Hilarion, Jr.

and Enrico ORENDAIN, represented by

Fe D. ORENDAIN, petitioners, vs.
Trusteeship of the Estate of Doa Margarita RODRIGUEZ, respondent.
G.R. No. 168660, June 30, 2009
FACTS:
On July 19, 1960, the decedent, Doa Margarita Rodriguez, died in Manila,
leaving a last will and testament. The will was admitted to probate. At the
time of her death, the decedent left no compulsory or forced heirs and,
consequently, was completely free to dispose of her properties, without
regard to legitimes, as provided in her will. Some of Doa Margarita
Rodriguezs testamentary dispositions contemplated the creation of a trust to
manage the properties and the income from her properties for distribution to
beneficiaries specified in the will.
Thus, the following pertinent items in the will paint the desire of the
decedent:
1. Clause 2 instructed the creation of trust;
2. Clause 3 instructed that the remaining income from specified properties,
after the necessary deductions for expenses, including the estate tax, be
deposited in a fund with a bank;
3. Clause 10 enumerated the properties to be placed in trust for perpetual
administration (pangasiwaan sa habang panahon);
4. Clauses 11 and 12 directed how the income from the properties ought to
be divided among, and distributed to the different beneficiaries; and
5. Clause 24 instructed the administrators to provide medical support to
certain beneficiaries, to be deducted from the fund deposits in the bank
mentioned in Clauses 2 and 3.
Almost four decades later, herein petitioners Hilarion, Jr. and Enrico
Orendain, heirs of Hilarion Orendain, Sr. who was mentioned in Clause 24 of
the decedents will, moved to dissolve the trust on the decedents estate,
which they argued had been in existence for more than twenty years, in
violation of Articles 867 and 870 of the Civil Code.
The trustees argued that the trust instituted may be perpetual citing the
case of Palad, et al. v. Governor of Quezon Province where the trust holding
the two estate of one Luis Palad was allowed to exist even after the lapse of
twenty years.
ISSUE:

1. Whether or not a trust may be perpetual.

2. Whether or not the named trustees may be considered as heirs to
the estate.
RULING:
The general rule remains that upon the expiration of the twenty-year
allowable period, the estate may be disposed of under Article 870 of the New
Civil Code, which regards as void any disposition of the testator declaring all
or part of the estate inalienable for more than 20 years.
The Palad Case is not violative of such provision of the law by the trust
constituted by Luis Palad because the will of the testator does not interdict
the alienation of the parcels devised. The will merely directs that the income
of said two parcels be utilized for the establishment, maintenance and
operation of the high school.
Said Article 870 was designed to give more impetus to the socialization of
the ownership of property and to prevent the perpetuation of large holdings
which give rise to agrarian troubles. The trust involved in the Palad case
covers only two lots, which have not been shown to be a large landholding.
And the income derived therefrom is being devoted to a public and social
purpose the education of the youth of the land. The use of said parcels
therefore is in a sense socialized.
In the present case, however, there is a different situation as the testatrix
specifically prohibited the alienation or mortgage of her properties which
were definitely more than the two (2) properties, unlike in the Palad case.
The herein testatrixs large landholdings cannot be subjected indefinitely to a
trust because the ownership thereof would then effectively remain with her
even in the afterlife.
Apparent from the decedents last will and testament is the creation of a
trust on a specific set of properties and the income accruing therefrom.
Nowhere in the will can it be ascertained that the decedent intended any of
the trusts designated beneficiaries to inherit these properties. Therefore, the
probate court must admit the case to determine the properties to be subject
to intestate succession as well as the nearest relative of the deceased that
may inherit the said properties under the perpetual trust.

Can a testator use a trust to prevent the sale of his properties in saecula
saeculorum after his death?
In her will, Doa Margarita Rodriguez provided for the creation of a trust to
manage the income from her properties. She prohibited the mortgage or
sale of certain of these properties, so that the income from these properties
can be used for the benefit of the specified beneficiaries. She wrote:
CLAUSULA DECIMA O PANG-SAMPU: Ipinaguutos ko na ang manga
pagaareng nasasabi sa Clausulang ito ay pangangasiwaan sa habang
panahon, at ito nga ang ipagbubukas ng Fideicomiso sa Jusgado
pagkatapos na maayos ang naiwanan kong pagaare. Ang pangangasiwaang
pagaare ay ang manga sumusunod . . .
Ang lahat ng pagaaring nasasabe sa Clusulang ito (hindi kasama ang
generator at automovil) hindi maisasanla o maipagbibili kailan man,
maliban sa pagaaring nasa Quezon Boulevard, Maynila, na maaring isanla
kung walang fondo na gagamitin sa ipagpapaigui o ipagpapagawa ng
panibago alinsunod sa kaayusang hinihingi ng panahon. (underscoring
supplied)
At the time of her death in 1960, Margarita left no compulsory or forced heirs
and, consequently, was completely free to dispose of her properties, without
regard to legitimes, as provided in her will.
Almost four decades after her death, petitioners Hilarion, Jr. and Enrico
Orendain, heirs of Hilarion Orendain, Sr. (who was mentioned in Clause 24 of
Margaritas will), moved to dissolve the trust on Margaritas estate, which
they argued had been in existence for more than 20 years, in violation of
Article 870 of the Civil Code, among others.
Article 870 provides:
The dispositions of the testator declaring all or part of the estate inalienable
for more than twenty years are void.
In 2005, the Regional Trial Court (RTC) ruled that while the testamentary
disposition prohibiting the mortagage or sale of the property is void after the
lapse of the 20 year period, the trust does not become void after the 20 year
period. According to the RTC:
There is no question that the testamentary disposition of Doa Margarita
Rodriguez prohibiting the mortgage or sale of properties mentioned in clause

