Roan Salanga Trusts Page 1 of 8 BUSINESS TRUSTS Nature and Classification of TrustsI.

Definition and Essential Characteristic of Trust 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 whosebenefit the trust has been created is referred to as the beneficiary. Trust legal relationship bet een one person ha!ing ane"uitable o nership in propert# and another person o ing thelegal title to such propert#$ the e"uitable o nership of thefor%er entitling hi% to the perfor%ance of certain duties andthe e&ercise of certain po ers b# the latter Characteristics of a trust or e&press trust' ()orales !. C*+a. It is a relationshipb. It is a relationship of a fiduciar# characterc. It is a relationship ith respect to propert#$ not one in!ol!ing%erel# personal dutiesd. It in!ol!es the e&istence of e"uitable duties i%posed upon theholder of the title to the propert# to deal ith it for the benefitof anothere. It arises as a result of a %anifestation of intention to create therelationship1. ,ased on E"uit# 1442. The principles of the general law of trusts, insofar as they arenot in conflict with this ode, the ode of ommerce, the !ules of ourt and "pecial laws are hereby adopted. -. Distinguished fro% *genc#*genc# Trust.iduciar# in natureEssentiall# re!ocable Essentiall# obligator# in its ter%sand period and can onl# berescinded based on breach of trust*gent possesses propert#under agenc# for and in thena%e of the o nerTrustee ta/es legal or na/ed title tothe sub0ect %atter of trust*gent %ust act uponinstructions of the o nerTrustee acts on his o n businessdiscretion*gent enters into contract inthe na%e of the principalTrustee enters into contracts in hiso n na%e*gent cannot be sued Trustee is liable directl# and %a# besu ed in his trust capacit#II. 1inds of Trust 1441. Trusts are either e#press or implied. $#press trusts are createdby the intention of the trustor or of the parties. %mplied trusts comeinto being by operation of law. *. E&press Trusts1. Essence and Definition of E&press Trusts E&press trust one created b# the intention of the trustor orof the parties (*rt. 1221+ o

Those created b# direct and positi!e acts of the parties$ b#so%e riting or deed or ill or b# ords e!idencing anintention to create a trust Essential Characteristics of E&press Trustsa. No%inate and Principal for ha!ing been gi!en particularna%e and essentiall# defined b# the Ci!il Code$ and notneeding another contract to be !alid and bindingb. 3nilateral onl# the trustee assu%es obligations to carr#on the trust for the benefit of the beneficiar#c. Pri%aril# gratuitous supported b# the consideration of liberalit#$ especiall# hen *rt. 1224 pro!ides that beneficiar#5s acce ptance is presu%edd. Real an e&press trusts constitute a real contract$ that is$ itis not %erel# perfected b# a %ere %eeting of %indsbet een the trustor and trustee to constitute a trust.Indeed$ no trust relationship e&ists$ until and unless$ thepropert# constituting the res is con!e#ed to the trustee.e. Preparator# not constituted for its o n sa/e in that thetrust relationship is essentiall# a %ediu% established b#the trustor to allo full authorit# and discretion on thepart# of the trustee to enter into !arious 0uridical acts on the corpus to earn inco%e or achie!e other goals gi!en forthe benefit of the beneficiar#. *n e&press trust %a# create a for% of contract pour atrui f. .iduciar# a+ Essentiall# Contractual in Nature6 Need No Particular7ordings 1444. &o particular words are re'uired for the creation of an e#press trust, it being sufficient that a trust is clearly intended. 7hat i%portant is hether the trustor %anifested anintention to create the /ind of relationship hich in la is/no n as trust. (8ulio !. Dalandan+ * clear intention to create trust %ust be sho n$ and theproof of fiduciar# relationship %ust be clear andcon!incing. (Cane9o !. Ro0as+b+ ,ased on Propert# Relationship 7hat distinguishes a trust fro% other relations is theseparation of legal title and e"uitable o nership of thepropert#. In a trust relation$ legal title is !ested in thefiduciar# hile e"uitable o nership is !ested in a cestui "ue trust (Cane9o+

