Los Recursos Educativos Abiertos (REA)

1. Essence and Definition of Express Trusts

―Our Civil Code defines an express trust as one created by the intention of the trustor or of the

parties, and an implied trust as one that comes into being by operation of law. [Article 1441] Express trusts are those created by the direct and positive acts of the parties, by some writing or deed or will or by words evidencing an intention to create a trust. . . .We find it clear that the plaintiffs alleged an express trust over an immovable, especially since it is alleged that the trustor expressly told the defendants of his intention to establish the trust. Such a situation definitely falls under Article 1443 of the Civil Code.‖ Cuaycong v. Cuaycong , 21 SCRA 1192 (1967).

―Express trusts are those which are created by the direct and positive acts of the parties, by some writing or deed, or will, or by words either expressly or impliedly evincing an intention to create a trust.‖

(89 C.J.S. 722).Ramos v. Ramos, 61 SCRA 284, 298 (1974).²⁰

InTamayo v. Callejo, the Court recognized that a trust may have a constructive or implied nature in the beginning, but the registered owner's subsequent express acknowledgement in a public document of a previous sale of the property to another party, had the effect of imparting to the aforementioned trust the nature of an express trust. Torbela v. Spouses Rosario, G.R. No. 140528, 07 December  2011.

a. Essentially Contractual in Nature; Need No Particular Wordings (Art. 1444)

For, technical or particular forms of words or phrases are not essential to the manifestation of intention to create a trust or to the establishment thereof. Nor would the use of some such words as

―trust‖ or ―trustee‖ essential to the constitution of a trust as we have held inLorenzo v. Posadas, 64

Phil. 453, 368. Conversely, the mere fact that the word ―trust‖ or ―trustee‖ was employed would not

necessarily prove an intention to create a trust. What is important is whether the trustor manifested an intention to create the kind of relationship which in law is known as a trust. It is important that the

trustor should know that the relationship ―which intents to create is called a trust, and whether or not

he knows the precise characteristics of the relationship which is called a trust. Here, that trust is effective as against defendants and in favor of the beneficiary thereof, plaintiff Victoria Julio, who accepted it in the document itself.‖  J ulio v. Dalandan, 21 SCRA 543, 550-551 (1967).

 Although no particular words are required for the creation of an express trust, a clear intention to create a trust must be shown, and the proof of fiduciary relationship must be clear and convincing. The creation of an express trust must be manifested with reasonable certainty and cannot be inferred from loose and vague declarations or from ambiguous circumstances susceptible of other interpretations. Cañezo v. Rojas, 538 SCRA 242 (2007).²¹

In other words, the creation of an express trust must be manifested with reasonable certainty and cannot be inferred from loose and vague declarations or from ambiguous circumstances susceptible of other interpretations. No such reasonable certitude in the creation of an express trust obtains in the case at bar. In fact, a careful scrutiny of the plain and ordinary meaning of the terms used in the Minutes does not offer any indication that the parties thereto intended that Aznar, et al., become beneficiaries under an express trust and that RISCO serve as trustor. Philippine National B ank v. A znar , [G.R. No. 171805. May 30, 2011.] 649 SCRA 214 (2011)

Express trusts are created by direct and positive acts of the parties, by some writing or deed, or will, or by words either expressly or implied evincing an intention to create a trust. Under Article

1444 of the Civil Code, ―[n]o particular words are required for the creation of an express trust, it being sufficient that a trust is clearly intended.‖ The Affidavit of Epifanio is in the nature of a trust

agreement. Epifanio affirmed the lot brought in his name was co-owned by him, as one of the heirs of Jose, and his uncle Tranquilino. And by agreement, each of them has been in possession of half of the property. Their arrangement was corroborated by the subdivision plan prepared by Engr.

Bunagan and approved by Jose P. Dans, Acting Director of Lands. Heirs of Tranquilino Labiste v. Heirs of J ose Labis te, 587 SCRA 417 (2009).

b. Based on Property Relationship,Where Legal Title Is Held by One, and the Equitable or Beneficial Title Is Held by Another (65 CORPUSJURIS 212)

 A trust is a legal relationship between one person havi ng an equitable ownership of the property and another person owning 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.

