Trusts 1

BUSINESS ORGANIZATION
1ST SEMESTER SY 2017-2018

LAW ON TRUSTS
(Based on the Book of Villanueva)
Book Summary: Den 1

Case Digests: Lilybeth
LAW ON TRUSTS
TRUSTS
EXPRESS TRUSTS
DEFINITION AND NATURE OF EXPRESS

TRUSTS
Art. 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.
CASE
Book Summary: Den 2

LAW ON TRUSTS
GUY VS CA (2007)
**TRUSTOR RESPONDENT SISTERS AS OWNERS;
**TRUSTEE GILBERT/LINCOLN CONTINTENTAL
FACTS:
This involves a family feud of the Guys, with

respect to the ownership and control of 20,160
shares of stock of Northern Islands Co., Inc.,
which is a family-owned corporation organized
by spouses Francisco and Simny Guy. Thereafter,
Lincoln Continental was incorporated as a
holding company of the 50% shares of stock of
Northern Islands in trust for their 3 daughters,
respondents Geraldine, Gladys, and Grace.
Problem is, sometime thereafter, spouses Guy

found that their son Gilbert (petitioner) has been
disposing of the assets of their corporations
without authority. So, in order to protect the
assets of Northern Islands, the 20,160 shares
covered by the 2 Stock Certificates were then
registered in the names of respondents-sisters.
Because of this, Lincoln Continental (for

petitioner) filed a Complaint for Annulment of
the Transfer of Shares of Stock against
respondents, alleging that Lincoln Continental
owns the 20,150 shares of stock; and that
respondents, in order to oust Gilbert from the
management of Northern Islands, falsely
transferred the said shares of stock in
respondents-sisters names.
After a series of proceedings, the RTC DISMISSED

the compliant; that Gilbert was only entrusted
to hold the disputed shares of stock in his name
for the benefit of the other family members; and
that it was only when Gilbert started to dispose
of the assets of the familys corporations without
their knowledge that respondents-sisters caused
the registration of the shares in their respective
names. CA AFFTIRMED. Hence, the petition.
PETITIONER GILBERTS CONTENTION: That

Gilbert (and/or Lincoln Continental) holds legal
title to the shares
RESPONDENTS-SISTERS CONTENTION: That

Gilbert (and/or Lincoln Continental) merely holds
Book Summary: Den 3

LAW ON TRUSTS
176650. The Resolutions of the Court of Appeals (Eighth Division), dated
the shares in trust for the respondents benefit.
October 28, 2004 and November 4, 2004, as well as the Decision dated
ISSUE: WON Gilbert (and/or Lincoln Continental) October 10, 2005 of the Court of Appeals (Seventh Division) in CA-G.R. SP
was a mere trustee. (YES, TRUSTEE) No. 87104 are AFFIRMED. We likewise AFFIRM IN TOTO the Decision of
the Court of Appeals (Special Second Division), dated November 27, 2006 in
HELD: Gilbert (and/or Lincoln Continental) was a
CA-G.R. CV No. 85937. Costs against petitioners.
mere trustee of the shares owned by the
respondents-sisters.
It was established before the trial court,

Art. 1441. Trusts are either express or
affirmed by the Court of Appeals, that Lincoln implied. Express trusts are created by the
Continental held the disputed shares of stock of intention of the trustor or of the parties.
Northern Islands merely in trust for the Guy Implied trusts come into being by
sisters. operation of law.
Article 1440 of the Civil Code provides that:
ART. 1440. A person who establishes a trust is called the TRUSTOR - The person who
trustor; one in whom confidence is reposed as regards establishes the trust
property for the benefit of another person is known as the (grantor/settlor/founder)
trustee; and the person for whose benefit the trust has been
created is referred to as the beneficiary.
TRUSTEE - The person in whom

In the early case of Gayondato v. Treasurer of the Philippine Islands,[23] this
confidence is reposed as regards the
Court defines trust, in its technical sense, as a right of property, real or
property placed in trust; who assumes
personal, held by one party for the benefit of another. Differently stated, a
certain duties relating to the res or the
trust is a fiduciary relationship with respect to property, subjecting the
trust property with respect to the person
person holding the same to the obligation of dealing with the property for
for whose benefit the trust is created.
the benefit of another person.
Both Lincoln Continental and Gilbert claim that

BENEFICIARY - The person for whose
the latter holds legal title to the shares in
benefit the trust has been created
question. (LACKS MERIT)
(cestui que trust)
a. Record shows that there is no evidence
of a legal title being held by Lincoln
Continental and Gilbert to the shares. TRUST definition (Tolentino): The legal
b. Rather, the evidence on record clearly relationship between one person having
indicates that the stock certificates an equitable ownership in property and
representing the contested shares are another person owning the legal title to
in respondents possession. such property, the equitable ownership of
the former entitling him the performance
c. Significantly, there is no proof of
of certain duties and exercise of certain
fraudulent transfer of shares to
powers by the latter.
respondents-sisters. As aptly held by
the Court of Appeals, fraud is never
presumed but must be established by
EXPRESS TRUST - A legal relationship
clear and convincing evidence. Gilbert
based primarily on the parties relationship to
failed to discharge this burden.
the property that constitutes the corpus or the
THUS: the respondent sisters own the shares of trust estate, whereby a person, called the
stocks, Gilbert being their mere trustee. trustor, conveys the naked or legal title to a
property to another person, called the trustee,
WHEREFORE, we DISMISS the petitions in G.R. Nos. 165849, 170185,
who takes title thereto under a fiduciary
170186 and 176650; and DENY the petitions in G.R. Nos. 171066 and obligation to administer, manage abd
dispose of the property for the benefit of
Book Summary: Den 4
LAW ON TRUSTS
another person, called beneficiary, to whom Art. 1446. Acceptance by the beneficiary
therefore beneficial or equitable title pertains. is necessary. Nevertheless, if the trust
imposes no onerous condition upon the
beneficiary, his acceptance is presumed,
CONSTRUCTIVE EXPRESS TRUST if there is no proof to the contrary.
TRUST
AN EXPRESS TRUST IS:

Does not generate a A beneficiary and a
-Essentially contractual in character can
fiduciary relation trustee are linked by
only be constituted through the contractual
confidential or
intention on the part of the trustor to dispose
fiduciary relations
of his property by dividing its full ownership
between the trustee and the beneficiary, and
requires generally the full acceptance of the
The duty is merely to Trutee has active naked title and fiduciary obligations on the
surrender the duties of part of the trustee, and the concomitant
property management obligations that go with it.
Arises by operation Arises as a result of a MORALES v. CA: It arises as a result of a

of law manifestation of minifestation of intention to create the
intention to create relationship.
the relationship.
-Express trusts are created by the intention

ESSENTIAL CHARACTERISTICS OF AN of the trustor or the parties.
EXPRESS TRUST:
-No particular words are required for the
creation of an express trust, it being sufficient
that a trust is clearly intended.
A. A relationship
ESSENTIAL ELEMENTS OF AN
B. Fiduciary in character
EXPRESS TRUST AS A CONTRACTUAL
C. Relationship with respect to property, RELATIONSHIP:
not one involving merely personal duties
D. Involves the existence of equitable

A. Nominate and principal
duties imposed upon the holder of the title
to the property to deal with it for the benefit B. Unilateral and primarily onerous as to
of another trustee
E. It arises as a result of a manifestation of C. Primarily gratuitous
intention to create the relationship
D. Real
E. Preparatory and primarily gratuitous as

EXPRESS TRUSTS ARE ESSENTIALLY to beneficiary
CONTRACTUAL IN CHARACTER
F. Fiduciary
Art. 1445. No trust shall fail because the
trustee appointed declines the
designation, unless the contrary should
ESSENTIAL ELEMENTS OF AN
appear in the instrument constituting the
EXPRESS TRUST:
trust.
Book Summary: Den 5

