Trust

Definitions:

A trust is a fiduciary relationship between a person having an equitable ownership in property and
another owning the legal title to such property.

Trust, in its technical sense, is a right of property, real or personal, held by one party for the benefit of
another. A trust is a fiduciary relationship with respect to the property, subjecting the person holding
the same to the obligation dealing with the property for the benefit of another person

Parties to a trust:

1. A person who establishes a trust is called the trustor;

2. One in whom confidence is reposed as regards property for the benefit of another person is
known as the trustee; and
3. The person for whose benefit the trust has been created is referred to as the beneficiary.

CHARACTERISTICS OF TRUST (Morales vs Court of Appeals)

1. It is a relationship
2. It is a relationship of a fiduciary character.
3. It is a relationship 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

Nature of Trust

1. Trust do not create separate juridical entities

It should be noted that there is no statutory provision or case- law which recognizes a trust relationship
as creating a separate juridical entity. Indeed, the essence of what constitute a trust is the recognition
that the trustee holds directly legal or naked title to the trust properties. Nevertheless, the naked or
legal title held by the trustee should be looked upon as being held "in his official capacity as trustee" and
cannot be deemed included in his estate to which he has full ownership.

2. Trust divorces naked title of the trustee from the rest of the trustee’s estate

In a trust, one person has an equitable ownership in the property while another person owns 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.

As far back as in Government v. Abadilla, the Court held that "it is not always necessary that the cestui
que trust should be named, or even be in esse at the time the trust is created in his favor." It is enough
that the beneficiaries are sufficiently certain or identifiable.

3. Trust is anchored on splitting or intention to split the naked title and beneficial title

The essence of trusts, whether express or implied, is that the fiduciary relationship or the enforcement
of equity principles is built upon property relations; unless, the dispute involved claims arising from
property rights, then trusts principles do not apply. In other words, there is no real trust relationship
based only on the meeting of the minds, and that the trustee does not even begin to assume fiduciary
duties towards the beneficiary, unless and until title to the res is transferred to him in either of three
ways:

(a) When only naked title is given to him (i.e., he is registered as the naked or legal title holder or
"trustee" for the benefit of an identified beneficiary), then an express trust has been constituted; or

(b) When full title has been registered in his name, but with a clear undertaking to hold it for the benefit
of another person or pursuant to a clear arrangement with another person as the beneficiary, then an
express trust at best, or resulting trust at least, has been constituted; or

(c) When full title to the property has been acquired by a person under circumstances that the law or
equity imposes upon him the obligation to convey it to another person who has a better claim to such
property, in which case a constructive trust is deemed constituted by force of law.

What distinguishes a trust from other relations is the separation of the legal title and equitable
ownership of the property. In a trust relation, legal title is vested in the fiduciary while equitable
ownership is vest in a cestui que trust.

The existence of valid title in the person of the trustee for the benefit of the cestui que trust is so
essential that in cases where the title of the purported trustee was found to be void, the Supreme Court
had refused to apply trust principles at all.

Kinds of Trust

ART. 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 1441 of the Civil Code expressly recognizes the following kinds of trust, thus:

1. Express Trust - which is created by the intention of the trustor or of the parties;

2. Implied Trust - which comes into being by operation of law.

In turn, jurisprudence has distinguished between two types of implied trusts, namely: (a) Resulting
Trusts; and (b) Constructive Trusts.

"Trust is the right to the beneficial enjoyment of property, the legal title to which is vested in another. It
is a fiduciary relationship that obliges the trustee to deal with the property for the benefit of the
beneficiary. Trust relations between parties may either be express or implied. An express trust is created
by the intention of the trustor or of the parties. An implied trust comes into being by operation of law."

On the other hand, implied trusts, particularly constructive trusts, are creatures of the law; they exist in
circumstances where the law mandates it so, and in all similar situations where justice or equity has to
be achieved. Implied trusts are essentially a product of equitable consideration.

