SPECIAL PROCEEDINGS

RULE 98
TRUSTEES

Sec. 1. Where trustee appointed. - A trustee necessary to carry into

effect the provisions of a will or written instrument shall be appointed
by the Court of First Instance in which the will was allowed if it be a
will allowed in the Philippines, otherwise by the Court of First Instance
of the province in which the property, or some portion thereof, affected
by the trust is situated.

NOTES:

1. Regional Trial Court Appoints the Trustee

If the will be allowed in the Philippines, a trustee necessary to carry into effect
the provisions of a will or written instrument shall be appointed by the RTC. In
other cases, a trustee without the Philipppines shall be appointed by the RTC in
which the property, or some portion thereof, affected by the trust is situated.
2. The executor or administrator or the person appointed as trustee under the will or
written instrument shall file the petition for the appointment of a trustee in compliance
with the wishes of the testator.
3. 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.
It is likewise within the discretion of of the RTC to remove incumbent trustees upon
proper showing that the interests of justice would be served. The appellate court will
not interfere with the courts decision absent any showing of grave abuse of discretion.

Sec. 2. Appointment and powers of trustee 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
Court of First Instance 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. No person succeeding to a trust as executor or administrator of
a former trustee shall be required to accept such trust.

NOTES:

1. Although the will does not name a trustee, the probate court exercises 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.
2. Notice and consent of beneficiary are not essential for the creation and existence of a
valid trust. In case of voluntary trust, the approval of the beneficiary is not necessary to
render it valid because as a general rule acceptance by the beneficiary is presumed.

Sec. 3. Appointment and powers of new trustee under written instrument. -

When a trustee under a written instrument declines, resigns, dies, or is
removed before the objects of the trust are accomplished, and no adequate
provision is made in such instrument for supplying the vacancy, the proper
Court of First Instance may, after due notice to all persons interested,
appoint a new trustee to act alone or jointly with the others, as the case
may be. Such new trustee shall have and exercise the same powers, rights,
and duties as if he had been originally appointed, and the trust estate
shall vest in him in like manner as it had vested or would have vested, in
the trustee in whose place he is substituted; and the court may order such
conveyance to be made by the former trustee or his representatives, or by
the other remaining trustees, as may be necessary or proper to vest the
trust estate in the new trustee, either alone or jointly with the others.

NOTES:

1. According to the general rules of trust, a trust will never fail for want of a trustee and a
court will always appoint a trustee where necessary to the administration of a trust of to
prevent failure of a trust.
2. A court may also refuse to exercise its power of appointment where the trust is legally
inoperative.
3. In determining whether or not to appoint a new trustee, the courts will consider all the
circumstances on the matter, including the wishes of the beneficiaries, of the acting
trustees, and the intention of the creator of the trust as revealed in the trust
instrument. But the court is not bound to follow the wishes of the parties interested.
4. A trust ordinarily continues even if the trustee declines. The reason for this rule is that:
a. The court can always appoint a new trustee, unless otherwise provided for in
the trust instrument;
b. A new trustee has to be appointed, otherwise the trust will not exist.
5. To be effective, the trust must be accepted by the beneficiary, either:
a. Expressly; or
b. Impliedly; or
c. Presumably, if the grant of the benefit is gratuitous.

EXCEPTION: If there is strong proof that he really did not accept. A mere
presumption cannot replace a fact.