―What distinguishes a trust from other relations is the separation of legal title and equitable

20Reiterated in Spouses Rosario v. Court of Appeals, 310 SCRA 464 (1999);  Cañezo v. Rojas, 538 SCRA 242 (2007); Peñalber v.

Ramos, 577 SCRA 509 (2009);DBP v. COA,DBP v. COA, 422 SCRA 459 (2004).

21Medina v. Court of Appeals, 109 SCRA 437, 445 (1981); Advent Capital and Finance Corporation v. Alcantara, G.R. No. 183050, 25 January 2012.

Formatted: Font: Not Bold

Formatted: Font: 10 pt Formatted: Font: 10 pt

Formatted: Space Before: 8 pt

ownership of the property. In a trust relation, legal title is vested in the fiduciary while equitable ownership is vested in a cestui que trust . The petitioner alleged in her complaint that the tax declaration of the land was transferred to the name of Crispulo without her consent. Had it been her intention to create a trust and make Crispulo her trustee, she would not have made an issue out of this because in a trust agreement, legal title is vested in the trustee. The trustee would necessarily have the right to transfer the tax declaration in his name and to pay the taxes on the property.

These acts would be treated as beneficial to the cestui qui trust and would not amount to an

adverse possession.‖ Cañezo v. Rojas, 538 SCRA 242, 255 (2007).

Trust, in its technical sense, is a right of property, real or personal, held by one party for the benefit of another –  it is 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. Guy v. Court of Appeals,539 SCRA 584 (2007).

c. Unilateral and Primarily Onerous (can be Gratuitous) d. Fiduciary

The juridical concept of a trust, which in a broad sense involves, arises from, or is the result of, a fiduciary relation between the trustee and the cestui que trust as regards certain property—real, personal, funds or money, or choses in action—must not be confused with an action for specific performance. Thus, when claimants to several parcels of land withdraw their claims in court relying on the assurance and promise of Yulo made in open court that he would convey the lots claimed

after the proceedings had terminated, then ―a trust or a fiduciary relation between them arose, or resulted therefrom, or was created thereby.‖ A trustee cannot invoke the statute of limita tions to bar the action and defeat the rights of the cestuis que trustent . Pacheco v. Arro, 85 Phil. 505 (1950).²²

2. Express Trust Must Be Proven

 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 vs. Peckson, 62 O.G.

994). As already noted, an express trust cannot be proven by parol evidence (Pascual vs. Menses, 20 SCRA 219 [1967]; Cuaycong vs. Cuaycong, 21 SCRA 1192[1967]).Ramos v. Ramos, 61 SCRA 284, 300-301 (1974).

 As a rule, however, 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.Morales v. Court of Appeals, 274 SCRA 282 (1997).²³

―What is crucial is the intention to create a trust. While oftentimes the intention is manifested by the

trustor in express or explicit language, such intention may be manifested by inference from what the trust has said or done, from the nature of the transaction, or from the circumstances surrounding the creation of the purported trust. However, an inference of the intention to create a trust, made from language, conduct or circumstances, must be made with reasonable certainty. It cannot rest on vague, uncertain or indefinite declarations. An inference of intention to create a trust, predicated only on

circumstances, can be made only where they admit of no other interpretation.‖ Ringor v. Ringor , 436 SCRA 484 (2004).

3. Kinds of Express Trust

a. Express Trust Involving Immovable (Art. 1443)

 A person who has held legal title to land, coupled with possession and beneficial use of the property for more than ten years, will not be declared to have been holding such title as trustee for himself and his brothers and sisters upon doubtful oral proof tending to show a recognition by such owner of the alleged rights of his brother and sisters to share in the produce of the land. [Ergo: The requirement that express trust over immovable must be in writing should be added as being governed by the Statute of Frauds.] G amboa v. G amboa, 52 Phil. 503 (1928).

―In one case [Ringor v. Ringor , 436 SCRA 484 (2004)], the Court allowed oral testimony to prove the existence of a trust, which had been partially performed. It was stressed therein that what is

important is that there should be an intention to create a trust.‖ Even when the purported trust res is

unregistered land, ―The existence of express trusts concerning real property may not be established by parol evidence. [Art. 1443]. It must be proven by some writing or deed. In this case, the only evidence to support the claim that an express trust existed between the petitioner and her father was the self-serving testimony of the petitioner. Bare allegations do not constitute evidence adequate to support a conclusion. They are not equivalent to proof under the Rules of Court.