Trust$ in its technical sense$ is a right of propert#$ real orpersonal$ held b# one part# for the benefit of another. (:u#!. C*+c+ .iduciar# The 0uridical concept of a trust$ hich in a broad sensein!ol!es$ arises fro%$ or is the result of$ a fiduciar# relationbet een the trustee and the cestui "ue trust as regardscertain propert# real$ personal$ funds or %one#$ orchoses in action %ust not be confused ith an action forspecific perfor%ance. * trustee cannot in!o/e the statuteof li%itations to bar the action and defeat the rights of the cestuis "ue trustent . (Pacheco !. *rro+-. E&press Trust %ust be Pro!en *n e&press trust cannot be pro!en b# parol e!idence. * trust %ust be pro!en b# clear$ satisfactor#$ and con!incinge!idence. It cannot rest on !ague and uncertain e!idence oron loose$ e"ui!ocal or indefinite declarations. Rule' the burden of pro!ing the e&istence of a trust is on thepart# asserting its e&istence The presence of the follo ing ele%ents %ust be pro!ed' a+ a trustor or settler ho e&ecutes the instru%ent creatingthe trust b+ a trustee$ ho is the person e&pressl# designated to carr#out the trustc+ the trust res $ constituting of dul# identified and definitereal propertiesd+ the cestui "ue trust $ or beneficiaries hose identit# %ustbe clear;. 1inds of E&press Trust*. E&press Trust in!ol!ing I%%o!able 144(. &o e#press trusts concerning an immo)able or any interest therein may be pro)ed by parol e)idence. The e&istence of e&press trusts concerning real propert#%a# not be established b# parol e!idence6 thus$ it %ust bepro!en b# so%e riting or deed o <o e!er$ if the parties to the action$ during the trial$%a/e no ob0ection to the ad%issibilit# of the orale!idence to support the contract$ there is dee%ed to be a ai!er

The re"uire%ent that e&press trust o!er i%%o!able %ust be in riting should be added as being go!erned b# the Statute of .rauds (:a%boa !. :a%boa+,. Contractual= Inter !i!os Trust *n inter !i!os trusts are e&pressed trust pursued in thefor% of donation$ and hich therefore beco%e sole%ncontracts hich %ust co%pl# ith the sole%nities%andated b# the >a on Donations C. Testa%entar# Trust 7hen an e&press trust is created under the ter%s of thelast ill and testa%ent of the testator$ it is a testa%entar#trust and is go!erned b# the >a on Succession o 3nless the ill confor%s ith the sole%nities andconditions set b# la $ it ill be !oid together ith thetesta%entar# trust sought to be created therein * testa%entar# trust as created b# a pro!ision in the ill hereb# the testator proposed to create trust for thebenefit of a secondar# school to be established in the to nof Ta#abas$ na%ing as trustee the a#uta%iento of the to nor if there be none$ then the ci!il go!ernor of the Pro!ince of Ta#abas. (:o!5t of the Phil. Islands !. *badilla+ D. Pension or Retire%ent Trusts Publicl#?regulated trusts ould be those here the Statepro!ides the !ehicle b# hich institutions are allo ed toad%inister large funds for the benefit of the public. *%ongsuch funds created under the la ould be the pensionand benefits funds ad%inistered b# the :SIS$ the SSS andthe Pag?Ibig .und. Ta& la s pro!ide for incenti!es to thesetting?up of retire%ent funds for e%plo#ees. *ll suchfunds are reall# being ad%inistered for the beneficiariesthereof through the %ediu% of trust.E. Charitable Trusts2. Parties to an E&press Trusta+ Trustor a person ho establishes a trust (*rt. 122@+b+ Trustee one in ho% confidence is reposed as regardspropert# for the benefit of another person (*rt. 122@+i. Trustee %ust ha!e legal capacit# to accept the trustii. .ailure of Trustee to *ssu%e the Position