I. What is TRUST?
- Trust is a fiduciary relationship concerning property which obliges the person
holding it to deal with the property for the benefit of another. The person holding,
 in view of his equitable title, is allowed to exercise certain powers belonging to the
owner of the legal title.
II. Characteristics of a Trust:
a. Fiduciary relationship;
b. Created by law or agreement;
c. Legal title is held by one, and the equitable or beneficial title to the property is held by
another.
As distinguished from guardianship, the trustee or holder has legal title to the
property which is not present in the latter.
III. Parties to a Trust:
a. Trustor or settler- who establishes the trust
b. Trustee- who holds the property in trust for the benefit of another. The trustee holds
Legal Title.
c. Beneficiary of the cestui que trust- the person for whose benefit the trust is created.
He holds the equitable title or beneficial title to the property held for his benefit by the
trustee who holds the legal title
The trustor or settler may at the sametime be the beneficiary.
IV. Elements of a Trust:
a. Parties to the trust; and
b. Trust property or trust estate, which is the subject matter of the trust.
V. Classification of Trusts:
a. Express Trust
- Created by the parties or by intention of the trustor or settler.
- Express Trust which concern real property or interest therein cannot be enforced by
Oral Evidence, but these may be binding between the parties, as in the Statute of
Frauds. If it concerns real property, to bind third persons, the same must be
registered in the Registrar of Land Titles and Deeds, and for that purpose, it must be
contained in a public instrument, which is a requisite for registration. If the subject
matter of the trust is personal property, the same may be proven by oral evidence.
- Express Trust is created by:
i. Conveyance to the trustee either by:
An act inter vivos; or
An act mortis causa, as in a will
ii. By Admission of the trustee that he holds the property only as a trustee.
Acceptance of a trust and receipt of the property thus entrusted is an
admission that ownership of the property does not belong to him but to
the beneficiary or cestui que trust, or the heirs of the latter.
b. Implied Trust
- Created by operation of law
- In implied trust, even if it concerns real property or an interest therein, may be
proven by oral evidence.
VI. Capacities of Parties to a Trust:
a. Trustor- must have capacity to convey property;
 b. Trustee- must have capacity to hold property and to enter into contracts;
c. Beneficiary- must have the capacity to receive gratuitously from the trustor. If he is
incapacitated to be the trustors done, or heir, or legatee, or devisee, he cannot be a
beneficiary of a gratuitous trust.
VII. Termination of Trusts:
a. Agreement mutually arrived at;
b. Fulfillment of any resolutory condition;
c. Rescission or annulment of trust (as in other contracts)
d. Order of the court;
e. Merger;
f. Accomplishment of the purpose;
g. Loss of the subject matter of the trust (physical or legal impossibility);
h. Expiration of the term of the trust.

Sec. 4. Proceedings where trustee appointed abroad. - When land in the

Philippines is held in trust for persons resident here by a trustee who
derives his authority from without the Philippines, such trustee shall, on
petition filed in the Court of First Instance of province where the land
is situated, and after due notice to all persons interested, be ordered to
apply to the court for appointment as trustee; and upon his neglect or
refusal to comply with such order, 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.

NOTES:

1. The powers of a trustee appointed by a Philippine court cannot extend beyond the
confines of the territory of the Republic of the Philippines.
2. The foreign appointed trustee should still file a petition with the RTC of the province
where the land under trusteeship is situated, otherwise the court may declare the trust
vacant, and appoint a new trustee.

Sec. 5. Trustee must file bond. - Before entering on the duties of his
trust, a trustee shall file with the clerk of the court having
jurisdiction of the trust a bond in the amount fixed by the judge of said
court, payable to the Government of the Philippines and sufficient and
available for the protection of any party in interest, and a trustee who
neglects to file such bond shall be considered to have declined or
resigned the trust; but the court may until further order exempt a trustee
under a will from giving a bond when the testator has directed or
requested such exemption, and may so exempt any trustee when all persons
beneficially interested in the trust, being of full age, request the
exemption. Such exemption may be cancelled by the court at any time and
the trustee required to forthwith file a bond.
 NOTES:

1. A trustee appointed by the court is required to furnish a bond and the terms of the trust
or a statue may provide that a trustee appointed by a court shall be required to furnish
a bond in order to qualify him to administer the trust. However, the court may until
further order exempt a trustee under a will from giving a bond when the testator has
directed or requested such exemption or when all persons beneficially interested in the
trust, being of full age, request the exemption.
2. A trustee who neglects to file the bond required by the rule shall be considered to have
declined or resigned. If the trustee fails to furnish a bond as required by the court, he
fails to quality as such. Nonetheless the trust is not defeated by such a failure to give
bond.

Sec. 6. Conditions included in bond. - The following conditions shall be

deemed to be a part of the bond whether written therein or not:

(a) 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;

(b) 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;

(c) 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 of the management and disposition thereof, and will render
such other accounts as the court may order;

(d) That at the expiration of his trust he will settle his

accounts 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 thereto.

But 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.

