Trusts: Implied Trusts (Arts. 1447-1457)

CHAPTER 3

 Implied Trusts (Arts. 1447-1457)

Article 1447. 

The enumeration of the following cases of implied trust 

does not exclude others established by the general law of trust, 

but the limitation laid down in article 1442 shall be applicable.

Concept of implied trust. 

• Implied trusts are those which, without being express, are deducible from the nature of the transaction as matters of intent, or which are superinduced on the transaction by operation of law, as matters of equity, independently of the particular intention of the parties.
• Implied trusts are not created voluntarily, but imposed by law or inferred from the conduct or dealings of the parties. 
• The concept of implied trusts is that from the facts and circumstances of a given case, the existence of a trust relationship is inferred in order to effect the presumed intention of the parties. 
• Thus, there is no implied trust where a contrary intention is proved. 
• The resulting trust arises out of or is created by, the conduct of the parties. 
• It is imposed in order to carry out the apparent intention of the parties at the time they entered into the transaction that gave rise to the trust. 
• The most frequent use of the resulting trust occurs when one party purchases land but records the title in the name of another who subsequently refuses to convey the property in accordance with their understanding of the nature of the transaction.

Kinds of implied trust. 

• Implied trusts are ordinarily subdivided into: 

1. Resulting trust.
• It is broadly defined as a trust which is raised or created by the act or construction of law. 
• 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.
• This kind of trust is based on the equitable doctrine that valuable consideration and not legal title determines the equitable title or interest.
• The trust is said to result in law from the act of the parties.
• Examples of this kind of trust are found in Articles 1448, 1449, 1451, 1452, and 1453.
2. Constructive trust.
• It is also a trust raised by construction of law or arising by operation by law. 
• In a more restricted sense, and as contra-distinguished from a resulting trust, 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 and prevent unjust enrichment. 
• It does not arise by agreement or intention but by operation of law against one who, by fraud, duress, or abuse of confidence obtains or holds the legal right to property which he ought not, in equity and good conscience, to hold. (
• “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.’’ 
• This kind of trust is illustrated in Articles 1450, 1454, 1455, and 1456.
• However, a trust will not be created when for the purpose of evading the law prohibiting one from taking or holding real property he takes conveyance thereof in the name of a third person. 
• For example, a homestead applicant is required by law to occupy and cultivate the land for his own benefit, and not for the benefit of someone else. Hence, a trust created in favor of one already disqualified from applying additional homestead under the Public Land Act (Sec. 112, CA No. 141.) is null and void considering that it is in direct violation of the Act as regards the acquisition of homestead patent. \
• A constructive trust is not a trust in a technical sense. 
• It is substantially an appropriate remedy against unjust enrichment.
• While the distinction is not always clear, constructive trust is usually imposed upon property by the courts to correct or rectify fraud or to prevent one party from being unjustly enriched at the expense of another. 
• In reality, it is a fiction or remedy to which a court of equity will resort to prevent injustice. 

Enumeration of cases of implied trust not exclusive.

• The enumeration of cases of implied trust in Chapter 3 is not exclusive. (Art. 1447.) 
• It is intended to be illustrative of situations in which implied trust is needed in order to correct a wrong or prevent an unjust enrichment. 

1. It has been held that the registration of a land under the Torrens System in the name of another does not bar evidence to show that the property is only being held in trust for the non-registered owner. 
2. Similarly, although no specific provision can be cited to apply, an implied trust is created when the certificate of registration of a vehicle is placed in the name of a person although the price thereof was not paid by him but by another. 
3. Even though a mortgagee who exercises the power of sale contained in a mortgage is not strictly considered a trustee in a purely equitable sense, he is deemed a custodian as far as concerns the surplus of the proceeds of the foreclosure sale and regarded a trustee thereof for the benefit of the mortgagor or owner of the equity of redemption.
4. An implied trust is created between the principal and the agent who willfully violated the trust reposed in him by the principal by buying for himself the property he was supposed to buy for the principal who designated and appointed him to negotiate with the owner. The agent is duty-bound to execute a deed of conveyance of the property upon payment by the principal of the purchase price without interest. So, a constructive trust may also arise by abuse of confidence, in order to satisfy the demands of justice.
5. In consonance with the trust fund doctrine in corporation law, the assets of the corporation as represented by its capital stock are regarded as “trust funds’’ to be maintained unimpaired for the payment of corporate creditors in the sense that there can be no distribution of such assets among the stockholders without provision being first made for the payment of corporate debts.
6. Included in the regulatory responsibilities of the Insurance Commissioner under Section 414 of the Insurance Code (Pres. Decree No. 1460, as amended.) is the duty to hold the security deposits under Sections 191 and 203 of the Code, for the benefit of all policy holders. Section 192 thereof specifically confers custody over the securities upon the Commissioner, with whom these investments are required to be deposited. An implied trust (Art. 1441.) is created by law for the benefit of all claimants under subsisting insurance contracts issued by the insurance company.

Implied trust founded upon equity.