The difference in legal effects between an express trust and an implied trust, according to Ramos, was
that the former is not susceptible to charges of prescription or laches, whereas in the latter, it is possible
that the cause of action of the cestui que trust may be extinguished by prescription or laches.

The reason for the difference in treatment is obvious. In express trusts, the delay of the beneficiary is
directly attributable to the trustee who undertakes to hold the property for the former, or who is linked
to the beneficiary by confidential or fiduciary relations. The trustee's possession is, therefore, not
adverse to the beneficiary, until and unless the latter is made aware that the trust has been repudiated.
But 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.

One other distinction between express trusts and implied trusts, is that express trusts over an
immovable property cannot be enforced by parol evidence, but must be properly supported by a written
instrument, whereas, implied trusts, regardless of the nature of the trust property, may always be
enforced even when constituted orally.

In other words, implied trusts are not within the operative cover of the Statute of Frauds, as expressed
succinctly in Article 1457: "An implied trust may be proved by oral evidence."

EXPRESS TRUST

Essential Elements of an express trust:

(1) a trustor or settlor who executes the instrument creating the trust;
(2) a trustee, who is the person expressly designated to carry out the trust;
(3) the trust res, consisting of duly identified and definite real property; and
(4) the cestui que trusts, or beneficiaries whose identity must be clear.

Enforceability of Express Trust:

Article 1444 of the New Civil Code, which applies particularly to express trusts, provides that "No
particular words are required for the creation of an express trust, it being sufficient that a trust is clearly
intended." Yet by its very definition, an express trusts constitute a real contract, that is, it is not merely
perfected by a mere meeting of minds between the trustor and trustee to constitute a trust. Indeed, no
trust relationship exists, until and unless, the property constituting the res is conveyed to the trustee.

Morales v. Court of Appeals, held that trust "is a relationship with respect to property, not one involving
merely personal duties," and "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."

The rule under Article 1444 of the New Civil Code is that "No particular words are required for the
creation of an express trust, it being sufficient that a trust is clearly intended,"48 reminds us that an
express trust will never be presumed to exist; that the party who claims are right under a trust
arrangement must prove the existence thereof, thus: "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. As already noted, an express trust cannot be proven by parol evidence."

An express trust is created by the direct and positive acts of the parties, by some writing or deed or by
words evidencing an intention to create a trust. The use of the word trust is not required or essential to
its constitution, it being sufficient that a trust is clearly intended.
Article 1443 of the New Civil Code provides that "No express trusts covering an immovable or any
interest therein may be proved by parol evidence." The clear legal implication of the language of Article
1443 is that an express trust concerning movables or any interests therein may be proved by parol
evidence; which means that the mere meeting of minds over the creation of an express trust over
movables creates a valid and enforceable contract of trust once the movable is delivered to the trustee.

Firstly, Article 1443 does not render the express trusts over immovables void when it is not effected in
writing, it merely renders the contractual relationship unenforceable. Since it is only the grantor or the
accepting beneficiary who have rights to enforce under the terms of the contractual relationship, it is
they who are unfavorably affected by the provisions of Article 1443: they cannot adduce parol evidence
in order to enforce the fiduciary duties and obligations of the trustee through court action. This means
that Article 1443 constitutes a mere species of the Statute of Frauds.

Parties to an Express Trust:

1. Trustor

Gayondato v. Treasurer of the P. I., distinguishes an express trust from an implied trust in the sense that
in an express trust, the trustor must have legal capacity to create the trust, which effectively requires
the ability to convey naked or legal title in the trust property to the trustee to be held by the latter for
the benefit of the beneficiary.

2. Trustee

It is to the trustee that naked or legal title to the trust properties is transferred. Consequently, the
trustee must also have legal capacity to accept the trust, especially when upon acceptance of the trust,
he binds himself to certain obligations.

