2/19/2018 TRUSTEES

Rule 98

SUBMITTED BY:
ARCISO, DIANE GALE
GARCIA, JUDYLYN
MARZAN, DINA

SECTION 3C
 RULE 98
TRUSTEES

A trust is a confidence reposed in one person, called the trustee, for the
benefit of another, called the cestui que trust, with respect to property held by
the former for the benefit of the latter.
It is fiduciary in nature, which is created by law or contract.
PARTIES
Generally, at least three (3) people are needed for an express trust.
1. Trustor- creator/settlor/grantor.
- the person who intentionally creates or establishes the trust. He
transfers legal ownership pf property or assets to a person for the
benefit of a third party.

2. Trustee- the person who takes and holds the legal title to the property in
trust and manages it solely for the benefit of another, with certain powers
and subject to certain duties. The trustee may be a natural person or a legal
entity.
- He is a person to whom the property of someone else is fictitiously
attributed by the law, to the extent that the rights and powers thus
vested in a nominal owner shall be used by him on behalf of the
real owner.

3. Beneficiary or cestui que trust- the person who has the equitable title or
interest in the property and enjoys the benefit of the administration of the
trust by the trustee. He is the recipient of the trust. The beneficiary may also
be a natural person or a legal entity. The trust may provide for more than
one beneficiary.

 The trustor may be the beneficiary at the same time, but not the sole trustee
and the sole beneficiary of a single trust. In such case, both the equitable
title and legal title to the trust property would be merged in the trustee and
he would hold the property free of any trust. 1

1
De leon, Partnership, Agency and Trust, pp 631-632
KINDS OF TRUST

Express Trust
- one created by the direct and positive acts of the parties, by some writing
or deed, or will, or by the words evidencing an intention to create a trust.
- Those trusts voluntarily and intentionally, created by direct and positive act
of the trustor, by some writing, deed, will, or oral declaration evidencing an
intention to create the trust.
- The acceptance or assent of the beneficiary to the trust is essential to the
creation and validity of an express trust

Elements:
1. a competent trustor and trustee;
2. an ascertainable trust res; and
3. Sufficiently certain beneficiaries

Illustrative case:
Vda. De Mapa vs. CA
154 SCRA 294

Facts: In her will, T, testatrix, designated her husband, H, as universal and

sole heir with the oblation to deliver the properties in question to certain persons
who were referred to as “beneficiaries”. The word “trust” does not appear in the
will.
Issue: Did T effectively create a trust in favor of the parties over the
properties adverted to in the will?
Held: 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.

Implied Trust
- one which, without being express, is deducible from the nature of the
transaction as a matter of intent, or which are super induced on the
 transaction by operation of law as matters of equity, independent of the
particular intention of the parties 2

Example: 1.
ART. 1448, Civil Code. 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 if the child.
Example 2:

Property is donated by A to B but only the legal title is transmitted to

B, the beneficial owner of the whole property or a part thereof being vested
in C.

There is a trust established by implication of law with B as the trustee

and C, the beneficiary.
Distinctions of Express and Implied Trust

Express trust Implied trust

Intention of the trustor or Operation of law
parties. Independently of the
Creation of trust Direct and positive acts of particular intention of
the partied by some the parties.
writing or deed or will.
(Immovable) cannot be (immovable) may be
Proof of trust proved by parole proved by parole
evidence. evidence.
For laches or acquisitive Laches constitutes a
prescription may bar an bar to actions to
action to enforce an enforce an implied
express trust, an express trust even where there
Repudiation repudiation made known is no repudiation,
to the beneficiary, proven unless there is
by clear and convincing concealment of the
evidence should be fact giving rise to the
made. trust

2
89 C.J.S. 724; Philippine National Bank vs. CA, 217 SCRA 347 (1993)
JURISDICTION
Will: RTC or MTC which admitted the will to probate.

MTC has exclusive original jurisdiction over the probate proceedings,

testate or intestate, where the gross value of the estate does not exceed
P300,000.00 outside Metro Manila, or, P400,000.00 within Metro Manila.

RTC has exclusive original jurisdiction over the probate proceedings where
the gross value of the estate exceeds P300,000.00 outside Metro Manila, or,
exceeds P400,000.00 within Metro Manila.
Written Instrument: RTC of the province where the property is situated.
When is a trustee necessary?
A trustee is necessary:

a. To carry into effect a will where the testator who expressly intended the
creation of trust omitted appointing a trustee in the Philippines;

b. To carry into effect other written instruments where the trustee declines,
resigns, dies or is removed before the accomplishment of trust (contractual trust).
In Lorenzo vs Posadas, GR No. L-43082, June 18, 1937, a probate court may
exercise sound judgment in appointing a trustee to carry into effect the provisions
of the will - where a trust is actually created by the will by the provision that certain
of the property shall be kept together undisposed during a fixed period and for a
stated purpose.
Does Rule 98 apply to implied trust?