• “The doctrine of implied trusts is founded upon equity. The principle is applied in the American legal system to numerous cases where an injustice would result if the legal estate or title were to prevail over the equitable right of the beneficiary. A number of instances of implied trusts are enumerated in the [new] Civil Code, but this enumeration does not exclude other cases established by the general law of trusts” insofar as they are not in conflict with the Civil Code, the Code of Commerce, the Rules of Court, and special laws.
• The consequences of an implied trust are, principally, that the implied trustee shall:
• deliver the possession and reconvey title to the property to the beneficiary of the trust, and 
• to pay to the latter the fruits and other net profits received from such property during the period of wrongful holding and otherwise, to adjust the equities between the trustee holding the legal title and the beneficiary of the trust.
• While the principle of undue enrichment or quasi-contract is not new, having been incorporated in the Spanish Civil Code, the provisions on trusts are fairly recent, having been introduced by the Code Commission in 1949. Although the concept of trusts is nowhere to be found in the Spanish Civil Code, the framers of our present Civil Code incorporated implied trusts on top of quasi-contracts, both of which embody the principle of equity above strict legalism. 
• A trust is as much a misnomer as a ‘quasi-contract,’ so far removed they are from trusts and contracts proper, respectively. 
• In the case of a constructive trust, as in the case of a quasi-contract, a relationship is ‘forced’ by operation of law upon the parties, not because of any intention on their part but in order to prevent unjust enrichment, thus giving rise to certain obligations not within the contemplation of the parties.’’
• The doctrine of implied trust if based on an illegal contract cannot be invoked. 
• Being founded in equity, trust can never result from acts violative of the law.

Distinctions between express trusts and implied trusts. 

• The following may be mentioned:

Creation of trust.

• Express trusts —
• created by the intention of the trustor or parties
• created by the direct and positive acts of the parties by some writing or deed or will or by words evidencing an intention to create a trust
• the intention to establish a trust is clear
• Implied trusts — 
• come into being by operation of law
• those which, without being expressed, are deducible from the nature of the transaction or imposed by operation of law, independently of the particular intention of the parties.
• the intention is to be taken from the circumstances or other matters indicative of such intent

Proof of trust.

• Express trusts —
• an express trust concerning an immovable or any interest therein cannot be proved by parol evidence
• Implied trusts — 
• an implied trust concerning an immovable or any interest therein may be proved by oral evidence

Repudiation of trust.

• Express trusts —
• in order that laches or acquisitive prescription may bar an action to enforce an express trust, an express repudiation made known to the beneficiary is required, while laches constitutes a bar to actions to enforce an implied trust even where there is no repudiation, unless there is concealment of the fact giving rise to the trust
• an express trust does not prescribe except when the trustee repudiates the trust
• while no time limit is imposed for the enforcement of rights under an express trust, prescription may, however, bar a beneficiary’s action for recovery, if a repudiation of the trust is proven by clear and convincing evidence and made known to the beneficiary.

Implied trust converted to express trust.

• An implied trust may be converted to an express trust by the recognition by the implied trustee of the right to the property of the owner.

1. Trustee acknowledged in a public instrument sale of land by his parents to beneficiary.
• In a case, where the plaintiff sought a reconveyance of a parcel of land he bought from defendant’s parents but which was inadvertently included in the certificate of title covering defendant’s land, more than ten years from the issuance of said title, the Supreme Court took the stand that if such erroneous inclusion initially created an implied trust, the trust was converted into an express trust when subsequently the defendant explicitly acknowledged in a public instrument the sale of said land by his parents and bound himself further, to defend plaintiff’s title against any claims whatsoever; it having been created by the will of the parties, no particular words being required for the creation of an express trust, it being sufficient that a trust is clearly intended — and hence, was no longer subject to the statute of limitations until and unless repudiated.
2. Trustee directed his tenant to pay rentals to beneficiary and allowed latter to take possession.
• In a decision that had become final and executory, the trial court declared that the defendant had the right to redeem the property in question and ordered the plaintiff to make the resale of the property in favor of the defendant. It was held that such declaration created an implied trust for the defendant to redeem, subject to the payment of the redemption price. Where pursuant to the decision, the plaintiff directed the tenant to pay his rentals to the defendant instead of to him, meaning the defendant had a right to said rentals, and allowed the latter to take possession of the property when the tenant left the same, such acts should be construed as a recognition by the plaintiff of the fact that the property though still in his name, was to be held in trust for the defendant, to be conveyed to the latter upon payment of the purchase price. The trust became an express one. 

Acquisition of property through prescription.

• The rule that a trustee cannot acquire by prescription ownership over property entrusted to him until and unless he repudiates the trust, applies to express trusts and resulting implied trusts.
• An action for reconveyance will not prescribe as long as the property stands in the name of the trustee. 
• To allow prescription would be to permit a trustee to acquire title against the principal and the true owner.
• The settled rule in constructive implied trusts is that prescription may supervene even if the trustee does not repudiate the relationship. Necessarily, repudiation of the said trust is not a condition precedent to the running of the prescriptive period.
• In resulting trusts, the rule of imprescriptibility may apply for as long as the trustee has not repudiated the trust. 
• Once the resulting trust is repudiated, however, it is converted into a constructive trust and is subject to prescription.