NOTES:

I. Administration of Trust
a. Trustee must file a Bond;
b. Trustee cannot acquire the property held in trust, even by prescription as long
as he admits the trust.
 If he repudiates the trust, and this is made known to the party involved,
then prescription is permitted.
c. Trustee must render a true and clear account;
d. Trustee must make an inventory;
e. Trustee must manage and dispose of the estate, and faithfully discharge his
trust in relation thereto, according to law, or according to the terms of the trust
instrument as long as they are legal and possible.
II. Duties of trustee compared to duties of 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. However, while the duties of an
executor/administrator are fixed and/or limited by law, those of an express trust are
usually governed by the intention of the trustor, or the parties, if the trust is established
by contract. Besides the duties of a trustee may cover a wider range than those of
executors or administrators of the estate of a deceased person.
III. Nature of Possession by Trustee
- For the purpose of prescription, the possession of the property by the trustee is not
an adverse possession, but only a possession in the name and in behalf of the
owner of the same. If the trustee has not repudiated the trust nor claimed any right
to the property entrusted to him, his possession of said property is not for himself
but for the owner and cannot be a ground for prescription, nor can the trustees
heirs make use of this possession to establish the prescription which they alleged. In
such case, the period of prescription in favor of the heirs of the trustee should be
computed from the date of the trustees death.
- A trustee may acquire the trust estate by prescription provided there is a
repudiation of the trust, such repudiation being open, clear and unequivocal, known
to the cestui que trust.

Sec. 7. Appraisal; Compensation of trustee. - 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.

NOTES:

I. Factors affecting the trustees compensation:

a. Character and powers of the trusteeship;
b. Risk and responsibility;
c. Time;
d. Labor and skill required in the administration of the trust, as well as the
care and management of the estate.
 For this reason, the court may not set in advance that the trustees fees
should not exceed that charged by trust companies, unless equality of
circumstances was proved.
II. Reimbursement of Trustee for Expenses:
- It is a rule that a trustee will be reimbursed from the trust estate for the following
expenses:
o All necessary and reasonable expenditures which he has made
o All necessary and reasonable expenses incurred in carrying out the
directions of the instrument
o All reasonable expenses incurred in protecting and preserving the trust
property
o Reimbursement should include expenses incurred in rendering and proving
his accounts and for costs and counsel fees in connection therewith.

Sec. 8. Removal or resignation of trustee. - The proper Court of First

Instance may, upon petition of the parties beneficially interested and
after due notice to the trustee and hearing, remove a trustee if such
removal appears essential in the interests of the petitioners. The court
may also, after due notice to all persons interested, remove a trustee who
is insane or otherwise incapable of discharging his trust or evidently
unsuitable therefor. 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.

NOTES:

I. Removal of a Trustee; How Effected:

- A trustee whose acts of omissions are such as to show a want of reasonable fidelity
will be removed by the court and where trust funds are to be invested by the
trustee, neglect to invest constitutes of itself a breach of trust, and is a ground for
removal. Such removal may be initiated in the court in which appointment of the
trustee was made, through a petition for his removal and not an action at law by
the beneficiary to recover the property from him.
-
II. Grounds for removal of trustee:
a. Insanity;
b. Resignation;
c. Incapability of discharging trust, or
d. Death of trustee;
e. When termination appears to be essential to the interests of the beneficiaries
of the trust;
f. Unsuitability.

Sec. 9. Proceedings for sale or encumbrance of trust estate. - When the

sale or encumbrance of any real or personal estate held in trust is
necessary or expedient, the court having jurisdiction of the trust may, on
petition and after due notice and hearing, order such sale or encumbrance
to be made, and the reinvestment and application of the proceeds thereof
in such manner as will best effect the objects of the trust. 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.

NOTES:

1. Requirement of Judicial Order for Sale or Encumbrance of Trust Estate

- It is the duty of the trustees to collect and preserve intact the trust property, and
that they have no power to change the character of the trust property, unless it is of
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.
- This rule is necessary for the preservation of the fund.
2. Duty of trustee during the sale of trust property
- A trustees conduct of bidding at a sale of trust property is governed by the cardinal
principle of his duty of good faith and loyalty to the trust.
- The duty of a trustee in respect of bidding at a sale of trust property is to the trust
and no bidders at the sale. Thus, unsuccessful bidders cannot complain of the
refusal of the trustee to furnish a statement of the earnings of the refusal of the
trustee to furnish a statement of the earnings of the trust property sold, where such
information might discourage bidding and tend to reduce the amounts of the bids.
 RULE 101
PROCEEDINGS FOR THE HOSPITALIZATION
OF INSANE PERSONS
Sec. 1. Venue; Petition for commitment. - A petition for the commitment of
a person to a hospital or other place for the insane may be filed with the
Court of First Instance of the province where the person alleged to be
insane is found. The petition shall be filed by the Director of Health in
the all cases where, in his opinion, such commitment is for the public
welfare, or for the welfare of said person who, in his judgment, is
insane, and such person or the one having charged of him is opposed to his
being taken to a hospital or other place for the insane.