LAW ON TRUSTS
declaration of terms is essential, and these

must be stated with reasonable certainty in
A. Trustee - who holds the trust property order that the trustee may administer, and
and subject to equitable duties to deal with that the court, if called upon so to do, may
it for anothers benefit enforce, the trust.
B. Beneficiary - to whom the trutee owed
equitable duties to deal with the trust
property for his GOYANKO v. UCPB
C. Res - which is the trust property which Issue: W/N the Bank had the duties and
the trustee manages for the sake or the obligations of a trustee under a contract of
interest of the beneficiary, which can be trust.
created in anything that the law recognizes
to be property. Held: No express trust existed by the
arrangement.
Under these standards, we hold that no

NOTE: The enumeration of the essential express trust was created. First, while an
elements of every express trust indicates ascertainable trust res and sufficiently
that every trust relationship is truly a legal certain beneficiaries may exist, a
relationship built on property rights, and competent trustor and trustee do
without the res or the corpus, there is really not. Second, UCPB, as trustee of the
no obligation upon the trustee who cannot ACCOUNT, was never under any equitable
be expected to manage the property for the duty to deal with or given any power of
benefit of the beneficiary, simply because administration over it. On the contrary, it
he has no control over property that has not was PALII that undertook the duty to hold
been transferred to his name. the title to the ACCOUNT for the benefit of
the HEIRS. Third, PALII, as the trustor, did
not have the right to the beneficial
RIZAL SURETY & INSURANCE CO. v. enjoyment of the ACCOUNT. Finally, the
CA the SC gave a rundown on the terms by which UCPB is to administer the
essential components for an express trust ACCOUNT was not shown with reasonable
to be recognized, thus: certainty. While we agree with the petitioner
that a trusts beneficiaries need not be
Basically, these elements include a particularly identified for a trust to exist, the
competent trustor and trustee, an intention to create an express trust must
ascertainable trust res, and sufficiently first be firmly established, along with the
certain beneficiaries. Stilted formalities are other elements laid above; absent these,
unnecessary, but nevertheless each of the no express trust exists.
above elements is required to be
established, and, if any one of them is
missing, it is fatal to the trusts EXPRESS TRUSTS ESTABLISH
(sic). Furthermore, there must be a present CONTRACTUAL RELATIONSHIPS BUILT
and complete disposition of the trust AROUND PROPERTY RELATION
property, notwithstanding that the
enjoyment in the beneficiary will take place Morales v. CA: One of the essential
in the future. It is essential, too, that the characteristics of trusts is that it is a
purpose be an active one to prevent trust relationship with respect to property, not
from being executed into a legal estate or one involving merely personal duties.
interest, and one that is not in contravention
of some prohibition of statute or rule of Mindanao Development Authority
public policy. There must also be some Case: Furthermore, there must be a
power of administration other than a mere present and complete disposition of the
duty to perform a contract although the trust property, notwithstanding that the
contract is for a third-party beneficiary. A enjoyment in the beneficiary will take place
Book Summary: Den 6

LAW ON TRUSTS
in the future. stipulation pour autrui. Although the proper

identification of the beneficiary constitutes an
It is essential to the creation of an express essential element of a valid trust, as it
trust that the settlor presently and determines the nature and extent of the
unequivocally make a disposition of fiduciary duties and obligations of the trustee,
property and make himself the trustee of formal acceptance of the benefits by the
the property for the benefit of another. beneficiary does not generally render the
While Ang Bansing had agreed in the deed trust void. The provisions of the law
of sale that he will work for the titling of "the mandating acceptance by the beneficiary,
entire area of my land under my own whether express or implied, or presumed,
expenses," it is not clear therefrom whether are meant to cover the principle of law that
said statement refers to the 30-hectare nobody can be compelled to accept the gift
parcel of land or to that portion left to him or charity of another person without his
after the sale. A failure on the part of the consent.
settlor definitely to describe the subject- NOMINATE AND PRINCIPAL, YET
matter of the supposed trust or the GOVERNED BY EQUITY PRINCIPLES
beneficiaries or object thereof is strong
evidence that he intended no trust. A. Nominate and Principal when a legal
relationship is created between the parties
Caezo v. Rojas: The following are the that embodies the essence of a trust, then in
essential elements of an express trust spite of the intention or nomenclature used
The presence of the following elements by the contracting parties, it would still be
must be proved: (1) a trustor or settlor who characterized by the law, and governed by
executes the instrument creating the trust; the Law on Trusts.
(2) a trustee, who is the person expressly B. Governed by Equity Principles Many
designated to carry out the trust; (3) of the obligations and duties of the trustee
the trust res, consisting of duly identified prevail on the basis of equity and not only
and definite real properties; and (4) upon the contractual stipulations of the
the cestui que trust, or beneficiaries whose parties.
identity must be clear.[28] Accordingly, it
was incumbent upon petitioner to prove the UNILATERAL AND GRATUITOUS
existence of the trust relationship. And
A. Unilateral since only the trustee
petitioner sadly failed to discharge that
burden. assumes obligations to carry on the trust for
the benefit of the beneficiary.
B. Gratuitous supported by the

NOTE: In Caezo, aside from reiterating that consideration of liberality the bebeficiarys
among the essential elements of an express acceptance is presumed if the trust imposes
trust if the trust res, consisting of duly no onerous condition upon the beneficiary,
identified and definite real property, it merely unless there is proof that he has not accepted
requires that the beneficiaries whose the benefits of the trust arrangement.
identity must be clear, and not that there
-The trust relation imposes no obligation or
must be prior acceptance by the beneficiary
burden upon the beneficiary.
of the trust benefits for the contractual trust
relationship between the trustor and the EXPRESS TRUST AS A PREPARATORY
trustee can come into existence. CONTRACT
This would indicate that the nexus of the Express trust is a preparatory contract
contractual meeting of the minds in an because it is not constituted for its own sake
express trust is that between the trustor and in that the trust relationship is essentially a
the trustee, and the acceptance of the medium established by the trustor to allow
benefits by the beneficiary under the trust full authority and discretion on the part of the
arrangement would constitute normally a trustee to enter into various juridical acts on
Book Summary: Den 7

LAW ON TRUSTS
the corpus to earn income or achieve other A trustee cannot invoke the statute of
goals given for the benefit of the beneficiary. limitations to bar the action and defeat the
right of the cestui que trustent.
Q: What happens when the designated
beneficiary expressly refuses to accept A trust such as that which was created
the benefits of the trust arrangement, and between the plaintiff and defendants
yet the naked or legal title to the corpus predecessor-in-interest is sacred and
has already been transferred to the inviolable. The Courts have therefore
trustee? Does the express trust therefor shielded fiduciary relations against every
fail? manner of chicancery or detestable design
cloaked by legal technecalities. The Torrens
A: The essential characteristic of express
system was never calculated to foment
trust being a preparatory contract would
betrayal in the performance of the trust.
mean that with the purpose of the trust no
longer availing, since the designated In view of the fiduciary nature of the legal
beneficiary has refused the trust relationship, relation that exists between the trustee and
the trust ceases to have an objective. But the cestui que trust, the statute of limitations
since the naked or legal title remains with the or prescription and the principle of laches
trustee, his obligations are to comply with the cannot be invoked by the trustee with respect
instructions of the trustor, and to dispose of to the right of action of the latter.
the trust properties in accordance with the
instructions of the trustor, which may include RULES OF ENFORCEABILITY OF
the designation of a new beneficiary. EXPRESS TRUSTS
TRUST CONSTITUTES FIDUCIARY Art. 1443. No express trust concerning an

DUTIES ON THE TRUSTEE immovable or any interest therein may be
proved by parol evidence.
Express trust creates a fiduciary obligation in
the trustee by virtue of his having assumed
naked or legal title to the properties
Art. 1444. No particular words are
constituting the corpus, under express
required for the creation of an express
provisions to use, control, administer and
trust, it being sufficient that a trust is
manage them for the benefit of the trustee.
clearly intended.
An express trust constitute the trustee as a
fiduciary for the benefit of the beneficiary,
since both by contractual stipulations and by
the fact that the trustee accepts title to the CASES
properties for the benefit of the beneficiary,
Art. 1443. No express trust concerning an
constitute necessarily the duties of diligence
immovable or any interest therein may be
and fidelity.
proved by parol evidence.
An express trust is a fiduciary relationship
with respect to property which 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.
ACQUISITIVE PRESCRIPTION ON THE

