BUS ORG TRUST

TSN by Sonny
October 1, 2013

Q: Define Trust and what are its characteristics.

A: Trust is a legal relationship between one person having an equitable ownership in property
and another person owing 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.

Characteristics:

1. It is essentially contractual
2. Based on a property relationship

3. It is a relationship
4. It is a relationship of a fiduciary character
5. It is a relationship with respect to property, not one involving merely personal duties
6. 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
7. It arises as a result of a manifestation of intention to create the relationship

Q: How many parties are in the relationship?

A: 3

Q: Who are they?

A: 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.

Q: How is Trust different from Agency?

AGENCY TRUST
Fiduciary in nature
Essentially revocable Essentially obligatory in its terms and period
and can only be rescinded based on breach of
trust
Agent possesses property under agency for Trustee takes legal or naked title to the
and in the name of the owner subject matter of trust
Agent must act upon instructions of the owner Trustee acts on his own business discretion
Agent enters into contract in the name of the Trustee enters into contracts in his own name
principal
Agent cannot be sued Trustee is liable directly and may be sued in
his trust capacity

Q: Are the principles of equity applicable to Trust?

A: Yes.

Q; What is the basis of Trust?

A: Equity. The basis of Trust is equity. The leading case there is Ramos v.Ramos, 61 SCRA 284
where the SC held that "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 words 'trust' is frequently employed to indicate duties, relations, and
responsibilities which are not strictly technical trusts."

Q: Can a minor be the trustor?

A: No.

Q: Can a trustee be a minor?

A: No.

Q: How about a minor acting through his legal guardian?

A: (Not answered)

Q: Can a juridical person be a trustor?

A: Yes.

Q: Can a juridical person be a trustee?

A: Yes.

Q: Can a juridical person be a beneficiary?

A: Yes. What is important is the capacity to receive gratuitously the property.

Q: Can a trustor become at the same time be a trustee?

A: Yes.
Q: Can the beneficiary be at the same time the trustee?

A: Yes.

Q: How do you distinguish a Trust from a stipulation pour autrui?

A: In Trust, there is transfer of legal title to the trustee and equitable title to the beneficiary. In
stipulation pour autrui, there is only a benefit in favour of a third person.

Q: What is an express trust?

A; One created by the intention of the trustor or of the parties (Art. 1441)or those created by
direct and positive acts of the parties, by some writing or deed or by words evidencing an
intention to create a trust

Q: What is an implied trust?

A: Those which 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.

Q: What are its distinctions?

A:

Express Trust Implied Trust

As to matter of creation, it is created by the By operation of law
intention of the parties
Manner of creation, by the direct and positive Deductible by the nature of the transaction
acts of the parties evincing an intention to
create trust
As to proof, if it involves immovable, it cannot Can be proved by parol evidence
be proved by parol evidence
As to prescription of action, it is Prescriptible after 10years from the
imprescriptible unless the trust has been registyration of the title
repudiated
The property cannot ve acquired by Can be acquired by prescription
prescription

Q: What is a resulting trust?

A: 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

Q: How about a constructive trust?

A: 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

Q: How do you distinguish a resulting from a constructive trust?

A:

RESULTING TRUST CONSTRUCTIVE TRUST

Based on equitable doctrine that valuable Created by the construction of equity in order
consideration, and not legal title, determines to satisfy the demands of justice and prevent
the equitable title or interest unjust enrichment
Presumed always to have been contemplated Arise contrary to intention against who [in bad
by the parties faith] ought to hold the legal right to property

Q: Does it prescribe if it is an express trust?

A: No.

Q: What are the different kinds of express trust?

A:

1. Express trust involving immovable

2. Contractual or inter vivos trust
3. Testamentary trust
4. Pension or retirement trust
5. Charitable trust

Q: What is the proof necessary in express trust?

A: If immovable, then it must be in writing; movable, parol evidence may be introduced.

Q: What is parol evidence?