1. By trustee.
• It is a well-settled rule that the possession of a trustee is, in law, possession of the cestui que trust and, therefore, it cannot be a good ground for title by prescription. 
• Co-ownership is a form of trust and every co-owner is a trustee for the other. 
• No prescription shall run in favor of a co-owner against his co-owners or co-heirs as long as he expressly or impliedly recognizes the co-ownership. (
• There should be a clear repudiation of co-ownership duly communicated to the other co-owner. 
• The express trusts disable the trustee from acquiring for his own benefit the property committed to his management or custody, at least while he does not openly repudiate the trust and makes such repudiation known to the beneficiary.
• For this reason, the rules on adverse possession do not apply to “continuing and subsisting (i.e., unrepudiated) trusts.” 
• The trustee may claim title by prescription founded on adverse possession where it appears that: 
1. he has performed open and unequivocal acts of repudiation amounting to an ouster of the cestui que trust or the other co-owners; 
2. such positive acts of repudiation have been made known to the cestui que trust or the other co-owners;
3. the evidence thereon should be clear and conclusive or convincing; and 
4. the period fixed by law has prescribed. 
• The period will commence to run from and after said repudiation and the knowledge thereof by the cestui que trust.
2. By third persons.
• Though the statute of limitations does not run between trustee and cestui que trust as long as the trust relation subsists, it does run between the trust and third persons. 
• Thus, a third person who holds actual, open, public, and continuous possession of a land, adversely to the trust, acquires title to the land by prescription as against such trust.

Acts amounting to repudiation of trust.

• Acts which may be adverse to strangers may not be sufficiently adverse to the cestui que trust. 
1. A mere silent possession of the trustee unaccompanied with acts amounting to an ouster of the cestui que trust cannot be construed as an adverse possession. 
2. His mere receipts of rents and profits from the property, the erection of fences and buildings adapted for the cultivation of the land held in trust, and the payment of land taxes, do not by themselves serve as proof of exclusive ownership. 
3. An action to compel the trustee to convey property registered in his name for the benefit of the cestui que trust does not prescribe unless the trustee repudiates the trust.
4. A denial of the trust made by a trustee to one who at the time of such repudiation is a minor, does not have the effect of abrogating the trust relation.

• In Pangan vs. Court of Appeals, the Supreme Court had occasion to lay down specific acts whic hare considered as acts of repudiation:

1. Filing by a trustee of an action in court against the trustor to quiet title to property, or for recovery of ownership thereof, held in possession by the former, may constitute an act of repudiation of the trust reposed on him by the latter. 
2. The issuance of the certificate of title would constitute an open and clear repudiation of any trust, and in the lapse of more than 20 years, open and adverse possession as owner would certainly suffice to vest title by prescription. 
3. An action for the reconveyance of land based on implied or constructive trust prescribes within 10 years. And it is from the date of the issuance of such title that the effective assertion of adverse title for purposes of the statute of limitations is counted.
4. The prescriptive period may only be counted from the time petitioners repudiated the trust relation in 1955 upon the filing of the complaint for recovery of possession against private respondents so that the counterclaim of the private respondents contained in their amended answer wherein they asserted absolute ownership of the disputed realty by reason of the continuous and adverse possession of the same is well within the 10-year prescriptive period. 
5. There is clear repudiation of a trust when one who is an apparent administrator of property causes the cancellation of the title thereto in the name of the apparent beneficiaries and gets a new certificate of title in his own name.  
6. It is only when the defendants, alleged co-owners of the property in question, executed a deed of partition and on the strength thereof obtained the cancellation of the title in the name of their predecessor and the issuance of a new one wherein they appear as the new owners of a definite area each, thereby in effect denying or repudiating the ownership of one of the plaintiff’s over his alleged share in the entire lot, that the statute of limitations started to run for the purposes of the action instituted by the latter seeking a declaration of the existence of the co-ownership and of their rights thereunder.

Prescriptibility of action for reconveyance based on implied trust.