NOTES:

1. Application of the Rule

- The rule is applicable only when the hospitalization of the insane person is for the
public welfare or for the welfare of said person.
2. Nature of proceedings
- The nature of the proceedings for commitment of an insane person under Rule 101
are distinguishable from the proceedings for the appointment of a guardian for the
person and estate of such insane person, the former being primarily for the purpose
of protecting the community at large and in the nature of police regulations, while
the latter are for the purpose of protecting the person and estate of the insane.
3. Venue of proceedings for the hospitalization of insane persons
- May be filed with the RTC of the province where the person alleged to be insane is
found.
4. Insanity Defined
- Insanity denotes that condition of mind which is so impaired in function or so
deranged as to induce a deviation from normal conduct in the person so afflicted. It
denotes a mind that is unsound, deranged, delirious or distracted.
- The fact that a person is acting crazy is not conclusive that he is insane.

Sec. 2. Order for hearing. - If the petition filed is sufficient in form

and substance, the court, by an order reciting the purpose of the
petition, shall fix a date for the hearing thereof, and copy of such order
shall be served on the person alleged to be insane, and to the one having
charge of him, or on such of his relatives residing in the province or
city as the judge may deem proper. The court shall furthermore order the
sheriff to produce the alleged insane person, if possible, on the date of
the hearing.

NOTES:

1. Right of Insane Person to notice and hearing

 - While it has been held that want of notice does not render the proceedings invalid
and that the commitment is not subject to collateral attack, it has also been held
that want of notice renders the proceeding void or at least, is good ground for
vacating the order of commitment.
- The time of notice where it is not fixed by the statute must be reasonable under the
circumstances of the particular case. The time must be adequate to afford the
alleged incompetent opportunity to be present and to be heard in defense of his
right.

Sec. 3. Hearing and judgment. - Upon satisfactory proof, in open court on

the date fixed in the order, that the commitment applied for is for the
public welfare or for the welfare of the insane person, and that his
relatives are unable for any reason to take proper custody and care of
him, the court shall order his commitment to such hospital or other place
for the insane as may be recommended by the Director of Health. The court
shall make proper provisions for the custody of property or money
belonging to the insane until a guardian be properly appointed.

NOTES:

1. In all actions of proving insanity is on the plaintiff who alleged it, as where it is set up as
an affirmative defense the burden of proving rests on the defendant.
a. If a party asserts insanity, which has been shown to be only occasional or
intermittent in its nature, the burden is on him of proving it of its existence at the
time alleged.
b. If a person alleges insanity as an element of his case, the burden of proof rests on
him to establish that fact, although the presumption of sanity operates in his favor.
2. Pending an appeal from a judgement declaring a person to be a lunatic, the trial court
has jurisdiction to order a third party to appear and show cause why he should not
deliver to the guardian property of the lunatic alleged to be unlawfully in said partys
possession. It is the duty of the court to protect the property pending appeal.

Sec. 4. Discharge of insane. - When, in the opinion of the Director of

Health, the person ordered to be committed to a hospital or other place
for the insane is temporarily or permanently cured, or may be released
without danger he may file the proper petition with the Court of First
Instance which ordered the commitment.

NOTES:

1. As a general rule, the application should be made to the court in which proceedings
were had resulting in the adjudication of incompetency.
2. A proceeding for the restoration to competency is a special proceeding of a summary
character and regarded not as a new proceeding but as a continuance of the original
guardianship proceeding.
 3. Where the insane person was judicially committed to the hospital or asylum, the
Director of Health cannot order his release without the approval of the RTC which
ordered the commitment. The said court cannot order his release without the
recommendation of the Director of Health.

Sec. 5. Assistance of fiscal in the proceeding. - It shall be the duty of

the provincial fiscal or in the City of Manila the fiscal of the city, to
prepare the petition for the Director of Health and represent him in court
in all proceedings arising under the provisions of this rule.

