Trusts: Express Trusts (Arts. 1443-1446)

CHAPTER 2

Express Trusts (Arts. 1443-1446)

Article 1443. 
No express trusts 
concerning an immovable or any interest therein 
may be proved by parol evidence.

Evidence to prove express trust. 
  1. Burden of proof.
    • The general rule is that the burden of proving the existence of a trust is on the party alleging its existence; and to discharge this burden, it is generally required that his proof be clear and satisfactory and convincing. 
  2. Trust concerns immovable therein.
    • By virtue of Article 1443, a writing is necessary to prove an express trust concerning an immovable or any interest therein. 
    • The writing is required by said article not for validity but for purposes of proof. 
    • Hence, by analogy, this requirement may also be included under the Statute of Frauds.
  3. Failure to object to parol evidence. 
    • Like the defense of the Statute of Frauds, the defense that express trusts cannot be proved by parol evidence may be waived, either by:
      • failure to interpose timely objections against the presentation of oral evidence not admissible under the law or 
      • by cross-examining the adverse party and his witnesses along the prohibited lines. 
  • To affect third persons, a trust concerning an immovable or any interest therein must be:
    • embodied in a public instrument and 
    • registered in the Registry of Property.
  • An express trust over personal property or any interest therein, and an implied trust, whether the property subject to the trust is real or personal, may be proved by oral evidence. 
Article 1444. 
No particular words are required 
for the creation of an express trust, 
it being sufficient that a trust is clearly intended.

Creation of an express trust. 
  • Express trusts are those trusts intentionally created by direct and positive act of the trustor, by some writing, deed, will, or oral declaration evincing an intention to create the trust. 
  • They are distinguishable from implied trusts, resulting and constructive, in that the latter are respectively founded upon an intention of the parties to a transaction implied in law, or upon fraud or wrong irrespective of the intention of the parties concerned.
  • No particular words are required or essential for the creation of an express trust, it being sufficient that a trust is clearly intended.
Terminology used not controlling. 
  • Technical or particular forms of words or phrases are not essential to the manifestation of an intention to create a trust. 
    • It is possible to create a trust without using the word “trust” or “trustee.” 
    • Conversely, the mere fact that the word “trust” or “trustee” is employed does not necessarily prove an intention to create a trust. 
  • What is important is whether the trustor or the party manifested an intention to create the kind of relationship which in law is known as a trust. 
    • It is immaterial whether or not he knows that the relationship which he intends to create is called a trust, and whether or not he knows the precise characteristic of the relationship which is called a trust, it being sufficient that a trust is clearly intended. 
  • In her will, T, testatrix, designated her husband, H, as universal and sole heir with the obligation to deliver the properties in question to certain persons who were referred to as “beneficiaries.” 
  • The word “trust” does not appear in the will.
  • Did T effectively create a trust in favor of the parties over the properties adverted to in the will? Yes. 
  • The designations, coupled with the other provisions for co-ownership and joint administration of the properties and other conditions imposed by T, clearly demonstrated the intent of T that the legal title to the properties should vest in H and the beneficial or equitable interest thereto should repose in said persons. 
Kinds of express trusts. 
  • Certain trusts are created for special purposes.
    • Both wills and trusts are the most commonly used estate planning devices. 
      • Estate planning is applying the law of property, wills, trusts, future interests, life insurance, and taxation to the ordering of one’s affairs, keeping in mind the possibility of retirement and the certainty of death. 
      • The aim is not merely to dispose of one’s estate at death but to organize resources during life in order to provide for the present and future well-being of one’s family.
    • Trusts are an excellent estate device, capable of accomplishing much more than other tools used in the construction of an estate plan. 
      • The use of trusts is usually motivated by tax benefits. 
      • For example, if property is transferred outright to the estate owner’s children, and they transfer it to their children, there will be estate taxes and other expenses at the death of the children — a double bite, so to speak. 
      • However, if the property is transferred to the owner’s children in trust for their lives, with the remainder to the grandchildren, no tax will be levied on the death of the children. A generation will be in the tax chain.
      • And if the transfer is properly made, inter vivos, the estate tax may be substantially reduced for both generations. 
    • There are several other reasons for using trusts. 
      • Those with “spendrift’’ provisions will protect beneficiaries from their own mismanagement. 
      • A trust can be set up so that a beneficiary cannot dispose of property the settlor wants to keep in the family. 
      • Insurance proceeds can be handled effectively by a trust because of its flexibility. 
      • A variety of beneficiaries can be provided for, with payments being increased or diminished depending on the individual needs of each.
    • However, in using the trust and other devices, familiarity with tax laws, particularly the National Internal Revenue Code, is absolutely essential.
  • Kinds of express trusts:
  1. Charitable trust
    • one designed for the benefit of a segment of the public or of the public in general. 
    • It is one created for:
      • charitable purposes
      • educational purposes
      • social purposes
      • religious purposes
      • scientific purposes
      • general benefit of humanity
    • A private trust is not for the good of the public in general or society as a whole; 
  2. Accumulation trust 
    • one that will accumulate income to be reinvested by the trustee in the trust for the period of time specified; 
  3. Spendthrift trust
    • one established when the beneficiary need to be protected, because of his:
      • inexperience or immaturity from his imprudent spending habits or 
      • simply because the beneficiary is spendthrift. 
    • Income will be paid to the beneficiary only when actually necessary. 
      • Under some circumstances, the  trustee will pay directly the creditor for obligations of the beneficiary; and
  4. Sprinkling trust 
    • one that gives the trustee the right to determine the income beneficiaries who should receive income each year and the amount thereof. 
      • Income that is not distributed in any given year is added to the corpus, as in an accumulation trust. 
    • It is a discretionary trust if it gives the trustee the discretion to pay or not to pay the income or principal.
When trustee may sue or be sued alone.
  • In order that a trustee may sue or be sued alone, it is essential that his trust be express, that is, a trust created by the direct and positive acts of the parties, by some:
    • writing
    • deed
    • will
    • proceedings in court
  • If a property is insured and the owner received the indemnity from the insurer, it is provided in Article 22072 of the Civil Code that the insurer is deemed subrogated to the rights of the insured against the wrongdoer. 
  • It has been held that the payment of the indemnity does not make the insured a trustee of the insurer as in the American law, with the right to bring the action in the name of the latter and the duty to pay to him (insurer) so much of the recovery as corresponds to the amount he (insured) had received. This matter being statutory, the same is governed by our own law in this jurisdiction. 
Article 1445. 
No trust shall fail 
because the trustee appointed declines the designation, 
unless the contrary should appear 
in the instrument constituting the trust.