CORPUS UNAVAILING TO THE TRUSTEE
One of the consequences of the fiduciary

relationship existing in a trust relationship is
the inability of the trustee to invoke the
statute of limitations or acquisitive
prescription against the beneficiary.
Book Summary: Den 8

LAW ON TRUSTS
DELA CRUZ VS CA (1990)
**TRUSTOR MDLC Y GUTTIEREZ as ownerclaimant of cadastral

lot
**TRUSTEE MDLC Y GUEVARRA for administration
**BENEFICIARY PETITIONER-HEIRS OF MDLC Y GUTTIEREZ

as heirs of trustor
FACTS:
This involves the conflicting claims over a

1,980 sq.m. portion of Lot 1488.
Petitioner-heirs claim that the owner thereof

was their deceased mother Maria de la Cruz
y Guttierez (not the deceaseds niece, Maria
de la Cruz y Guevarra).
a. This is based on MDLC y Guttierez

occupation in the lot in the concept
of an owner from 1921 until her
death in 1951.
b. She declared the lot for tax purposes
in her name.
c. Although later, she entrusted the
administration of said lot to her
niece MDLC y Guevarra.
The problem arises when in MDLC y

Guttierez Answer (as claimant) in the
cadastral proceedings, the space provided to
be filled up with the personal circumstances
of the claimant, what appears therein is the
name Maria de la Cruz married to Calixto
Dimalanta (which refers to MDLC y
Guevarra, and not Guttierez). Accordingly,
the trial court adjudicated the disputed lot in
favor of Maria de la Cruz, married to
Calixto Dimalanta (i.e. MDLC y Guevarra).
Upon learning this on July 1, 1974 from

MDLC y Guevarra who told the same to
petitioners before her death, 3 months after
the discovery of the registration, and 2
years after MDLC y Guevarras death,
petitioner-heirs filed on October 1, 1974 a
Complaint for Reconveyance.
Book Summary: Den 9

LAW ON TRUSTS
PETITIONER-HEIRS OF Y GUTTIEREZS
CONTENTION:
Respondents argued that said document is a
a. The claimant of Lot 1488 in the Cadastral portion of a tax declaration, and not the
case was in fact MDLC y Guttierez, and written instrument constituting an
not MDLC y Guevarra, who by not using express trust required under ART. 1443,
her maternal surname Guevarra, NCC. (LACKS MERIT)
succeeded in registering Lot 1488 in her
name; and
b. MDLC y Guevarra merely held the The ff. are the principles under the Law on
property in trust for petitioner-heirs. Trusts:
(considering it as an EXPRESS TRUST)
a. It is not necessary that the
document expressly state and
RESPONDENT-HEIRS OF Y GUEVARRAS provide for the express trust, for it
CONTENTION: may even be created orally, no
particular words are required for its
a. That the disputed land is their exclusive creation (Article 1444, Civil Code).
property b. An express trust is created by the
b. That petitioners action has direct and positive acts of the
prescribed. (on the premise that it was parties, by some writing or deed
an IMPLIED TRUST) or will or by words evidencing an
intention to create a trust.
c. No particular words are required
RTC ruled in favor of petitioners. BUT, CA for the creation of an express trust, it
REVERSED on the ground of prescription on being sufficient that a trust is
the premise that the action is based on clearly intended.
implied or constructive trust. d. That Article 1443 of the Civil Code
which states "No express trusts
concerning an immovable or any
interest therein may be proved by
ISSUE:
parol evidence," refers merely to
A. Whether it is an express or an enforceability, not validity of a
implied trust. (EXPRESS TRUST) contract between the parties. Be it
B. WON the action for reconveyance noted Thus, Article 1443 of the Civil
has prescribed. (NOT Code may be said to be an extension
PRESCRIBED) of the Statute of Frauds.
e. Otherwise stated, for purposes of
validity between the parties, an
express trust concerning an
HELD: The action for reconveyance is based
immovable does not have to be in
on express trust, which has not prescribed.
writing.
A. IT IS BASED ON EXPRESS
THUS: Petitioners action for reconveyance
TRUST.
is based on express trust on an immovable,
which does not require it to be in writing for
purposes of its validity. Whatever lack or
Petitioners presented in evidence the defect which the prepared document,
prepared document where MDLC y granting authority to MDLC y Guevarra to
Guttierez affixed her thumbmark and administer the property, may have had will
consented and entrusted to her niece not affect the validity of the express trust
MDLC y Guevarra the mere administration already established.
the lot in question.
Book Summary: Den 10

LAW ON TRUSTS
state a cause of action as there was no

allegation therein that Irene, as
beneficiary of the purported trust, has
B. ACTION HAS NOT PRESCRIBED. accepted the trust created in her favor.
Petitioner's action, being one based on RTC ruled in Irenes favor.

express trust, has not yet prescribed. The
action to compel the trustee to convey the
property registered in his name for the But CA REVERSED in favor of respondents,
benefit of the cestui for trust does not wherein it proceed to pass on the factual
prescribe. If at all, it is only when the issue of the existence and enforceability of
trustee repudiates the trust that the the asserted trust
period of prescription may run.
PETITIONER IRENES CONTENTION:

PREMISES CONSIDERED, the June 17, 1986 decision of the
Intermediate Appellate Court is hereby REVERSED and the That the CA erred in ruling on the merits of
November 17, 1983 decision of the trial court is hereby the trust issue even without looking into any
REINSTATED, except as to the latter court's finding that this case evidence of facts to establish the same.
deals with an implied trust.
MARCOS-ARANETA VS CA (2008) ISSUE:
FACTS: a. WON an action for reconveyance is an

action in personam for purposes of
This involves the 65% stockholdings of venue. (YES, IN PERSONAM)
FEMII and UEC, both of which were b. WON the CA can rule on the merits of the
organized by deceased Roberto Benedicto trust issue even without first establishing
along with his business associates (the certain facts based on evidence. (NO)
Benedicto group, respondents).
HELD:
There was a contract of arrangement
whereby Benedicto (as trustor), placed in his A. The action for reconveyance is an action
name and in the name of his associates, the in personam regardless of the fact that
Benedicto Group (as trustees), the shares of real properties are involved. It should be
stocks of FEMII and UEC with the obligation noted that the cause of action here seeks
to hold those shares and their fruits in trust to recognize the trust agreement and not
and for the benefit of Irene (as beneficiary) to on the ownership of subject properties;
the extent of 65% of such shares. hence, it is a personal action for
purposes of venue.
The conflict arose when Irene demanded the B. The CA cannot immediately rule on the
reconveyance of said 65% stockholdings, to merits of the trust issue without evidence
which the Benedicto Group refused. This being presented to establish the same.
prompted Irene to file the complaint for Since the matter of trust is evidentiary in
conveyance of shares of stock against the nature, it is best determined by the trial
Benedicto Group. court, and not by the CA. Any
pronouncement on the issue that is
based on mere speculation and
conjecture is void.
RESPONDENT BENEDICTO GROUPS
CONTENTION: That the complaint failed to

LAW ON TRUSTS
Art. 1444. No particular words are

required for the creation of an express
The CA cannot validly delve into the issue of trust, it being sufficient that a trust is
trust which, under the premises, cannot be clearly intended.
judiciously resolved without first establishing
certain facts based on evidence. Thus, CA
cannot virtually resolve petitioner Irenes
case for reconveyance on its substantive
merits even before evidence on the matter
could be adduced.
To stress, the nature of the trust allegedly

constituted in Irene's favor and its
enforceability, being evidentiary in nature,
are best determined by the trial court. The
original complaints and the amended
complaint certainly do not even clearly
indicate whether the asserted trust is implied
or express. To be sure, an express trust
differs from the implied variety in terms of the
manner of proving its existence.[31] Surely,
the onus of factually determining whether
the trust allegedly established in favor of
Irene, if one was indeed established, was
implied or express properly pertains, at
the first instance, to the trial court and not
to the appellate court in a special civil action
for certiorari, as here. In the absence of
evidence to prove or disprove the
constitution and necessarily the existence of
the trust agreement between Irene, on one
hand, and the Benedicto Group, on the other,
the appellate court cannot intelligently pass
upon the issue of trust. A pronouncement on
said issue of trust rooted on speculation and
conjecture, if properly challenged, must be
struck down. So it must be here.
WHEREFORE, the instant petition is hereby DISMISSED. The
Decision and Resolution dated October 17, 2001 and June 20, 2002,
respectively, of the CA in CA-G.R. SP No. 64246, insofar as they
nullified the assailed orders of the RTC, Branch 17 in Batac, Ilocos
Norte in Civil Case Nos. 3341-17 and 3342-17 on the ground of lack
of jurisdiction due to improper venue, are hereby AFFIRMED. The
Orders dated October 9, 2000, December 18, 2000, and March 15,
2001 of the RTC in Civil Case Nos. 3341-17 and 3342-17 are
accordingly ANNULLED and SET ASIDE and said civil cases are
DISMISSED.
CASES

