property purportedly sold in really imprescriptible (i.e.,
for as long as the buyer can fully pay the principal obligation, which
brings about the extinguishment of the accessory equitable
mortgage arrangement), save when formal foreclosure proceedings
have been brought by the lender-buyer, or if the property has
passed a third party buyer in good faith and for value.

d. Two or More Persons Purchase Property Jointly, But Places

Title in One of Them
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

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created by force of law in favor of the others in proportion to

the interest of each.
Under Article 1452 of the Civil Code, 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. Both PNB andLopez classify the arrangement under Article
1452 as a resulting trust, to which characterization we agree with.
An application of the principle covered in Article 1452 under the old
Civil Code can be found in De la Cruz v. Nino, 18 Phil. 284 (1911),
where the title to certain parcels of land appear to have been drawn
up only in the name of one of the two parties who formed a
partnership and combined their capital to acquire the
properties. Nonetheless, there was drawn up between them a
private document that described their arrangements, which has
never been impugned by the party in whose names the titles to the
land had been placed. The Court held that the parties were really
co-owners, and the party in whose names appear the titles to the
land, being in possession of only half of the parcels of land, was not
entitled to claim possession of the other half held by the heirs of the
deceased co-owner.
In Uy Aloc v. Cho Jan Jing, 19 Phil. 202 (1911), where a number of
Chinese merchants raised a fund by voluntary subscription with
which they purchased a valuable tract of land and erected a large
building to be used as a sort of club house for the mutual benefit of
the subscribers to the fund; but since the association was not
registered as a juridical person, it was agreed to have the title to
the property placed in the name of one of their members, who
accepted the trust, and agreed to hold the property as agent and
trustee of the members of the association. When the title holder
refused to account for the rentals earned from the property, and in
fact set up title in himself, the members brought suit to have title
conveyed to them. The Court held in Uy Aloc that there was an
implied trust constituted and the registered owner held it under an
obligation, both express and implied, to deal with it exclusively for

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the benefit of the members of the association and subject to their

will.
One has to wonder why the arrangement described under Article
1452 of the Civil Code should even be considered an implied trust
arrangement; the very language of Article 1452 shows that it covers
an express trust arrangement, since it says that is covers as
situation where two or more persons agree to purchase property
and that by common consent the legal title is taken in the one of
one of them for the benefit of all. In other words, a trust
arrangement is created not by force of law, but by the intentions
clearly expressed by the parties through their agreement and
common consent, and therefore falls with the definition under
Article 1441 that Express trust are created by the intention of the
trustor or of the parties.
The only reason we see why the law would treat the arrangement
under Article 1452 not as an express trust is because full title, not
just naked or legal title is placed in the name of the trustee, which
means that insofar as the world is concerned he appears to be the
full owner, rather than as a trustee. This is especially true when it
comes to registered land where full title is placed in the name of the
trustee (i.e., he is not registered as trustee in the certificate of
title), and therefore, the trust arrangement can only be implied
from other source.

e. Property Conveyed to Person Merely as Holder Thereof

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.
Under Article 1453 of the Civil Code, 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.

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Both PNB and Lopez characterize the arrangement under Article

1453 as resulting trust.
As in the case of Article 1452, the situation covered by Article 1453
covers really an express trust, because title to property is taken by
the trustee under a clear agreement to hold it for another person.
The only difference is that there may be a situation where the
person sought to be benefited by the grantor has not yet given
formal acceptance of the benefit. Even such a situation is not
critical, since under Article 1446, if the trust imposes no onerous
conditions upon the beneficiary, his acceptance is presumed.
Jurisprudence has also affirmed the validity of a trust established for
a person who is not yet existing, such as an unborn child.
The points raised in the foregoing paragraph seemed to have been
affirmed by the Supreme Court in Cuaycong v. Cuaycong, 21 SCRA
1192 (1967), but with opposite results. In Cuaycong, the Court
denied the application of the provisions of Article 1453 to establish
an implied trust: Said arguments are untenable, even considering
the whole complaint. The intention of the trustor to establish the
alleged trust may be seen in paragraphs 5 and 6. Article 1453 would
apply if the person conveying the property did not expressly state
that he was establishing the trust, unlike the case at bar where he
was alleged to have expressed such intent. Consequently, the lower
court did not err in dismissing the complaint, (at p. 1198) on the
ground that since the complaint sought to recover an express trust
over immovables, then under Article 1443 of the Civil Code, the
same may not be proved by parol evidence.
An example of the situation covered by Article 1453 may be found
in the decision in Pacheco v. Arro, 85 Phil. 505 (1950), where the
claims of respondents in cadastral case were withdrawn relying
upon the assurance and promise made in open court by petitioners
predecessor-in-interests that upon obtaining title to the properties
subject to the petition, he would convey and assign the lots to the
respondents in accordance with their respective claims. In an action
for specific performance filed to compel the petitioner to assign and
convey the lots covered, the Court held: When the claim to the lots
in the cadastral case was withdrawn by the respondents relying

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upon the assurance and promise made in open court by . . . the

predecessor-in-interests of the petitioners, a trust or a fiduciary
relation between them arose, or resulted therefrom, or was created
thereby. (at pp. 514-515) Consequently, the Court held that such
trustee cannot invoke the statute of limitations to bar the action and
defeat the right of thecestuis que trust.
Earlier, in Martinez vs. Grao, 42 Phil. 35 (1921), the Court held
that a person who, before consolidation of property in the purchaser
under a contract of sale with pacto de retro, agrees with the
vendors to buy and administer the property until all debts
constituting an encumbrance thereon shall be paid, after which the
property shall be turned back to the original owner, is bound by
such agreement, and becomes in effect a trustee to hold
and administer the property in such character. The principle was
reiterated inCristobal v. Gomez, 50 Phil. 810 (1927).
In reiterating the Martinez ruling, the Court in Heirs of Emilio
Candelaria v. Romero, 109 Phil. 500 (1960), held
The trust alleged to have been created, in our opinion, is an implied
trust. As held, in effect, by this Court in the case of Martinez vs.
Grano (42 Phil., 35), where property is taken by a person under an
agreement to hold it for, or convey it to another or the grantor, a
resulting or implied trust arises in favor of the person for whose
benefit the property was intended. This rule, which has been
incorporated in the new Civil Code in Art. 1453 thereof, is founded
upon equity. The rule is the same in the United States, particularly
where, on the faith of the agreement or understanding, the grantee
is enabled to gain an advantage in the purchase of the property or
where the consideration or part thereof has been furnished by or for
such other. Thus, it has been held that where the grantee takes the
property under an agreement to convey to another on certain
conditions, a trust results for the benefit of such other or his heirs,
which equity will enforce according to the agreement. (189 C.J.S.
960). It is also the rule there that an implied trust arises where a
person purchases land with his own money and takes a conveyance
thereof in the name of another. In such a case, the property is held
on a resulting trust in favor of the one furnishing the consideration