A: In the context of contracts, deeds, wills, or other writings, parol evidence refers to
extraneous evidence such as an oral agreement (a parol contract), or even a written agreement,
that is not included in the relevant written document. The parol evidence rule is a principle that
preserves the integrity of written documents or agreements by prohibiting the parties from
attempting to alter the meaning of the written document through the use of prior and
contemporaneous oral or written declarations that are not referenced in the document.

So you cannot prove stipulations in the contract by parol evidence.

Q: So how do you establish an express trust under 1444 of the NCC?

A: Article 1444. No particular words are required for the creation of an express trust, it being
sufficient that a trust is clearly intended.

So it is based on the intention.

Q: Can the court appoint a trustee?

A: Yes.

Q: What are those instances where the court can appoint a trustee?

A: Just read Rule 98 of the Rules of Court regarding the obligations of the trustee.

Q: Is a trustee entitled to receive his compensation or is that gratuitous?

A: Under the Rules of court, the trustee is generally entitled to a compensation.

BUS ORG TRUST

TSN by James
October 8, 2013

(Note: Q - Question, A - Students Answer; C Maam Comments)

Q: So we are now in Article 1445. State the rule and its exceptions.
Art. 1445. No trust shall fail because the trustee appointed declines the designation, unless
the contrary should appear in the instrument constituting the trust.

A: Under this rule, it says that if ever the trustee declines the designation, the trust does not
necessarily fail unless it appears in the instrument that the trust shall fail if ever the trustee
shall decline the trust.

Q: Why is that so?

A: Because in case of refusal of the trust by the trustee, the court will appoint another trustee.
If the appointment of the trustee is a material provision, the trustor can provide that a refusal
of the trustee ____ sought the failure of the constitution of the trust.

Q: Because what is the main reason?

A: Perhaps, under the Rules of Court, Rule 98, you cannot force a trustee to accept a trust.
Necessarily there must be an acceptance. If the trustee does not accept it, it does not
necessarily mean that the trust will fail. Otherwise, the institution of the trust will depend on
the trustee and not on the trustor.

C: Okay, thank you. Take note: We are talking about express trust. So under Article 1445,
even if the trustee declines the designation, we must respect the intention of the trustor to
create the trust. That is why the court comes in to appoint a substitute. In other words, the
intention of the trustor must be respected. That is the reason behind Article 1445. Take note
that if on the other hand, no beneficiary can be found, what will happen to the trust? The
trust must necessarily fail. In one case, SC stated that as between the mother and the uncle,
the mother is preferred to be the trustee of the proceeds of the insurance policy in the
absence of any showing that she is incompetent. This is based on the case of Cabanas vs.
Pilapil 58 SCRA 95.

Q: Can you please explain Article 1446?

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.

Q: Why is the acceptance by the beneficiary necessary?

C: Acceptance by the beneficiary is necessary for the perfection of the contract. So the
acceptance by the beneficiary, this is akin to a contract of donation that there must be
acceptance. But as to the form of acceptance, no particular form is required even if the subject
property is immovable property. So form is not essential for the validity of the acceptance.

Q: What are the grounds for the extinguishment of an express trust?

C: GROUNDS FOR THE EXTINGUISHMENT OF EXPRESS TRUST

1. Accomplishments of the aims of the trust;
2. Expiration of the agreed term;
3. Mutual agreement of ALL the parties (the trustor, trustee and the beneficiary);
4. The happening of a resolutory condition if one has been imposed;
5. Total destruction of the object of the trust;
6. Annulment or rescission of the trust;
 7. Decision of the court declaring the trust as terminated;
8. Merger of the rights of the trustor and the trustee as when the trustor waives his
beneficial rights in favor of the trustee and vice versa; and
9. Prescription which arises when there is an express repudiation of the trust.

Q: In express trust, is prescription a mode of acquiring ownership?

C: As a general rule, a trustee cannot acquire by prescription the ownership of the property
entrusted to him because his possession is not adverse. The exception is when he repudiates
the same expressly. For how many years?30 years because it is a possession in bad faith.

Q: When is there repudiation? What are the elements of repudiation?

C: There is repudiation when the following elements are present:
1. The trustee has performed unequivocal acts amounting to the ouster of the
beneficiary;
2. Such positive acts of repudiation have been known to the cestuique trust (the
beneficiary); and
3. Evidence thereon is clear and conclusive.

