I.
HOW A TRUST IS CREATED
A. IN GENERAL
ARTICLES 1440 – 1442
Article 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.
Article 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 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.
1. DE LEON VS PECKSON, GR NO. L-17809
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.
An express trust may be declared by a writing made after the legal estate has been
vested in the trustee.
In the absence of any reservation of the power to revoke, a voluntary trust is irrevocable
without the consent of the beneficiary.
An express trust constituted before the effectivity of the new civil code shall be governed
by the Civil Code of 1889 and other laws and authorities on the matter, although the
instrument recognizing and declaring such trust was executed after the effectivity of said
Code.
It is the duty of a trustee to deliver the property in trust to the cestui que trust free from
all liens and encumbrances.
An accounting of the fruits of the properties in trust can only be made after proof had
been submitted that the conditions stated in the mutual agreement had been complied
with.
The parol evidence necessary to establish an alleged trust in a real property must be
clear and as convincing as if the acts giving rise to the alleged trust obligation were
proved by authentic document in order to prevail over registered title. (Suarez vs
Tirambulo)
2. ARANETA VS PEREZ, GR NO. L-20787-8
Medical expenses made for the sake of the beneficiary of a trust by the father of the
beneficiary should be borne by the trust fund only when the beneficiary is insolvent.
Under Section 60 of the Negotiable Instruments Law, the maker of a promissory note
cannot escape liability by alleging that he spent the money for the medical treatment of
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his daughter, the beneficiary of the trustee who is the payee of the note, since it is not
the payee’s concern to know how said proceeds should be spent, inasmuch as that is the
sole concern of the maker, and the payee’s interest is merely to see that the note be
paid according to its terms.
3. MINDANAO DEVELOPMENT AUTHORITY VS CA, GR NO. L-49087
It is fundamental in the law of trusts that before an express trust will be recognized,
these elements must be included:
1. A competent trustor and trustee;
2. An ascertainable trust res;
3. Sufficiently certain beneficiaries.
Stilted formalities are unnecessary, but nevertheless each of the above elements is
required to be established, and, if any of them is missing, it is fatal to the trust.
Clear and unequivocal language is necessary to create a trust and mere precatory
language and statements of ambiguous nature, are not sufficient to establish one.
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.
An action for reconveyance based on implied or constructive trust is prescriptible.
(Carantes vs CA)
In constructive or implied trusts, there is neither promise nor fiduciary relation. The so-
called trustee does not recognize any trust and has no intent to hold the property for the
beneficiary. It does not arise by agreement or intention, but by operation of law.
(Carantes vs CA)
Where real property was registered through fraud, an implied trust is created and the
offended party may sue within a period of 10 years. (Ruiz vs CA)
Prescription does not run in favor of a co-heir as long as he expressly or impliedly
recognizes the co-ownership. (Inting vs Bernaldez)
A person is not barred by prescription from filing an action for reconveyance of land
erroneously included in the title of another. (Vda. De Recinto. Vs Inciong)
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. (Salao vs Salao)
Trust must be proven by clear, satisfactory and convincing evidence. (Salao vs Salao)
An action for the reconveyance of land based on implied trust or constructive trust
prescribes within ten years. And it is from the date of the issuance of such title that the
effective assertion of adverse title for purposes of the statute of limitations is counted.
(Jaramil vs CA)
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Under the law on trusts, it is not necessary that the document expressly state and
provide for the express trust, for no particular words are required for the creation of an
express trust, it being sufficient that a trust is clearly intended. (Sotto vs Teves)
B. TRUST BY OPERATION OF LAW
ARTICLE 1456
Article 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.
4. ADILLE VS CA, GR NO. L-44546
The redemption of the whole property by a co-owner will not make him of all of it. The
right of repurchase may be exercised by a co-owner with respect to his share alone.
The failure of all co-owners to redeem the property entitles the vendee a retro to retain it
and consolidate title thereto in his name.
Registration of property is not a means of acquiring ownership. It operated as a mere
notice of existing title, that is, if there is none.
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.
Prescription, as a mode of terminating a relation of co-ownership, must have been
preceded by repudiation (of the co-ownership).
The act of repudiation is subject to certain conditions:
(1) a co-owner repudiates the co-ownership;
(2) such an act of repudiation is clearly made known to the other co-owners;
(3) the evidence thereon is clear and conclusive; and
(4) he has been in possession through open, continuous, exclusive, and notorious
possession of the property for the period required by law.