Acceptance, declination, or renunciation by the trustee. 
  • In the case of an express trust, acceptance of trust by a trustee is necessary:
    1. to charge him with the office of the trustee and the administration of the trust and 
    2. to vest the legal title in him.
    • However, his acceptance of the trust is not necessary to its existence and validity, since if he declines the trust, the courts will appoint a trustee to fill the office that he declines. 
  • One designated or appointed as trustee may decline the responsibility and thereby be free from any legal or equitable duty or liability in the matter. 
    • Unless a contrary intention appears in the instrument constituting the trust (Art. 1145.), declination or refusal or disqualification of a trustee does not operate to defeat or void the trust; nor does it operate to vest legal as well as equitable title in the beneficiary. 
  • Furthermore, renunciation of a trust after its acceptance can only be by:
    1. resignation or retirement with court approval or at least, with agreement of beneficiaries and 
    2. on satisfaction of all legal liabilities growing out of the acceptance of the trust. 
  • A contract to renounce, for a pecuniary consideration, the right to act as a trustee has generally been recognized to be against public policy.
    • When a person administering property in the character of trustee inconsistently assumes to be holding in his own right, this operates as renunciation of the trust and the beneficiaries in the property are entitled to maintain an action to declare their right and remove the unfaithful trustee.
Article 1446. 
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.

Acceptance of trust by the beneficiary.
  • Acceptance of or assent to the trust by the beneficiary is essential to the creation and validity of a trust. 
  • The trust being beneficial to the beneficiary, his acceptance is presumed if there is no proof to the contrary. 
  • However, if the trust imposes some onerous condition, acceptance must be shown. 
  • Such acceptance may be express or implied. 

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