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for the transfer, unless a different intention or understanding

appears. The trust which results under such circumstances does not
arise from contract or agreement of the parties, but from the facts
and circumstances, that is to say, it results because of equity and
arises by implication or operation of law. (See 89 C.J.S. 964-968).
(at pp. 502-503)

f. Donation of Property to a Donee Who Shall Have No

Beneficial Title
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.
Under Article 1449 of the Civil Code, there is 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. In such a
situation, the donor is deemed to have become the beneficiary
under an implied trust arrangement. Lopez andPNB classify the
arrangement under Article 1449 as a resulting trust; for obvious
reasons, we agree with such a position.
In has been opined that the resulting trust covered under Article
1449 is analogous to, but should not be confused with,
the fideicommissarysubstitution under Article 863 of the Civil Code,
wherein the testator designates a person as an heir charging him to
deliver to another person the whole or part of the inheritance.
(Coquia, Jorge R., The Doctrine of Implied Trust, 310 SCRA 486,
492). Yet, under the old Civil Code, it was observed by the Court
in Perez v. Garchitorena and Casimiro, 54 Phil. 431(1930), that
a fideicommissary substitution is not equivalent to the English trust.
Under the New Civil Code, in Adaza v. Court of Appeals, 171 SCRA
369 (1989), where the father donated a piece of land in the name of
the daughter but with verbal notice that the other half would be

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held by her for the benefit of a younger brother, coupled with a

deed of waiver later on executed by the daughter that she held the
land for the common benefit of her brother, the Court held that the
arrangement created an implied trust in favor of the brother under
Article 1449 of the Civil Code.
Adaza is quite a curious ruling for two reasons. Firstly, if the
donation to the daughter was made by the father with the express
directive that the daughter would take title for her benefit and that
of her younger brother, would that not constitute an express trust,
or one that is created by the express intention of the
father? Secondly, did not the waiver constitute a written
acknowledgment on the part of the trustee that the took title for the
benefit of the brother also,
and thereby constitute competent evidence to support an express
trust arrangement?

g. Land Passes By Succession But Heir Places Title into a

Trustee
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.
Under Article 1451 of the Civil Code, when land passes by
succession to any person and he causes the legal title to be placed
in the name of another, a trust is established by implication of law
for the benefit of the true owner.
Both PNB and Lopez characterize the implied trust arrangement
covered under Article 1451 as resulting trust. We agree with such
characterization.

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The language of Article 1451, as it limits its application to land, may

be taken to mean that no such implied trust arises when it comes to
other types of property, especially as to movable properties, when
the prevailing doctrine is that he who possess movable is presumed
to be the rightful owner. That would perhaps be an erroneous
conclusion for the following reasons: Firstly, Article 1451 limits its
application to land because the principal of implied trust it embodies
is most appropriate to registered land, where title issued in the
name of the trustee, without indication that he holds the same
under fiduciary undertakings, can be an occasion to abuse.Secondly,
the enumeration of the applicability of implied trust under Article
1451 and those of other articles, is not deemed to be on an
exclusive basis as clearly expressed in the language of Article 1447:
The enumeration of the following cases of implied trust does not
exclude others established by the general law of trust.
Article 1451 should be read to cover the situation when the property
inherited is registered in anothers name as full owner rather than
as trustee, for in the latter case that would clearly be an express
trust.
Article 1451 should also be distinguished from the situations
covered by Article 1456 where property is acquired through fraud or
mistake (discussed hereunder), because under Article 1451, the
placing of title in the name of another (the trustee) is done
purportedly with the knowledge and consent of the cestui que trust.
What makes the arrangement under Article 1451 an implied trust
arrangement is the lack of clear purpose or intention on why the
heir caused legal title to be put in another persons name. Article
1451 does not cover a situation where the person takes title to the
inherited land acknowledging clearly that he does so for the benefit
of the heir, for that would be an express trust, except for the fact
that title in registered fully in the name of such person, and not
expressly as trustee.
The doctrine covered in Article 1451 has for its basis the decisions
of the Supreme Court under the old Civil Code that did not contain
provisions on trusts. Thus, in Bargayo v. Camumot, 40 Phil. 857
(1920), the Court held that that the co-owner or co-heir who is in

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possession of an inheritance pro indiviso for himself and in

representation of his co-owners or co-heirs, if, as such owner, he
administers or takes care of the rest thereof with the obligation of
delivery it to his co-owners or co-heirs, is under the same situation
as a trustee. Bargayo however recognized the principle that when a
co-owner or co-heir refutes the co-ownership and takes adverse
possession of the property for himself alone, then acquisitive
prescription may arise in his favor to the detriment of the other coheirs or co-owners. Bargayodistinguished between the rule of
imprescriptibility of the action for partition among co-owners, from
the doctrine of acquisitive prescription that allows a person to obtain
title to property by open, adverse possession.
In Castro v. Castro, 57 Phil. 675 (1932), the Court held that one
who acquires a Torrens title in his own name to property which he is
administering for himself and his siblings as heirs in common by
descent from a common ancestor may be compelled to surrender to
each of his co-heirs his appropriate share, and a proceedings for
partition is an appropriate remedy by which to enforce such right.
With respect to the legal position taken by the brother who had title
registered in his name that he had repudiated the trust more than
ten years before the action for partition had been filed by his
siblings, and thus had acquired title by adverse possession, the
Court did not dispute the theory of acquisitive prescription being
available in such a situation but held that it could not be applied on
the basis that this supposed repudiation of the trust first took place
before [brothercestui que trust] had reached his majority. The Court
held we are unable to see how a minor with whom another is in
trust relation can be prejudiced by repudiation of the trust
addressed to him by the person who is subject to the trust
obligation. The defendant in our opinion is not entitled to the benefit
of prescription from his supposed repudiation of the trust. (at p.
685)
In Mabana v. Mendoza, 105 Phil. 260 (1959), where title to a
homestead was obtained pursuant to an agreement entered into
between the applicant and his co-heirs that should put the title in
his name subject to the condition that he was merely to act as a