While actions to enforce a constructive trust prescribe in ten years from registration of
the property, a private respondents’ right commences from actual discovery of
petitioner’s act of defraudation.
5. ROA JR. VS CA, GR NO. L-27294
An express trust cannot be deemed created unless there is a sufficiently clear intention
to create a trust.
A constructive trust, otherwise known as a trust ex maleficio, a trust ex delicto, a trust de
son tort, an involuntary trust, or an implied trust, is a trust by operation of law which
arises contrary to intention and in invitum, against one who, by fraud, actual or
constructive, by duress or abuse of confidence, by commission of wrong, or by any form
of unconscionable conduct, artifice, concealment, or questionable means, or who in any
way against equity and good conscience, either has obtained or holds the legal right to
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property which he out not, in equity and good conscience hold and enjoy. It is raised by
equity to satisfy the demands of justice.
No implied trust can be inferred where there was no fraud or mistake involved, but only
voluntary agreement of one party to withdraw his opposition to a petition for land
registration.
Trust relationships may be recognized in equity to the end that unjust enrichment is
prevented.
A constructive trust is substantially an appropriate remedy against 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.
The prescriptive period of 10 years in equitable trusts is counted from the time the trust
is repudiated.
A clear intention to create a trust must be shown. It must be manifested with certainty
and not from loose or vague declarations and circumstances. (Medina vs CA)
The legal effect of an agreement to preserve the properties in co-ownership is to create
an express trust among the heirs as co-owners of the properties in question. (Sotto vs
Teves)
Under the law on trusts, it is not necessary that the document expressly state and
provide for the express trust, for no particular words are required for the creation of an
express trust, it being sufficient that a trust is clearly intended. (Sotto vs Teves)
Where real property was registered through fraud, an implied trust is created, and the
offended party may sue within the period of 10 years. (Ruiz vs CA)
There is a clear repudiation of a trust where one who is an apparent administrator of
property causes the cancellation of the title thereto in the name of the apparent
beneficiaries and gets a new certificate of title in his own name. (Carantes vs CA)
II. EXPRESS TRUST
A. IN GENERAL
ARTICLE 1443 – 1445
Article 1443. No express trusts concerning an immovable or any interest therein may be
proved by parole evidence.
Article 1444. No particular words are required for the creation of an express trust, it
being that a trust is clearly intended.
Article 1445. No trust shall fail because the trustee appointed declines the designation,
unless the contrary should appear in the instrument constituting the trust.
EXPRESS TRUSTS
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6. GERTRUDES CUAYCONG VS LUIS CUAYCONG, GR NO. L-21616
An express trust is one created by the intention of the trustor or the parties while an
implied trust comes into being by operation of law. Express trusts are created by direct
and positive acts of the parties, by some writing or deed or will or by words evidencing
an intention to create a trust. On the other hand, implied trusts are those which, without
being expressed, are deducible from the nature of the transaction by operation of law as
matters of equity, independently of the intention of the parties.
If the intention to establish a trust is clear, the trust is express; if the intent to establish a
trust is to be taken from circumstances or other matters indicative of such intent, then
the trust is implied.
The intention to establish a trust can be proven by parole evidence if it is clear and
unequivocal.
It is settled that the right to enforce an implied trust in one’s favor prescribes in 10
years.
B. EXPRESS TRUST CANNOT BE PROVEN BY PAROL EVIDENCE
7. PATRICIO SINAON VS ANDRES SORONGON, GR NO. L-59879
An implied trust cannot be established contrary to the recitals of a Torrens title upon
vague and inconclusive proof.
The title and possession of registered owners cannot be defeated by oral evidence which
can easily be fabricated and contradicted.
Express trusts concerning real property cannot be proven by parol evidence while
implied trusts cannot be established contrary to the recitals of a Torrens title upon
inconclusive proof.
Prescription is rightly regarded as a statute of repose whose object is to suppress
fraudulent and stale claims from springing up at great distances of time and surprising
the parties or their representatives when the facts have become obscure from the lapse
of time or the defective memory or death or removal of witnesses.
An action for reconveyance of realty, based upon a constructive or implied trust resulting
from fraud, may be barred by prescription. The prescriptive period is reckoned from the
issuance of the title which operates as a constructive notice.
An action for reconveyance based on implied trust prescribes in ten years.
Negligence or omission to assert a right within a reasonable time warrants presumption
that the party entitled to assert it had abandoned it and casts doubt on the claim of
ownership.
