UP LAW BOC IX. Trusts Trusts A fiduciary relationship with respect to property, subjecting the person holding the same to the obligation of dealing with the property for the benefit of another person [Reyes and Puno) Characteristics of Trust: 1. [tis relationship 2, The relationship is of fiduciary character 3. The relationship is with respect to property, not one involving merely personal duties, 4. 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 5. Itarises as a result of a manifestation of intention to create the relationship Trust as di concepts guished from other Refers toa specific property Involves any’ stipulation in favor of a third person Performance or accomplishment is not enforceable Performance of trust is enforceable Trust erred Exe rd Trustees has legal Guardians or Executors title to the property | do not have legal title but mere actual possession and limited powers over the property OBLIGATIONS AND CONTRACTS CIVL LAW A. GOVERNING RULES 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 B. PARTIES [Art. 1440] 1. Truster ~ the person who establishes the trust 2. Trustee - one in whom the confidence is reposed as regards property for the benefit of another person 3. Beneficiary or cestui que trust ~ person for whose benefit the trust has been created C. KINDS OF TRUST C.1. EXPRESS TRUST Created by the intention of the trustor or of the parties [Art. 1441] Elements: 1. Competent trustor or settlor 2. Trustee 3. Ascertainable trust res / Trust property 4. Sufficiently certain beneficiaries Trust is created: 1. By declaration of the trustor or settlor that he holds property in trust 2. By conveyance to the trustee: ‘a. Inter vivos, or b, Bytestament Proof Required: 1. No express trusts conceming an immovable or any interest therein may be proved by parol evidence [Art. 1443] > Trusts over real property are unenforceable unless in writing, although writing is not required for validity, onty for proof. 2. Where the trust is over personel property, an oral trust is sufficient between the parties. Page 264 of 574UP LAW BOC OBLIGATIONS AND CONTRACTS CIVL LAW 3. But to bind third persons the trust must be in a public instrument (Art. 1358(1) and (3)] Form of Express Trusts Art. 1444, No particular words are required for the creation of an express trust, it being sufficient that trust is clearly intended Want of Trustee “Art. 1445. No trust shall fail because the trustee appointed declines the designation, unless the contrary should appear in the instrument constituting the trust To permit the trust to fail for want of trustee is to defeat the intention of the trustor in creating the trust. Acceptance by beneficiary Acceptance by beneficiary is necessary [Art. 1446]. It may be: 1. Express 2. Implied + Acceptance by the beneficiary is not subject to the formal rules of donations [Cristobal v Gomez, 19271 3. Presumed ~ if the trust imposes no onerous condition upon the beneficiary Termina n of Express Trusts 1. Revocation or modification by the trustor under a reserved power 2. Rescission 3. Expiration of the period or happening of the resolutory condition 4, Accomplishment of the purpose or its becoming impossible or illegal 5, Dissolution by the Court if continuation will defeat the purpose of the trust, 6. Dissolution by the consent of all the beneficiaries and/or the settlor 7. Merger C.2. IMPLIED TRUST Come into being by operation of law (Art. 144], The essential idea involves a certain antagonism between the cestul que trust and the trustee even where the 7trust has not arisen out of fraud or an immoral transaction U.B.L. Reyes] Proof required ‘Art. 1457. An implied trust may be proved by oral evidence ‘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 [De Leon v. Molo-Peckson, 1962] 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 [Suarez v. Tirambulo, 1933] Examples of Implied Trusts 1. Resulting Trusts - a trust raised by implication of law and 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 or instrument of conveyance [Salao v. Sola0, 1976] Art. 1448. Theres an implied trust when property is sold, and the legal estat Page 265 of 574UP LAW BOC OBLIGATIONS AND CONTRACTS CIVL LAW ‘another for the purpose of having the beneficial interest of the property. The former is the trustee, while the latteris 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 ‘and compel a conveyance thereof to him. 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. 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. ‘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. ‘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, @ trust is established by operation of law in favor of the person to whom the funds belong, Art. 1452. Iftwo 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. 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. 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. C.3. CONSTRUCTIVE TRUST Constructive Trusts - a trust not created by any words, either expressly or impliedly evincing a direct intension to create a trust, bout by the construction of equity in order to satisly the demands of justice [Salao v Salao, 1976] “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's is paid. The latter may redeem the property Express trust is a "continuing and subsisting” trust, not subject to the statute of limitations, at least, until repudiated, in Which event the period of prescription begins to run only from the time of the repudiation, [Tamayo v Callejo, 1972] In constructive trusts, the rule is that laches constitutes a bar to actions to enforce the trust, and repudiation is not required, unless there is a concealment of the facts giving rise to the trust. [Fabian v Fabian, 1968) Page 266 of 574