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trustee of his co-heirs, and a partition of the property would later be

effected between him and his co-heirs, the Court held that there
was created a relationship of trust between the applicant and his coheirs which gives to the latter the right to recover their share in the
property unimpaired by the defense of prescription.
In Custodia v. Casiano, 9 SCRA 841 (1963), where the predecessorin-interest had bought a large tract of land on installments, which
devolved to the heirs upon his death, but upon full payment thereof,
the only male heir had caused the title to be issued in his name with
the understanding with his co-heir that he would act as trustee, the
Court held that there being no evidence that the trust relation had
even been repudiated by said trustee, then the relationship of coownership had existed between such trustee and his sisters and the
right of the successors in interest of the said sister to bring an
action for the recovery of their shares against the successor-ininterest of the said trustee cannot be barred by prescription, despite
the lapse of 25 years from the date of registration of the land in the
trustees name.
The decision in Mariano v. Judge De Vega, 148 SCRA 342 (1987),
reminds us that the principles of implied trust under Article 1451 do
not apply when the real property is unregistered land and no title
has been issued in the name of one of the co-owners, and the
situation only shows that he has possession and enjoyment of the
property subject of the co-ownership. No implied trust could be
ascribed to the situation according to the Court in that: The
existence of the co-ownership here argues against theory of implied
trust, for then a co-owner possesses co-owned property not in
behalf of the other co-owners but in his own behalf, (at p. 346) in
accordance with the truism that possession by a co-owner of the
property owned in common is not necessarily adverse possession
against the other co-owners for [a]fter all, co-owners are entitled
to be in possession of the premises, and it would not also constitute
a clear repudiation of the co-ownership itself. (at p. 346)
In Ting Ho, Jr. v. Teng Gui, 558 SCRA 421 (2008), where a Chinese
resident had caused land to be placed in the name of the trustee
who was bound to hold the same for the benefit of the trustor and

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his family in the event of death, the application of the doctrine of a

resulting trust under Article 1451 by the heirs of the trustor could
not be upheld by the Court: This contention must fail because the
prohibition against an alien from owning lands of the public domain
is absolute and not even an implied trust can be permitted to arise
on equity consideration. (at p. 434)

h. When Trust Fund Used to Purchase Property Which is

Registered in Trustees Name
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.
Under Article 1455 of the Civil Code, 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.
While Ramos and PNB characterize the arrangement covered under
Article 1455 as constituting a resulting trust, Lopez holds that it is a
form of constructive trust. I believe that the better position is to
treat such a situation as constituting a resulting trust, since it
comes about in breach of fiduciary duty of loyalty that is brought
about that a pre-existing contractual relationship, i.e., agency or
express trust.
Article 1455 is the operative provision governing the duty of loyalty
of the agent to the principal, as well as the trustee to the
beneficiary. A trustee is duty-bound to handle the affairs of the trust
and to apply all the properties in the trust estate for the sole benefit
of the beneficiary. In a situation where there is a conflict between
the interests of the trustee and the beneficiary, it is the duty of the

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trustee to prefer that of the beneficiary. A violation of the duty of

loyalty makes the trustee personally liable to the beneficiary for the
resulting damages. An appropriation of any business or interest that
should be for the account of the beneficiary would require that the
trustee to reimburse the profits or turn-over the benefits to the
estate trust. The principle laid down in Article 1455 covering the
fiduciary duty of loyalty of the trustee is applicable to express trusts
and implied trusts.
In Camacho v. Municipality of Baliwag, 28 Phil. 466 (1914), where
evidence showed that a municipal officer received funds from the
members of the community to bid on behalf of the municipality at a
public auction of the land that was taken over by the national
government, and who after many years claimed title in his own
name, the Court held
There have been a number of cases before this court in which a title
to real property was acquired by a person in his own name while
acting in a fiduciary capacity, and who afterwards sought to take
advantage of the confidence reposed in him by claiming the
ownership of the property for himself. This court has invariably held
such evidence competent as between the fiduciary and the cestui
que trust. (at pp. 468-469)
The Court went further to summarize the development of the
doctrine, thus
In Uy Aloc vs. Cho Jan Ling (19 Phil. Rep., 202), the members of a
Chinese club agreed to purchase some real property and for that
purpose subscribed a fund and placed it in the hands of the
defendant, who made the purchase in his own name. Subsequently,
he refused to account for the rents on the property and claimed it
as his own. This court held parol proof of the trust sufficient to
overcome the case in favor of the defendant by reason of his
registered documents of title, and decreed that a conveyance be
made by the defendant to the members of the association.
In Taguinot vs. Municipality of Tanay (9 Phil. Rep., 396), the
plaintiffs, as heirs of their father, sought to recover possession of a