1. Basis of action.
• An action for reconveyance is a legal remedy granted to a rightful owner of land wrongfully or erroneously registered under the Torrens System in the name of another to compel the latter to reconvey the land to him even after one (1) year from the issuance of the decree of registration, for such action does not seek to set aside the decree which is respected as incontrovertible and no longer open to review, but instead seeks to transfer or reconvey the land wrongfully or erroneously registered in another person’s name from said registered owner to the rightful owner or to one with a better right.
• It is incumbent upon the aggrieved party to show that:
• he has a legal claim on the property superior to that of the registered owner; and
• title to the property has not yet passed to the hands of an innocent purchaser.
2. Period of prescription.
• It is now well-settled that an action for reconveyance to enforce an implied trust in one’s favor prescribes in ten (10) years from the time the right of action accrues, the action being based upon an obligation created by law (see Art. 1144[2].) because just as a resulting trust is an offspring of the law, so is the corresponding obligation to convey the property to the true owner. 
• It is incumbent upon the party who sets up the defense of prescription (affirmative) to prove the date from which the prescriptive period began to run.
3. Where person claiming to be owner in actual possession of property. 
• The prescriptive rule applies only when the plaintiff or the person enforcing the trust is not in possession of the contested property, since if a person claiming to be the owner thereof is in actual possession of the property, the right to seek reconveyance, which, in effect, seeks to quiet title to property (see Arts. 476-481.), does not prescribe, for he may wait until his possession is disturbed or his title is attacked before taking steps to vindicate his right. 
• The reason for the rule is that his undisturbed possession gives him the continuing right to seek the aid of a court of equity to ascertain and determine the nature of the adverse claim of a third party and its effect on its own title, which right can be claimed only by one who is in possession. 
• The owner of real estate has possession either:
• when he himself is physically in occupation of the property, or 
• when another person who recognizes his rights as owner is in such occupancy.
4. When prescriptive period begins to run.
• The ten-year period of prescription of an action for reconveyance of property (real or personal) based on an implied trust starts from the moment the law creates the trust (when the cause of action arises) because the so-called trustee does not recognize any trust, and has no intention to hold for the beneficiary. 
• It has been held that where the action for reconveyance of real property is based on constructive trust (see Art. 1456.) resulting from its fraudulent registration in the name of another, the action may be filed from the discovery of the fraud or notice thereof, which is deemed to have taken place from the inscription of the instrument and/or the issuance of the new certificate of title by virtue thereof.
• The reference point is the date of registration of the deed or the date of issuance of said new certificate of title of the property which constitutes constructive notice to the public.
• It constitutes an open and clear repudiation of the alleged fiduciary or trust relationship and the lapse of ten years of adverse possession is sufficient to vest title by adverse possession.
• This rule applies only to the remedy of reconveyance which has its basis on Section 53 (par. 3.) of P.D. No. 1529, otherwise known as the Property Registration Decree and Article 1456 of the Civil Code. 
• Reconveyance is available in case of registration of property procured by fraud, thereby creating a constructive trust between the parties. 
• In another case, however, where the ownership of land was sold fictitiously to avoid a foreclosure of mortgage, it was ruled that the ten-year prescriptive period should be counted not from the registration of the simulated sale (see Arts. 1345, 1346.), but from the date of recording of the release of mortgage, on which date the cestui que trust was charged with the knowledge of the settlement of the mortgage obligation, the attainment of the purpose for which the trust was created.
• If the legitimate owner of the subject property which was fraudulently registered in the name of another had always been in possession thereof, the constructive notice rule cannot be applied. The action for reconveyance is in reality an action to quiet title; therefore, the action is imprescriptible. 
• Actions for reconveyance grounded on the nullity of the conveyance of the subject property are imprescriptible.
• In a case, where the registration under the Torrens System was secured through fraudulent misrepresentation, the period was reckoned not from the date of registration but from the time the true owner actually discovered the act of defraudation. 
• The Torrens title, according to the Supreme Court, does not furnish a shield for fraud. 
• In the absence of fraud, the period should be counted from the date adverse title was asserted, that is, from the registration of the title.
• Generally, an action for reconveyance of real property based exclusively on fraud prescribes in four (4) years from the discovery of the fraud; such discovery is deemed to have taken place upon the issuance of the certificate of title over the property. If the action is based on implied or constructive trust, it prescribes in 10 years from the alleged fraudulent registration or date of issuance of the certificate of title over the property. (see Art. 1456.) 
• Since such registration or issuance operates as a constructive notice to the whole world, the discovery is deemed to have taken place at that time. This is the general rule. 
• It has been held, however, that where the defendant acted in bad faith in securing title over real property, he is not entitled to the protection of the law for the law cannot be used as a shield for frauds and the prescriptive period for the filing of the action for reconveyance based on implied trust must be reckoned from the actual discovery of the fraud where such discovery was made after the date of registration. 
5. Where rights of the beneficiary are recognized by the trustee. 
• In such case, the ten-year period of prescription commences to run from the time the trustee begins to assert his title or repudiate the trust, or to hold adversely, as:
• when the trustee files an ejectment suit against the beneficiary, or 
• when he registers the deed of assignment of property to him and secures the cancellation of the certificate of title in the name of the former owner, and the issuance of new certificate of title in his own name, or when he sells portions of the property. 
• The exercise of such rights of dominion is anathema to the concept of a continuing and subsisting trust.
• Continuous recognition of a resulting trust precludes any defense of prescription or laches in a suit to declare and enforce the trust.
• Where the predecessor-in-interest of the claimant has appeared to be the registered owner of the property under the Torrens System for more than 30 years, his title has become indefeasible and his dominical rights over it can no longer be challenged. 
• In such case, any insinuation as to the existence of an implied or constructive trust should not be allowed.
6. When tacking of possession not permitted. 
• When a person through fraud succeeds in registering a land in his name, the law creates what is called a constructive trust in favor of the defrauded party. (see Art. 1456.) 
• The latter is granted the right to recover the property fraudulently registered within the period of ten (10) years.
• In the computation of time necessary for prescription, the present possessor may complete the period necessary for prescription by tacking his possession to that of his grantor. (see Art. 1138.) 
• This rule, however, applies only where there is privity between successive possessors. 
• It does not apply where the possessor came into possession of the property in dispute by virtue of sale that is null and void ab initio because the sale was entered into contrary to public policy or is absolutely fictitious or simulated.
7. Where property in possession of third person. 
• The only limitation upon the right of the beneficiary to recover title over the property held in trust is that the same must not have been transferred to an innocent purchaser for value in which event, his remedy is to ask for damages. 
• In a case, however, the claim by the respondent that reconveyance would not be legally possible because the property under litigation has already been mortgaged by him to a bank was held untenable for, otherwise, the judgment for reconveyance could be negated at the will of the holder of the title by the simple expedient of constituting a mortgage or other encumbrance on the property. 
• Being doubly in bad faith, the respondent must suffer the consequences. Given the undisputed facts of the case, the mortgage was declared void and its consequences were left between the mortgagor and the mortgagee. The Court observed that the mortgagee might even be faulted for not making the requisite investigation on the possession of the land mortgaged.

