D. Trusts

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. (Article 1440, Civil Code)

2 kinds of trusts:
1) Express trusts;
Express trusts – are created by the intention of the trustor or of the parties. (Article 1441, Ibid.)
2) Implied trust.
Implied trusts – come into being by operation of law. (Ibid.)
An implied trust may be proved by oral evidence. (Article 1457, Ibid.)

1. EXPRESS TRUSTS

Express trusts on immovable cannot be proved by parol evidence. No express trusts concerning an immovable or any interest therein may be proved by parol evidence. (Article 1443, Ibid.)

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

When trustee appointed declines designation. No trust shall fail because the trustee appointed declines the designation, unless the contrary should appear in the instrument constituting the trust. (Article 1445, Ibid.)

Acceptance by beneficiary, required. Acceptance by the beneficiary is necessary. Nevertheless, if the trust imposes no onerous condition upon the beneficiary, his acceptance shall be presumed, if there is no proof to the contrary. (Article 1446, Ibid.)

2. IMPLIED TRUSTS

Examples of implied trusts:
1) When property is sold to and legal title is granted to a person, but price was paid by another.
There is an implied trust when property is sold, and the legal estate is granted to one party but the price is paid by another for the purpose of having the beneficial interest of the property. The former is the trustee, while the latter is the beneficiary. However, if the person to whom the title is conveyed is a child, legitimate or illegitimate, of the one paying the price of the sale, no trust is implied by law, it being disputably presumed that there is a gift in favor of the child. (Article 1448, Ibid.)
2) When donation is made to donee who has no beneficial interest or only part thereof.
There is also an implied trust when a donation is made to a person but it appears that although the legal estate is transmitted to the donee, he nevertheless is either to have no beneficial interest or only a part thereof. (Article 1449, Ibid.)
3) When price is loaned or paid by a person for the benefit of another.
If the price of a sale of property is loaned or paid by one person for the benefit of another and the conveyance is made to the lender or payor to secure the payment of the debt, a trust arises by operation of law in favor of the person to whom the money is loaned or for whom its is paid. The latter may redeem the property and compel a conveyance thereof to him. (Article 1450, Ibid.)
4) When land passes by succession to any person who caused legal title to be put in the name of another.
When land passes by succession to any person and he causes the legal title to be put in the name of another, a trust is established by implication of law for the benefit of the true owner. (Article 1451, Ibid.)
5) When two or more persons agree to purchase a property and legal title is taken in the name of one of them for the benefit of all.
If two or more persons agree to purchase property and by common consent the legal title is taken in the name of one of them for the benefit of all, a trust is created by force of law in favor of the others in proportion to the interest of each. (Article 1452, Ibid.)
6) When property is conveyed to a person in relation of his declared intention to hold it for, transfer it to another or the grantor.
When property is conveyed to a person in reliance upon his declared intention to hold it for, or transfer it to another or the grantor, there is an implied trust in favor of the person whose benefit is contemplated. (Article 1453, Ibid.)
7) When an an absolute conveyance of property is made in order to secure the performance of an obligation of the grantor toward the grantee.
If an absolute conveyance of property is made in order to secure the performance of an obligation of the grantor toward the grantee, a trust by virtue of law is established. If the fulfillment of the obligation is offered by the grantor when it becomes due, he may demand the reconveyance of the property to him. (Article 1454, Ibid.)
8) When any trustee, guardian or other person holding a fiduciary relationship uses trust funds for the purchase of property and causes the conveyance to be made to him or to a third person.
When any trustee, guardian or other person holding a fiduciary relationship uses trust funds for the purchase of property and causes the conveyance to be made to him or to a third person, a trust is established by operation of law in favor of the person to whom the funds belong. (Article 1455, Ibid.)
9) When property is acquired through mistake or fraud, the person obtaining it is, by force of law.
If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes. (Article 1456, Ibid.)

Disclaimer: All information herein is for educational and general information only intended for those preparing for the bar exam. These should not be taken as professional legal advice or opinion. Please consult a competent lawyer to address your specific concerns. Any statements or opinions of the author are solely his own and do not reflect that of any organization he may be connected.

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