AgPart 925 - Trust
AgPart 925 - Trust
AgPart 925 - Trust
I INTRODUCTION page 2
II EXPRESS TRUSTS page 15
III IMPLIED TRUSTS page 66
I INTRODUCTION
[Updated: 06 August 2010]
I INTRODUCTION
the
Court
frequently
employed to
indicate duties,
relations,
and
responsibilities which are not strictly technical trusts (89 C.J.S.
712).
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 (Art.
1440, Civil Code). There is a fiduciary relation between the trustee
and the cestui que trust as regards certain property, real, personal,
money or choses in action. Pacheco v. Arro, 85 Phil. 505 (at p. 80).
The equity nature of a trust supports the proposition that the
intention of the trustor to create a trust for the benefit of intended
beneficiary should as much as possible be realized. Thus, Article
1444 provides that No particular words are required for the
creation of an express trust, it being sufficient that a trust is clearly
intended. An application of this doctrine (not the article) can be
found in Government v. Abadilla, 46 Phil. 642 (1924), where after
holding that the testamentary trust was very unskillfully drawn; its
language is ungrammatical and at first blush seems to somewhat
obscure, the Court nonetheless held: but on closer examination it
sufficiently reveals the purpose of the testator. And if its provisions
are not in contravention of some established rule of laws or public
policy, they must be respected and given effect. (at p. 646.)
In applying the equity nature of trusts, Abadilla held that the
intention of the trustor is the more essential consideration, and that
recognition that the trustee holds directly legal or naked title to the
trust properties. Nevertheless, the naked or legal title held by the
trustee should be looked upon as held in his official capacity as
trustee and cannot be deemed included in his estate to which he
has full ownership and by which he owes no fiduciary duties.
These principles are best exemplified in Development Bank of the
Philippines v. COA, 422 SCRA 465 (2004), where the DBP
contributed funds into a retirement plan for its officers and
employees, and constituted a board of trustees vesting it with the
control and administration of the fund. Augmentation to the
retirement fund were made through loans extended to the qualified
officers and employees, which were invested in shares of stocks and
other marketable securities, and the earnings from which were
directed to be distributed to the beneficiaries even before they have
retired.
The COA objected to the distribution of the earnings from the
investments made through the retirement fund on the ground that
is was contrary to an express provision of law which prohibits the
distribution of retirement benefits to government employees prior to
their actual retirement. COA also directed that the earnings from
the investment be included in DBPs books of account as part of its
own earnings, since the retirement and its income were actually
owned by DBP having made the contributions thereto. DBP objected
to the COA resolution on the ground the express trust created for
the benefit of qualified DBP employees under the Trust Agreement .
. . gave the Fund a separate legal personality, (at p. 467) and
therefore the earnings pertained to the employees and should be
credited as income of DBP.
While DBP v. COA characterized an employees trust as a trust
maintained by an employer to provide retirement, pension or other
benefits to its employees . . . [and ] is a separate taxable entity
established for the exclusive benefit of the employees, (at p. 473)
still the Court did not consider the such employees trust as a
separate juridical person. The Court ruled that The principal and
income of the Fund [of employees trust] would be separate and
distinct from the funds of DBP, on the ground that DBP as trustor
this does not invalidate the trust created by DBP or the concomitant
transfer of legal title to the trustees. As far back as in Government
v. Abadilla, the Court held that it is not always necessary that
the cestui que trust should be named, or even be in esse at the time
the trust is created in his favor. It is enough that the beneficiaries
are sufficiently certain or identifiable. (at pp. 476-477.)
The Court resolved in DBP v. COA, that The Agreement
indisputably transferred legal title over the income and properties of
the Fund to the Funds trustees. Thus, COAs directive to recored
the income of the Fund in DBPs books of account as the
miscellaneous income of DBP constitutes grave abuse of discretion.
The income of the Fund does not form part of the revenues or
profits of DBP, and DBP may not use such income for its own
benefit. The principal and income of the Fund together constitute
the res or subject matter of the trust. The Agreement established
the Fund precisely so that it would eventually be sufficient to pay for
the retirement benefits of DBP employees under [the law] without
additional outlay from DBP. COA itself acknowledged the authority
of DBP to set up the Fund. However, COAs subsequent directive
would divest the Fund of income, and defeat the purpose for the
Funds creation. (at p. 477.)