Laches in action to enforce a trust.

1. In case of express trusts.
• A cestui que trust is entitled to rely upon the fidelity of the trustee. 
• Laches applies from the time the trustee openly denies or repudiates the trust and the beneficiary is notified thereof, or is otherwise plainly put on guard against the trustee. 
• The repudiation of the trust must be clearly proved by the trustee. 
• In express trusts, the delay of the beneficiary is directly attributable to the trustee who undertakes to hold the property for the former, or who is linked to the beneficiary by a confidential or fiduciary relation. 
• The trustee’s possession is, therefore, not adverse to the beneficiary until and unless the latter is made aware that the trust has been repudiated. 
• In constructive trusts (that are imposed by law), there is neither promise nor fiduciary relation. 
• When it does not appear when the trustee repudiated the existence of the fiduciary relation, the same shall be taken to have been made only upon the filing of his answer to the complaint. 
2. In case of implied trusts. 
• It is well-established in American law of trusts (expressly made applicable by Art. 1442.) that implied trusts, as distinguished from express trusts, may be barred not only by prescription but also by laches. 
• Laches constitutes a defense to suit to declare and enforce an implied trust, and for the purpose of the rule, express repudiation is not required, unless the trustee fraudulently and successfully conceals the facts giving rise to the trust. 
• Inasmuch as the so-called trustee in a constructive or implied trust does not recognize any trust, and has no intent to hold for the beneficiary, the latter is not justified in delaying action to recover his property. 
• It is his fault if he delays. 
• If he so delays, his action may be barred by laches or extinctive prescription.
• The law protects those who are vigilant of their rights. 
• It is well-settled that the negligence or omission to assert a right within a reasonable time warrants not only a presumption that the party entitled to assert it either had abandoned it or declined to assert it but also casts doubt on the validity of the claim, since it is human nature for persons to assert their rights most vigorously when threatened or invaded. 
• Such undue neglect or delay to assert a right taken in conjunction with the lapse of time, more or less great, and other circumstances causing prejudice to the adverse party, operates as a bar in equity. 
• The defense of laches is an equitable one and does not concern itself with the character of the defendant’s title but only with whether or not by reason of plaintiff’s long inaction or inexcusable neglect, he should be barred from asserting his claim at all, because to allow him to do so would be inequitable and unjust to defendant. 
• Laches is not concerned merely with lapse of time, unlike prescription. 
• While the latter deals with the fact of delay, laches deals with the effect of unreasonable delay. 
• The doctrine of laches, however, is less strictly applied between near relatives than when the parties are strangers to each other. 
• The existence of a confidential relationship is an important consideration as it tends to excuse an otherwise unreasonable delay.
• Where a party clearly has no cause of action, the issue of prescription or laches becomes irrelevant.

Article 1448. 

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.

Sale to a party but price paid by another. 

• General rule.
• A resulting trust arises in favor of a person from whom a consideration comes for a conveyance of property, whether realty or personalty, to another. 
• The presumption is that he who pays for a thing intends a beneficial interest therein for himself with the legal estate in the buyer.
• The trust created is sometimes referred to as a purchase money resulting trust. 
• It occurs when there is:
1. an actual payment of money, property, or services, or an equivalent, constituting valuable consideration; and
2. such consideration must be furnished by the alleged beneficiary of a resulting trust.
• It is created in order to effectuate what the law presumes to have been the intention of the parties in the circumstances that the person to whom the land was conveyed held it as trustee for the person who supplied purchase money. 
• It is essential that:
1. there be an actual payment of money, property, or service, or an equivalent constituting valuable consideration and 
2. such consideration must be furnished by the alleged beneficiary of a resulting trust.
• The trust is rebuttable by proof of a contrary intention of the person from whom the consideration comes, and such proof may be by parol evidence. 
• The trust results only in favor of one advancing the consideration, and not in favor of one for whose benefit the purchase may have been made.
• A trust, which derives its strength from the confidence one reposes on another, especially between families, do not lose that character simply because of what appears in a legal document.
• Exceptions. 
• Title conveyed to a child.
• However, no trust is implied if the person to whom the legal estate is conveyed is a child, legitimate or illegitimate, of the payor, because it is presumed that a gift or donation was intended in favor of the child. 
• This presumption of a gift is rebuttable by proof of a contrary intention, and on such rebuttal, a resulting trust arises. 
• The reason for the presumption lies in the fact that the trustee may be under a disability. 
• Besides, it is unnatural that a parent could convey in a roundabout manner his property to his direct heirs (children) as trustee if he could do it directly by way of gift. 
• Sale to evade some rule of law.
• The parties must necessarily be subject to the same limitations on allowable stipulations in ordinary contracts. 
• What the parties then cannot expressly provide in their contracts for being contrary to law, morals, good customs, public order, or public policy (Art. 1306.), they cannot impliedly or implicitly do so in the guise of a resulting trust.
• Thus, if the purpose of the payor of the consideration in having title placed in the name of an- other was to evade some rule of law, the courts will not assist the payor in achieving his improper purpose (e.g., an alien or applicant who is ineligible to hold title to land, who used a per- son as a dummy) by enforcing a resulting trust for him in accordance with the “clean hands’’ doctrine. 
• The trust is invalid if its enforcement would be against public policy, even though its performance does not involve the commission of a criminal or tortious act by the trustee. 
• However, the court, on equitable grounds, may allow the payor to recover what he had paid with legal interest.
• Example:
• A property is sold to X who acquires title but the price is paid by Y for the purpose of having the beneficial interest in the property. 
• By operation of law, an implied trust arises with X as the trustee and Y, the beneficiary.
• If X is the legitimate or illegitimate child of Y, no trust is implied by law. 
• It is disputably presumed that there is a gift in favor of X, and consequently no trust is created in favor of Y, absent any clear proof to rebut the presumption.