C. ACCEPTANCE BY THE BENEFICIARY
ARTICLE 1446
Article 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.
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IMPLIED TRUST
A. IN GENERAL
ARTICLE 1447 – 1457
Article 1447. The enumeration of the following cases of implied trust does not exclude
others established by the general law of trust, but the limitation laid down in article 1442
shall be applicable.
Article 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.
Article 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.
Article 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.
Article 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.
Article 1452. If two or more persons agree to purchase property and by common consent
the legal title is taken in the name of one of them for the benefit of all, a trust is created
by force of law in favor of the others in proportion to the interest of each.
Article 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.
Article 1454. If an absolute conveyance of property is made in order to secure the
performance of an obligation of the grantor toward the grantee, a trust by virtue of law is
established. If the fulfillment of the obligation is offered by the grantor when it becomes
due, he may demand the reconveyance of the property to him.
Article 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.
Article 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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Article 1457. An implied trust may be proved by oral evidence.
IMPLIED TRUSTS
8. O’LACO VS CO CHO CHIT, GR NO. 58010
Trust relations can either be express or implied. 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 evincing an intention to create a trust. Implied trusts are those which, without
being express, are deducible from the nature of the transaction as matters of intent, or
which are superinduced on the transaction by operation of law as matters of equity,
independently of the intention of the parties.
Implied trusts can be resulting or constructive trusts. Resulting trusts arise from the
nature or circumstances of the consideration involved in a transaction, where one person
holds legal title but is obligated to hold it for the benefit of another. Constructive trusts,
on the other hand, are created by equity to prevent unjust enrichment and arise when
someone holds legal title to property that they should not hold in good conscience.
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 were proven by
authentic document. It cannot be established upon vague or inconclusive proof.
A party’s continued possession of documents of ownership suggests that property is held
by another in trust for him.
As differentiated from constructive trusts, where the settled rule is that prescription may
supervene, in resulting trusts, the rule of imprescriptibility may apply for as long as the
trustee has not repudiated the trust. Once the resulting trust is repudiated however, it is
converted into a constructive trust and is subject to prescription.
A resulting trust is repudiated if the following requisites concur:
(a) The trustee has performed unequivocal acts of repudiation amounting to an ouster
of the cestui qui trust;
(b)Such positive acts of repudiation have been made known to the cestui qui trust;
(c) The evidence thereon is clear and convincing.
Absence of any act showing repudiation of resulting trust, prescription of action for
reconveyance shall not commence to run.
When a defendant acquires property subject matter of litigation by means of fraud, the
transfer of said property in his/her favor should be considered to have created an implied
trust for the benefit of the plaintiff. (Ramnani vs CA)
It is well-settled that the attempt to compromise as well as the inability to succeed is a
condition precedent to the filing of a suit between members of the same family.
B. CONSTRUCTIVE IMPLIED TRUST
9. DE ESCONDE VS CA, GR NO. 103635
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A constructive trust is created by the court to prevent unjust enrichment and arises when
a person obtains or holds the legal right to property that he or she should not hold in
equity and good conscience.
Trust is the legal relationship between one person having an equitable ownership in
property and another person owning the legal title to such property, the equitable
ownership of the former entitling him to the performance of certain duties and exercise
of certain powers by the latter.
Trusts are either express or implied. An express trust is 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. No particular words are required for the creation of an express trust, it
being sufficient that a trust is clearly intended.
Implied trusts are those which, without being expressed, are deducible form 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.
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. One person thereby becomes invested with legal title
but is obligated in equity to hold his legal title for the benefit of another.
Constructive trusts are created by the construction of equity 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 hold.
Article 1456. If property is acquitted 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.
The rule that a trustee cannot acquire by prescription ownership over property entrusted
to him until and unless he repudiates the trust applies to express trusts and resulting
implied trusts but not to constructive implied trusts, repudiation of the said trust being
not a condition precedent to the running of the prescriptive period.
The prescriptive period for an action for reconveyance of real property based on implied
or constructive trust, which is counted form the date of registration of the property,
applies when the plaintiff is not in possession of the contested property.
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.
The doctrine of laches applies whether the implied trust is constructive or resulting.
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No express trust concerning an immovable or any interest therein may be proved by
parole evidence. (Ong Ching Po vs CA)
If property is acquired through mistake or fraud, the person obtaining it is considered a
trustee of an implied trust for the benefit of the person whom the property comes. (Noel
vs CA)