Cañezo v. Rojas, 538 SCRA 242 (2007).

22Reiterated in Ramos v. Ramos, 61 SCRA 284 (1974);Peñalber v. Ramos, 577 SCRA 509 (2009).

23Reiterated Cañezo v. Rojas, 538 SCRA 242 (2007);Booc v. Five Star Marketing Co., Inc., 538 SCRA 42 (2008).

Formatted: English (U.S.) Formatted: English (U.S.)

 An express trust over real property cannot be constituted when nothing in writing was presented to prove it; but it may be proved as an implied trust. Ty v. Ty,553 SCRA 306 (2008).

In accordance with Article 1443, when an express trust concerns an immovable property or any interest therein, the same may not be proved by parol or oral evidence. However, when the oppositors failed to timely object when the petitioner tried to prove by parol evidence the existence

of an express trust over immovable, there is deemed to be a waiver since Article 1443 ―is in the

nature of a statute of frauds. The term statute of frauds is descriptive of statutes which require certain classes of contracts in writing. The statute does not deprive the parties of the right to contract with respect to the matters therein involved, but merely regulates the formalities of the contract necessary to render it enforceable. The effect of non-compliance is simply that no action can be proved unless the requirement is complied with. Oral evidence of the contract will be excluded upon timely objection. But if the parties to the action, during the trial, make no objection to the admissibility of the oral evidence to support the contract covered by the statute, and thereby permit such contract to be proved orally, it will be just as binding upon the parties as if it had been

reduced to writing.‖ Peñalber v. R amos, 577 SCRA 509 (2009).

b. Contractual/Intervivos Trust c. Testamentary Trust

 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 theayutaminetoof the town or if there be no ayutamiento, then the civil governor of the Province of Tayabas.Government of P.I. v. Abadilla, 46 Phil. 642 (1924).

 Although the will executed by the testator did not use the words ―trust‖ or ―trustee‖, but the

intention to create one is clear since he ordered in his will that certain of his properties be kept together undisposed during a fixed period, for a stated purpose. No particular or technical words are required to create a testamentary trust. (69 C.J., p. 711.) Hence, the probate court certainly exercised sound judgment in appointing a trustee to carry into effect the provisions of the will.

Lorenzo v. Pasadas, 64 Phil. 353 (1937).

d. Pension or Retirement Trusts e. Charitable Trusts

4. Parties to an Express Trust

 As a rule, however, 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. The presence of the following elements must be proved: (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 properties; and (4) thecestui que trust , or beneficiaries whose identity must be clear.Filipinas Port Services, Inc. v. Go., 518 SCRA 453 (2007).²⁴

a. The Trustor

 A person who establishes a trust is called the trustor. DBP v. COA, 422 SCRA459 (2004);

Peñalber v. Ramos, 577 SCRA 509 (2009).

b. The Trustee

One in whom confidence is reposed is known as the trustee. DBP v. COA, 422 SCRA459 (2004);Peñalber v. Ramos, 577 SCRA 509 (2009).

(1)Trus tee Must Have Leg al Capacity to A ccept the Trus t;

(2) Failure of Trustee to As s ume the Pos ition (Art. 1445);

(3)Oblig ations of the Trustee (Rule 98, Rules of Court);

(4) Generally, Trustee Does Not Assume Personal Liability on the Trust as to Pr operties Outs ide of the Trus t Es tate.

There is an implication by the Supreme Court that when a trustee enters into a contract that gives rise to liability, but there is no clear indication that he enters into the contract as trustee, then the trustee would be held individuallyliable on the liability arising from the contract: ―But

even if the contract had been authorized by the trust indenture, the Philippine Trust Company in its individual capacity would still be responsible for the contract as there was no express

24Cañezo v. Rojas, 538 SCRA 242 (2007).

stipulation that the trust estate and not the trustee should be held liable on the contract in question. In other words, 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 therefrom shall be chargeable to the trust estate, otherwise they are due from the trustee in his personal capacity. Tan Senguan and Co. v. P hil. Trust C o., 58 Phil. 700 (1933).