4. Essence of Trust Is Anchored on Splitting or Intention to
Split the Naked Title and Beneficial Title of the Res or
Trust Property
The essence of trusts, whether express or resulting, is that the
fiduciary relationship or the enforcement of equity principles is built
upon property relations; unless, the dispute involved claims arising
from property rights, then trusts principles do not apply. In other
words, there is no real trust relationship based only on the meeting
of the minds, and that the trustee does not even begin to assume
fiduciary duties towards the beneficiary, unless and until title to the
res is transferred to him in either of three ways:
(a) When only naked title is given to him (i.e., he is registered as
the naked or legal title holder or trustee for the benefit of an
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The existence of valid title in the person of the trustee for the
benefit of thecestui que trust is so essential that in cases where the
title of the purported trustee was void, the Supreme Court has
refused to apply trust principles at all. Thus, in Ferrer v. Bautista,
231 SCRA 257 (1994), where the free patent and original certificate
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of title issued in the name of the occupant of a strip of land that had
arisen by accretion was held to be void, the Court refused to apply
the principle that an action for reconveyance on an implied trust
prescribes in ten years after the issuance of the title, on the ground
that no implied trust could arise from a void title held by the
purported trustee, and hence the action to reconvey was deemed
imprescriptible.
Likewise, in Macababbad, Jr. V. Masirag, 576 SCRA 70 (2009),
where the title to the registered land was obtained through forging
the signatures of the heirs in the purported extrajudicial settlement
of estate, the Court held title by the heir who exercised fraud, was
void and the rules on implied trust to limit the period to file an
action for reconveyance to ten (10) years was deemed inapplicable.
5. Kinds of Trust
Art. 1441. Trusts are either express or implied. Express
trusts are created by the intention of the trustor or of the
parties. Implied trusts come into being by operation of law.
Article 1441 of the Civil Code expressly recognizes the following
kinds of trust, thus:
Express Trust which is created by the intention of the trustor or
of the parties;
Implied Trust which comes into being by operation of law.
In turn, jurisprudence has distinguished between two types of
implied trusts, namely: (a) Resulting Trusts; and (b)
Constructive Trusts.
Express trusts are the product of contractual intents; they are
essentially creatures of Contract Law, and therefore are animated
by the agreed intentions of the parties under the principle
of autonomy or the freedom to contract doctrine.
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II EXPRESS TRUSTS
[Updated: 16 August 2010]
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with all the beneficial title to the estate property held in the hands
of the trustee. In such cases, what is executed is merely a Deed of
Trust, the solemnities of which do not fall under the Law on
Donations, and generally would comply with the formalities of an
ordinary deed of conveyance.
b. Essential Elements of Express Trusts
Much of the discussions hereunder, unless otherwise indicated,
cover essentially contractual trusts arrangementsthose that are
created by the intention of the trustor or of the parties, without
taking the form of donation or testamentary disposition. Therefore,
we will discuss immediately hereunder the essential characteristics
of express trusts as contractual relationship of being: (a) nominate
and principal; (b) unilateral; (c)primarily gratuitous; (d) real;
(e) preparatory; and (f) fiduciary. The essential characteristic of an
express trust being a real contract will be discussed in the next
section on The Rules of Enforcement of Express Trusts.
It should be noted that Title V of the New Civil Code does not
expressly state under any of its article that express trusts
are contractual relationships. However, as explained above, it would
be more useful on our part to consider express trusts, as
distinguished from implied trusts, to be essentially contractual in
nature, i.e., of being created under contractual intents, and with the
rights, duties and responsibilities arising from contractual
relationship.
In Mindanao Development Authority v. Court of Appeals, 113 SCRA
429 (1982), the Supreme Court held that It is fundamental in the
law of trusts that certain requirements must exist before an express
trust will be recognized, (at p. 436), and it affirmed the following to
be the essential elements of an express trust, enumerated earlier
in Francisco v. Leyco, 3 C.A.R. 2s 1384, citing Rous, Florimond
C., The Trust Relationship, 96 SCRA 186, 191, thus:
(a) The Trustee: who holds the trust property and is subject to
equitable duties to deal with it for anothers benefit;
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that the court, if called upon so to do, may enforce the trust. (at p.
437, citing 76 Am Jur 2d, Sec. 31, pp. 278-279; emphasis
supplied.)
Thus, when the deed of sale upon which an express trust was
sought to be established in Mindanao Development Authority merely
provided that the seller agree[s] to work for the titling of the
entire area of my land under my own expense and the expenses for
the titling of the portion sold to me shall be under the expenses of
the said Juan Cruz Yap Chuy, the Court held that no express trust
was constituted, since other than undertaking to pay for the
expenses of titling of the property, The stipulation does not
categorically create an obligation on the part of [the seller] to hold
the property in trust for Juan Cruz. Hence there is no express trust.