Purchase by a person with his own funds for another. 

• One corollary of the rule that a conveyance to one person on a consideration from another raises a resulting trust in favor of the latter is that purchase by one person, on a consideration furnished by himself, where he takes the conveyance in the name of another, raises a resulting trust in favor of the former. 
• The rule rests on the presumption or implication of law of the intention of the purchaser that he intends the purchase for his own benefit and the conveyance in the name of another as a matter of convenience or arrangement for collateral purposes. 
• The trust which results under such circumstances does not arise from contract or agreement of the parties, but from the facts and circumstances, that is to say, it results because of equity and arises by implication or operation of law.
• Example:
• To prevent the eventual sale at public auction of the land of A (deceased owner) which was forfeited by the Government for delinquency in payment of real estate taxes, B paid the delinquent taxes and accepted receipts for payments issued in the name of A.
• Did B acquire the rights of A in and to said property byreason of said payments? No. 
• B became a trustee of the land for the benefit of the heirs of A.

Article 1449. 

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.

Donation to a person but beneficial interest vested in another. 

• An implied trust arises on a donation of property where it appears that although the legal estate is transmitted to the donee, he is to have no beneficial interest or only a part thereof. 
• In such case, a trust results in favor of the person in whom it is intended to vest the beneficial interest in the property donated, with the donee being the trustee.
• Example:
• Property is donated by A to B but only the legal title is transmitted to B, the beneficial  ownership of the whole property or a part thereof being vested in C. 
• Here, a trust is established by implication of law with B as the trustee and C, the beneficiary. 
• Art.1061. Every compulsory heir, who succeeds with other compulsory heirs, must bring into the mass of the estate any property or right which he may have received from the decedent, during the lifetime of the latter, by way of donation, or any other gratuitous title, in order that it may be computed in the determination of the legitime of each heir, and in the account of the partition. 

Article 1450. 

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.

Purchase with borrowed funds. 

1. Trust in favor of lender.
• The general rule is that the use of borrowed money in making a purchase does not raise a resulting trust in favor of the lender, even where the money is loaned to enable the borrower to purchase the property in question and the borrower promises, but fails, to execute a mortgage on the property after it is purchased to secure the loan. 
• Nor does the use of money given to one for the purchase of property raise a resulting trust on the property in favor of the donor.
2. Trust in favor of borrower. 
• When money is borrowed to purchase property, and the conveyance is made, not to the borrower, but to the lender who takes title to the property in his own name in order to secure the loan, a resulting trust in the property, binding the lender or payor (trustee) in favor of the borrower (beneficiary), arises. 
• In this case, the real purchaser is the borrower. 
• After payment of the amount loaned or paid, he has the right to redeem the property and compel a conveyance thereof to him, even if there is no mention of the interest of the borrower in the title of the lender.
• An agreement between the parties whereby the property purchased shall be considered sold to the trustee in case the beneficiary fails to reimburse him is tantamount to a pactum commissorium, which is expressly prohibited by Article 2088 of the Civil Code12 for in such case there would be automatic appropriation of the property by the trustee in the event of failure of the beneficiary to pay the loan. 

• Example:
• A buys a land in his own name from B with money borrowed from or paid by C. 
• There is no trust here. 
• The relation between A and C is that of debtor and creditor. 
• If the property is conveyed to C to secure the amount advanced, an implied trust is created by operation of law. 
• C becomes the trustee and A, the beneficiary. 
• But it is only after A reimburses C of the purchase price that the former can compel conveyance of the purchased property from the latter.

Article 1451. 

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.

Legal title to land inherited by heir placed in name of another. 