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parcel of land held by the municipality on the strength of a Spanish

patent issued to him. It was proved (largely by parol evidence) that
their father acted on behalf and at the expense of the municipality
in securing the patent. The patent was retained by the
gobernadorcillo, a copy only being issued to the patentee. The latter
also drew up a private document engaging to execute a conveyance
to the municipality, the same being offered in evidence. The
municipality had continuously occupied the land since the issuance
of the title. The judgment of the court below dismissing the
complaint was affirmed.
In the following cases of a similar character, parol evidence was
held not sufficient to overcome the case made out by the holder of
the registered title: Belen vs. Belen (13 Phil. Rep., 202); Garen vs.
Pilar (17 Phil. Rep., 132); Balatian vs. Agra (17 Phil. Rep., 501).
Agonoy vs. Ruiz (11 Phil. Rep., 204), and Madariaga vs. Castro (20
Phil. Rep., 563), were both cases wherein one person was delegated
by a community of property owners to secure in his own name a
patent from the Spanish Government covering all their lands, the
object being to save the expense of obtaining individual patents in
the name of each. After securing these patents, the therein
grantees ejected their neighbors from the land covered by the
patents and respectively claimed the land as their own. The
evidence tending to establish these facts was considered by the
court in both cases relief by reformation of the patent or a
compulsory conveyance to the injured persons was denied in each
case, because the rights of an innocent third purchaser intervened.
But in the first case the injured persons were held entitled to
damages, provided they were able to establish the same. In the
second case, however, the court presumed a waiver of their claims
by reason of other evidence of record. The fact that the parol
evidence relied upon in the cases cited in this paragraph to defeat
the documents of title was carefully considered by the court,
impliedly admits its competency. It failed in its purpose in these
cases merely because it was not sufficiently strong to overcome the
case in favor of the holders of the registered titles. (at pp. 469)

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The Court concluded in Camacho that We hold, therefore, that the

parol evidence introduced by the defendant municipality was
competent to defeat the terms of the plaintiffs deed. It need only
be added that in all such cases as the present we have required and
shall continue to require that the proof contradicting such
documents must be clear and convincing. These qualities are
apparent in the proof offered by the defendant municipality in the
case at bar. (at p. 470)
In Sing Joco v. Sunyantung, 43 Phil. 589 (1922), where a trusted or
confidential employee of the company directly employed fraud to
induce the company to forfeit it option to purchase a valuable large
tract of land, and thereafter caused his wife to purchase the same.
In affirming the decision of the trial court which decreed the
reconveyance of the property to the company, the Court then
admitted that from statutory law point of view only a recovery of
damages against the employee was allowed, thus: This reparation
provided for in the Civil Code and applied to the case of bar seems
to be limited to the indemnification of damages, as we are not
aware of any express provision in said Code which imposes upon
the person thus held liable, any obligation, such as that of
transferring to plaintiffs the estate in question. (at p. 593).
Nonetheless, the Court affirmed that This specific relief [of
reconveyance], however, has already come to be applied in this
jurisdiction in similar cases, among which can be cited that of
Camacho vs. Municipality of Baliuag (28 Phil., 466.) And in the
North American law such sanction is expressly recognized, and a
transaction of this nature might be regarded as an equitable trust
by virtue of which the thing acquired by an employee is deemed not
to have been acquired for his own benefit or that of any other
person but for his principal, and held in trust for the latter. (at p.
593, citing 21 R. C. L., 825; 2 Corpus Juris, 353). In justifying such
a resolution, the Court held
Such an act of infidelity committed by a trusted employee calculated
to redound to his own benefit and to the detriment of his employers
cannot pass without legal sanction. Nemo debet aliena jactura
locupletari; nemo ex suo delicto meliorem suam conditionem facera

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potest. It is an illicit act committed with culpa and therefore, its

agent is liable (art. 1089, Civil Code), for the damage caused (art.
1902, ibidem). Not identical, but similar, to this infidelity is the
abuse of confidence sanctioned in our Penal Code as a generic
circumstance, nay as specific aggravating one, and even as an
essential element of certain crimes.
Such principle, however, in case of this nature is generally
recognized in our laws, since in the case of commercial agents
(factores) it is expressly established. Undoubtedly, formerly under
the circumstances then prevailing such sanction was not necessary
in the field of civil law, because its sphere of action is the general
relations of society; but even then it was deemed necessary
expressly to protect with such sanction the commercial relations
wherein the question of gain was involved, which is sometimes so
imperative as to ignore everything, even the very principles of
loyalty, honesty, and fidelity. (at pp. 592-593)
A confidential employee who, knowing that his principal was
negotiating with the owner of some land for the purchase thereof,
surreptitiously succeeds in buying it in the name of his wife,
commits an act of disloyalty and infidelity to his principal, and is
liable for damage. The reparation of the damage must consist in
respecting the contract which was about to be concluded, and
transferring the said land for the same price and upon the same
terms as those on which the purchase was made for the land sold to
the wife of said employee passed to them as what might be
regarded as equitable trust, by virtue of which the thing thus
acquired by an employee is deemed to have been acquired not for
his own benefit or that of any other person but for his principal and
held in trust for the latter. (at p. 593)
In Severino v. Severino, 44 Phil. 343 (1923), the Court held
The relations of an agent to his principal are fiduciary and it is an
elementary and very old rule that in regard to property forming the
subject-matter of the agency, he is estopped from acquiring or
asserting a title adverse to that of the principal. His position is
analogous to that of a trustee and he cannot consistently, with the

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principles of good faith, be allowed to create in himself an interest

in opposition to that of his principal or cestui que trust. Upon this
ground, and substantially in harmony with the principles of the Civil
Law (see sentence of the supreme court of Spain of May 1, 1900),
the English Chancellors held that in general whatever a trustee does
for the advantage of the trust estate inures to the benefit of
the cestui que trust. (Greenlaw vs. King, 5 Jur., 18; Ex parte
Burnell, 7 Jur., 116; Ex parte Hughes, 6 Ves., 617; Ex parte James,
8 Ves., 337; Oliver vs. Court, 8 price, 127.) The same principle has
been consistently adhered to in so many American cases and is so
well established that exhaustive citations of authorities are
superfluous and we shall therefore limit ourselves to quoting a few
of the numerous judicial expressions upon the subject. The principle
is well stated in the case of Gilber vs. Hewetson (79 Minn., 326)
A receiver, trustee, attorney, agent, or any other person occupying
fiduciary relations respecting property or persons, is utterly disabled
from acquiring for his own benefit the property committed to his
custody for management. This rule is entirely independent of the
fact whether any fraud has intervened. No fraud in fact need be
shown, and no excuse will be heard from the trustee. It is to avoid
the necessity of any such inquiry that the rule takes so general a
form. The rule stands on the moral obligation to refrain from placing
ones self in positions which ordinarily excite conflicts between selfinterest and integrity. It seeks to remove the temptation that might
arise out of such a relation to serve ones self-interest at the
expense of ones integrity and duty to another, by making it
impossible to profit by yielding to temptation. It applies universally
to all who come within its principle. (at pp. 350-351)

i. When Property is Acquired Through Mistake or Fraud

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.