It is essential to the creation of an express trust that the settlor
[trustor] presently and unequivocally make a disposition of property
and make himself the trustee of the property for the benefit of
another. (at p. 437,citing 76 Am Jur 2d, sec. 35, p. 281.)
Finally,
the
Court
also
noted
in Mindanao
Development
Authority that the provision in the deed of sale that the buyer will
work for the titling of the entire area of my land under my own
expense, it was not clear what particular property of the seller was
referred to, and thus no express trust could be validly constituted
since A failure on the part of the settlor definitely to describe the
subject-matter of the supposed trust or the beneficiaries or object
thereof is strong evidence that he intended no trust. (at p. 438.)
In Caezo v. Rojas, 538 SCRA 242 (2007), reiterating the ruling
in Morales v. Court of Appeals, 274 SCRA 282 (1997), on what
constitutes the essential elements of an express trust, the Court
held:
. . . 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 deisgnated to carry out
the trust; (3) the trust res, consisting of duly identified and definite
real property; and (4) thecestui que trusts, or beneficiaries whose
identity must be clear. . . (at p. 253.)
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One answer to this issue is that before delivery of title over the
trust estate to the trustee, there is no valid contract of trust, but
only a nominate contract of do ut facia, that is that the trustor has
contractually bound himself to delivery and transfer title over the
trust property to the trustee (essentially a real obligation to give),
and the trustee has bound himself to accept delivery and to manage
the properties to be delivered for the interests of the beneficiary
(essentially a personal obligation to do).
If the so-called contract of trust is valid at this point (i.e., upon
mere meeting of the minds), then in order to be a real contract, it
must mean that it creates a binding obligation. But the only
enforceable obligation so far created by meeting of the minds is that
of the trustor to deliver legal title to the trust property to the
trustee and beneficial title to the beneficiary, which does not fall
within the essence of a trust which is supposed to create an
obligation on the part of the trustee to manage the trust property
for the benefit of the beneficiary. The trustor of a true trust does
not assume any obligation; he is the creator of the trust.
d. Express Trusts Over Immovables Must Be in Writing
Article 1443 of the Civil Code provides that No express trusts
converning an immovable or any interest therein may be proved by
parol evidence. The clear legal implication of the language of
Article 1443 is that an express trust concerning movables or any
interests therein may be proved by parol evidence; which means
that the mere meeting of minds over the creation of an express
trust over movables creates a valid and enforceable contract of trust
once the movable is delivered to the trustee.
It is my submission that Article 1443 is a lame provision, and really
serves no useful purpose in the realm of true express trusts
arrangements involving immovables or any interest therein.
Firstly, Article 1443 does not render the express trusts over
immovables void when it is not effected in writing, it merely renders
the contractual relationship unenforceable. Since it is only the
grantor or the accepting beneficiary who have rights to enforce
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5.
Distinguishing
Arrangements
Express
Trusts
from
Other
Similar
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stripped of the legal title unless it is shown that he is unfit for the
position of trustee, or he has breached his trust obligations. Thus,
in De Leon v. Molo-Peckson, 6 SCRA 798 (1962), the Court held
that in the absence of any reservation of the power to revoke, an
express trust (referred to as voluntary trust), is irrevocable
without the consent of the beneficiary.
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a. Contractual Trusts
The manner of splitting the legal title and beneficial ownership over
the property (i.e., the corpus) to be held in trust may be done in
several ways. For example, the situation covered under Article 1440
would involve a situation where the full owner of a property, defined
as the trustor, conveys the naked title to one person, say a banking
institution, as trustee, under the terms of the trust agreement for
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is true that her mother in whose name the land was registered was
the natural guardian of her person, but that guardianship did not
extend to the property of the minor and conferred no right to the
administration of the same . . . and the plaintiff, being a minor and
under disability, could not create a technical trust of any kind.
Applying Bouviers definition to this state of facts, it is clear that
there was no trust in its technical signification. The mother had no
right of property or administration in her daughters estate and was
nothing but a mere trespasser. . . . (at p. 250)
In effect, capacity of the parties is not essential in implied trusts,
because the arrangement is imposed by operation of law; whereas,
in an express trust, capacity to transfer title on the trust properties,
in order to have legal title held by the trustee, is critical.
b. The Trustee
(1) Trustee Is the Party Primarily Bound
Under Article 1440, the trustee is the person in the trust relation
in whom confidence is reposed as regards property for the benefit of
another person. It is the trustee therefore who is the party primarily
bound under the trust relation, and being possessed of the legal
title to the trust property held for the benefit of another person, he
is bound by the fiduciary duties of diligence and loyalty.