LAW ON TRUSTS
LABANON VS LABANON (2007)

++TRUSTOR: CONSTANCIO as the cultivator and possessor of the
land
++ TRUSTEE: MAXIMO in whose name the title of the land is

registered
FACTS:
This involves the conflicting claims of the

surviving heirs of deceased brothers
Constancio and Maximo Labanon, with
respect to a public agricultural land cultivated
by Constancio but registered under
Maximos name.
Apparently, before the outbreak of WWII,

Constancio settled upon and cultivated a
public agricultural land in Kidapawan,
Cotabato. But because of his limited
educational attainment, Constancio had
difficulty filing for a public land
application over said lot. So, he asked his
brother Maximo, who was better
educated, to file the application. Maximo
assented and, eventually, the homestead
application was approved and an OCT No.
P-14320 was issued in favor of Maximo.
Consequently, Maximo executed two

documents:
a. Assignment of Rights and

Ownership, for purposes of
safeguarding the ownership and interest
of his brother Constancio; and
b. Sworn Statement, where he
reiterated his desire that his elder brother
Constancio, his heirs and assigns shall
own the eastern portion of the lot.
Following the death of the brothers, the ff.

events took place among their heirs:
a. Constancios heirs executed an

Extrajudicial Settlement of Estate
with Simultaneous Sale over the
subject lot in favor of Alberto Makilang,
husband of Visitacion, one of
Constancios children. TD No. 11593
was issued in Albertos favor.
b. However, Maximos heirs caused the
Cancellation from the records of TD
No. 11593.
c. Because of that, Constancios heirs

LAW ON TRUSTS
demanded for the owners copy of the respondents are not precluded from recovering the eastern portion of
certificate of title to fully effectuate the OCT No. P-14320. The action for Recovery of Ownership before the
ownership of Alberto. RTC is indeed the appropriate remedy.
d. But Maximos heirs refused to give the

said copy and continued to refuse to A. TRUST AGREEMENT EXISTS.
honor the trust agreement entered into Trust is the legal relationship between one
by the deceased brothers. person having an equitable ownership in
e. This prompted Constancios heirs to file property and another person owning the
a Complaint for Specific legal title to such property, the equitable
Performance, Recovery of ownership of the former entitling him to the
Ownership, Attorneys Fees and performance of certain duties and the
Damages with Writ of Preliminary exercise of certain powers by the latter. This
Injunction and Prayer for TRO against may be classified into two: implied trust and
Maximos heirs. express trust. Classification is significant in determining the
However, RTC DISMISSED the prescriptive period.
complaint in favor of Maximos heirs.
f. On appeal, the CA REVERSED and An express trust is created by the direct
recognized the lawful possession and and positive acts of the parties, by some
ownership of Constancios heirs over the writing or deed or by words evidencing an
subject lot. Hence, the petition. intention to create a trust; the use of the word
trust is not required or essential to its
PETITIONERS MAXIMOS HEIRS constitution, it being sufficient that a trust is
CONTENTION: clearly intended.
a. That the OCT registered in Maximos Article 1444 of the New Civil Code on
name is indefeasible and conclusive. express trust provides that "[n]o particular
b. That the Trust Agreement between words are required for the creation of an
Constancio and Maximo had express trust, it being sufficient that a trust is
prescribed. clearly intended."
In this case, an express trust exists between

RESPONDENTS CONSTANCIOS HEIRS brothers Constancio (trustor) and Maximo
CONTENTION: (trustee), and this is manifested by the
express acts of Constancio, when he
a. That the Trust Agreement exists and executed the ff.:
has not prescribed.
a. Assignment of Rights and
ISSUE: Ownership, for purposes of
safeguarding the ownership and
***FIRST ISSUE: WON OCT IS INDEFEASIBLE AND
interest of his brother Constancio; and
CONCLUSIVE. (IT IS INDEFEASIBLE BUT NOT CONCLUSIVE,
b. Sworn Statement, where he
ACTION FOR RECOVERY OF OWNERSHIP MAY BE AVAILED OF)
reiterated his desire that his elder
Regarding the Trust Agreement: brother Constancio, his heirs and
assigns shall own the eastern portion
a. WON a trust agreement exists. of the lot.
(YES, TA EXISTS)
b. If so, WON it has prescribed. (NOT In both documents, Maximo Labanon
PRESCRIBED) recognized Constancio Labanon's
ownership and possession over the
HELD: A Trust Agreement exists and it may eastern portion of the property covered by
still be enforced since it has not yet OCT No. P-14320, even as he recognized
prescribed. himself as the applicant for the
***FIRST ISSUE ON INDEFEASIBILITY: The principle of
Homestead Patent over the land. Thus,
indefeasiblity does not totally deprive a party of any remedy to recover
Maximo Labanon maintained the title over
the property fraudulently registered in the name of another. Hence,
the property while acknowledging the

LAW ON TRUSTS
true ownership of Constancio Labanon agreement was not impugned during the
over the eastern portion of the land. The former's lifetime and the recognition of his
existence of an express trust cannot be brother's rights over the eastern portion of
doubted nor disputed. the lot was further affirmed and confirmed in
This legal relationship can be distinguished from other relationships
the subsequent April 25, 1962 Sworn
Statement.
of a fiduciary character, such as deposit, guardianship, and agency,
in that the trustee has legal title to the property.[11] In the case at Petitioners as heirs of Maximo cannot
bench, this is exactly the relationship established between the parties. disarrow the commitment made by their
father with respect to the subject property
B. IT HAS NOT PRESCRIBED. since they were merely subrogated to the
RULES ON PRESCRIPTION OF EXPRESS rights and obligations of their
TRUSTS: predecessor-in-interest.
WHEREFORE, the petition is DENIED. The May 8, 2003 CA Decision
a. Unrepudiated written express
and October 13, 2003 Resolution in CA-G.R. CV No. 65617 are
trusts are imprescriptible.
AFFIRMED with the modifications that the Kidapawan City, Cotabato
b. Express trusts prescribe 10 years
RTC, Branch 17 is directed to have OCT No. P-14320 segregated
from the repudiation of the trust
and subdivided by the Land Management Bureau into two (2) lots
by the trustee.
based on the terms of the February 11, 1955 Assignment of Rights
In the case at bar, there is no repudiation of and Ownership executed by Maximo Labanon and Constancio
the express trust between the brothers. Labanon; and after approval of the subdivision plan, to order the
Hence, it is imprescriptible. Register of Deeds of Kidapawan City, Cotabato to cancel OCT No. P-
14320 and issue one title each to petitioners and respondents based
a. Maximo Labanon never on the said subdivision plan. Costs against petitioners.
repudiated the express trust
instituted between him and GRIMM VS PARSONS (2006)
Constancio Labanon.
b. And after Maximo Labanon's ++TRUSTOR: GRIMM as original owner and transferor of the club
death, the trust could no longer be share MC No. 590
renounced; thus, respondents' right

