What are the Legal Implications of the new Supreme Court’s Decision on Trust Deeds with Real Estate?

supreme court trust decision transaction agreement sale

The discussed decision, aside from addressing a problem of undoubted practical importance, serves as a fertile ground from which to draw certain insights to explore – on a more general level and within the limits allowed by this writing – the rationality of legal reasoning and argumentative processes.

Against the backdrop of the question brought before its examination, the United Sections of the Supreme Court first recognized the problem of the conceptual configuration of the fiduciary transaction. The Court recalls that doctrinal elaboration has long acknowledged the variety of the “phenomenon,” to the extent that, in the absence of an organic legislative discipline, it is considered correct to discuss trust in terms of “case law” rather than “specific cases,” distinguishing various types according to structure or purpose: static and dynamic; cum creditor and cum friend; Germanic and Romanistic.

The case investigated by the United Sections can be attributed to the Romanistic model of trust cum amico: the trustee becomes the owner of the property – following the purchase with funds provided by the settlor – and undertakes to transfer it back to the settlor. Thus, the question arises for the Court: whether the assumption of this obligation requires written form or not. An issue, moreover, drawn from a further question: if, in the absence of a written trust pact, the unilateral declaration of the trustee can constitute a valid source of the obligation to transfer the real estate to the settlor, with more or less explicit terms recognizing the existence of an oral trust transaction and undertaking to transfer the property back to the settlor.

As for the causal foundation of the phenomenon, the Court recalls that, on the one hand, proponents of the so-called monistic thesis construct the transaction as a unitary contract, characterized by a cause fiduciae consisting of a transfer of ownership, the management of the asset by the trustee, and the assumption of a transfer obligation. On the other hand, there are those who, considering the reference to the cause fiduciae inadequate to exhaust the morphological data of the phenomenon, advocate the so-called pluralistic thesis: in the operation, several transactions would emerge, with a cause different from the trust, relegated to the motive of the operation. In particular, there would be a corrective transfer transaction from a mandatory pact obligating the grantor to exercise the bundle of rights transmitted to him following the instructions of the settlor.

The motivation of the decision, regarding the theoretical framing of the fiduciary transaction, is limited to mentioning the individual doctrinal positions, clarifying that the question raised by the interlocutory order “actually raises a practical problem concerning the identification of a detailed rule whose solution is independent of adherence to one or the other of the theses just exposed.” The discourse then revolves around a question: is the obligation to transfer the real estate to the settlor subject to written form ad substantiam?

Two orientations were reviewed by the United Sections. According to the traditional approach, the transaction involving real estate, involving transfer obligations of the property from the trustee to the settlor, would be subject – similarly to the preliminary contract obliging to transfer real estate – to written form ad substantiam. The provision contained in art. 1351 of the Civil Code, regarding the form for relationem of the preliminary contract, would be applicable analogously to the transaction; consequently, the commitment to transfer (or retransfer) the property should be contained in a written and bilateral declaration.

From a different perspective, with judgment no. 10633 of May 15, 2014, the Court of Cassation, called upon to judge a case of fiduciary pact concluded orally, did not expressly address the issue of the form of the pactum fiduciae, since, for the decision, it deemed it sufficient to establish that the source of the trustee’s obligation to transfer the property could also be found in the sole unilateral declaration with which the latter commits in writing to transfer to the settlor (or to a third party indicated by him) the ownership of one or more real estate assets in the execution of the previous fiduciary agreement. In other words, according to judgment no. 10633/2014, the unilateral written declaration of the trustee – note, recognizing the previous oral pactum fiduciae – would constitute an autonomous source of the obligation to transfer the property, judicially enforceable.

This last ruling, moreover, is part of a path already traced by decision no. 20051 of September 2, 2013: regarding the mandate without representation to purchase real estate, in fact, the Supreme Court, changing its previous approach with surprising reversal, has established that written form is not necessary, as it is sufficient, for validity (and therefore of the enforceability of the transfer obligation), a written act of the mandatary, even after the acquisitions made, recognizing the commitment previously undertaken.

Departing from the previous rulings of legitimacy – all aimed at the need for a written act, albeit with different solutions (bilateral and substantial according to the traditional approach; unilateral and evidentiary according to the 2014 ruling) – and specifying that it intends to circumscribe the examination

to the specific question of the necessity of written form, the United Sections return to express the issue: is the obligation to transfer ownership from the trustee to the settlor of a real estate subject to written form ad substantiam?

Against the traditional approach, and by reiterating the recent orientation already highlighted with judgment no. 10633 of 2014, the United Sections establish that the source of the trustee’s obligation to transfer the property can also be found in the sole unilateral declaration of the trustee, with which the latter – acknowledging the previous pact concluded orally – commits in writing to transfer to the settlor (or to a third party indicated by him) the ownership of one or more real estate assets.

The rejection of the traditional approach, moreover, finds support in the systematic coherence of the ruling: as stated by the Court, the transaction cannot be subsumed into the preliminary contract. Therefore, the fiduciary pact, even if it presupposes the transfer of ownership, cannot be subject to the written form required by the legislation for the preliminary contract, both in the case in which the pact is concluded before the transfer of the real estate and in that in which it is stipulated after the same transfer.

In conclusion, the United Sections – by following the orientation outlined in judgment no. 10633 of 2014 – affirm that the obligation of the trustee to transfer ownership to the settlor of a real estate asset can also be found in the sole unilateral declaration of the trustee, recognizing the existence of a previous fiduciary pact concluded orally, with the consequence that the transfer obligation can be enforced even without written form ad substantiam.