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There are cases, however, in which it may appear that the trustor intended the trust to continue only so
long as the person designated by him as trustee should continue as such. It may be so provided by the
terms of the trust, or it may appear that the purposes of the trust cannot be carried out unless the person
named as trustee continues to act. In such a case, the trust will fail, if the trustee resigns, dies, is
removed, or otherwise ceased to be a trustee. (Tolentino, Civil Code of the Philippines, Vol. IV, at pp.
676-677 [1991 ed.].)
The principle that the law will not allow a trust to fail due nonacceptance, resignation, incapacity or death of the designated
trustee in recognized under our Rules of Court which provide for the
duties of the trustee and the manner of appointment or
replacement, as discussed hereunder.
(4) Obligations of the Trustee
(i) Contractually Stated Duties and Obligations of the Trustee
An express trust constituted under a trust agreement normally
provides for the powers and functions of the trustee, and would
enumerate such powers which under the law need to be covered by
a special power of attorney to remove any doubt as to the duties of
the trustee, and provide for the parameters of his obligations as
well.
(ii) Common Law Duties of the Trustee
The position of trustee being fiduciary in nature, a trustee is
expected to carry out the trust using the diligence of a good father
of a family. The trustee becomes personally liable for gross
negligence committed even when it is in the pursuit of the trust
arrangement; for negligence which causes damage to another
person constitutes a wrong committed by the tortfeasor for which
he can be held personally liable. Every trustee has the common law
duty of diligence.
In addition, the trustee is expected to be loyal to the affairs and
interest of the beneficiary. He cannot appropriate for himself any
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(d) To render upon oath at least once a year until his trust is
fulfilled, unless he is excused therefrom in any year by the court, a
true account of the property in his hands and of the management
and disposition thereof, and will render such other account as the
court may order; and
(e) Upon the expiration of his trust, he will settle his accounts in
court and pay over and deliver all the estate remaining in his hands,
or due from him on such settlement, to the person or persons
entitled thereto.
(vi) Proper Proceedings for Sale or Encumbrance of Trust
Estate
Under Section 9 of Rule 98 of the Rules of Court, when the sale or
encumbrance of any real or personal estate held in trust is
necessary or expedient, the Regional Trial Court (RTC) having
proper jurisdiction of the trust may, on petition and after due notice
and hearing, order such sale or encumbrance to be made, and the
reinvestment and application of the proceeds thereof in such
manner as will best effect the objects of the trust.
(vii) Trustee Does Not Assume Generally Personal Liability
on the Trust
Although a trustee enters upon the fulfillment of his duties by his
own name, and not in the name of the trustor or the beneficiary,
nonetheless, it should be understood that the performance of the
functions of the trustee and the contracts entered into in pursuit of
the trust, as performed under official capacity as a trustee.
Consequently, the liabilities assumed by the trustee is such capacity
can only be enforced to the extent of the trust properties. In other
words, the trustee, unless he so stipulates, does not become
personally liable to his separate properties outside of the trust
properties, for contracts and transactions arising from the trust and
entered into in his official capacity as trustee.
Thus, in Tan Senguan and Co. v. Phil. Trust Co., 58 Phil. 700
(1933), where the properties for which the trust company had
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Trusts:
Resulting
Trusts
and
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the principle that trusts contracts (i.e., express and resulting trusts)
have
the
essential
characteristic
of real as
distinguished
from consensual or formal.
Under the old Civil Code, the syllabus appearing at the beginning in
the decision in Gamboa v. Gamboa, 52 Phil. 503 (1928), affirmed
the nature of proof that must be satisfied in order to prove implied
trusts, thus
1. Trusts; Proof Insufficient to Show Title of Land to Have Been Held
in Trust.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 brothers and sisters to share in the produce of the land. (at pp.
503-504)
Under Article 1457 of the New Civil Code, an implied trust, whether
resulting or constructive, may be proved by oral evidence, without
distinction on whether it involves a movable or an immovable
property. Article 1457 therefore contains the rationale for implied
trusts as reported by the Code Commission that the underlying
doctrine of implied trusts is founded on equity . . . under a legal
system where injustice would result in which the legal estate or title
were to prevail over the equitable right of the beneficiary. This is
in contrast to Article 1443, which provides that an express trust
over immovables or any interest therein can only be constituted in
writing, and cannot be proved by parol evidence, which embodies
the public policy that when it comes to registered land, generally
parol evidence cannot derogate the title of the registered owner.
