Professional Documents
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Agent enters into contract in the name of Trustee enters into contracts in his own
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Agent cannot be sued
Kinds of Trust
1441. Trusts are either express or implied. Express trusts are created by the intention of
the trustor or of the parties. Implied trusts comeinto being by operation of law.
A.Express Trusts
1.Essence and Definition of Express Trusts
Express trust
- one created by the intention of the trustor or of the parties (Art. 1441)
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Those 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
c) the trust res, constituting of duly identified and definite real properties
d) the cestui que trust , or beneficiaries whose identity must be clear
3. Kinds of Express Trust
A. Express Trust involving Immovable
1443. No express trusts concerning an immovable or any interest therein may
be proved by parol evidence.
The existence of express trusts concerning real property may not be established by
parol evidence; thus, it must be proven by some writing or deed
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However, if the parties to the action, during the trial,make no objection to the
admissibility of the oral evidence to support the contract, there is deemed to be a
waiver
The requirement that express trust over immovable must be in writing should be
added as being governed by theStatute of Frauds (Gamboa v. Gamboa)
B. Contractual/ Inter vivos Trust
An inter vivos trusts are expressed trust pursued in the form of donation, and which
therefore become solemn contracts which must comply with the solemnities mandated
by the Law on Donation
C.Testamentary Trust
When an express trust is created under the terms of the last will and testament of the
testator, it is a testamentary 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 testamentary trust sought to be created therein
A testamentary trust was created by a provision in the will whereby the testator
proposed to create trust for the benefit of a secondary school to be established in the
town of Tayabas, naming as trustee the ayutamiento of the town or if there be none,
then the civil governor of the Province of Tayabas. (Govt of the Phil. Islands v. Abadilla)
D.Pension or Retirement 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 nand 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.
E.Charitable Trusts
4.Parties to an Express Trust
a)Trustora person who establishes a trust (Art. 1440)
b)Trustee one in whom confidence is reposed as regards property for the benefit of
another person (Art. 1440)
i.Trustee must have legal capacity to accept the trust
ii. Failure of Trustee to Assume the Position
1445. No trust shall fail because the trustee appointed declines the designation, unless
the contrary should appear in the instrument constituting the trust.
In case of refusal to accept the trust by the trustee, the court will appoint a trustee.
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But, if the appointment of the trustee is a material provision, the trustor can
provide that a refusal of the trustee to accept the trust shall result in the failure
or nullification of the same
the will was allowed if it be a will allowed in the Philippines, otherwise by the Court of
First Instance of the province in which the property, or some portion thereof, affected by
the trust is situated.
Sec. 2. Appointment and powers of trustee under will; Executor of former trustee need
not administer trust. - If a testator has omitted in his will to appoint a trustee in the
Philippines, and if such appointment is necessary to carry into effect the provisions of
the will, the proper Court of First Instance may, after notice to all persons interested,
appoint a trustee who shall have the same rights, powers, and duties,and in whom the
estate shall vest, as if he had been appointed by the testator. No person succeeding to
a trust as executor or administrator of a former trustee shall be required to accept such
trust.
Sec. 3. Appointment and powers of new trustee under written instrument. - 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 Court of First Instance 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 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 the others.
Sec. 5. Trustee must file bond. Before entering on the duties of his trust, a trustee shall
file with the clerk of the court having jurisdiction of the trust a bond in the amount fixed
by the judge of said court, payable to the Government of the Philippines and sufficient
and available for the protection of any party in interest, and a trustee who neglects to file
such bond shall be considered to have declined or resigned the trust; but the court may
until further order exempt a trustee under a will from giving a bond when the testator
has directed or requested such exemption, and may so exempt any trustee when all
persons beneficially interested in the trust, being of full age, request the exemption.
Such exemption may be cancelled by the court at any time and the trustee required to
forthwith file a bond.
Sec. 6. Conditions included in bond. - The following conditions shall be deemed to be a
part of the bond whether written therein or not:(a) That the trustee will 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;(b) That he will 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;(c) That he will render upon oath at least once a year until his trust is fulfilled,
unless he is excused there from 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
accounts as the court may order;(d) That at 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.But when the
trustee is appointed as a successor to a prior trustee, the court may dispense with the
making and return of an inventory, if one has already been filed, and in such case the
condition of the bond shall be deemed to be altered accordingly.
iv.Generally, trustee does not assume personal liability on the trust as to properties
outside the trust estate
When the transaction at hand could have been entered into by a trustee either as such
or in its individual capacity, then it must be clearly indicated that the liabilities arising
there from shall be chargeable to the trust estate, otherwise they are due from the
trustee inhis personal capacity (Senguan v. Phil. Trust Co.)
v.Trustee generally entitled to receive a fair compensation for his services
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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.c)
Beneficiary
the person for whose benefit the trust has been created (Art. 1440)
In regard to private trusts, it is not always necessary that the cestui que trust
should be named, or even be in esse atthe time the trust is created in his favor
(Abadilla)
Acceptance by beneficiary of gratuitous trust is not subject to the rules for the
formalities of donations
d)The Corpuso r the Res
The subject matter of the trust
5.How Express Trust is Terminated
A.Destruction of the Corpus
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.
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
D.Confusion or Merger of Legal Title and Beneficial Title in the Same Person
When the trustee of an existing trust becomes the beneficiary thereof, or
vice versa, the trust relation is ipso jure extinguished, for it is difficult to see how a
person can owe fiduciary duties to himself.
E.Breach of Trust
When a trustee breaches his duty of loyalty, it would constitute legal basis by which to
terminate the trust
-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.
F.Upon the Death of 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
but a new trustee will be appointed
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.)
A trust terminates upon the death of the trustee where the rust is personal to the
trustee in the sense that the trustor intended no other person to administer it
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
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The period reckoned from the issuance of the adverse title to the property which
operates as a constructive notice
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
11.Does Implied Trust Prescribe or may it be Defeated by Laches?
The prescriptive period of 10 years for an action of reconveyance applies only if there
is an actual need to reconvey the property as when the plaintiff is not in possession
thereof
Point of reference is the date of registration of the deed or the date of the
issuance of the certificate of title of the property provided that the property has
not been acquired by an innocent purchaser for value
When plaintiff is in possession of the subject property, the action, being in effect that of
quieting of title to the property,does not prescribe
Prescription cannot apply when title of Trustee is Void due to Forgery
In constructive trusts, prescription may supervene even if the trustee does not
repudiate the relationship
Repudiation of the said trust is not a condition precedent to the running of the
prescriptive period
Close relationship and Continued recognition of Trust relationship