No. Rule 98 only applies to express trust, one which is created by a will or
written instrument.
Can a trustee acquire property by prescription?
General Rule:

No, because the trustee is not holding the property in the concept of
ownership but only in behalf of the cestui que trust.

An action to compel a trustee to convey property registered in his name in

trust for the benefit of the cestui que trust does not prescribe. The trustee’s
possession is not adverse and, therefore, cannot ripen into a title by prescription.
 Exception:

Prescription may arise where there is adverse possession of the property. To

constitute adverse possession, the following requisites must concur:

1. that the trustee has performed unequivocal acts of repudiation

amounting to the ouster of the cestui que trust;

2. that such positive acts of repudiation have been known to the cestui que
trust; and

3. that the evidence thereon should be clear and conclusive. (Ceniza v.

CA, 181 SCRA 552)
POWERS OF TRUSTEES
Sec. 2. Appointment and powers of trustees under will. Executor of former
trustee need not administer trust. – if a testator has omitted in his will to appoint a
trustee in the Philippines, and if such appointment is necessary to carry into effect
the provisions of the will, the proper CFI may, after notice to all persons interested,
appoint a trustee who shall have the same rights, powers, and duties, and in
whom the estate shall vest, as if he had been appointed by the testator. x x x.

The powers of a trustee appointed by a Philippine court cannot extend

beyond the confines of the territory of the Republic of the Philippines. His authority
cannot extend beyond the jurisdiction of the country under whose court he was
appointed.

A trustee is bound to comply with the directions contained in the trust

instrument defining the extent and limits of his authority, and the nature of his
power and duties.
CONDITIONS OF BOND

 The bond is fixed by the court.

1. make and return to the court a true inventory of all real and personal
estate that at the time of the inventory shall have come to his
possession or knowledge;
2. manage and dispose of all such estate according to law and will of
the testator or provisions of the instrument or order under which he
was appointed;
3. render a true account of the property in his hands under oath at least
once a year; and
 4. at the expiration of the trust, settle his accounts I court and pay over
and deliver all the estate remaining in his hands, or due from him on
such settlement, to the person or persons entitled thereto.
EFFECT OF FAILURE TO POST BOND
It is considered a declined or resigned trust.

Neglect of trustees to file bond will be interpreted by the court as

resignation or decline to accept the trust.
May a trustee be compensated?

Yes. The compensation of the trustee shall be fixed by the court, if it be not
determined in the instrument creating the trust. (Sec. 7, Rule 98)

PROCEDURAL REQUIREMENTS FOR THE REMOVAL OF TRUSTEE

Petition of Beneficially
the parties intrested

Notice to the Notice to all

trustee persons interested

Hearing Hearing

Removal: Removal: insane or

essential to the otherwise incapable of
interest of the discharging his trust or
petitioners evidently unsuitable
therefor
GROUNDS FOR REMOVAL

1. the removal appears essential in the interest of the petitioners;

2. the trustee is insane; or
3. the trustee is otherwise incapable of discharging the trust or is evidently
unsuitable to act as one
TERMINATION OF EXPRESS TRUST

1. Expiration of period fixed.

2. Accomplishment of purpose - when the purpose has not yet been fulfilled,
then on the date specified.
3. Mutual agreement of all beneficiaries.
4. Exercise of power to terminate – under the terms if the trust deed, the trustor,
trustee, or someone else may have the power to terminate the trust.
o Upon termination of a trust, any balance of funds reverts to the trustor
or is disposed of in accordance with the instructions contained in the
trust.
 EXPRESS TRUST

SEC 2: SEC 3:
Appointment of Written Appointment of
Will
trustees under will instrument new trustee under
written instrument

Appointment
RTC in which the RTC of any province in which
of trustee who
will was allowed some property affected by
the trust is situated derives his
authority from
without the
Philippines

Filing of bond by the trustee

GR: Neglect of a trustee to file a bond will be
interpreted by the court as resignation or
decline to accept the trust.
EXEMPTED FROM BOND WHEN REQUESTED BY
THE:
1. Testator
2. All persons beneficially interested

Acts of administration by the trustee (Sec 9)

-sale or encumbrance of any real or personal
property
-re-investment and application of the
proceeds that will best effect the objects of
the trust

REMOVAL OF TRUSTEE:

1. when it appears essential in RESIGNATION OF TRUSTEE:

the interest of the petitioners;
2. the trustee is insane; A trustee may resign his trust if it
3. the trustee is otherwise appears to the court proper to
incapable of discharging the trust allow such resignation
or is evidently unsuitable to act
as one.
 TERMINATION OF TRUSTEESHIP

Trusteeship is terminated upon turning over the

property to beneficiary after expiration of trust
(period may be provided for in the will or trust
contract.)