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Under Article 1456 of the Civil Code, if property is acquired through

mistake or fraud, the person obtaining it is, by force of law,
considered a trustee under a implied trust arrangement for the
benefit of the person from whom the property comes.
Lopez affirms that Article 1456 covers a form of constructive
trust. Philippine National Bank v. Court of Appeals, 217 SCRA 347
(1993), also confirms the arrangement covered under Article 1456
as a constructive trust, thus
A deeper analysis of Article 1456 reveals that it is not a trust in the
technical sense[,] for in a typical trust, confidence is reposed in one
person who is named a trustee for the benefit of another who is
called the cestui que trust, respecting property which is held by the
trustee for the benefit of the cestui que trust. A constructive trust,
unlike an express trust, does not emanate from, or general a
fiduciary relation. While in an express trust, a beneficiary and a
trustee are linked by confidential or fiduciary relations, in a
constructive trust, there is neither a promise nor any fiduciary
relation to speak of and the so-called trustee neither accepts any
trust nor intends holding the property for the beneficiary. (at pp.
353-354)
By its language Article 1456 covers all types of property, whether
movable or immovable. Yet the cases that have applied the principle
in Article 1456 have often involved immovable, specially registered
parcels of land, where the public policy is that the operative key to
determine who has title to the property is registration. When it
comes to movable property, the operation of an implied trust under
Article 1456 must contend with the public policy covered in Article
559 of the Civil Code that possession of movable property acquired
in good faith is equivalent to title, thus
Art. 559. The possession of movable property acquired
in good faith in equivalent to a title. Nevertheless, one who
has lost any movable or has been unlawfully deprived
thereof, may recover it from the person in possession of the
same.

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If the possessor of a movable lost or of which the owner has

been unlawfully deprived, has acquired it in good faith at a
public sale, the owner cannot obtain its return without
reimbursing the price paid therefore.
The second part of Article 559 offers the same principle of recovery
on the part of the true owner of a movable that is similar to the
implied trust doctrine under Article 1456: Nevertheless, one who
has lost any movable or has been unlawfully deprived thereof, may
recover it from the person in possession of the same.
(1) Application of Principle under the Old Civil Code
Lopez affirms that Article 1456 covers a form of constructive trust.
Philippine National Bank v. Court of Appeals, 217 SCRA 347 (1993),
also confirms the arrangement covered under Article 1456 as a
constructive trust, thus
A deeper analysis of Article 1456 reveals that it is not a trust in the
technical sense[,] for in a typical trust, confidence is reposed in one
person who is named a trustee for the benefit of another who is
called the cestui que trust, respecting property which is held by the
trustee for the benefit of thecestui que trust. A constructive trust,
unlike an express trust, does not emanate from, or general a
fiduciary relation. While in an express trust, a beneficiary and a
trustee are linked by confidential or fiduciary relations, in a
constructive trust, there is neither a promise nor any fiduciary
relation to speak of and the so-called trustee neither accepts any
trust nor intends holding the property for the beneficiary. (at pp.
353-354)

(1) Application of Principle under the Old Civil Code

The equity principle now expressed in Article 1456 first found
expression inGayondato v. Insular Treasurer, 49 Phil. 244 (1926).
In Gayondato, where a mother and her minor daughter inherited a
large tract of land, and had it applied for cadastral survey, but title

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was mistakenly issued only in the name of the mother, the Court
held that courts of equity will impress upon the title, a condition
which is generally in a broad sense termed constructive trust in
favor of the defrauded party, but the use of the word trust in this
sense is not technically accurate and is not the kind of trust.
In the application of the underlying equity principle now contained
in Article 1456, the Court has always emphasized that in spite of the
proceedings under the Torrens system of registration being in rem,
and the title issued thereto being considered imprescriptible and
indefeasible, the Torrens system does not prevent the cestui que
trust under an implied trust to sue for the recovery of the land in
the action for reconveyance, whenever the property is acquired
through mistake or fraud, since the person obtaining the registered
title is, by force of law, considered a trustee of an implied trust for
the benefit of the person from whom the property comes.
In Severino v. Severino, 44 Phil. 343 (1923), where the uncle who
was acting as agent or administrator of the property belonging to a
niece, had procured through fraud a Torrens title over said property
in his name, it was held that the uncle was obliged to surrender the
property to the niece and transfer title to her.
In Laureano v. Stevenson, 45 Phil. 252 (1923), a certificate of title
under the Torrens system was mistakenly issued in favor of
petitioner Kilayko covering not only the parcel of land he bought
from Laureano, but including another adjacent land which remained
the property of his seller. When the creditors of Kilayko had levied
upon all the properties covered by the title to enforce a judgment
debt obtained against Kilayko, Laureano then learned of the mistake
committed during the registration proceedings which had become
final and executory. In determining whether Laureano could legally
prevent the public sale of properties registered under the Torrens
system in the name of Kilayko, the Court held
The fundamental principles governing the Torrens system are well
known. Ordinarily if one tasks no steps to protect his property
interests at the time of the cadastral survey, he is estopped to
dispute the title. He has one year from the issuance of the decree to

