SPECIAL

PROCEEDINGS
RULE 98
(TRUSTEES)

SUBMITTED BY:
Elma Belino
Essell Joyce Ganuelas
Karyl Vic Pilacan

SUBMITTED TO:
Atty. Roger Nafianog

February 12, 2018

 I. TRUST AND TRUSTEE

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 of the
benefit of the latter.

a. WHAT ARE THE CHARACTERISTICS OF A TRUST?

1. It is a relationship of a fiduciary character
2. It is a relationship with respect to property, not one involving merely personal duties
3. It involves the existence of equitable duties imposed upon the holder of the title to the
property to deal with it for the benefit of another
4. It arises as a result of a manifestation of intention to create the relationship

b. KINDS OF TRUST
1. 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.
-Rule 98 only applies to express trust or one which is created
by a will or written instrument since the obligation of the trustee in such case is
to carry into effect the provisions of a will or written instrument which absent in an
implied trust.

2.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.

c. WHO ARE THE PARTIES?

1. Trustor -A person who establishes a trust
2. Trustee -one in whom confidence is reposed as regards property for the benefit of
another person
-he has an obligation to carry into effect the provisions of a will on written
Instrument

d. WHEN IS A TRUSTEE NECESSARY TO BE APPOINTED BY THE COURT?

a. to carry into effect a will when the testator 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.

3. Beneficiary or cestui que trust -person for whose benefit the trust has been created
-notice and consent of the beneficiary is not
necessary for the creation of a trust since
acceptance by the beneficiary is presumed

 NOTE: -Trustor could be the trustee or beneficiary. However, he could

not be a trustee and beneficiary at the same time.
-It is not necessary that the beneficiary be named or identified at
the creation of a trust (i.e. charitable trust).

e. WHAT ARE THE SIMILARITIES AND DIFFERENCE BETWEEN A TRUSTEE AND

AN EXECUTOR OR ADMINISTRATOR?
1. A trustee, like an executor or administrator, holds an office of trust, particularly when
the trustee acts as such under judicial authority.
2. The duties of an executor or administrator are however, fixed and/or limited by law
whereas those of the trustee of an express trust are, usually governed by the intention
of the trustor or the parties, if established by contract.
 II. APPOINTMENT OF TRUSTEE

(Sec. 1) JURISDICTION: A trustee is appointed by the RTC

VENUE: -Where the will was allowed or
-Where the property or portion thereof affected by the trust is
situated

a. IS THE POWER OF THE COURT TO APPOINT DISCRETIONARY?

 Yes, the power to appoint a trustee is discretionary with the court before whom
application is made, and the appellate court will decline to interfere except in
cases of clear abuse.

ORIGINAL NEW TRUSTEE APPOINTED

TRUSTEE (Sec. 3) ABROAD (Sec. 4)
(Sec. 2)
Requisites:
Conditions 1. testator has 1. original trustee under 1. Land in the
omitted in his will to a written instrument Philippines held in
in the appoint a trustee in declines, resigns, dies trust;
Appointment the Philippines; or removed before the 2. held in favor of
of a Trustee 2. such appointment objects of the trust are persons resident of
is necessary to accomplished. Philippines;
carry into effect the 2. no adequate 3. trustee derives
provisions of the provision is made in his authority from
will; and such instrument for without the
3. notice to all supplying the vacancy Philippines
persons interested 3. due notice to all
persons interested
His Powers cannot
Powers Such trustee shall Such new trustee shall extend beyond the
have the same have and exercise the confines of the
of a Trustee rights, powers, and same powers, right, territory of the
duties, and in whom and duties as if he had Republic. (based
the estate shall vest, been originally on the principle that
as if he had been appointed, and the trust his authority cannot
appointed by the estate shall vest in him extend beyond the
testator. in like manner as it had jurisdiction of the
vested or would have Republic, under
vested, in the trustee in whose courts he
whose place he is was appointed)
substituted and the
court may order such Duties:
conveyance to be made 1. Petition the RTC
by the former trustee or of province where
his representatives, or land is situated
by the other remaining 2. Notify all persons
trustees, as may be interested
necessary or proper to 3. Apply to the
vest the trust estate in court for
the new trustee, either appointment as
or jointly with the others. such

 NOTE: In case of failure of the trustee to comply with the abovementioned

duties, the court shall declare such trust vacant, and shall appoint a new trustee
in whom the trust estate shall vest in like manner as if he had been originally
appointed by such court.
 III. BOND

(Sec. 5) Before entering on the duties of his trust, a trustee shall:

1. file with the clerk of the court having jurisdiction of the trust a bond
2. amount of bond is fixed by the judge
3. payable to the Government of the Philippines; and
4. sufficient and available for the protection of any party in interest

a. WHAT IF THE TRUSTEE NEGLECTS TO FILE A BOND?