(5) Trustee Generally Entitled to Receive a Fair Compensation for His Services . Lorenzo v. Pasadas, 64 Phil. 353 (1937), citing Barney v. Saunders, 16 How., 535;

14 Law. Ed., 1047.

c. Beneficiary (Arts. 1440 and 1446)

In order that a trust may become effective there must, of course be a trustee and a cestui que trust . The existence of an equivalent designated position in the testamentary trust to act as

trustee (i.e., the Civil Governor of Tayabas) complies with the requirement of a trustee. ―In regard

to private trusts it is not always necessary the the cestui que trust should be named, or even be

in esse at the time the trust is created in his favor. Thus a devise a father in trust for accumulation for his children lawfully begotten at the time of his death has been held to be good although the father had no children at the time of the vesting of the funds in him as trustee. In charitable trusts such as the one here under discussion, the rule is still further relaxed.

G overnment v. A badilla, 46 Phil. 642, 647 (1924).

 Acceptance by beneficiary of gratuitous trust is not subject to the rules for the formalities of donations. Cri s tobal v. G omez , 50 Phil. 810 (1927)

The person for whose benefit the trust has been created is referred to as the beneficiary.

DBP v. COA, 422 SCRA459 (2004);Peñalber v. Ramos, 577 SCRA 509 (2009).

d.The Corpus or the Res

Where DBP establishes a pension trust for its officers and employees and appoints trustees for the fund whereby the trust agreement transferred legal title over the income and properties of the fund, then the principal and the income of the fund together constitute the res or subject matter of the trust. Since the trust agreement established the fund precisely so that it would eventually be sufficient to pay for the retirement benefits of DBP officers and employees, then the income and profits thereof cannot be booked by DBP as its own, and DBP cannot be directed by COA to treat such income as it own. DBP v. COA, 422 SCRA459 (2004).

5. How Express Trust Terminated a. Where the Trust Fails

Under an ordinary devise of land in trust, the trustee holds the legal title and the cestui que trust

the beneficial title and the natural heirs of the testator who are neither trustees nor cestuis que trustenthave no remaining interest in the land devised except the right to the reversion in the event the devise should fail, or the trust for other reasons terminate. Government v. Abadilla, 46 Phil. 642 (1924).

b. Upon the Death of Trustee

 Assuming that such a [trust] relation existed, it terminated upon Crispulo‘s death in 1978. A trust terminates upon the death of the trustee where the trust is personal to the trustee in the sense that the trustor intended no other person to administer it. If Crispulo was indeed appointed as trustee of the property, it cannot be said that such appointment was intended to be conveyed to the respondentor any of Crispulo‘s other heirs. Hence, after Crispulo‘s 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. Where one mistakenly retains property which rightfully belongs to another, a constructive trust is the proper remedial devise to correct the situation. Cañezo v.

Rojas, 538 SCRA 242 (2007).

c. Generally Express Trusts Not Susceptible to Prescription . . .unrepudiated written express trusts are imprescriptible. …

To apply the 10-year prescriptive period, which would bar a beneficiary's action to recover in an express trust, the repudiation of the trust must be proven by clear and convincing evidence and made known to the beneficiary. The express trust disables the trustee from acquiring for his own benefit the property committed to his management or custody, at least while he does not openly repudiate the trust, and makes such repudiation known to the beneficiary or cestui que trust. For this reason, the old Code of Civil Procedure (Act 190) declared that the rules on adverse possession do not apply to "continuing and subsisting" (i.e., unrepudiated) trusts. In an express trust, 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

Formatted: Indent: Left: 0.5"

Formatted: Indent: Left: 0.5"

aware that the trust has been repudiated. Torbela v. Spouses Rosario, G.R. No. 140528, 07 December 2011.]

When there exists an express trust, prescription and laches will run only from the time the expresstrust  is repudiated. The Court has held that for acquisitive prescription to bar the action of the beneficiary against the trustee in an express trust for the recovery of the property held in trust it must be shown that: (a) the trustee has performed unequivocal acts of repudiation amounting to an

When there exists an express trust, prescription and laches will run only from the time the expresstrust  is repudiated. The Court has held that for acquisitive prescription to bar the action of the beneficiary against the trustee in an express trust for the recovery of the property held in trust it must be shown that: (a) the trustee has performed unequivocal acts of repudiation amounting to an