NOTES:

I. Court of Jurisdiction- the Regional Trial Court

II. Venue- of the place where the alleged insane is FOUND
III. Petition to be filed by the Secretary of Health,
a. If in his opinion, it is for the public welfare or the welfare of the allegedly insane
person; and
b. The person having charge of such person allegedly insane OPPOSED the
hospitalization of the person allegedly insane
IV. The Fiscal shall prepare the Petition and assist the Secretary of Health in the
proceedings
V. Procedures:
a. Upon receipt of Petition, the court sets the case for hearing;
b. Notice shall be given to the person who is allegedly insane, and to the one
having charge of him, or his relative residing in the province of city as the court
may deem necessary or proper;
c. The court orders the sheriff to produce the alleged insane person, if possible,
on the date of hearing;
d. If the facts alleged in the petition are satisfactorily established, the court orders
his commitment to such hospital or other place for the insane, as the Secretary
of Health may recommend;
e. The court shall make provisions for the custody of the property or money
belonging to the insane until such time that a guardian shall be properly
appointed;
f. The court, after securing the opinion of the Secretary of Health that the insane
is cured and may be released without danger, may discharge the sane from the
hospital.

CASE: Chin Ah Foo and Yee Shee v. Concepcion and Lee Voo, 54 Phil 775, 780-781

FACTS:

A Judge of First Instance, who has in effect acquitted a man charged with murder on the plea of
insanity, and who has ordered the confinement of the insane person in an asylum, subsequently to
permit the insane person to leave the asylum without the acquiescence of the Director of Health.
Otherwise stated, the factor determinative of the question has to do with the effect, if any, of section
1048 of the Administrative Code on article 8 of the Penal Code. cha

On November 15, 1927, one Chan Sam (alias Chin Ah Woo), was charged in the Court of First
Instance of Manila with the murder of Chin Ah Kim. Thereafter, the trial judge rendered judgment
declaring the accused not responsible for the crime, and dismissing the case, but requiring the reclusion
of the accused for treatment in San Lazaro Hospital, in accordance with article 8 of the Penal Code, with
the admonition that the accused be not permitted to leave the said institution without first obtaining
the permission of the court. In compliance with this order, Chan Sam was confined for approximately
two years in San Lazaro Hospital. During this period, efforts to obtain his release were made induced by
the desire of his wife and father-in-law to have him proceed to Hongkong. Opposition to the allowance
of the motions came from the wife and children of the murdered man, who contended that Chan Sam
was still insane, and that he had made threats that if he ever obtained his liberty he would kill the wife
and the children of the deceased and probably other members of his own family who were living in
Hongkong. These various legal proceedings culminated in Doctors Domingo and De los Angeles being
delegated to examine and certify the mental condition of Chan Sam, which they did. After this report
had been submitted, counsel for the oppositors challenged the jurisdiction of the court. However, the
respondent judge sustained the court's right to make an order in the premises and allowed Chan Sam to
leave the San Lazaro Hospital to be turned over to the attorney-in-fact of his wife so that he might be
taken to Hongkong to join his wife in that city.ch

ISSUE:

Whether a judge, who ordered the confinement of an insane person in an asylum, may permit
the same to leave the asylum without the opinion of the Director of Health.

HELD:

No. Article 8 of the Penal Code and section 1048 of the Administrative Code can be construed so that
both can stand together in such a way that the powers of the courts and of the Director of Health are
complimentary to each other.

An examination of article 8, paragraph 1, of the Penal Code discloses that the permission of the court
who orders the confinement of one accused of a grave felony in an insane asylum is a prerequisite for
obtaining release from the institution. The respondent judge has based his action in this case on this
provision of the law. On the other hand, section 1048 of the Administrative Code grants to the Director of
Health authority to say when a patient may be discharged from an insane asylum. There is no pretense that
the Director of Health has exercised his authority in this case, or that the head of the Philippine Health
Service has been asked to express his opinion.

The Director of Health was without power to release, without proper judicial authority, any person
confined by order of the court in an asylum pursuant to the provisions of article 8 of the Penal Code. Any
person confined by order of the court in an asylum in accordance with article 8 of the Penal Code cannot be
discharged from custody in an insane asylum until the views of the Director of Health have been ascertained
as to whether or not the person is temporarily or permanently cured or may be released without danger. In
other words, the powers of the courts and the Director of Health are complementary each with the other. It
is well to adopt all reasonable precautions to ascertain if a person confined in an asylum as insane should be
permitted to leave the asylum, and this can best be accomplished through the joint efforts of the courts and
the Director of Health in proper cases.

--oOo
 SPECIAL PROCEEDINGS

RULE 98
TRUSTEES

RULE 101
PROCEEDINGS FOR THE HOSPITALIZATION
OF INSANE PERSONS

Submitted to :
Justice Lloren

Submitted by:
Hanzel U. Villones