X of her Last Will and Testament forevermore is void after the lapse of the
twenty year period. However, it does not mean that the trust created by
[the] testatrix in order to carry out her wishes under clauses 12, 13 and 24
will also become void upon expiration of the twenty year period. As ruled by
the Supreme Court in Emetrio Barcelon v. CA, the codal provision cited in
Art. 870 is clear and unequivocal and does not need any interpretation. What
is declared void is the testamentary disposition prohibiting alienation after
the twenty year period. Hence, the trustees may dispose of the properties
left by the testatrix in order to carry out the latters testamentary disposition.
In other words, the RTC ruled that:
(1)

only the perpetual prohibition to alienate or mortgage is void;

(2)
the trust over her properties stipulated in Clauses 12, 13 and 24 of
the will remains valid; and
(3)
the trustees may dispose of these properties in order to carry out the
latters testamentary disposition.
The Supreme Court disagreed with the RTCs ruling. According to the
Supreme Court, the RTC was mistaken in denying petitioners motion to
dissolve the trust and ordering the disposition of the properties in Clause 10
according to Margaritas wishes. As regards these properties, intestacy
should apply as the decedent did not institute an heir therefor (citing Article
782, in relation to paragraph 2, Article 960 of the Civil Code). The Supreme
Court ruled that the trust on Margaritas properties must be dissolved and
remanded the case to the RTC to determine the following:
(1)
the properties listed in Clause 10 of the will, constituting the
perpetual trust, which are still within reach and have not been disposed of as
yet; and
(2)
the intestate heirs of the decedent, with the nearest relative of the
deceased entitled to inherit the remaining properties.
The Supreme Court was conscious that its ruling may be read to be a
departure from Palad, et al. vs. Governor of Quezon Province, et al., 46 SCRA
354 (1972), wherein the Supreme Court ruled that Article 870 is not violated
by a trust created by the testator:
Article 870 of the New Civil Code, which regards as void any disposition of
the testator declaring all or part of the estate inalienable for more than 20

years, is not violated by the trust constituted by the late Luis Palad; because
the will of the testator does not interdict the alienation of the parcels
devised. The will merely directs that the income of said two parcels be
utilized for the establishment, maintenance and operation of the high school.
Said Article 870 was designed to give more impetus to the socialization of
the ownership of property and to prevent the perpetuation of large holdings
which give rise to agrarian troubles. The trust herein involved covers only
two lots, which have not been shown to be a large landholding. And the
income derived therefrom is being devoted to a public and social purpose
the education of the youth of the land. The use of said parcels therefore is in
a sense socialized. There is no hint in the record that the trust has spawned
agrarian conflicts.
The Supreme Court explained the difference as follows:
In this case, however, we reach a different conclusion as the testatrix
specifically prohibited the alienation or mortgage of her properties which
were definitely more than the two (2) properties in the aforecited case. The
herein testatrixs large landholdings cannot be subjected indefinitely to a
trust because the ownership thereof would then effectively remain with her
even in the afterlife.
The Supreme Courts statement suggests that following Palad, a trust may
be upheld if the testator does not expressly prohibit the mortgage or sale of
the properties covered by the trust. (Hilarion, Jr. and Enrico Orendain,
represented by Fe Orendain vs. Trusteeship of the Estate of Doa Margarita
Rodriquez, G.R. No. 168660, June 30, 2009)

G.R. No. 168660

June 30, 2009
Orendain vs. Trusteeship of the Estate of Doa Rodriquez

Facts:

MR died with a will. She left no compulsory or forced heirs. In her will, she
created a trust over her estate which expressly prohibits alienating or
mortgaging some specified pieces of property. The Supreme Court cited its
previous ruling that such provision on perpetual trust shall only last for a
maximum of twenty years in accordance with Article 870 of the Civil Code.
The petitioners came to court to move for the dissolution of the trust having
already existed for more than twenty years.

Issues:

w/n the trust should be dissolved

w/n petitioners are entitled to inherit the remaining properties

Held:

The trust should be dissolved having lapsed for more than twenty years.
The petitioners are not necessarily entitled to inherit. The lower court must
determine who are the heirs entitled.