++TRUSTEE: PARSONS as transferee of the club share
to enforce the trust agreement can
no longer be restricted nor FACTS:
prejudiced by prescription.
This involves the stock certificate of MGCC
(Manila Golf & Country Club) covered by MC
It must be noted that the Assignment of No. 1088 for 100 units, which was originally
Rights and Ownership and Maximo MC No. 590.
Labanon's Sworn Statement were
executed after the Homestead Patent was Antecedents show that Edward Miller Grimm
applied for and eventually granted with the and Charles Parsons (together with Conrado
issuance of Homestead Patent No. 67512 on Simon) formed in 1952 a partnership named
June 6, 1942. Evidently, it was the intent of G-P and Company.
Maximo Labanon to hold the title over the
land in his name while recognizing
Constancio Labanon's equitable In 1964, Sept. 7, Grimm transferred his
ownership and actual possession of the Club share covered by MC No. 590 for 100
eastern portion of the land covered by OCT units in trust to Parsons. Consequently,
No. P-14320. MC No. 590 was cancelled and MC No.1088
was issued in the name of Parsons.
In addition, petitioners can no longer Records show that Grimms intention of transferring the
question the validity of the positive same temporarily in trust was to accommodate a certain
declaration of Maximo Labanon in the Daikichi Yoshida.
Assignment of Rights and Ownership in favor
of the late Constancio Labanon, as the Eventually, Grimm and Parsons died, but the
LAW ON TRUSTS
law, either through implication of an intention to create a trust as a
partnership G-P and Company continued by
virtue of the amended articles of partnership matter of law or through the imposition of the trust irrespective of,
executed by Parsons heirs. and even contrary to any such intention.
Thereafter, Parsons heirs: Patrick and Judging from their documented acts
Jose were reminded of the trust immediately before and subsequent to the
arrangement between their late father and actual transfer on September 7, 1964 of MC
Grimm. In response, they denied the No. 590, Parsons, as transferee, and
existence of the trust over the Club share Grimm, as transferor, indubitably
and refused to return the same. This was the contemplated a trust arrangement.
root of the legal dispute.
The ff. circumstances show a trust
As for the Estate of Grimm, it was prompted agreement exists:
to file a suit for recovery of MC No. 1088
with damages against the Estate of Parsons, a. Owing to the letter exchanges between
Patrick Parsons, and MGCC. the Club, in particular its Honorary
Secretary E. C. Von Kauffman, and
In his Answer, Patrick Parsons averred that Parsons, the reason Grimm
his father was a mere trustee, not of transferred his MC No. 590 to Parsons
Grimm, but of G-P & Co., the true owner was because of the latter's wish to
thereof. accommodate one Daikichi Yoshida.
The conclusion easily deductible from
RTC favored the Estate of Grimm, finding the foregoing exchanges is that, given
that the temporary transfer of Grimms existing Club restrictions, the
original share (MC No. 590 whence MC No. simplest way to accommodate and
1088 descended) to Parsons created a trust qualify Yoshida for Club membership
relationship between the two. was for Grimm to transfer his 100-unit
CA REVERSED, favored Parsons, finding share to Parsons who will then assign
that no trust exists between Parsons-and- the playing rights of that share to
Grimm, but only between Parsons-and-G-P Yoshida, as the rules are that only
& Co. members who holds (sic) 200 units may
assign 100 units to an individual.
b. The certificate transfer from Grimm to
Parsons was temporary, there being no
ISSUE: WON the transfer to Parsons of MC
evidence whatsoever that the transfer
No. 590, as replaced by MC No. 1088,
was for value. Such transfer was
partook of the nature of a trust transaction.
doubtless meant only to accommodate
(YES, TRUST EXISTS)
Yoshida whose stay in the country was
obviously temporary. Even a witness for
the (respondents) intervenor and the
HELD: There is a trust transaction when Parsons, Celso Jamias, Chief
Grimm transferred MC No. 590 to Parsons. Accountant of G-P and Company,
confirmed that the transfer of the share
to Parsons was temporary. Since the
Trust is the legal relationship between one having an equitable transfer of Grimm's share to Parsons
ownership in property and another person owning the legal title was temporary, a trust was created
to such property, the equitable ownership of the former entitling him with Parsons as the trustee, and
to the performance of certain duties and the exercise of certain Grimm, the beneficial owner of the
powers by the latter.[26] Trust relations between parties may be share. The duties of trustees have
express, as when the trust is created by the intention of the been said, in general terms, to be: "to
trustor.[27] An express trust is created by the direct and positive protect and preserve the trust
acts of the parties, by some writing or deed or by words evidencing property, and to see to it that it is
an intention to create a trust; the use of the word trust is not required employed solely for the benefit of the
or essential to its constitution, it being sufficient that a trust is clearly cestui que trust." xxx Parsons as a
intended.[28] Implied trust comes into existence by operation of mere trustee, it is not within his rights

LAW ON TRUSTS
to transfer the share to G-P and said 1/3 portion of the lot to PACENCIA
Company. upon approval of the application in
c. The Letter of Trust dated September 1, Maximas name.
1964 showed that, in respondents' own 3. 1953 After approval of the application
words, it "provides the answer to the in Maximas name , Paciencia
question of who the real owner of MC possessed the property and later sold
#1088 is." In the Letter he purportedly 3,000sq.m. thereof to DALMACIO
signed, Parsons declared holding MC Secuya by means of a private
No. 374 and MC No. 1088 as "NOMINEE document which was lost.
IN TRUST for and in behalf of G-P AND 4. 1976 Such sale was confirmed by
COMPANY ... or its nominee." RAMON Secuya, the only heir of
d. And lest it be overlooked, Parsons had Pacencia, per notarized Confirmation
previously acknowledged Grimm to of Sale of Undivided Shares.
be the owner of MC No. 1088, after his 5. When Dalmacio die single, his brothers,
earlier repeated declarations that the sisters, nephews, and nieces (all
transfer of the replaced MC No. 580 petitioners) continued possessing and
was temporary. Parsons was thus in cultivating the land.
contextually in estoppel to deny, thru the 6. Problem is, GERARDA SELMA
Letter of Trust aforementioned, (respondent) filed a complaint against
hypothetically assuming its authenticity, petitioners, asserting ownership over the
Grimm's ownership of the replacement subject property which she allegedly
certificate. bought from a CESARIA Caballero
(wife of Silvestre Aro, one of the
Summing up, the Court finds the evidence registered owners of the mother lot) as
adduced and admitted by the trial court more evidenced by a notarized Deed of Sale.
than adequately supporting a conclusion that 7. RTC favored respondent. CA
MC No. 1088 was issued to and held by AFFIRMED.
Parsons as the trustee thereof of Grimm
or his estate. The fact that respondent G-P PETITIONERS SECUYA-HEIRS
& Co. may have paid, starting 1992, as CONTENTION:
evidence discloses, the membership fees
due on MC No. 1088 does not make Grimm - They asserted better right over the
less of a beneficial owner. Such payment, property (portion of the mother lot) as
needless to stress, is not a mode of acquiring evidence by the Agreement of
ownership. Partition and the Confirmation of
Sale in favor of their predecessor
WHEREFORE, the herein assailed decision of the Court of Appeals
Dalmacio Secuya.
is REVERSED and SET ASIDE, and the Decision of the Regional
Trial Court of Makati City in Civil Case No. 92-2452 is REINSTATED.
RESPONDENT SELMAS CONTENTION:

SECUYA VS DE SELMA (2000)
- She asserted ownership based on
++TRUSTOR: PACIENCIA as transferee by virtue of the supposed
the notarized Deed of Sale
Partition Agreement
executed with Cesaria Caballero,
++TRUSTEE: MAXIMA as transferor and original owner, who held wife of one of the registered owners
the property pending approval of her application for sale certificate. of the mother lot.
FACTS:
1. This involves the subject portion of Lot ISSUE: WON petitioners (Secuya heirs) can
5679 (the mother lot) registered in the claim better right over the subject property on
name of MAXIMA Caballero. the basis of the Agreement of Partition.
2. 1938 Notably, in an Agreement of (NO)
Partition between Maxima and
Pacienca Sabellona, Maxima shall give