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allege and prove fraud. But he may not wait longer than this period
to assert his rights. And were this an ordinary registration case, we
would reach a conclusion satisfactory to the appellants. But we think
that there is more to the case than this.
It must not be forgotten that Kilayco never laid claim to this
property; that the two lots Nos. 4267 and 4289 covered by the
certificate of title No. 830 were mistakenly registered in the name of
Eugenio Kilayco; that the court did not have jurisdiction to confirm
the title of said two lots either in favor of Eugenio Kilayco or of
anybody else, for the reason that no petition for title was filed, no
trial was held, no evidence was presented, and no judgment was
rendered regarding these two lots in the land registration
proceedings; that Kilayco never asserted any right of ownership
over the property; that the rent was paid to Laureano; and that
judgment was obtained in the courts in favor of Laureano through
the acquiescence and consent of Kilayco. Kilayco was, in effect,
merely holding the title of the property in trust for Laureano. The
creditors of Kilayco had in the property, which, in this case, was
nothing. (at pp. 254-255)
In De Ocampo v. Zaporteza, 53 Phil. 442 (1929), where it was
determined that an instrument, which did not express the true
contract between the parties, but which nevertheless became the
basis upon which the defendants obtained the amendment of the
decree of adjudication by which they received a certificate of
transfer of title covering more than the number of lots due them,
the Court held that application must here be made of the doctrines
upheld in the cases of Uy Aloc vs. Cho Jan Ling (19 Phil., 202);
Camacho vs. Municipality of Baliuag (28 Phil., 466); and Severino
vs. Severino (44 Phil., 343), to the effect that the defendants only
hold the certificate of transfer in trust for the plaintiffs with respect
to the portion of the lot planted with 1,300 coconut trees; and they
are therefore bound to execute a deed in favor of the plaintiff,
transferring to them said portion planted with 1,300 coconut trees.
(at p. 445)
In Escobar v. Locsin, 74 Phil. 86 (1943), the designated agent,
taking advantage of the illiteracy of the principal, claimed for

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himself the property which he was designated to claim for the

principal and managed to have it registered in his own name and
became part of his estate when the agent died. The Court held that
the estate was in equity bound to execute the deed of conveyance
of the lot to the cestui que trust: A trustsuch as that which was
created between the plaintiff and Domingo Sumangilis sacred and
inviolable. The Courts have therefore shielded fiduciary relations
against every manner of chicanery or detestable designed cloaked
by legal technicalities. The Torrens system was never calculated to
foment betrayal in the performance of a trust. (at p. 87).
In Pacheco v. Arro, 85 Phil. 505 (1950), the Court held that When
the claim to the lots in the cadastral case was withdrawn by the
respondents relying upon the assurance and promise made in open
court by . . . the predecessor-in-interest of the petitioners, a trust
or fiduciary relation between them arose, or resulted therefrom, or
was created thereby. The trustee cannot invoke the statute of
limitations to bar the action and defeat the right of the cestui que
trustent. (at pp. 514-515)
The reason why Pacheco is covered under Article 1456, rather than
under Article 1453 (When property is conveyed to a person in
reliance to his declared intention to hold it for, or transfer is to
another or the grantor) is because the action for reconveyance was
being filed against the successors-in-interest of the person who
gave such a declaration, and consequently, the property held in
trust passed to the heirs by way mistake, and rightfully covered
under Article 1456. This state of things was acknowledged years
later by the Supreme Court in Canezo v. Rojas, 538 SCRA 242
(2007), where it held:
Assuming that such a[n express trust] relation existed, it
terminated upon Cripulos death in 1978. A trust terminates upon
the death of the trustee where the trust is personal to the trustee in
the sense that the trustor intended no other person to administer it.
If Crispulo was indeed appointed as trustee of the property, it
cannot be said that such appointment was intended to be conveyed
to the respondents or any of Crispulos other heirs. Hence, after
Crispulos death, the respondent had no right to retain possession of

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the property. At such point, a constructive trust would be created

over the property by operation of law. Where one mistakenly retains
property which rightfully belongs to another, a constructive trust is
the proper remedial device to correct the situation. (at p. 257)
In Sevilla v. De los Angeles, 97 Phil. 875 (1955), one of the heirs of
decedent Felix Sevilla, through fraudulent representation,
succeeded in having the original certificate of title issued in the
name of the heirs of Felix Sevilla cancelled and a new one issued
in her name only and thereby enabling her to possess the land and
appropriate the produce therefor. The Court held that This was of
acquiring title creates what is called constructive trust in favor of
the defrauded party and grants to the latter a right to vindicate the
property regardless of the lapse of time. (at p. 879;italics
supplied)

(2) Application under the New Civil Code

In Diaz v. Gorricho and Aguado, 103 Phil. 261 (1958), the Supreme
Court recognized that Article 1456 merely expresses a rule already
recognized by our courts [first enunciated in Gayondato v. Insular
Treasurer, 49 Phil. 244 (1926)] prior to the [New Civil] Codes
promulgation. (at p. 264)
Shortly thereafter, in Avecilla v. Yatco, 103 Phil. 666 (1958), the
Court held that the implied trust arrangement imposed by Article
1456 allows the aggrieved party a remedy to seek reconveyance
against the party who has employed fraud, thus
But the right of action in this constructive trust should be exercised
against the trustee, who caused the fraud, and not against an
innocent purchaser for value, as the Susana Realty, Inc. This right
may also be exercised against Santiago Cruz who also obtained title
to the land with knowledge of the fraud, but not with regard to
Susana Realty, Inc. which, as already stated, has bought the
property in good faith. The remedy in this case of the defrauded
heirs is to bring an action for damages against those who caused

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the fraud or were instrumental in depriving them of the property.

Their action cannot reach an innocent purchaser for value who is
protected by law. (at p. 670)
Likewise, under the New Civil Code, the Court reiterated the
principle that public policy demands that a person guilty of fraud or
at least, of breach of trust, should not be allowed to use a Torrens
title as a shield against the consequences of his own wrongdoing.
In Vda. de Jacinto v. Vda. de Jacinto, 5 SCRA 370 (1962), the
Supreme Court held
Even in the absence of fraud in obtaining registration or even after
the lease of one year after the issuance of a decree of registration,
a co-owner of land who applied for and secured its adjudication and
registration in his name knowing that it had not been allotted to him
in the partition, may be compelled to convey the same to whoever
received it in the apportionment, so long as no innocent third party
had acquired rights therein, in the meantime for a valuable
consideration. Indeed, any rule to the contrary would sanction
ones enrichment at the expense of another. Public policy demands
that a person guilty of fraud or, at least, of breach of trust, should
not be allowed to use a Torrens title as a shield against the
consequences of his wrongdoing (Cabanos vs. Register of Deeds,
etc., 40 Phil. 620; Severino vs. Severino, 41 Phil. 343).
Lastly, the claim of the heirs of Pedro Jacinto that the latter had
acquired ownership of the property in litigation by prescription, is
likewise untenable. As we had recently held in Juan, et a. vs.
Zuiga, G.R. No. L-17044, April 28, 1962, an action to enforce a
trust is imprescriptible. Consequently, a co-heir who, through fraud,
succeeds in obtaining a certificate of title in his name to the
prejudice of his coheirs, is deemed to hold the land in trust for the
latter, and the action by them to recover the property does not
prescribe. (at pp. 376-377)
The Court has since then re-affirmed under the New Civil Code the
principle that registration of property by one person in his name,
whether by mistake or fraud, the real owner being another person,
impresses upon the title so acquired the character of a constructive

