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33453216-UP-SpecPro-Reviewer-2008

33453216-UP-SpecPro-Reviewer-2008

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Published by: Aubrey Venus Dizon Almacin on Mar 26, 2011
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11/29/2012

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PROCEDURE FOR APPOINTMENT OF
TRUSTEES UNDER RULE 98

DEFINITION

• The legal relationship between a person having
an equitable ownership in the property and
another person owning the legal title to the
property; the equitable ownership of the former
entitles him to performance of certain duties
and the exercise of certain powers by the
latter. [Saltiga v. CA (1999)]
DECLARATION OF TRUST – Act by which a
person acknowledges that the property, title to
which he holds, is held by him for the use of
another. [De Leon v. Molo-Peckson (1962)]

PARTIES TO A TRUST [Regalado]
1) Trustor
2) Trustee
3) Beneficiary (cestui que trust)

KINDS OF TRUST [Saltiga v. CA (1999)]
1) EXPRESS – Created by parties’ direct and
positive acts; by some writing/words
evidencing an intention to create a trust.
2) IMPLIED – Deducible from the nature of the
transaction as matters of intent; or
superinduced on the transaction by operation
of law as a matter of equity, independently of
the parties’ particular intention.
a) RESULTING TRUSTS – Based on equity
that valuable consideration (and not title)
determines the equitable title/interest, and
are presumed always to have been
contemplated by parties.
b) CONSTRUCTIVE TRUSTS – Created by
the construction of equity in order to satisfy
the demands of justice and prevent unjust
enrichment. They arise contrary to
intention against one who fraudulently
obtains/holds the legal right to property
which he should not, in equity, hold.

SCOPE AND APPLICABILITY

• Rule 98 applies only to express trusts under
CC. [Regalado]
• Express trust on an immovable, or interests in
it, may not be proved by parole evidence. [Art.
1443, CC]

• While an implied trust may be established
by parol evidence, an express trust cannot.
Even then, an implied trust cannot be
established upon vague and inconclusive
proof. [Heirs of Lorenzo Yap v. CA (1999)]
• No particular words are required to create an
express trust. It is sufficient that a trust is
clearly intended. [Art. 1444, CC]
• The right creating/declaring a trust need
not be contemporaneous or inter-parties.
An express trust may even be declared by
a writing made after the legal estate has
vested in the trustee. The fact that an
express trust was created by a deed which
was absolute on its face may be shown by
a writing separate from the deed itself. [De
Leon v. Molo-Peckson (1962)]

• A trust shall not fail because the trustee
appointed declines. [Art. 1445, CC]
Exception: The contrary appears in the
instrument constituting the trust.
• Beneficiary’s acceptance is necessary. But if the
trust does not impose any onerous condition on
the beneficiary, his acceptance is presumed;
Exception: If there is contrary proof. [Art.
1446, CC]

General rule: A voluntary trust is irrevocable
without the consent of the beneficiary. [De
Leon v. Molo-Peckson (1962)]

Exception: If the power to revoke was
reserved.

VENUE [Rule 98, Sec.1]

• If a trustee is necessary to carry into effect a
will/instrument, the trustee shall be appointed
by the RTC where:
1) the will was allowed; or
2) the property was located.

TRUSTEE’S APPOINTMENT

• If testator omitted appointment of trustee, the
court may appoint a trustee. That trustee shall
have the same rights, powers and duties as if
he was appointed by the testator. [Rule 98,
Sec. 2]

• The power to appoint a trustee is discretionary
with the court, and the appellate court will
decline to interfere except in cases of clear
abuse. Thereafter, it is likewise the discretion
of the court to remove the trustee. [Tiangco v.
Francisco]

SUCCESSOR TRUSTEES
• If the trustee declines/resigns/dies or is
removed before the trust’s objects are
accomplished, and there is no adequate
provision in the instrument creating the trust,
the court may appoint a new trustee to act
alone or jointly with others. That trustee shall
have the same rights, powers and duties as if
he was originally appointed. The court may
order former/remaining trustees to convey the
estate to him. [Rule 98, Sec. 3]
• A person succeeding to a trust (as the former
trustee’s executor/administrator) is not
required to accept the trust. [Rule 98, Sec. 2]

Allowance of the instrument creating the trust

Petition by the executor/administrator or the
person appointed as trustee in the instrument