144*. &o trust shall fail because the trustee appointed declinesthe designation, unless the contrary should appear in theinstrument constituting the trust. In case of refusal to accept the trust b# the trustee$ thecourt ill appoint a trustee ,ut$ if the appoint%ent of the trustee is a %aterialpro!ision$ the trustor can pro!ide that a refusal of thetrustee to accept the trust shall result in the failure ornullification of the sa%eiii. Abligations of the Trustee (Rule B8 of Rules of Court+ "ec. 1. +here trustee appointed. , A trustee necessary to carry into effect the pro)isions of a will or written instrument shallbe appointed by the ourt of -irst %nstance in which the will was allowed if it be a will allowed in the .hilippines, otherwiseby the ourt of -irst %nstance of the pro)ince in which theproperty, or some portion thereof, affected by the trust issituated."ec. 2. Appointment and powers of trustee under will;$#ecutor of former trustee need not administer trust. , %f atestator has omitted in his will to appoint a trustee in the.hilippines, and if such appointment is necessary to carry intoeffect the pro)isions of the will, the proper ourt of -irst%nstance may, after notice to all persons interested, appoint atrustee who shall ha)e the same rights, powers, and duties,and in whom the estate shall )est, as if he had been appointedby the testator. &o person succeeding to a trust as e#ecutor oradministrator of a former trustee shall be re'uired to acceptsuch trust."ec. (. Appointment and powers of new trustee under writteninstrument. , +hen a trustee under a written instrumentdeclines, resigns, dies, or is remo)ed before the ob/ects of thetrust are accomplished, and no ade'uate pro)ision is made insuch instrument for supplying the )acancy, the proper ourtof -irst %nstance may, after due notice to all personsinterested, appoint a new trustee to act alone or /ointly withthe others, as the case may be. "uch new trustee shall ha)eand e#ercise the same powers, rights, and duties as if he hadbeen originally appointed, and the trust estate shall )est in himin like manner as it had )ested or would ha)e )ested, in thetrustee in whose place he is substituted; and the court may order such con)eyance to be made by the former trustee orhis representati)es, or by the other remaining trustees, as may

!ice !ersa $ the trust relation is ipso 0ure e&tinguished$ for it is difficult to see ho a person cano e fiduciar# duties to hi%self.E. ,reach of Trust 7hen a trustee breaches his dut# of lo#alt#$ it ouldconstitute legal basis b# hich to ter%inate the trust o This operates as a renunciation of the trust and thepersons interested as beneficiaries in the propert# areentitled to %aintain an action to declare their right andre%o!e the unfaithful trustee... 3pon the Death of Trustee 3nless other ise e&pressl# stipulated in the trustinstru%ent$ the death$ ci!il interdiction$ insanit# orinsol!enc# of the trustee does not necessaril# ter%inatethe trust but a ne trustee ill be appointed o The reason h# a trust does not fail for ant of a trusteeis that to per%it it to fail for this reason ould becontrar# to the intention of the trustor in creating thetrust. The trustor is pri%aril# interested in the dispositionof the beneficial interest in the propert#$ and the %atterof its ad%inistration is a subsidiar# consideration.(Tolentino$ at p. 4C4.+ * trust ter%inates upon the death of the trustee here thetrust is personal to the trustee in the sense that the trustorintended no other person to ad%inister it o *fter Crispulo5s death$ the respondent had no right toretain possession of the propert#. *t such point$ aconstructi!e trust ould be created o!er the propert# b#operation of la o 7here one %ista/enl# retains propert# hich rightfull#belongs to another$ a constructi!e trust is the properre%edial de!ise to correct the situation:. :enerall# E&press Trusts Not Susceptible to Prescription 7hen there e&ists an e&press trust$ prescription and laches ill run onl# fro% the ti%e the e&press trust is repudiated The rule re"uires a clear repudiation of the trust dul#co%%unicated to the beneficiar# .or ac"uisiti!e prescription to bar the action of thebeneficiar# against the trustee$ in an e&press trust$ for thereco!er# of the propert#$ it %ust be sho n that'a+ Trustee has perfor%ed une"ui!ocal acts of repudiationa%ounting to an ouster of the cestui "ue trust b+

,. Re!ocation b# the Trustor In a re!ocable e&press trust$ the trustee %a# si%pl# in!o/ethe re!ocation or ter%ination clause found in the deed of trust thereb# re!o/ing the trust and con!e#ing noticethereof to the trustee. 3nless there is reser!ed po er tore!o/e$ the general rule is that an e&press trust isirre!ocable.C. *chie!e%ent of Ab0ecti!e$ or <appening of the ConditionPro!ided for in the Trust Instru%ent 7hen the trust instru%ent pro!ides the ob0ecti!e or thecondition upon hich the trust shall be e&tinguished$ sa# hen the trust instru%ent pro!ides that full o nership inthe trust properties shall be consolidated in the person of the beneficiar# once he reaches the age of %a0orit#$ thehappening of the condition shall ter%inate the trustD. Confusion or )erger of >egal Title and ,eneficial Title in theSa%e Person 7hen the trustee of an e&isting trust beco%es thebeneficiar# thereof$ or

