Special Proceedings

Trustee
Rule 98 of the
Rules of Court

Members:
Campos, Christopher
Cardona, Geraldine May
Ciano, Charity

Submitted to:
ATTY. RUTH BAWAYAN
 I N T R O D U C T I O N

What is Trust?
A trust is a relationship whereby property is held by one party for the benefit of another. It is
created by a settlor, who transfers property to a trustee. The trustee holds that property for the
trust's beneficiaries. Trusts exist mainly in common law jurisdictions and similar systems existed
since Roman times.1
Concept of a Trust
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 of the benefit of the latter. The
person in whom confidence is reposed as regards property for the benefit of another is known as
the trustee.2
Difference between a TRUSTEE, EXECUTOR and an ADMINISTRATOR
A Trustee is the person in charge of the assets held in a trust, and is normally named as trustee
in the trust. If the trust is a living trust, probate will be avoided for the assets held in the trust, and
court supervision is usually not necessary. In such a case, the Trustee may perform many of the
same tasks that the Executor would otherwise handle, except without the burden of probate. If
the trust is created in the deceased persons Will, it is a testamentary trust and it will be subject
to the supervision of the Probate Court. In either case, the Trustee is responsible for managing
and distributing the trust assets to or for the benefit of the beneficiaries of the trust in accordance
with the terms of the trust.3
An Executor is a person named expressly by the deceased person in his will to administer, settle
and liquidate his estate.
While an Administrator is a person appointed by the intestate court to administer the estate of
a deceased person who: a) dies without leaving a will; or b) did not name any executor evein if
their was a will; or c) if there be one named, he is incompetent, refuses the trust of fails to give a
bond, or that the will was subsequently declared null and void.4

1 Accessed at wikipedia.org/wiki/Trust_law on 20 February 2017

2 Dean Gemy Lito L. Festin. 2016. Special Proceedings (A Foresight to the Bar Exam & the Practice of Law), p. 177. on 20
February 2017
3 Eric N. Holk. 2012. EXECUTORS & TRUSTEES: WHAT YOU OUGHT TO KNOW. Accessed at trusts-etc.com/execs_ttees.html on

20 February 2017
4 Dean Gemy Lito L. Festin. 2016. Special Proceedings (A Foresight to the Bar Exam & the Practice of Law), p. 177. on 20

February 2017
N A T U R E O F T H E S P E C I A L
P R O C E E D I N G S

Applicability of Rule 98 to Trusts

Rule 98 only applies to express trust, one which is created by a will or written instrument.As you
know, express trust is one created by the direct and positive acts of the parties, in writing, deed
or will, or by the words evidencing an intention to create a trust.5 Consequently, there must be an
existence of a contract or a written instrument of trust for Rule 98 to be pertinent.
When a Trustee Necessary
Under Section 2 and 3 of Rule 98 of the Rules of Court, a trustee is necessary:
a) To carry into effect a will where 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.
What is a Bond?
A bond under Sec. 5, Rule 98, is something the trustee must file before entering on the duties of
his trust. A Trustee shall file with the Clerk of Court having jurisdiction of the trust, a bond in the
amount fixed by the judge of the said court, payable to the government of the Philippines and it
must be sufficient and available.
Purpose of the Bond
Under the same section, the Trustee needs to file a bond for the purpose of protecting the rights
of any party in interest and 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. Such exemption may be canceled by the
court at any time, and the trustee required to forthwith file a bond.
Effect of Failure to File a Bond
If the trustee fails to furnish a bond as required by the court, he fails to qualify as such.
Nonetheless the trust is not defeated by such a failure to give bond.6
Manner of Executing the Trust

5
Dean Gemy Lito L. Festin. 2016. Special Proceedings (A Foresight to the Bar Exam & the Practice of Law), p. 177.
on 20 February 2017
6Oscar M. Herrera. 2005. Special Proceedings and Special Rules Implementing the Family Courts Act of 1997. p453. Accessed on
20 February 2017
In the execution of trusts, the trustee is bound to comply strictly with the directions contained in
the trust instrument defining the extent and limits of his authority, and the nature of his power and
duties. He must carry into effect the trusts so far as they are valid and consistent with the rules of
law, unless exempted from literal performance by the consent of all persons interested, and by
the sanction of the court.
Duties of Trustee vis-a-vis Executor or Administrator
A trustee, like an executor or administrator, holds an office of trust, particularly when the trustee
acts as such under judicial authority The duties of executors or administrators 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. Besides, the duties of trustees
may cover a wider range than those of executors or administrators of the estate of deceased
persons.7
Filing Inventory
The trustee should 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. When however, 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
altered accordingly.8
Faithful Discharge of the Trust
It is within the power and duty of a trustee who has accepted an active trust to collect, take
possession of, and keep in his custody the trust property and assets, and to hold, manage, and
apply the same to effect the purposes and objects of the trust and to make payments and
distribution to beneficiaries in accordance with the terms of the trust. The trustee is chargeable
with the value of assets lost though a failure in his duty to get them into his possession.
In the performance of this duty of taking and collecting the estate, the trustee must act with
reasonable diligence; unnecessary and unreasonable delay in securing possession of the trust
property is at his personal risk. The duty to take, collect, hold and manage the trust estate in
accordance with the terms of the trust extends to income and increment of the estate. The trustee
must enforce and collect chooses in action, debts, and demands belonging to the estate, except
where such collection and enforcement will result in a loss to the estate.9
Accounting by Trustee
Where a trust relation exists between parties, the cestui que trust is entitled to a complete
accounting from the trustee, in which all data in the trustee's accounts, which it is his duty to keep,
should be furnished.6 The trustee is bound to put his que trust in possession of the full and true
state of his affairs before any settlement will bind.10

7 Araneta v. Perez, G.R. Nos. L-16185-86, May 31,1962, 5 SCRA 333.

8 Section 6, Rule 98, Rules of Court
9 Oscar M. Herrera. 2005. Special Proceedings and Special Rules Implementing the Family Courts Act of 1997. p453. Accessed on

20 February 2017
10 Ibid. p456.
 Liability of Trustee for Trust Funds
One who, having in his possession trust funds, deposits them in his personal account in a bank,
and mixes them with his own funds, does not thereby assume an obligation different from that
under which he would have lain if such deposit had not been made; nor does he thereby become
liable to repay the money at all hazards; and where such funds are taken from the bank by furze
mayor (force major), he is relieved from responsibility in relation thereto.11
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 trustee's 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 trustee's death.12
A trustee in other words, 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.13
Breach of Trust by Trustee
Every violation by a trustee of a duty which equity imposes on him, whether willful and
fraudulent or done through negligence or arising through mere oversight or forgetfulness is a
breach of trust.14

11 Roman Catholic Bishop of Jaro v. de la Pena, 26 Phil 712

12 Tolentino v. Vitug, 39 Phil 126; Palma v. Cristobal, 77 Phill. 712
13 Salinas v. Tuazon, 55 Phil. 729
14 Oscar M. Herrera. 2005. Special Proceedings and Special Rules Implementing the Family Courts Act of 1997. p453. Accessed

on 20 February 2017