LAW ON TRUSTS
A.
HELD; The petitioners cannot claim better AGREEMENT NOT OF
right over the subject property on the basis of PARTITION, BUT OF EXPRESS
the Agreement of Partition: TRUST.
Trust is the right to the beneficial enjoyment of property, the legal
A. The agreement is not one of partition, but
title to which is vested in another. It is a fiduciary relationship that
of an express trust, where Maxima acted
as trustee-transferor being the original obliges the trustee to deal with the property for the benefit of the
owner who held the property pending beneficiary.[13] Trust relations between parties may either be express
approval of the application and Pacencia or implied. An express trust is created by the intention of the trustor
(predecessor of the Secuyas) acted as or of the parties. An implied trust comes into being by operation of
trustor-transferee; and law.
B. There was repudiation of the express

trust by Maximos heirs from the This Agreement is not one of partition,
moment the sale certificate was issued in because there was no property to partition
Maximas name but there was failure to and the parties were not co-owners.
deliver or transfer the property to Rather, it is in the nature of a trust
Paciencia and instead sold them to third agreement, particularly an express trust,
parties; thus, prescription runs from the since Maxima bound herself to give 1/3 of
time of such repudiation; Lot 5629 to Paciencia upon approval of
C. There was inaction for 31 years by the formers application which is clear
petitioner Secuyas to timely assert their from the terms of the Agreement
proprietary rights after said repudiation, (considering that Article 1444, NCC provides
notwithstanding the subsequent several that no particular words are required for the
sales transactions covered by several creation of an express trust, it being sufficient
TCTs of the subject lot. It was only in that a trust is clearly intended).
1985 when they filed an action for
quieting of title, which is of course now
barred by prescription; and As a result of the Agreement, Maxima
D. Even granting that express trust Caballero held the portion specified
subsists, petitioners have not proven that therein as belonging to Paciencia
they were rightful successors-in-interest Sabellona when the application was
of Paciencia, because: eventually approved and a sale certificate
a. The very document evidencing was issued in her name. She should have
the sale (private document) transferred the same to the latter, but she
was never presented in court never did so during her lifetime. Instead,
since it had been lost; her heirs sold the entire Lot No. 5679 to
b. The testimonies and deed Silvestre Aro in 1955, who sold the same
presented has doubtful to Gerarda Selma. (MAXIMA acted as
probative value; TRUSTOR being the original owner of the lot
c. There was no proof that they and who hold it pending approval of the
exercised their rights and duties application; while PACIENCIA acted as mere
as owners of the same; TRUSTEE, but no effective transfer was
d. They were remiss in their duty to made during Maximas lifetime).
pay land taxes;
e. Their claim cannot debunk the
supporting documents B. THERE WAS REPUDIATION OF
presented by respondent Selma, EXPRESS TRUST.
considering that she was a
purchaser in good faith, having
relied upon Cesaria Caballeros
While no time limit is imposed for the
assurance that petitioners were
enforcement of rights under express
merely tenants of the lot.
trusts,[17] prescription may, however, bar a
COURTS DISCUSSION: beneficiary's action for recovery, if a
repudiation of the trust is proven by clear
LAW ON TRUSTS
and convincing evidence and made had been the subject of several sales
known to the beneficiary. transactions and covered by several
transfer certificates of title. Hence, they
are already barred by prescription.
There was a repudiation of the express D. EVEN GRANTING EXPRESS
trust: TRUST SUBSISTS, PETITIONERS
a. When the heirs of Maxima FAILED TO PROVE THAT THEY
Caballero (trustor) failed to deliver WERE RIGHTFUL SUCCESSORS-
or transfer the property to IN-INTEREST OF PACIENCIA.
Paciencia Sabellona, and instead The ff. circumstances reveal that petitioners
sold the same to a third person not failed to establish that they were truly the
privy to the Agreement. rightful successors-in-interest of Paciencia:
b. There was no notation of the
Agreement between her and a. The very document evidencing the
Paciencia in the memorandum of sale (private document) was never
encumbrances of the TCT. presented in court since it had been
c. The Agreement was not registered; lost;
thus, it could not bind third persons. b. The testimonies and deed presented
d. No allegation that Silvestre Aro, has doubtful probative value;
who purchased the property from c. There was no proof that they exercised
Maximas heirs, knew of it. their rights and duties as owners of the
same;
Consequently, the subsequent sales d. They were remiss in their duty to pay
transactions involving the land in dispute land taxes;
and the titles covering it must be upheld, e. Their claim cannot debunk the
in the absence of proof that the said supporting documents presented by
transactions were fraudulent and respondent Selma, considering that
irregular. she was a purchaser in good faith,
C. ACTION PRESCRIBES BECAUSE having relied upon Cesaria Caballeros
OF INACTION. assurance that petitioners were merely
tenants of the lot.
The enforcement of rights under an express f. Moreover, the lot had been the subject
trust, which is clearly repudiated, shall be of several sales transactions, without
barred by prescription for 10 years from the any protestation or complaint from the
time of such repudiation. petitioners.
In this case, repudiation was made upon the WHEREFORE, the Petition is hereby DENIED and the assailed
issuance of the sale certificate in favor of the Decision AFFIRMED. Costs against petitioners.
Caballeros in 1954. Even then, 31 years

passed (1954-1985) but petitioners did not
do anything to enforce their property rights. EXPRESS TRUST IS ESSENTIALLY A
From 1954 when the sale certificate was REAL CONTRACT, NOT MERELY
issued until 1985 when petitioners filed CONSENSUAL
their Complaint. Paciencia and her
successors-in-interest did not do xxx
anything to enforce their proprietary
rights over the disputed property or to EXPRESS TRUST MUST NEVERTHELESS
consolidate their ownership over the same. BE CLEARLY SHOWN TO HAVE BEEN
In fact, they did not even register the said INTENDED
Agreement with the Registry of Property Art. 1444. No particular words are required
or pay the requisite land taxes. While for the creation of an express trust, it being
petitioners had been doing nothing, the sufficient that a trust is clearly intended.
disputed property, as part of Lot No. 5679,

LAW ON TRUSTS
Express trust will never be presumed to exist; beneficiary (essentially a personal obligation
that the party who claims any right under a to do).
trust arrangement must prove the existence
thereof, thus: A trust must be proven by If the so-called contract of trustisvalid at this
cllear, satisfactory, and convincing evidence. point (I.e., upon mere meeting of the minds),
It cannot rest on vague and uncertain then in order to be a real contract, it must
evidence or on loose, equivocal or indefinite mean that it creates a binding obligation. But
declarations. As already noted, an express the only enforceable obligation so far created
trust cannot be proven by parol evidence, by meeting of the minds is that of the trustor
to deliver legal title to the trust property to the
No particular words are required for the trustee and beneficial title to the beneficiary,
creation of an express trust, it being sufficient which does not fall within the essence of a
that a trust is clearly intended. It is possible trust which is supposed to create an
to create a trust without using the word trust obligation on the part of the trustee to
or trustee. Conversely, the mere fact that manage the trust property for the benefit of
tthese words are used does not necessarily the beneficiary. The trustor of a true trust
indicate an intention to create a trust. does not assume any obligation; he is the
creator of the trust.
As a rule, however, the burden of proving the
existence of a trust is on the party asserting EXPRESS TRUSTS OVER IMMOVABLES
its existence, and such proof must be clear MUST BE IN WRITING
and satisfactorily show the existence of the
trust and its elements. Art. 1443. No express trust concerning an
immovable or any interest therein may be
ESSENCE OF THE RELATIONSHIP proved by parol evidence
BETWEEN TRUSTOR AND TRUSTEE
PRIOR TO THE CONVEYANCE OF THE An express trust concerning movables or any
RES interests therein may be proved by parol
evidence; which means that the mere
A private Deed of Trust setting-up the trust meeting of minds over the creation of an
relationship, constituting the trustee, express trust over movables creates a valid
providing for his and responsibilities and and enforceable contract of trust once the
designating the beneficiary would not give movable is dellivered to the trustee.
rise to a true trust relationship even with the
formal acceptance of the designated trustee, VILLIANUEVAS SUBMISSION: 1443 is a
unless and until the property that would lame provision.
constitute the corpus of the trust relationship 1st: The express trust concerning an
is actually conveyed to the trust relationship, immovable or an interest therein be in writing
with the Deed constituting constructive is merely for purposes of proof, not for the
delivery. validity of the trust agreement xxx
Q: What is the status of private Deed of Since express trust over an immovable
Trust, duly executed by the trustor and presents a real contract where ownership
the trustee and accepted in the same has in fact been conveyed to the purported
instrument by the beneficiary, before title trustee, then it is exempted from the
to the designated trust property is coverage of the SOF, and parol evidence
actually placed in the name of the trustee? may now be adduced to prove the existence
A: Before delivery of title over the trust estate of such express trust.
to the trustee, there is no valid contract of 2nd: Considering that express trust over
trust, but only a nominate contract of do ut immovables are necessarily covered by the
facia, that is that the trustor has trust property characteristic of being a real contract,
to the trustee (essentially a real obligation to ineleuctably no express trust over
give), and the trustee has bound himself to immovables can be constituted by mere
accept delivery and to manage the properties meeting of the minds. To even be validly
to be delivered for the interests of the constituted , an express trust over
LAW ON TRUSTS
immovables requires the fourth requisite of