Such positi!e acts of repudiation ha!e been %ade /no nto the cestui "ui trust c+ E!idence thereon is clear and conclusi!eIII. I%plied Trusts1. >isting of I%plied Trusts Not E&clusi!e6 .ounded on E"uit# 1440. The enumeration of the following cases of implied trust doesnot e#clude other established by the general law of trust, but thelimitation laid down in Art. 1442 shall be applicable. I%plied trusts fro% the facts and circu%stances of a gi!encase$ the e&istence of a trust relationship is inferred in order to effect the presu%ed intention of the parties or to satisf# thede%ands of 0ustice or to protect against fraud o Those hich are deducible fro% the nature of thetransactions as %atters of intent$ or hich are superinducedon the transaction b# operation of la as %atters of e"uit#$independentl# of the particular intention of the partiesa+ Resulting Trusts * trust hich is raised or created b# the act or constructionof la * trust raised b# i%plication of la and presu%ed al a#s toha!e been conte%plated b# the parties$ the intention as to hich is to be found in the nature of their transaction$ butnot e&pressed in the deed or instru%ent of con!e#ance ,ased on the e"uitable doctrine that !aluable considerationand not legal title deter%ines the e"uitable title or interestand are presu%ed al a#s to ha!e been conte%plated b# thepartiesb+ Constructi!e Trusts * trust raised b# construction of la $ or arising b# operationof la * trust not created b# an# ords$ either e&pressl# ori%pliedl# e!incing a direct intention to create a trust$ but b#the construction of e"uit# in order to satisf# the de%ands of 0ustice * constructi!e trust is not a trust in technical sense There is neither pro%ise nor fiduciar# relations o The so?called trustee does not recogni9e an# trust and hasno intent to hold the propert# for the beneficiar# Ather ise /no n as a trust e& %aleficio $ a trust e& delicto

$ atrust de son tort $ an in!oluntar# trust$ or an i%plied trust * trust b# operation of la hich arises contract to intentionand in in!itu% $ against on ho$ b# fraud$ actual orconstructi!e$ b# duress or abuse of confidence$ b#co%%ission of rong$ or b# an# for% of unconscionableconduct$ artifice$ conceal%ent$ or "uestionable %eans$ or ho in an# a# against e"uit# and good conscience$ eitherhas obtained or holds the legal right to propert# hich heought not$ in e"uit# and good conscience$ hold and en0o# Constructi!e trusts are fictions of e"uit# that the courts useas de!ices to re%ed# an# situation in hich the holder of thelegal title %a# not$ in good conscience$ retain the beneficialinterestc+ Distinction bet een Resulting and Constructi!e Trust Resulting Trust ,ased on e"uitable doctrine that !aluable consideration$and not legal title$ deter%ines the e"uitable title or interest Presu%ed al a#s to ha!e beenconte%plated b# the parties Constructi!e Trust Created b# the construction of e"uit# in order to satisf# the de%ands of 0ustice and pre!ent un0ust enrich%ent *rise contrar# to intention against ho Din bad faithEought to hold the legal right to propert# d+ <o to Pro!e I%plied Trust )ust be pro!en b# clear$ satisfactor# and con!incinge!idence$ and cannot rest on !ague and uncertain e!idenceor on loose$ e"ui!ocal or indefinite declarations )a# be pro!en b# oral e!idence$ but the e!idence %ust betrust orth# and recei!ed b# the courts ith e&tre%ecaution$ and should not be %ade to rest on loose$ e"ui!ocalor indefinite declarationse+ Distinguished fro% Fuasi?Contracts ,oth e%bod# the principle of e"uit# abo!e strict legalis%-. Purchase of Propert# here ,eneficial Title in Ane Person$ butPrice Paid b# *nother Person 1441. There is an implied trust when property is sold, and the legalestate is granted to one party but the price is paid by another for thepurpose of ha)ing the beneficial interest of the property. Theformer is the trustee, while the latter is the beneficiary. 2owe)er, if the person to whom the title is con)eyed is a child, legitimate orillegitimate, of the one paying the price of the sale, no trust is Roan Salanga Trusts Page C of 8 implied by law, it being disputably presumed that there is a gift infa)or of the child. Rationale' one ho pa#s for so%ething usuall# does so for hiso n benefit;. Purchase of Propert# here Title is Placed in the Na%e of Person ho >oaned the Purchase Price