In Salao v. Salao, 70 SCRA 65 (1976), where the Court refused to
enforce the claims of the plaintiffs under a cause of action based on
an express trust over immovable property unsupported by a written
instrument, next proceeded to address the issue Is plaintiffs
massive oral evidence sufficient to prove an implied trust, resulting
or constructive, regarding the two fishponds? (at p. 81). The Court
held that indeed if the principles of express trust cannot be applied
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3. Resulting Trusts
In Ramos v. Ramos, 61 SCRA 284 (1974), the Court held that A
resulting trust is broadly defined as a trust which is raised or
created by the act or construction of law, but in its more restricted
sense it is a trust raised by implication of law and presumed always
to have been contemplated by the parties, the intention as to which
is to be found in the nature of their transaction, but not expressed
in the deed or instrument of conveyance (quoting from 89 C.J.S.
725; italics supplied). Examples of resulting trusts are found in
article 1448, [1449, and] 1455 of the Civil Code. (at p. 298).
This characterization of resulting trust was reiterated in Salao v.
Salao, 70 SCRA 65, 80-81 (1976).
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had agreed to allow one of their own to effect redemption and deal
directly with the savings association.
Martinez decision narrated that The person chosen as the
repository of this trust was Clemencia Grao, (at p. 39) who
executed a notarial declaration in which she states, among other
things, that she had intervened in the aforementioned transactions
in behalf of all the Martinez heirs. (at p. 40) But [i]n
consideration of the responsibility thus to be assumed by Clemencia
Grao, as borrower, all of the adult Martinez heirs personally and
the guardians of the minor heirs executed a document jointly with
Clemencia Grao . . . in which it was agreed that Clemencia Grao
should have exclusive possession of all the land pertaining to the
Martinez estate and administer the same for the purpose of raising
the necessary revenue to meet her obligations (at p. 40) to the
lending savings association. Years later, Clemencia Grao asserted
that she was the absolute owner of all the property obtained by her
from the original buyer a retro and denied that the other Martinez
heirs had any interest whatsoever therein.
The Supreme Court held in Martinez that the properties redeemed
from the buyer a retro and mortgaged with the savings
associations were held in trust by the said Clemencia Grao for the
benefit of the said heirs . . . subject, however, to the mortgage in
favor of the savings association. The Court did not characterize
what type of trust was created by the transaction since the decision
was rendered under the Spanish Civil Code, but it held that the
Martinez heirs were entitled to accounting from the said Clemencia
Grao of all the proceeds obtained from her administration of the
properties, that any amount appropriated by her for her own benefit
and not applied to the payment of the mortgage loan would have to
be reimbursed; and that it being manifestly improper that a person
in the hostile attitude occupied by Clemencia Grao towards the
Martinez heirs should be allowed to administer the property in
question, it results that the receivership [previously ordered by the
trial court] should be reinstated. (at p. 49).Martinez is a prime
example of the application of trusts principles under the old Civil
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4. Constructive Trusts
In Diaz v. Gorricho and Aguado, 103 Phil. 261, 266 (1958),
and Carantes v. Court of Appeals, 76 SCRA 514, 524 (1977), the
Court characterized constructive trust as one which is imposed by
law . . . [and] there is neither promise nor fiduciary relations; the
so-called trustee does not recognize any trust and has no intent to
hold the property for the beneficiary.
In Geronimo and Isidoro v. Nava and Aquino, 105 Phil. 145 (1959),
a constructive trust was held to have arisen upon a trial courts
decision becoming final and executory which held that defendantsspouses right to redeem the property in litigation and ordered the
plaintiffs-spouses to make the resale, in the sense that although the
plaintiffs-spouses were the registered owners of the property they
possessed only naked title thereto which they were to hold in trust
for the defendants-spouses to redeem, subject to the payment of
the redemption price. However, the Court held in that decision that
In the latter instance of constructive trust, prescription may apply
only where the trustee asserts a right adverse to that of thecestui
que trust, such as, asserting acts of ownership over the property
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being held in trust, (at p. 153), which is contrary to its ruling that
in a constructive trust, since there is really no fiduciary relationship,
no act of repudiation need to be made by the trustee for
prescription to run.