 He is considered to have declined or resigned the trust

b. MAY THE COURT EXEMPT A TRUSTEE FROM GIVING A BOND?

 Yes. The court may until further order exempt a trustee under a will from giving a
bond when:
1. the testator has directed or requested such exemption; or
2. all persons beneficially interested in the trust, being of full age, request the
exemption, in such case, the court may exempt any trustee.

However, such exemption may be cancelled by the court at any time and the
trustee required to forthwith file a bond.

(Sec. 6) c. WHAT ARE THE CONDITIONS OF THE BOND?

1. Inventory - That the trustee will make and return to the court, at such time as it may
order, a true inventory of all the real and personal estate belonging to him as trustee,
which at the time of the making of such inventory shall have come to his possession or
knowledge;

EXCEPTION: when the trustee is appointed as a successor to a prior trustee, the

court may dispense with the making and return of an inventory, if one has already been
filed, and in such case the condition of the bond shall be deemed to be altered
accordingly.

NOTE: When an inventory is required to be returned by a trustee, the estate and

effects belonging to the trust shall be appraised and the court may order one or more
inheritance tax appraisers to assist in the appraisement. The compensation of the
trustee shall be fixed by the court, if it be not determined in the instrument creating the
trust

2. Faithful management - That he will manage and dispose of all such estate, and
faithfully discharge his trust in relation thereto, according to law and the will of the
testator or the provisions of the instrument or order under which he is appointed;

3. Accounting - That he will render upon oath at least once a year until his trust is
fulfilled, unless he is excused therefrom in any year by the court, a true account of the
property in his hands and the management and disposition thereof, and will render such
other accounts as the court may order;

4. Settlement of account and deliver estate - That at the expiration of his trust he will
settle his account in 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 to thereto.

IV. COMPENSATION OF TRUSTEE

 (Sec. 7) Provided by the instrument creating the trust otherwise, it shall be fixed
by the court
 III. REMOVAL OR RESIGNATION (Sec. 8)

A. REMOVAL
(Requisites) A trustee may be removed by the court:
1. upon petition of the parties beneficially interested
2. due notice to the trustee
3. hearing
4. removal is based on the grounds provided by law
Grounds (at least 1):
 removal appears essential in the interest of the petitioner; or
 trustee is insane;
 trustee is incapable of discharging his trust;
 trustee is evidently unsuitable.

B. RESIGNATION
A trustee, whether appointed by the court or under a written instrument, may resign his
trust if it appears to the court proper to allow such resignation.

IV. SALE OR ENCUMBRANCE OF TRUST ESTATE (Sec. 9)

(Requisites) The court may order the sale or encumbrance of any real or personal
estate held in trust and the re-investment and application of the proceeds thereof in
such manner as will best effect the objects of the trust when:

1. the sale or encumbrance of any real or personal estate held in trust is necessary
or expedient;
2. a petition is filed;
3. due notice and hearing;

NOTE: The petition, notice, hearing, order of sale or encumbrance, and record of
proceedings, shall conform as nearly as may be to the provisions concerning the sale or
encumbrance by guardians of the property of minors or other wards.

A. WHAT IS THE REQUIREMENT OF JUDICIAL ORDER FOR SALE OR

ENCUMBRANCE OF TRUST ESTATE?
- it is of a perishable or transitory nature and then only to convert it into substantial,
enduring and revenue producing investment.
- If a change be deemed necessary, or for the interest of the beneficiary, the
permission or sanction of the court should be obtained

b. MAY A TRUSTEE ACQUIRE PROPERTY HELD IN TRUST WITH HIM?

 No. a trustee shall not be allowed to take advantage for himself of trust property
under the pretense of serving the beneficiary

c. Can A Trustee Acquire Property By Prescription?

 General Rule: No. The trustee’s property is not adverse and, therefore, cannot
ripen into a title by prescription.

Except: where there is adverse possession of the property.

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