Take note, if there is repudiation, the beneficiary should file an action to recover possession
of the property within 10 years from the time the repudiation is made to him. We are talking
here about express trust.

Q: How about if it is implied trust in relation to the question above, how many years?
C: If it is implied trust, 10 years from the time the right of action accrues provided that the
beneficiary is not in possession of the property. Take note, the basis of this 10 years is Article
1144, paragraph 2 of your Civil Code. This is an action based on an obligation created by law.

Q: Why is it necessary that in order for this action to prosper, the beneficiary should not be in
possession of the property?
C: Because if the beneficiary is in possession, it is not adverse and the action should be an
action for quieting of title which is imprescriptible.

Q: How about if it is a constructive trust, how many years?

C: 10 years from the date of the registration of the deed of conveyance which operates as a
constructive notice to the whole world.

Q: What is an implied trust?

A: Implied trusts are those which 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.

Q: What is a resulting trust?

A: 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

Q: How about a constructive trust?

A: 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.

Q: May an implied trust be converted into an express trust?

A: Yes. It may be converted into express trust by the recognition by the implied trustee to their
right in the property inherited.

Q: Explain Article 1448.

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.

A: In this case, there are two different persons involved. One is the person who has possession
of the property bought and the other person is the one who has paid the price. In this case, the
person who paid the price is the beneficiary because it is somehow stated that he paid the price
to give the possession thereof, to have the legal title thereof, to the person in a possession as a
trustee so that the trustee may hold the trust and the benefit of the trust will go to the person
who paid the price.

Q: So the legal title of the property is under whose name?

A: The possessor. But in a case when the person who has possession of the property is the child
of a person paying the price of the said property,, the law says that there will be no trust. But
instead what is contemplated is a donation or a gift by the person who paid the price to the in
possession of the property who is his child.

Q: What kind of implied trust is Article 1448?

C: It is an implied resulting trust because in here there is an intention to create a trust but it is
not put into writing. So take note ha that this is otherwise known as a purchase money
resulting trust.

The following are the requisites for a purchase money resulting trust:
 1. Actual payment of money, property, or services, or an equivalent constituting
valuable consideration; and
2. Such consideration must be furnished by the alleged beneficiary of the resulting trust.

In one case, SC ruled that there is no implied trust created when the purchase is made in
valuation of the law.
Q: Explain Article 1449.
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.

C: Take note here that the done is just like a dummy.

Q: Article 1450.
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.

Q: What kind of implied trust is Article 1450?

A: Constructive trust.

Q: Explain Article 1451.

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 t of the true
owner.

Q: What kind of implied trust is Article 1451?

A: It is a resulting trust.

Q: Explain Article 1452.

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 benefi t of all, a trust is created by force
of law in favor of theothers in proportion to the interest of each.

A: It is also a resulting trust.

C: Take note that the requisites for Article 1452 to apply:
1. Two or more persons agree to purchase a property; and
2. They consent that one should take the title in his name for the benefit of everyone.

Take note also under Article 1452 that here, the purchasers are co-owners of the property
in the absence of any specific agreement to the contrary, their shares are presumed to be
equal pursuant to Article 485 of the Civil Code.
Another ruling of the SC, co-owners are trustees for the shares of the other co-owners.

Q: Explain Article 1453.

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: This is a case of an implied resulting trust because of the intention of the grantee to whom
or transfer the property to the grantor or to another person.

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.

A: it is a resulting trust maam.

C: Okay. It is akin to a sale with a right to repurchase.

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.

A: It is a constructive trust.

Q: Who are the persons covered by the provision?

A: An agent is also covered.

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.

C: Requisites:
1. The property is acquired through mistake, fraud or abuse of confidence (based on
jurisprudence); and
2. The mistake is committed by a third person.
ART. 1457. An implied trust may be proved by oral evidence.

C: Take note, even if the property involved is immovable. How about if it is express trust? If it
is an express trust and it involves immovable, it cannot be proved by parol evidence. If it
involves only movable properties, then it can be proved by parol evidence.