Ramos v. Ramos, 61 SCRA 284 (1974), characterized constructive
trust as
. . . a trust raised by construction of law, or arising by operation of
law. In a more restricted sense and as contradistinguished from a
resulting trust, a constructive trust is a trust not created by any
words, either expressly or impliedly evincing a direct intention to
create a trust, but by the construction of equity in order to satisfy
the demands of justice. It does not arise by agreement or intention,
but by operation of law. (89 C.J.S. 726-727). If a person obtains
legal title to property by fraud or concealment, courts of equity will
impress upon the title a so-called constructive trust in favor of the
defrauded party. A constructive trust is not a trust in the technical
sense. (at p. 298-299; citing Article 1456 of the Civil Code;
and Gayondato v. Treasurer of the P.I., 49 Phil. 244 [1926]).
The ruling has been reiterated in Salao v. Salao, 70 SCRA 65, 81
(1976);Guy v. Court of Appeals, 539 SCRA 584 (2007).
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In De los Santos v. Reyes, 205 SCRA 437 (1992), the Court held
that if the person to whom the title is conveyed is a child, legitimate
or illegitimate, of the one paying the price of the sale, no trust is
implied by law, it being disputably presumed that there is a gift in
favor of the child.
As a general rule, it cannot be expected that a parent placing
property he bought in the name of the child intended any form of
trust, since it cannot be normally expected that a child would
administer property for the benefit of the parents. Should Article
1448 be interpreted to mean, when it uses the word child to cover
a situation where title to the property is placed by the parent in the
name of a child who then was a minor? I believe that this is a
reasonable presumption, as bolstered by the decisions discussed
hereunder.
In Martinez v. Martinez, 1 Phil. 647 (1903), the Court alluded to the
provision of then Article 161 of the old Civil Code, relating to
minors, that the ownership or enjoyment of property acquired by a
minor child with funds of his parents, pertain to the latter [parents],
which the Court observed was the only provision which the we
have found anywhere in the laws now in force that declares the
property to belong to the person who paid the money. (at p. 649).
The exception under Article 1448 is merely a disputable
presumption, which means that it can still be shown that indeed the
parents had placed property bought by them in the name of their
child to impose an obligation on the part of the child to administer
the same for the benefit of the parents, especially when the child
reaches the age of majority.
In Morales v. Court of Appeals, 274 SCRA 282 (1997), the Court
recognized three exceptions to the establishment of an implied
resulting trust under Article 1448, The first is stated in the last part
of Article 1448 itself. Thus, where A pays the purchase money and
title is conveyed by absolute deed to As child or to a person to
whom A stands in loco parentis and who makes no express promise,
a trust does not result, the presumption being that a gift was
intended. (at p. 299.) It is only with respect to a minor child that a
parent stands in loco parentis.
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Only lately in Ty v. Ty, 553 SCRA 306 (2008), where the evidence
showed that the father had paid for the price of the purchase of a
valuable tract of land along EDSA, but where the title was placed in
the name of a son, it was held by the Court that no express trust
could be deemed constituted because there was no writing to prove
the same as required under Article 1443 of the Civil Code when it
comes to trust being constituted over immovable properties.
Although, the Court did concede that it was still possible to prove
the existence of an implied trust, nevertheless, it ruled that the
provisions of Article 1448 expressly provide that no implied trust is
deemed to have been established if the person to whom the title is
conveyed is the child of the one paying the price of the sale, and
instead a donation is disputably presumed in favor of the child.
In Ty, the successors of the deceased father had not shown that no
such donation was intended.
(2) When It Is the Child that Supplies the Purchase Price
A good illustration where no implied trust arises can be found
in Trinidad v. Ricafort, 7 Phil. 449 (1907), where the evidence
showed that the father had repurchased the property he sold to a
third party using the money of his son; yet the implied trust
arrangement imbued by the trial court to justify the taking over of
title by the son after the death of the father, was overturned by the
Supreme Court
It plainly appears from all of the evidence in the case that at the
time of the death of [the father] he was still the owner of whatever
interest was acquired by the repurchase of this property in 1894,
and that if the 2,600 pesos furnished by [the son] to his father for
that purpose it was so furnished by way of a loan and did not
transfer to [the son] any interest in the property. (at p. 452)
In other words, the equity principles under Article 1448 cannot
apply in a situation where property is bought by the father in his
own name, using the money of the child. Resulting trusts under
Article 1448 comes from the presumed intention of the trustor who
supplied the money to have beneficial on trust in the property.
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In Ty, the presumed intention was coming from the father and could
not be presumed to come from a child.