delivery to have taken place that nakedor
The usufructuary
legal title over the properties constituting the
enjoys the property
corpus have been transferred in the name of
of another (the naked
the designated trustee. Under current
title owner), and may
legislation, no title to registered land or any
be constituted on the
interest therein may be registered with the
whole or a part od
Register of deeds and title transferred in the
the fruits of the thing.
name of a trustee, unless the deeds are in a
Consequently, it is
public instrument, and all taxes thereto have
the usufructuary who
been paid and certified to have been paid.
directly possess and
3rd: It is now well-settled in Philippine enjoys the fruits and
jurisprudence that when an express trust benefits of the
over immovable is not in writing, it can still be subject property.
proven by clear and convincing parol
evidence to be a resulting trust, under the
aegis of Articlr 1457 that provides that An It is the usufructuary
implied trust may be prived by oral evidence. who is obliged to
preserve the form
FOR ACADEMIC DISCUSSION
and substance of the
PURPOSES:
property held in
If Article 1443 is to have any legal usufruct, and to take
significance at all, its provisions must be Under a trust care of it with the
understood to apply to an agreement to relationship, it is the diligence of a
create an express trust over an immovable or trustee, the naked- GFOAF for the
any interest therein (which is the innominate title holder, who benefit of the naked
contract do ut facia referred to earlier). in actively manages title holder at the end
other words, an oral agreement between the and adminsters the of the usufruct.
trustor and the trustee to constitute a trust trust property, and
over an immovable or any interest therein the beneficiary
which is not followed-up with an actual mainly is a passive
conveyance of the covered res is not receiver of the fruits
enforceable by parol evidence. and benefits arising
from the trust
property
DISTINGUISHING EXPRESS TRUSTS
FROM SIMILAR ARRANGEMENTS
B. Compared with lease.
TRUST LEASE
1. SPLITTING OF FULL DOMINION INTO
NAKED/LEGAL TITLE AND
BENEFICIAL/EQUITABLE TITLE
Full beneficial The lessor retains
When there is a split of the full dominion of a ownership over the not only naked title to
particular property between legal title in one trust is for the the property leased
person and beneficial ownership in another, account of the and many other
does not necessarily create a trust beneficiary, and beneficial titles, and
relationship. what is assumed by what is contracted
the trustee is the out to the lessee is
A. Compared with usufruct.
obligation to manage the narrow
TRUST USUFRUCT the trust property as enjoyment of the
the legal title holder possession and use

LAW ON TRUSTS
for the benefit and of the leased 2. ON BEING BOUND TO FIDUCIARY

interest of the property, and only for DUTIES AND OBLIGATIONS
beneficiary. Unlike in a limited period
A. Compared with agency.
a lease arrangement provided in the lease
where the benefits agreement. NOTE: Both trust and agency are fiduciary
enjoyed by lessee in nature.
are only for a limited
contracted period, TRUST AGENCY
those of the
beneficiary in a trust
arrangement are Why office of trustee
usually of a is fiduciary in
permanent nature. character? He holds
the title to the
property for the
C. Compared with sale. benefit of another
person which is the
TRUST SALE beneficiary.
Express trusts The seller obliges Trust relationship is
therefore belong to himself to transfer essentially borne out
those genres of ownership and of property
contracts which deliver possession to relationship whereby Fiduciary
involve the the buyer. full dominion over a relationship is strictly
disposition of title to property is split based on a personal
property. Buyer takes full
between naked title level: that he has
ownership of the
in the name of the been comissioned by
An express trust is subject matter for his
trustee where he the principal to
not perfected by sole benefit.
would manage and represent him and
mere consent, but
administer the his interest in
requires the actual
property for the dealings with third
delivery of the naked
benefit of another parties.
or legal title to the
person inwhom
trustee for the
beneficial ownership
relationship to legally
is given.
arise.
The trustee in an
express trust only
takes naked or legal
title and for the Trustee not bound by
benefit of another any duty of
person, the obedience, for
beneficiary. indeed he has been
given legal title to the
Constituted merely Entered into for its trust property An agent therefore
as a preparatory own end, the precisely to use his is bound to act in
arrangement, a acquiring of title of discretion and best accordance with the
medium, by which the subject matter by judgment in pursuing instructions of the
the trustee is the buyer. transactions under principal, and in the
expected to pursue the trust name of the
other juridical acts for arrangement. Unless principal;
the benefit of the otherwise stipulated, consequently, the
beneficiary he is not expected to agent is not a party to
be bound by the the contracts entered

LAW ON TRUSTS
instructions of the into by him in the -ETs therefore are the creatures of what we
beneficiary, who name of the term in Contract Law as the freedom to
often is in an infant, principal, and has no contract or the doctrine of autonomy, and
or who has no legal rights, or assumes the right of every owner to deal with
capacity, like an no obligations, under proprietary arrangements over property
insane person. Since such contracts. owned by him in a manner that serves his
the trustee is obliged purpose, provided it is not contrary tolaws,
to manage the trust morals or public policy.
property for the
Ex: Involving 3 parties: Full owner of
benefit of the
beneficiary, he is property (trustor), conveys the naked title to
bound to exercise one person, say a banking institution
due diligence in his (trustee), under the terms of the trust
dealings in relation to agreement for the benefit of another person
the trust. (beneficiary), say the retarded child of the
trustor.
Involving 2 parties: Trustor to convey the

A trustee cannot be naked title of the trust property to a trustee
generally be stripped (banking institution), with trustor himself to
of the legal title become the beneficiary of the trust.
unless it is shown
that he is unfit for the 2. INTER VIVOS TRUSTS - Are expressed
position of trustee, or trusts pursued in the form of donations, and
he has breached his which therefore become solemn contracts
trust obligations. which must comply with the solemnities
mandated by the Law on Donations.
In the absence of any
Ex: Involving 2 parties: The trustor would
reservation to the
power to revoke, an formally convey the beneficial, title to the
Essenially revocable
property another person, leaving himself
express trust at the will of the
merely as trustee for the benefit of the
(referred to as principal, being
voluntary trust), is beneficiary, such as when a father donates a
based primarily on
irrevocable without property to his son by constituting himself as
the willingness of the
the consent of the the trustee during the infancy of the son. In
principal to be
beneficiary. this case, there are esentially 2 parties, the
represented by
trustor-turned-trustee and the beneficiary.
another person.
Such an arrangement essentially covers a
gift by the trustor to the beneficiary.
KINDS OF EXPRESS TRUSTS DE LEON v. MOLO-PECKSON: Although

the donees-daughter subsequently tried to
1. Contractual Trusts revoke the Mutual Agreement, the Court held
that an express trust had been duly
2. Intervivos Trusts
constituted, since the instrument, wherein
3. Testamentary Trusts the appellants (donees-daughters) agreed to
sell to the appellee the lots at a nominal price
4. Eleemosynary or Charitable Trusts of P1.00 per lot, represents a recognition of
a pre-existing trust or a declaration of an
5. Publicly-Regulated Trusts
express truwt, based on the provision in the
donors will to the effect that the titles to the
land should be conveyed to appellants with
1. CONTRACTUAL TRUSTS - Express trust the duty to hold them in trust for the appellee.
relationship is the product of contractual
intentions. 3. TESTAMENTARY TRUSTS - When an
express trust is created under the terms of