Article 1445 of the New Civil Code provides that "No trust shall fail because the trustee appointed
declines the designation, unless the contrary should appear in the instrument constituting the trust." On
this matter, Tolentino wrote —

Want of Trustee. — The principle that equity will not allow a trust to fail for want of a trustee is clearly
established. Where a trust has once been created and the trustee dies, becomes insane or subject to
some other legal incapacity, or resigns or is removed, the trust does not fail, but a new trustee will be
appointed. Such an appointment will be made by the proper court unless by the terms of the trust other
provision is made for the appointment of a successor trustee. 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.

xxx

There are cases, however, in which it may appear that the trustor intended the trust to continue only so
long as the person designated by him as trustee should continue as such. It may be so provided by the
terms of the trust, or it may appear that the purposes of the trust cannot be carried out unless the
person named as trustee continues to act. In such a case, the trust will fail, if the trustee resigns, dies, is
removed, or otherwise ceased to be a trustee.

The principle that the law will not allow a trust to fail due non-acceptance, resignation, incapacity or
death of the designated trustee in recognized under our Rules of Court which provide for the duties of
the trustee and the manner of appointment or replacement.

Under Article 736 of the New Civil Code, "trustees cannot donate the property entrusted to them." Such
prohibition is in accordance with the fiduciary duty of loyalty of a trustee, that the holds the trust
property for the benefit of the beneficiary. He therefore cannot exercise acts of beneficence employing
the property that he holds for the benefit of another person.

Although a trustee enters upon the fulfillment of his duties by his own name, and not in the name of the
trustor or the beneficiary, nonetheless, it should be understood that the performance of the functions of
the trustee and the contracts entered into in pursuit of the trust, as performed under "official capacity"
as a trustee. Consequently, the liabilities assumed by the trustee is such capacity can only be enforced to
the extent of the trust properties. In other words, the trustee, unless he so stipulates, does not become
personally liable to his separate properties outside of the trust properties, for contracts and transactions
arising from the trust and entered into in his official capacity as trustee.

3. Beneficiary

Under Article 1446 of the New Civil Code, acceptance by the beneficiary of the express trust 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. The situation does not cover the case when the
trustor designates himself as the beneficiary.

De Leon v. Molo-Peckson,91 relying upon American jurisprudence, held that "The fact that the
beneficiaries [to a donation inter vivos] were not notified of the existence of the trust or that the latter
have not been given an opportunity to accept it is of no importance, for it is not essential to the
existence of a valid trust and to the right of the beneficiaries to enforce the same that they had
knowledge thereof at the time of its creation. Neither is it necessary that the beneficiary should consent
to the creation of the trust. In fact it has been held that in case of a voluntary trust the assent of the
beneficiary is not necessary to render it valid because as a general rule acceptance by the beneficiary is
presumed."

How Express Trust Extinguished or Terminated

1. 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 trusted and the
beneficiary.
2. 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.

In De Leon v. Molo-Peckson,» the donee-daughters had tried to revoke the Mutual Agreement they
previously executed confirming the desires of the mother who donated to them that the ten parcels of
land donated would be sold at nominal price to a designated cetui que trust.

The Court held that although "It is true, as appellants contend, that the alleged declaration of trust was
revoked, and having been revoked it cannot be accepted, but the attempted revocation did not have any
legal effect. The rule is that in the absence of any reservation of the power to revoke a voluntary trust is
irrevocable without the consent of the beneficiary... It cannot be revoked by the creator alone, nor by
the trustee.

3. Achievement of the 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.

4. Death or Legal Incapacity of the 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. Thus, Tolentino writes:

The principle that equity will no allow a trust to fail for want of a trustee is clearly established. Where a
trust has once been created and the trustee dies, becomes insane or subject to some other legal
incapacity, or resigns or is removed, the trust does not fail, but a new trustee will be appointed. Such an
appointment will be made by the property court unless by the terms of the trust other provision is made
for the appointment of a successor trustee. 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.

5. 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.