(3) When a Contrary Intention Is Proved
Morales v. Court of Appeals, 274 SCRA 282 (1997), held that
Another exception [to the establishment of an implied resulting
trust under Article 1448] is, of course, that in which an actual
contrary intention is proved. (at p. 299.) The ruling emphasizes the
fact that the implied trusts superinduced by law under the various
provisions in the Title V in the new Civil Code constitute merely
disputable presumptions, and the burden of proof is on the party
alleging that there is no implied trust constituted on each of the
transactions specifically covered by law. Yet, in Morales, the
immediate ruling of the Court tended to apply the general rule that
the burden of proving the existence of a trust is on the party
asserting its existence, thus:
There are recognized exceptions to the establishment of an implied
resulting trust. . . Another exception is, of course, that in which an
actual contrary intention is proved. . . (at p. 299)
As a rule, the burden of proving the existence of a trust is on the
party asserting its existence, and such proof must be clear and
satisfactorily show the existence of the trust and its elements. While
implied trust may be proved by oral evidence, the evidence must be
trustworthy and received by the courts with extreme caution, and
should not be made to rest on loose, equivocal or indefinite
declarations. Trustworthy evidence is required because oral
evidence can easily be fabricated. (at p. 300)
(4) When Purchase Price Extended as a Loan
If it is shown that the person who paid for the amount of the
purchase price did so as a loan or as an advance to the person in
whose name the title to the property is transferred, then no implied
trust should also result because of the lack of intention on the part
of the person supplying the money to have beneficial interest in the
property bought.
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was mistakenly issued only in the name of the mother, the Court
held that courts of equity will impress upon the title, a condition
which is generally in a broad sense termed constructive trust in
favor of the defrauded party, but the use of the word trust in this
sense is not technically accurate and is not the kind of trust.
In the application of the underlying equity principle now contained
in Article 1456, the Court has always emphasized that in spite of the
proceedings under the Torrens system of registration being in rem,
and the title issued thereto being considered imprescriptible and
indefeasible, the Torrens system does not prevent the cestui que
trust under an implied trust to sue for the recovery of the land in
the action for reconveyance, whenever the property is acquired
through mistake or fraud, since the person obtaining the registered
title is, by force of law, considered a trustee of an implied trust for
the benefit of the person from whom the property comes.
In Severino v. Severino, 44 Phil. 343 (1923), where the uncle who
was acting as agent or administrator of the property belonging to a
niece, had procured through fraud a Torrens title over said property
in his name, it was held that the uncle was obliged to surrender the
property to the niece and transfer title to her.
In Laureano v. Stevenson, 45 Phil. 252 (1923), a certificate of title
under the Torrens system was mistakenly issued in favor of
petitioner Kilayko covering not only the parcel of land he bought
from Laureano, but including another adjacent land which remained
the property of his seller. When the creditors of Kilayko had levied
upon all the properties covered by the title to enforce a judgment
debt obtained against Kilayko, Laureano then learned of the mistake
committed during the registration proceedings which had become
final and executory. In determining whether Laureano could legally
prevent the public sale of properties registered under the Torrens
system in the name of Kilayko, the Court held
The fundamental principles governing the Torrens system are well
known. Ordinarily if one tasks no steps to protect his property
interests at the time of the cadastral survey, he is estopped to
dispute the title. He has one year from the issuance of the decree to
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allege and prove fraud. But he may not wait longer than this period
to assert his rights. And were this an ordinary registration case, we
would reach a conclusion satisfactory to the appellants. But we think
that there is more to the case than this.
It must not be forgotten that Kilayco never laid claim to this
property; that the two lots Nos. 4267 and 4289 covered by the
certificate of title No. 830 were mistakenly registered in the name of
Eugenio Kilayco; that the court did not have jurisdiction to confirm
the title of said two lots either in favor of Eugenio Kilayco or of
anybody else, for the reason that no petition for title was filed, no
trial was held, no evidence was presented, and no judgment was
rendered regarding these two lots in the land registration
proceedings; that Kilayco never asserted any right of ownership
over the property; that the rent was paid to Laureano; and that
judgment was obtained in the courts in favor of Laureano through
the acquiescence and consent of Kilayco. Kilayco was, in effect,
merely holding the title of the property in trust for Laureano. The
creditors of Kilayco had in the property, which, in this case, was
nothing. (at pp. 254-255)
In De Ocampo v. Zaporteza, 53 Phil. 442 (1929), where it was
determined that an instrument, which did not express the true
contract between the parties, but which nevertheless became the
basis upon which the defendants obtained the amendment of the
decree of adjudication by which they received a certificate of
transfer of title covering more than the number of lots due them,
the Court held that application must here be made of the doctrines
upheld in the cases of Uy Aloc vs. Cho Jan Ling (19 Phil., 202);
Camacho vs. Municipality of Baliuag (28 Phil., 466); and Severino
vs. Severino (44 Phil., 343), to the effect that the defendants only
hold the certificate of transfer in trust for the plaintiffs with respect
to the portion of the lot planted with 1,300 coconut trees; and they
are therefore bound to execute a deed in favor of the plaintiff,
transferring to them said portion planted with 1,300 coconut trees.