• Succession is a mode of acquisition by virtue of which the property, rights, and obligations to the extent of the value of the inheritance, of a person are transmitted through his death to another or others either by his will or by operation of law. (Art. 774.) 
• The rights to the succession are transmitted from the moment of the death of the decedent. (Art. 777.) 
• Where a person who has acquired land by inheritance causes the legal title to be placed in the name of another, a resulting trust is presumed in law in favor of the true owner, the heir. 
• Here, the heir himself by his voluntary action, causes the registration of his legal title under the name of another person. 
• Where, through fraudulent representations or by pretending to be the sole heir of the deceased, an heir succeeded in having the original title of a land in the name of the deceased cancelled and a new one issued in his name thereby enabling him to possess the land and get its produce, there is created what is called “constructive trust” in favor of the defrauded. 
• No trust relationship can exist over a property in favor of an heir as beneficiary where it appears that the deceased predecessor had no title to the property in question. 

Article 1452.

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.

Legal title to property purchased taken in one co-owner. 

• Where property is purchased by two or more persons and by common consent the legal title is placed in the name of only one of the co-owners for the benefit of all, a trust arises by implication of law in favor of the others in proportion to the interest of each.
• The property must be capable of private ownership; otherwise, Article 1452 is not applicable, as in the case of a fishpond of public domain the title to which remains in the Government.

Article 1453. 

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.

Conveyance under a promise to hold for, or transfer to another. 

• The trust established by virtue of this article is based on the promise or representation of the grantee to hold the property conveyed for, or transfer it to another or the grantor.
• The grantee is estopped from asserting ownership in himself by denying his representation as against the person for whose benefit the implied trust is created. 
• The rule in Article 1453 is founded upon equity, particularly where on the faith of the agreement or understanding, the grantee is enabled to gain an advantage in the purchase of the property or where the consideration or part thereof has been furnished by or for another. 
• Thus, it has been held that where property is taken by a person under an agreement to hold it for or convey it to another or to the grantor, or on certain conditions, a trust results for the benefit of such other or his heirs, which equity will enforce according to the agreement.
• Likewise, a person who, before consolidation of property in the purchaser under a contract of sale with pacto de retro, agrees with the vendors to buy the property and administer it until all debts constituting an encumbrance thereon shall have been paid after which the property shall be turned back to the original owners, is bound by such agreement; and upon buying the property under these circumstances, such person becomes in effect a trustee and is bound to administer the property in this character. '
• Article 1453 would apply if the person conveying the property did not expressly state that he was establishing the trust.

Article 1454. 

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.

Absolute conveyance to a person to secure performance of grantor’s obligation.

• Ordinarily, the creditor will require the execution by the debtor of a mortgage (see Art. 2124.) or a pledge (see Art. 2093.) as security for the fulfillment of the latter’s obligation. 
• In this case, the mortgagee or pledgee does not become a trustee. 
• But if an absolute conveyance of property is made instead in order to guarantee the performance of an obligation of the grantor toward the grantee, an implied trust is created by operation of law for the benefit of the grantor. 
• Upon offering to the grantee the fulfillment of the obligation, the grantor is entitled to a deed of reconveyance of the property so long as the rights of innocent third parties have not intervened.

Article 1455. 

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.

Purchase of property with use of trust funds.

• A purchase by a trustee, guardian or other person holding a fiduciary relationship of property, where he takes the conveyance in his own or third person’s name, using trust funds for the purchase, establishes a resulting trust for the benefit of the person to whom the funds belong. 
• Thus, an agent is bound to return to the principal the property acquired with the funds and at the instance of the principal.
•  He holds the property in trust for his employer or principal who can bring an action to compel a conveyance to him subject to the rights of an innocent purchaser for value
• “The rule stands on the moral obligation to refrain from placing one’s self in positions which ordinarily excite conflicts between self-interest and integrity. It seeks to remove the temptation that might arise out of such a relation to serve one’s self-interest at the expense of one’s integrity and duty to another, by making it impossible to profit by yielding to temptation. It applies universally to all who come within its principle.”
• The above rule of a resulting trust goes, of course, to the fact of consideration, and has nothing to do with fraud or breach of confidence. 
• A constructive trust arises on a purchase with the use of trust funds where there is fraud or breach of confidence.

Article 1456. 

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.

Acquisition of property through mistake or fraud.