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trust for the real owner, which would justify an action for
reconveyance

In Gonzales v. Jimenez, 13 SCRA 80 (1965), where unregistered

land was sold by the father to a buyer who took possession
thereof, but subsequently, the father managed to obtain a free
patent over the same property in the name of the son to whom
an original certificate of title was issued.

In Fabian v. Fabian, 22 SCRA 231 (1968), where co-heirs

entered into an extrajudicial settlement of the estate of the
decedent, excluding therefrom some of the other forced heirs,
and subsequently obtaining original and transfer certificates of
title in their names, the co-heirs who obtained title through
fraud were considered trustees under an implied trust for the
benefit of the other co-heirs.

In Buena v. Reyes, 27 SCRA 1179 (1969), where the husband of

one of the co-heirs was designated by all the heirs of the
decedent to file an answer in the cadastral proceedings and to
obtain title to the property left by the decedent in behalf of all
heirs, but instead only obtained title in his name and his two
brothers, the Court ruled the creation of a constructive trust.

In Magallon v. Montejo, 146 SCRA 282 (1986), where conjugal

property was adjudicated entirely in the name of the surviving
husband and leaving out the children from their successional
rights to one-half of the property pertaining to their deceased
mother, the Court held that a constructive trust under Article
1456 had been duly constituted with the surviving father as the
trustee of a constructive trust, [with] an obligation to convey to
the private respondents that part of the land in question to
which she now claims an ostensible title, said portion rightfully
pertaining to the respondents deceased mother as her share in
the conjugal partnership. (at p. 290)

In Municipality of Victorias v. Court of Appeals, 149 SCRA 32

(1987), where registered land previously sold to the municipal
corporation, but which failed to duly register the sale, was
erroneously passed by intestate succession to the heirs of the

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seller, it was held that notwithstanding the irrevocability of the

Torrens title the trustee and his successors-in-interest were
bound to execute the deed of reconveyance: As the land in
dispute is held by private respondents in trust for the
Municipality of Victorias, it is logical to conclude that the latter
can neither be deprived of its possession nor be made to pay
rentals thereof. Private respondent is in equity bound to
reconvey the subject land to the cestui que trust, the
Municipality of Victorias. The Torrens system was never
calculated to foment betrayal in the performance of a trust. (at
p. 45)

In Adille v. Court of Appeals, 157 SCRA 455 (1988), where one

of the co-owners exercised for himself alone the right to redeem
the property sold under a sale a retro and placed title solely in
his name, he was held to have taken title as trustee under an
implied trust governed under Article 1456.

Pajarillo v. Intermediate Appellate Court, 176 SCRA 340 (1989),

where the mother had previously validly donated the land to a
daughter, and latter sold it again to a son who knew of the
donation, the latter having received title thereto as a trustee of
an implied trust under Article 1456.

Yet, the Supreme Court has not been consistent in its position. Let
us first take the decision in Heirs of Tanak Pangaaran Patiwayon v.
Martinez, 142 SCRA 252 (1986), where the decedent during his
lifetime had married legitimately three successive times, but without
liquidation of the conjugal partnerships formed during the first and
second marriages. The only male issue managed to convince his coheirs that he should act as administrator of the properties left by
the decedent, but instead obtained a certificate of title in his own
name to the valuable piece of property of the estate. It was held by
the Court that where the son, through fraud was able to secure a
title in his own name to the exclusion of his co-heirs who equally
have the right to a share of the land covered by the title, an implied
trust was created in favor of said co-heirs, and that said son was
deemed to merely hold the property for their and his benefit:

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The rules are well-settled that when a person through fraud

succeeds in registering the property in his name, the law creates
what is called a constructive or implied trust in favor of the
defrauded party and grants the latter the right o recover the
property fraudulently registered within a period of ten years. (See
Ruiz v. Court of Appeals, 79 SCRA 525, 537). (at p. 261, citing
Gonzales v. Jimenez, Sr., 13 SCRA 80, 82 [1965])
Just a few months later, in Mariano v. Judge De Vega, 148 SCRA
342 (1987), where the children of the decedent by his second
marriage had taken over properties of the estate, excluding
therefrom grandchildren of the decedent by his first marriage, the
Court held that the situation is one that is governed by the rules of
co-ownership under Article 494 of the Civil Code which provides that
no prescription shall run in favor of a co-owner or co-heir against
his co-owners or co-heirs so long as he expressly or impliedly
recognizes the co-ownership. In view of a clear repudiation of the
co-ownership duly communicated to the co-heirs, no prescription
occurred and the filing of the action for partition and delivery of
possession covering their corresponding shares 28 years after the
death of the decedent was deemed not filed out of time.
In Tomas v. Court of Appeals, 185 SCRA 627 (1990), while a large
tract of land was still unregistered land, the owners sold portions
thereof to the vendees covered by tax declarations, and possession
and control thereof was transferred to the vendees. Yet when the
owners had sought registration of the property under the Torrens
system, they included the portions already sold and obtained title
thereto in their names. Upon discovery thereof, the vendees filed an
action for reconveyance to which the registered owner pleaded
finality of the decree of registration. The Court held that an implied
trust was constituted under Article 1456 thus: In the present case,
prescription will not lie in favor of the petitioners [owners-sellers]
who are not even in possession of the disputed land. (at p. 633).
In Noel v. Court of Appeals, 240 SCRA 78 (1995), where the
surviving wife sold the entirety of a parcel of land bought during the
marriage, without the authority from the forced heirs of the
deceased husband, the Court in ruling that that the sale of the other