(at p. 445)
In Escobar v. Locsin, 74 Phil. 86 (1943), the designated agent,
taking advantage of the illiteracy of the principal, claimed for
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trust for the real owner, which would justify an action for
reconveyance
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Yet, the Supreme Court has not been consistent in its position. Let
us first take the decision in Heirs of Tanak Pangaaran Patiwayon v.
Martinez, 142 SCRA 252 (1986), where the decedent during his
lifetime had married legitimately three successive times, but without
liquidation of the conjugal partnerships formed during the first and
second marriages. The only male issue managed to convince his coheirs that he should act as administrator of the properties left by
the decedent, but instead obtained a certificate of title in his own
name to the valuable piece of property of the estate. It was held by
the Court that where the son, through fraud was able to secure a
title in his own name to the exclusion of his co-heirs who equally
have the right to a share of the land covered by the title, an implied
trust was created in favor of said co-heirs, and that said son was
deemed to merely hold the property for their and his benefit:
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Pasio v. Monterroyo, 560 SCRA 739 (2008), held that Under the
principle of constructive trust, registration of property by one
person in his name, whether by mistake or fraud, the real owner
being another person, impresses upon the title so acquired the
character of a constructive trust for the real owner, which would
justify an action for reconveyance. (Citing Heirs of Tabia v. Court of
Appeals, 516 SCRA 431 [2007]) In the action for reconveyance, the
decree of registration is respected as incontrovertible but what is
sought instead is the transfer of the property wrongfully or
erroneously registered in anothers name to its rightful owner or to
one with a better right. (Ibid) If the registration of the land is
fraudulent, the person in whose name the land is registered holds it
as a mere trustee, and the real owner is entitled to file an action for
reconveyance of the property. (citing Mendizabel v. Apao, 482 SCRA
587 [2006]) (at p. 751)
In Pasio the respondents were able to establish that they have a
better right to the parcel of land since they had long been in
possession of the property in the concept of owners, by themselves
and through their predecessors-in-interest. Therefore, despite the
irrevocability of the Torrens titles issued in the names of the
petitioners and even if they are already the registered owners under
the Torrens system, the petitioners may still be compelled under the
law to reconvey the property to respondents.
In Lopez v. Court of Appeals, 574 SCRA 26, where in her notarial
will the testator expressed that she wished to constitute a trust
fund for her paraphernal properties, denominated as Fideicomiso de
Juliana Lopez Manzano (Fideicomiso), to be administered by her
husband. . . Two-thirds (2/3) of the income from rentals over
theses properties were to answer for the education of deserving but
needy honor students, while one-third (1/3) was to shoulder the
expenses and fees of the administrator, but that eventually in the
probate of the will the properties were adjudicated to the husband
as sole heir, the Court ruled that On the premise that the disputed
properties are the paraphernal properties of Juliana which should
have been included in the Fideiocomiso, their registration in the
name of Jose would be erroneous and Joses possession would be
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oOo
1.
to
jen:
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(a) Establish the filiation of your half brother to your father to have
standing to be executing a waiver of inheritance right under the
Extrajudicial
Settlement;
(b) The waiver in the Extrajudicial Settlement would be signed by the
mother in behalf of her 5 year old son, and to be valid and effective
the law requires that the mother has to be judicially appointed as
guardian over the person and estate of the son. Without such
authority on the part of the mother who will sign the Extrajudicial
Settlement, the waiver is void and not binding on the son, and when
he comes of legal age, he actually can seek from you his share in the
estate of your father as the acknowledged illegitimate son.
(c) But even having both of those indicated above, the Extrajudicial
Settlement will not be registered by the Register of Deeds unless you
comply with the requirements of the Rules of Court publishing the
same in a newspaper of general circulation for three (3) consecutive
weeks;
(d) In addition, aside from paying the registration fees to the local
government, and those pertaining to the Register of Deeds, it is
required that you must have settled with the BIR all the estate taxes
due separately on the estate of your mother and father (which have
accumulated penalties and charges) and be able to obtain a BIR
Clearance on the matter to be attached to the Extrajudicial
Settlement when filed with the Register of Deeds.
I hope the inputs are helpful to you.
Dean CLV