• Constructive trust created. 
• Article 1456 illustrates a constructive trust. 
• Where a party acquires through mistake or fraud a legal title to property to which another has a better right, there is created by law what is termed in jurisprudence as “constructive trust” in favor of the aggrieved party who is truly entitled to it or his successors-in-interest, and grants to the latter the right to recover his or their title over the property by way of reconveyance while the same has not yet passed to an innocent purchaser for value, in keeping with the primary principle of law and equity that one should not unjustly enrich himself at the expense of another.
• The grantor may operate to avail of an action to enforce a constructive trust or the quasi-contract of solutio indebiti under Article 2154. Under Article 1145(2), however, an action upon a quasi-contract must be commenced within six (6) years.
• The presence of fraud or mistake creates an implied trust for the benefit of the rightful and legal owner giving him the right to seek reconveyance of the property. 
• All that must be alleged in the complaint are two (2) facts: 
1. that the plaintiff was the owner of the property; and 
2. that the defendant had illegally dispossessed him of the same. 
• Applying the rule in Article 1456, the Supreme Court, held that a buyer of a parcel of land at a public auction to satisfy a judgment against a widow, acquired only 1/2 interest on the land corresponding to the share of the widow and the other half belonging to the heirs of her husband became impressed with a constructive trust in behalf of said heirs. 
• A purchaser in bad faith is, by Article 1456, considered a trustee of an implied trust for the benefit of the true owner of the property. That being the case, he may not successfully set up prescription as a defense. 
• Under the Article, the “mistake’’ or “fraud’’ that results in an implied trust being impressed upon the property involved, may be the mistake or fraud of a third person, and need not be a mistake or fraud committed directly by the trustee himself under the implied trust. 
• A constructive trust unlike an express trust does not emanate from, or generate a fiduciary relation. 
• While in an express, a beneficiary and trustee are linked by confidential or fiduciary relations, in a constructive trust, there is neither a promise nor a fiduciary relation to speak of and the so-called trustee neither accepts any trust nor intends holding the property for the beneficiary.
• Not trust in the technical sense. 
• The use of the word “trust” in Article 1456 is not basically accurate. The law has styled such a situation a “trust” and the person obtaining the property a “trustee” for want of a better term as such person has no title to the property and really holds it for the true owner. 
• “But as courts are agreed in administering the same remedy in a certain class of frauds as are administered in fraudulent breaches of trusts, and as courts and the profession have concurred in calling such frauds as constructive frauds, there can be no misapprehension in continuing the same phraseology while a change might lead to confusion and misunderstanding.’’
• The trust alluded to, as just pointed out, is constructive trust arising by operation of law. It is not trust in the technical sense for in a typical trust, confidence is reposed in one person for the benefit of another respecting property which is held by the former for the benefit of the latter. 
• A constructive trust unlike an express trust does not emanate from, or generate a fiduciary relation. While in an express, a beneficiary and trustee are linked by confidential or fiduciary relations, in a constructive trust, there is neither a promise nor a fiduciary relation to speak of and the so-called trustee neither accepts any trust nor intends holding the property for the beneficiary
• It is created as a means of affording relief to the innocent, and constitutes a remedial device “through which preference of self is made subordinate to loyalty to others.’’
• Remedy of owner under the torrens system.
• The sole remedy of the landowner whose property has been wrongfully or erroneously registered under the torrens system in another’s name is, after one year from the date of the decree of registration, not to set aside the decree but, respecting it as incontrovertible and no longer open to review, to bring an ordinary action in the ordinary court of justice for reconveyance or, if the property has passed into the hands of an innocent purchaser for value, for damages. 
• The principle that a trustee who takes a torrens title in his name cannot repudiate the trust by relying on the registration, is a well-known exception to the principle of conclusiveness of a certificate of title. 
• The beneficiary has the right to enforce the trust, notwithstanding the irrevocability of the torrens title, and the trustee and his successors-in-interest are bound to execute the deed of reconveyance. After all, the torrens system was never designed to shield and protect one who had committed fraud or misrepresentation and thus holds title in bad faith. 
• It does not create or vest title but only confirms and records title already existing and vested. Where one does not have any rightful claim over a real property, the torrens system of registration can confirm or record nothing. 
• Where a party is in actual possession of the property, the action to enforce the trust and recover the property and thereby quiet title thereto, is imprescriptible. 

Article 1457. 

An implied trust 

may be proved by oral evidence.

Proof of implied trust.

• An express trust concerning an immovable or any interest therein may not be proved by parol or oral evidence. (Art. 1443.)
• An implied trust, however, whether involving realty or personalty, may be proved by oral evidence. (Art. 1457.) 
• Thus, where the grantor conveys land to the grantee with the understanding that afterthe latter’s death the property would be returned to the grantor or his heirs, an implied trust is created in favor of the grantor or his heirs (Art. 1453.) which may be proved by parol evidence.
• Trustworthy oral evidence is required to prove an implied trust because oral evidence can be easily fabricated. It cannot rest on loose, equivocal or indefinite declarations. 
• In order to establish an implied trust in real property, by parol evidence, the proof should be as fully convincing as if the acts giving rise to the trust obligation are proven by an authentic document. 
• An implied trust, in fine, cannot be established upon vague and inconclusive proof.
• Thus, in a case, where the supposed trustees had appeared to be the registered owners of the lot in question for more than forty years and had possessed it during that period, and the trustors who created the alleged trust, died a long time ago, “their title and possession cannot be defeated by oral evidence which can be easily fabricated. 
• Any pretension as to the existence of an implied trust should not be countenanced.”
• The doctrine of implied trust finds no application where there are no proven facts to support it. 
• While an implied trust (of real and personal property) does not require the formalities of an express trust over realty which as mandated by Article 1443 cannot be proved by oral evidence, still there must be proof that the trustor wanted to grant one party only the beneficial ownership of a property, although said beneficiary may have legal title in himself. 
• The bare existence of confidential relation between grantor and grantee (mother-in-law and son-in-law) does not, standing alone, raise the presumption of fraud. 
• A deed (of sale) will not be set aside merely because the grant or and the grantee sustained a confidential relationship where the evidence shows no fraud or abuse of confidence.