6. Breach of Trust

When a trustee breaches his duty of loyalty, it would constitute legal basis by which to terminate the
trust. In Martinez v. Granothe Court held that when a person administering the property in the
character of a trustee inconsistently assumes to be holding it in his own right, 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.

IMPLIED TRUST

1. The Two Types of Implied Trusts

There are two types of implied trusts recognized under the NeW Civil Code, namely:

(a) Resulting Trusts; and

(b) Constructive Trusts.

In Ramos v. Ramos,* the Supreme Court defined and characterized implied trusts as "those which,
without being expressed, 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 (89 C.J.S. 724)."6 Therefore, implied trusts which are "deductible
from the nature of the transactions as matters of intent," are referred to as resulting trusts; and those
which are superinduced "by operation of law as matters of equity" are constructive trusts.

Nature of Evidence Required to Prove Implied Trusts Under Article 1457 of the New Civil Code, an
implied trust, whether resulting or constructive, may be proved by oral evidence, without distinction on
whether it involves a movable or an immovable property.

Salao also held that although oral evidence may be adduced to prove an implied trust over immovables,
in order to be recognized such oral evidence must measure up to the yardstick that a trust must be
proven by clear, satisfactory and convincing evidence, and cannot rest on vague and uncertain evidence
or on loose, equivocal or indefinite declarations. The Court quoted the following authorities —

Trusts; Trust and trustee; establishment of trust by parol evidence; certainty of proof. - 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. A trust
cannot be established, contrary to the recitals of a Torrens title, upon vague and inconclusive proof."

As a rule, the burden of proving the existence of a trust is on the party asserting its existence and such
proof must be clear and satisfactorily show the existence of the trust and its elements." Booc held that
an affidavit of the fact of resulting trust against contrary affidavits presented by other witnesses, as well
as the transfer certificates of title and tax declarations to the contrary, do not support clearly the
existence of trust.

RESULTING TRUST

In Ramos v. Ramos, the Court held that '"A resulting trust is broadly defined as a trust which is raised or
created by the act or construction of law, but in its more restricted sense it is 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. Examples of resulting trusts are found in article 1448, 1449, and 1455 of the Civil Code.

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.

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. 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 resulting trust is a species of implied trust that is presumed always to have been contemplated by the
parties, the intention as to which can be found in the nature of their transaction although not expressed
in a deed or instrument of conveyance. A resulting trust is based on the equitable doctrine that it is the
more valuable consideration than the legal title that determines the equitable interests in property.

It seems therefore that when the intention of the parties bound by the trust relationship is found
expressed in a deed or instrument, it covers an express trust; whereas, when the same intention is
merely verbal or can be proved by parol evidence, it may be considered as a resulting trust.

The question has been asked whether for express trust to exist, as distinguished from resulting trust, it is
necessary that naked title is formally registered in the name of the trustee who expressly assumes
fiduciary obligations to an identified beneficiary. The implication is that a written undertaking by the title
holder of a property, especially registered land, holding the property for the benefit of another only
creates a resulting trust and not an express trust.

Burden of Proof

Since it is the law that imbues certain transactions with the characteristics of resulting trusts, the cestui
que trust need only prove the facts that would constitute the covered transaction and the legal
presumption that there exists a resulting trust would arise from the very nature of the transaction;
thereafter, the burden of proof would be on the part of the purported trustee to show that no such trust
relationship was intended.

Rule of Prescriptibility of Resulting Trust

Since a resulting trust is much akin to an express trust under the consideration that it arises from the
presumed or sometimes merely orally expressed intention of the parties, the Supreme Court has held in
Ramos v. Ramos,m that the rule of imprescriptibility of an action to recover property held in express
trust, may possible apply to a resulting trust as long as the trustee has not repudiated the trust.

Therefore, the rules on acquisitive prescription when it comes to resulting trusts, would be the same
rules pertaining to express trusts. The matter is dealt more in detail in the last chapter of this section on
Trusts.