LAW ON TRUSTS
the last will and testament of the testator, it is ajudication to the husband (Jose) a sole heir.
a testamentary trust and is governed by the Consequently, the Court ruled that On the
Law on Succession. Unless the will conforms premise that the disputed properties were the
with the solemnities and conditions set bylaw, paraphernal properties of Juliana which
it will be void together with the testamentary should have been included in the
trust sought to be created therein. Fideicomiso, their registration in the name of
Jose would be erroneous and Joses
PALAD v. PROVINCE OF QUEZON: Shows possession would be that of a trustee in an
where an express trust was embodied in a implied trust (which from) the factual milieu
holographic will containing testamentary of this case is provided in Article 1456, CC.
dispositions, through which the testator
created a trust for the establishment and 5. PUBLICLY-REGULATED TRUSTS -
maintenance of a highschool to be financed Those where the State provides the vehicle
with the income of certain specified by which institutions are allowed to
properties for the benefit of the inhabitants of administer large funds for the benefit of the
a town, naming a trustee whomsoever may public. Among such funds created under the
be governor of the province. law would be the pension and benefits funds
administered by the GSIS, the SSS and the
PEREZv. ARANETA: The provisions of the Pag-Ibig Fund. Tax laws provide for
will of the decedent explicitly authorizing the incentives to the setting-up of retirement
trustee constituted therein to sell the property funds for EEs. All such funds are really being
held in trust and to acquire, with the priceeds administered for the beneficiaries thereof
of the sale, other properties, leaves no room through the medium of trust.
for doubt about the intent of the testatrix to
keep, as part ofnthe trust estate, said CAPACITIES, RIGHTS, DUTIES AND
proceeds of sale, and not turn the same over OBLIGATIONS OF THE PARTIES TO THE
to the beneficiary as net rental income. EXPRESS TRUST (Check the Table)
DE LEON v. MOLO-PECSON: The xxx

execution by the appellants of the agreement
to sell the parcels of land at a nominal price HOW EXPRESS TRUST EXTINGUISHED
of P1.00 per lot, represent a recognition of a OR TERMINATED
pre-existing trust or a declaration of an 1. Destruction of the Corpus
express trust, based on the provisions in the
donors will to the effect that the titles to the 2. Revocation by the Trustor
parcels of land covered should be conveyed
to appellants with the duty to hold them 3. Achievement of the Objective, or
in trust for the appellee. Happening of the Condition, Provided for
in the Trust Instrument
4. ELEEMOSYNARY OF CHARITABLE
TRUSTS 4. Death or Legal Incapacity of theTrustee
LOPEZ v. CA: In the notarial will, the testator 5. Confusion or Merger of Legal Title and
expressed that she wished to constitute a Beneficial Title inthe Same Person
trust fund for her paraphernal properties, 6. Breach of Trust
denominated as Fideicomiso de Juliana
Lopez Manzano (Fideicomiso), to be
administered by her husband 2/3 of the
1. DESTRUCTION OF THE CORPUS -
income from rentals over these properties
were to answer for the education of When the entire trust estate is lost or
deserving but needy honor students, while destroyed, the trust is extinguished since the
1/3 was to shoulder the expenses and fees underlying proprietary basis no longer exists
of the administrator. to warrant any leal relationship between the
trustee and the beneficiary.
However, the properties designated for the
2. REVOCATION OF THE TRUSTOR - The
Fideicomiso were excluded and instead
trustor may simply invoke the revocation or
LAW ON TRUSTS
termination clause found in the deed of trust 5. CONFUSION OR MERGER OF LEGAL

thereby revoking the trust and conveying TITLE AND BENEFICIAL TITLE IN THE
notice thereof to the trustee. Unless there is SAME PERSON - When the trustee of an
reserved power to revoke, the general rule is existing trust becomes the beneficiary
that an express trust is irrevocable. thereof, or vice versa, the trust relation is ipso
jure extinguished, for it is difficult to see how
DE LEON v. MOLO-PECSON: The rule is a person can owe fiduciary duties to himself.
that in the absence of any reservation of the
power to revoke a voluntary trust is 6. BREACH OF TRUST - When a trustee
irrevocable without the consent of the breaches his duty of loyalty, it would
beneficiary It cannot be revoked by the constitute legal basis by which to terminate
creator alone, nor by the trustee. the trust.
3. ACHIEVEMENT OF THE OBJECTIVE, MARTINEZ v. GRANO: When a person

OR HAPPENING OF THE CONDITION, administering the property in the character of
PROVIDED FOR IN THE TRUST a trustee inconsistently assumes to be
INSTRUMENT - When the trust instrument holding it in his own right, this operates as a
provides the objective or the condition upon renunciation of the trust and the persons
which the trust shall be extinguished, say interested as beneficiaries in the property are
when the trust instrument provides that full entitled to maintain an action to declare their
ownership in the trust properties shall be right and remove the unfaithful trustee.
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 espressly
stipulated in the trust instrument, the death,
civil interdiction, insanity or insolvency of the
trustee does not necessarily terminate the
trust.
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.
CENEZO v. ROJAS: 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. xxx Hence, after Crispulos
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 device to correct the
situation.


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1ST SEMESTER SY 2017-2018

Book Summary: Den 1

DEFINITION AND NATURE OF EXPRESS

Art. 1440. A person who establishes a

Book Summary: Den 2

**TRUSTEE GILBERT/LINCOLN CONTINTENTAL

This involves a family feud of the Guys, with

Problem is, sometime thereafter, spouses Guy

Because of this, Lincoln Continental (for

After a series of proceedings, the RTC DISMISSED

PETITIONER GILBERTS CONTENTION: That

RESPONDENTS-SISTERS CONTENTION: That

Book Summary: Den 3

It was established before the trial court,

created is referred to as the beneficiary.

TRUSTEE - The person in whom

Both Lincoln Continental and Gilbert claim that

AN EXPRESS TRUST IS:

Arises by operation Arises as a result of a MORALES v. CA: It arises as a result of a

-Express trusts are created by the intention

D. Involves the existence of equitable

E. Preparatory and primarily gratuitous as

Book Summary: Den 5

declaration of terms is essential, and these

Under these standards, we hold that no

Book Summary: Den 6

in the future. stipulation pour autrui. Although the proper

B. Gratuitous supported by the

Book Summary: Den 7

TRUST CONSTITUTES FIDUCIARY Art. 1443. No express trust concerning an

ACQUISITIVE PRESCRIPTION ON THE

One of the consequences of the fiduciary

Book Summary: Den 8

DELA CRUZ VS CA (1990)

**TRUSTOR MDLC Y GUTTIEREZ as ownerclaimant of cadastral

**TRUSTEE MDLC Y GUEVARRA for administration

**BENEFICIARY PETITIONER-HEIRS OF MDLC Y GUTTIEREZ

This involves the conflicting claims over a

Petitioner-heirs claim that the owner thereof

a. This is based on MDLC y Guttierez

The problem arises when in MDLC y

Upon learning this on July 1, 1974 from

Book Summary: Den 9

Book Summary: Den 10

state a cause of action as there was no

Petitioner's action, being one based on RTC ruled in Irenes favor.

PETITIONER IRENES CONTENTION:

MARCOS-ARANETA VS CA (2008) ISSUE:

FACTS: a. WON an action for reconveyance is an

Book Summary: Den 11

Art. 1444. No particular words are

To stress, the nature of the trust allegedly

WHEREFORE, the instant petition is hereby DISMISSED. The

Book Summary: Den 12

LABANON VS LABANON (2007)

++ TRUSTEE: MAXIMO in whose name the title of the land is

This involves the conflicting claims of the

Apparently, before the outbreak of WWII,

Consequently, Maximo executed two

a. Assignment of Rights and

Following the death of the brothers, the ff.

a. Constancios heirs executed an