127

half constituted the buyer as trustee under an implied trust under

Article 1456, held
In Diaz v. Gorricho, 103 Phil. 261 (1958), the Court said that Article
1456 merely expresses a rule recognized in Gayondato v. Insular
Treasurer,
49
Phil.
244
(1926).
Applying
said
rule,
the Gayondato court held that the buyer of a parcel of land at a
public auction to satisfy a judgment against a widow acquired only
one-half interest on the land corresponding to the share of the
widow and the other half belonging to the heirs of her husband
became impressed with a constructive trust in behalf of said heirs.
(at pp. 88-89)

(3) Recent Applications of Article 1456

Pedrano v. Heirs of Benedicto Pedrano, 539 SCRA 401 (2007), paid
lip service to the principle embodied in Article 1456 that 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.
In Heirs of Valeriano S. Concha, Sr. v. Lumocso, 540 SCRA 1
(2007), the Court held that An action for reconveyance respects
the decree of registration as incontrovertible but seeks the transfer
of property, which has been wrongfully or erroneously registered in
other persons names, to its rightful and legal owners, or to those
who claim to have a better right. There is no special ground for an
action for reconveyance. It is enough that the aggrieved party has a
legal claim on the property superior to that of the registered owner
and that the property has not yet passed to the hands of an
innocent purchaser for value. (at pp. 13-14).
Lumocso also held that cases brought under Article 1456 may also
be considered as actions to remove cloud on ones title as they are
intended to procure the cancellation of an instrument constituting a
claim on petitioners alleged title which was used to injure or vex
them in the enjoyment of their alleged title. (at p. 15)

128

Pasio v. Monterroyo, 560 SCRA 739 (2008), held that Under the
principle of constructive trust, registration of property by one
person in his name, whether by mistake or fraud, the real owner
being another person, impresses upon the title so acquired the
character of a constructive trust for the real owner, which would
justify an action for reconveyance. (Citing Heirs of Tabia v. Court of
Appeals, 516 SCRA 431 [2007]) In the action for reconveyance, the
decree of registration is respected as incontrovertible but what is
sought instead is the transfer of the property wrongfully or
erroneously registered in anothers name to its rightful owner or to
one with a better right. (Ibid) If the registration of the land is
fraudulent, the person in whose name the land is registered holds it
as a mere trustee, and the real owner is entitled to file an action for
reconveyance of the property. (citing Mendizabel v. Apao, 482 SCRA
587 [2006]) (at p. 751)
In Pasio the respondents were able to establish that they have a
better right to the parcel of land since they had long been in
possession of the property in the concept of owners, by themselves
and through their predecessors-in-interest. Therefore, despite the
irrevocability of the Torrens titles issued in the names of the
petitioners and even if they are already the registered owners under
the Torrens system, the petitioners may still be compelled under the
law to reconvey the property to respondents.
In Lopez v. Court of Appeals, 574 SCRA 26, where in her notarial
will the testator expressed that she wished to constitute a trust
fund for her paraphernal properties, denominated as Fideicomiso de
Juliana Lopez Manzano (Fideicomiso), to be administered by her
husband. . . Two-thirds (2/3) of the income from rentals over
theses properties were to answer for the education of deserving but
needy honor students, while one-third (1/3) was to shoulder the
expenses and fees of the administrator, but that eventually in the
probate of the will the properties were adjudicated to the husband
as sole heir, the Court ruled that On the premise that the disputed
properties are the paraphernal properties of Juliana which should
have been included in the Fideiocomiso, their registration in the
name of Jose would be erroneous and Joses possession would be

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that of a trustee in an implied trust . . . [which from] the factual

milieu of this case is provided in Article 1456 of the Civil Code. . . .
The apparent mistake in the adjudicati
adjudication
on of the disputed properties
to Jose created mere implied trust of the constructive variety in
favor of the beneficiaries of the Fideicomiso.
. (at pp. 38)
Recently, in Luna, Jr. v. Cabales
Cabales,, 608 SCRA 206 the court held that
The registration of a propert
property
y in ones name, whether by mistake
or fraud, the real owner being another, impresses upon the title so
acquired the character of a constructive trust for the real owner.
The person in whose name the land is registered holds it as a mere
trustee, and the real owner is entitled to file an action for
reconveyance of the property. The Torrens system does not protect
a usurper from the true owner. (at p. 206)

oOo

One Response to III IMPLIED TRUSTS

DeanCLV Says:

1.

Tuesday, 10 August, 2010 at 11:58 am | Reply

to

jen:

There is no doubt that if you are able to finalize an Extrajudicial

Settlement of the estates of both your parents, with the mother of
your half brother waiving the latters inheritance right to the estate of
your father, then it can be registered with the Registry of Deeds as
the basis by which eventually title to the two conjugal properties left
by your parents will then be registered in your name as the only
remaining forced heir. However, to arrive at such end you would need
to first achieve the followi
following:

130

(a) Establish the filiation of your half brother to your father to have
standing to be executing a waiver of inheritance right under the
Extrajudicial
Settlement;
(b) The waiver in the Extrajudicial Settlement would be signed by the
mother in behalf of her 5 year old son, and to be valid and effective
the law requires that the mother has to be judicially appointed as
guardian over the person and estate of the son. Without such
authority on the part of the mother who will sign the Extrajudicial
Settlement, the waiver is void and not binding on the son, and when
he comes of legal age, he actually can seek from you his share in the
estate of your father as the acknowledged illegitimate son.
(c) But even having both of those indicated above, the Extrajudicial
Settlement will not be registered by the Register of Deeds unless you
comply with the requirements of the Rules of Court publishing the
same in a newspaper of general circulation for three (3) consecutive
weeks;
(d) In addition, aside from paying the registration fees to the local
government, and those pertaining to the Register of Deeds, it is
required that you must have settled with the BIR all the estate taxes
due separately on the estate of your mother and father (which have
accumulated penalties and charges) and be able to obtain a BIR
Clearance on the matter to be attached to the Extrajudicial
Settlement when filed with the Register of Deeds.
I hope the inputs are helpful to you.
Dean CLV