CONTRSUCTIVE TRUST

In Diaz v. Gorricho and Aguado, and Carantes v. Court of Appealsthe Supreme Court characterized
constructive trust as one "which is imposed by law ... [and] there is neither promise nor fiduciary
relations; the so-called trustee does not recognize any trust and has no intent to hold the property for
the beneficiary."

Ramos v. Ramos, characterized constructive trust as — " . . . a trust raised by construction of law, or
arising by operation of law. In a more restricted sense and as contradistinguished from a resulting trust,
a constructive trust is 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. It
does not arise by agreement or intention, but by operation of law. If a person obtains legal title to
property by fraud or concealment, courts of equity will impress upon the title a so-called constructive
trust in favor of the defrauded party. A constructive trust is not a trust in the technical sense."

In analyzing the law on trust, it would be instructive to refer to Anglo-American jurisprudence on the
subject. Under American Law, a court of equity does not consider a constructive trustee for all purposes
as though he were in reality a trustee; although it will force him to return the ' property, it will not
impose upon him the numerous fiduciary obligations ordinarily demanded from a trustee of an express
trust. It must be borne in mind that in an express trust, the trustee has active duties of management
while in a constructive trust, the duty is merely to surrender the property.

IMPLIED TRUST PARTICULARLY CONSTITUTED BY LAW

Article 1447 of the Civil Code expressly provides that the enumeration in the subsequent articles of the
cases of implied trust does not exclude others established by the general law of trust, but that the
limitation laid down in Article 1442 shall be applicable, i.e., so long as those principles do not conflict
with the Civil Code, the Code of Commerce, the Rules of Court and special laws.

The discussions in this section would ultimately show that strictly speaking the enumerated implied
trusts are essentially resulting trusts (Articles 1448 to 1455), and that the only true constructive trusts
are those covered by Article 1456, which actually embodies the general principle for constructive trusts.

1. Purchase of Property Where Title Placed in One Person, But Price Paid by another Person
 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.

The reason why the situation described under Article 1448 is an implied trust is that unlike in an express
trust, the person who takes title to the purchased property does not expressly bound himself to hold or
administer the same for the benefit of any person. The presumption of a resulting trust arises from the
fact of a sale transaction where the evidence shows that title is placed in the name of one person, while
the purchase price was paid by the other.

The other reason why there is only an implied or resulting trust is that full title, not just naked or legal
title, is placed in the name of a person who is not referred to formally as "trustee" nor is the other
person who paid for the purchase price referred to formally as a "beneficiary."

Exemptions:

1. When title is placed in the name of a child.

2. When it is the child that supplies the purchase price.
3. When a contrary intention is proved since implied trust constitute merely disputable
presumptions.
4. When purchase price extended as a loan since there is a lack of intention on the part of the
person supplying the money to have beneficial interest in the property bought.
5. When purchase is made in violation of an existing statute.

2. Purchase of Property Where Title Is Placed in the Name of Person Who Loaned the Purchase Price

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.

Under Article 1450 of the New Civil Code, if the price of a property bought 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" an implied trust arises by operation of law in favor of the person to whom the
money is loaned or for whom it is paid. The beneficiary is expressly empowered to redeem the property
and compel a conveyance thereof to him.
The implied trust situation covered under Article 1450 of the New Civil Code is akin to an equitable
mortgage arrangement, since title to the property intended for the borrower is placed in the name of
the lender to secure the payment of the debt.

3. When Absolute Conveyance of Property Effected as a Means to Secure Performance of Obligation

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 1 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.

Under Article 1454 of the New Civil Code, if an absolute conveyance of property is made in orderto
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.

If one would wonder why the matter has to be covered by the principles of implied trusts under Article
1454 of the New Civil Code, the plausible answer is that Articles 1604 and 1605 in the Law on Sales,
expressly allows the purported seller to ask for the reformation of the deed of absolute sale to reflect its
true nature as a mortgage contract, but nowhere expressly grants the right to the seller to redeem the
property sold.