Notice to all interested parties

Appointment of trustee by the court

Filing of bond by the trustee

1111 0000 0000 %%%% UUUU PPPP LLLL AAAA WWWW

U P B A R O P S 2 0 0 8

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SPECIAL PROCEEDINGS

REMEDIAL LAW

TRUSTEES APPOINTED ABROAD

TERRITORIALITY

OF

TRUSTEE’S
AUTHORITY
– The powers of a trustee
appointed by a Philippine court cannot extend
beyond the confines of the Philippine territory.
• Proceedings if the trustee is appointed abroad:

• If trustee fails to comply with the court order,
the court will declare the trust vacant and
appoint a new trustee. The trust shall vest in
the new trustee as if he was originally
appointed.

TRUSTEE’S BOND [Rule 98, Sec.5]

• Before entering his duties, a trustee must file a
bond with the COC in an amount fixed by the
court, payable to the Philippine government
and sufficient and available to protect any party
in interest.
• Failure to file bond is considered as
decline/resignation of the trust.
• Court may exempt from giving bond:
1) A trustee under a will, if the testator so
directed/requested; or
2) Any trustee, if all persons beneficially
interested are of full age and request the
exemption.
• The court may cancel the bond exemption
anytime; the trustee shall then file the bond.

TRUSTEE’S DUTIES

• Conditions upon the bond, WON written: [Rule
98, Sec. 6]

1) To make and return the estate’s inventory;
Exception: If inventory was already
filed, succeeding trustees need not file.
• Court may order inheritance tax
appraisers to assist in the appraisal of
the estate. [Rule 98, Sec. 7]
2) To manage the estate and faithfully
discharge his trust;
3) To render an accounting under oath, once a
year until the trust is fulfilled;
Exception: If excused by the court in
any year.
4) To settle his accounts in court and deliver
the remaining estate to those entitle, at the
trust’s expiration.
• It is the trustee’s duty to deliver the
properties to the beneficiary free from
all liens and encumbrances. [De Leon
v. Molo-Peckson (1962)]

TRUSTEE’S COMPENSATION

• If the trustee’s compensation is not determined
in the instrument creating the trust, it shall be
fixed by the court. [Rule 98, Sec. 7]

TRUSTEE’S REMOVAL/RESIGNATION [Rule
98, Sec. 8]

• Grounds for removal of a trustee:
1) If essential to the interests of the party
petitioning the removal;
• Requires petition of a beneficially
interested person, notice to trustee and
hearing.
2) If trustee becomes insane or otherwise
incapable/unsuitable of discharging the
trust;
• Requires notice to all interested parties.
3) If trustee assumes to be possessing in his
own right and thus renounces the trust.

[Martinez v. Grano]

General Rule: A trustee cannot
acquire the trust estate by prescription
because for the purpose of prescription,
the possession of the property by the
trustee is not an adverse possession,
but only a possession in behalf of the
owner of the same. [Palma v. Cristobal]
Exception: If there is an open,
clear and unequivocal repudiation
of the trust, and the beneficiary
knows of the repudiation. [Salinas
v. Tuazon]
• A trustee may resign if it is proper for the court
to allow him, whether the trustee was ppointed
by the court or by a will.

TRUSTEE VS.
EXECUTOR/ADMINISTRATOR

Trustee

Executor/
Administrator

Holds an office of trust

Holds an office of trust

Duties may cover a wider
range, and are usually
governed by the intention
of the trustor or the
parties (if established by
contract)

Duties are fixed and/or
limited by law

[Araneta v. Perez (1962)]

ESTATE’S SALE/ENCUMBRANCE [Rule 98,
Sec. 9]

• If

estate’s

sale/encumbrance

is
necessary/expedient, court may order such
sale/encumbrance

and

reinvestment/application of the proceeds.
• Proceedings shall conform as much as possible
with the provisions on a guardian’s
sale/encumbrance of a ward’s properties.

Philippine land is held in trust for Philippine
residents, by a trustee who derives authority from
outside the Philippines

Petition filed in the RTC of the province where the
land is situated

Notice to all interested parties

Trustee is ordered by the court to apply for
appointment

1111 0000 0000 %%%% UUUU PPPP LLLL AAAA WWWW

U P B A R O P S 2 0 0 8

Page 111111113333 of 44440000

SPECIAL PROCEEDINGS

REMEDIAL LAW

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