14*0. if the price of a sale of property is loaned or paid by oneperson for the benefit of another and the con)eyance is made to thelender or payor to secure the payment of the debt, a trust arises by operation of law in fa)or of the person to whom the money isloaned or for whom it is paid. The latter may redeem the property and compel a con)eyance thereof to him. It is onl# after the beneficiar# rei%burses the trustee of thepurchase price that the for%er can co%pel con!e#ance of thepropert# fro% the latter2. 7hen *bsolute Con!e#ance of Propert# Effected onl# as )eansto Secure Perfor%ance of Abligation of the :rantor E"uitable)ortgage 14*4. %f an absolute con)eyance of property is made in order tosecure the performance of an obligation of the grantor toward thegrantee, a trust by )irtue of law is established. %f the fulfillment of the obligation is offered by the grantor when it becomes due, hemay demand the recon)eyance of the property to him. G. T o or )ore Persons Purchase Propert# 8ointl#$ but Places Titlein Ane of The% 14*2. %f two or more persons agree to purchase property and by common consent the legal title is taken in the name of one of themfor the benefit of all, a trust is created by force of law in fa)or of theothers in proportion to the interest of each. 4. Propert# Con!e#ed to Person )erel# as <older thereof 14*(. +hen property is con)eyed to a person in reliance upon hisdeclared intention to hold it for, or transfer it to another or thegrantor; there is an implied trust in fa)or of the person whosebenefit is contemplated. 3nder this$ the i%plied trust is enforceable e!en hen theagree%ent is not in riting This article applies if the person con!e#ing the propert# did note&pressl# state that he as establishing the trust but such isthe intentionC. Donation of Propert# to a Donee ho shall ha!e No ,eneficialTitle 1443. There is also an implied trust when a donation is made to aperson but it appears that although the legal estate is transmitted tothe donee, he ne)ertheless is either to ha)e no beneficial interest oronly a part thereof. 8. >and Passes b# Succession but <eir Places Title in a Trustee 14*1. +hen land passes by succession to any person and he causesthe legal title to be put in the name of another, a trust is establishedby implication of law for the benefit of the true owner. B. 7hen Trust .und 3sed to Purchase Propert# hich is Registered in Trustee5s Na%e 14**. +hen any trustee, guardian or other person holding afiduciary relationship uses trust funds for the purchase of property and causes the con)eyance to be made to him or to a third person, atrust is established by operation of law in fa)or of the person to whom the funds belong. 1@. 7hen Propert# is *c"uired through )ista/e or .raud 14*4. %f property is ac'uired through mistake or fraud, the personobtaining it is, by force of law, considered a trustee of an impliedtrust for the benefit of the person from whom the property comes. 7hen a person through fraud succeeds in registering thepropert# in his na%e$ the la creates hat is called a Hconstructi!e or i%plied trustI in fa!or of the defrauded part#

and grants the latter the right to reco!er the propert#fraudulentl# registered ithin a period of 1@ #ears (<eirs of Pati a#on !. )artine9+ o The period rec/oned fro% the issuance of the ad!erse title tothe propert# hich operates as a constructi!e notice Public polic# de%ands that a person guilt# of fraud or$ at least$of breach of trust$ should not be allo ed to use a Torrens titleas a shield against the conse"uences of his rongdoing

Roan Salanga Trusts Page 8 of 8 11. Does I%plied Trust Prescribe or %a# it be Defeated b# >aches The prescripti!e period of 1@ #ears for an action of recon!e#ance applies onl# if there is an actual need torecon!e# the propert# as hen the plaintiff is not in possessionthereof o Point of reference is the date of registration of the deed orthe date of the issuance of the certificate of title of thepropert# pro!ided that the propert# has not been ac"uiredb# an innocent purchaser for !alue 7hen plaintiff is in possession of the sub0ect propert#$ theaction$ being in effect that of "uieting of title to the propert#$does not prescribe Prescription cannot appl# hen title of Trustee is Joid due to.orger# In constructi!e trusts$ prescription %a# super!ene e!en if thetrustee does not repudiate the relationship o Repudiation of the said trust is not a condition precedent tothe running of the prescripti!e period Close relationship and Continued recognition of Trustrelationship o The doctrine of laches is not to be applied %echanicall# asbet een the near relati!es hich ould tend to e&cuse hatother ise %a# be considered a long dela# in ta/ing action o )oreo!er$ continued recognition of the e&istence of thetrust precludes the defense of laches Though the Statute of >i%itations does not run bet een thetrustee and cestui "ue trust as long as the trust relationssubsist$ it does run bet een the trust and third persons Prescription cannot appl# against a )inor ,eneficiar# inI%plied Trust

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