4. Two or More Persons Purchase Property Jointly, But Place Title in One of Them

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 benefit of all, a trust is created
by force of law in favor of the others in proportion to the interest of each.

Under Article 1452 of the New Civil Code, 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.

The only reason we see why the law would treat the arrangement under Article 1452 not as an express
trust is because full title, not just naked or legal title is placed in the name of the trustee, which means
that insofar as the world is concerned he appears to be the full owner, rather than as a trustee. This is
especially true when it comes to registered land where full title is placed in the name of the trustee (i.e.,
he is not registered as "trustee" in the certificate of title), and therefore, the trust arrangement can only
be "implied" from other source.

5. Property Conveyed to a Person Merely as Holder Thereof

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.
Under Article 1453 of the New Civil Code, 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.

6. Donation of Property to a Donee Who Shall Have No Beneficial Title

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.

Under Article 1449 of the New Civil Code, there is 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. In such a situation, the donor is deemed to have
become the beneficiary under an implied trust arrangement. Lopez and PNB classify the arrangement
under Article 1449 as a resulting trust; for obvious reasons, we agree with such a position.

7. Land Passes By Succession But Heir Places Title into a Trustee

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.

Under Article 1451 of the New Civil Code, when land passes by succession to any person and he causes
the legal title to be placed in the name of another, a trust is established by implication of law for the
benefit of the true owner.

Article 1451 should be read to cover the situation when the property inherited is registered in another's
name as full owner rather than as "trustee," for in the latter case that would clearly be an express trust.

8. When Trust Fund Used to Purchase Property Which Is Registered in Trustee's Name

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.

Under Article 1455 of the New Civil Code, 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 1455 of the New Civil Code is the operative provision governing the duty of loyalty of the agent to
the principal, as well as the trustee to the beneficiary. A trustee is duty-bound to handle the affairs of
the trust and to apply all the properties in the trust estate for the sole benefit of the beneficiary. In a
situation where there is a conflict between the interests of the trustee and the beneficiary, it is the duty
of the trustee to prefer that of the beneficiary. A violation of the duty of loyalty makes the trustee
personally liable to the beneficiary for the resulting damages.

9. When Property Is Acquired Through Mistake or Fraud

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.

Under Article 1456 of the New Civil Code, if property is acquired through mistake or fraud, the person
obtaining it is, by force of law, considered a trustee under an implied trust arrangement for the benefit
of the person from whom the property comes.

The Court has since then re-affirmed under the New Civil Code the principle that registration of property
by one person in his name, whether by mistake or fraud, the real owner being another person,
impresses upon the title so acquired the character of a constructive trust for the real owner, which
would justify an action for reconveyance.

The registration of a property in one's name, whether by mistake or fraud, the real owner being
another, impresses upon the title so acquired the character of a constructive trust for the real owner.
The person in whose name the land is registered holds it as a mere trustee, and the real owner is
entitled to file an action for reconveyance of the property. The Torrens system does not protect a
usurper from the true owner.

But the right of action in this constructive trust should be exercised against the trustee, who caused the
fraud, and not against an innocent purchaser for value.

RULES OF PRESCRIPTION

Express trust:

When title and possession of the property is held by a person as trustee under an express trust, and for
as long as he has not made a clear and express repudiation of the trust, then the rights of the cestui qui
trust are not subject to prescription to favor the trustee.

Exemption:

The Supreme Court recognized the principle that in an express trust, the trustee who is in adverse\
possession may claim title by prescription where it appears that:

1. the trustee has performed unequivocal acts of repudiation amounting to an ouster of the cestui
que trust;
2. such positive acts of repudiation have been made known to the cestui que trust, and
3. the evidence thereon is clear and conclusive.

Implied Trust:
The prescriptibility of an action for reconveyance based on implied or Constructive trust, is now a settled
question in this jurisdiction. It prescribes in ten (10)years