Tiangco vs. Francisco

A probate court may, in the exercise of its discretion, require the resignation or removal of trustees who have not faithfully discharged their duties and whose continuance in office would prejudice the trust estate; its order will not be disturbed on appeal absent clear abuse of discretion, and its findings may be supplied by the commissioner's report read together with the order.

Petrona Francisco's last will established a continuing trust over one-half of her fishpond in the barrio of Gasak, Navotas, Rizal, with the income to be devoted to the celebration of the Flores de Mayo in Malabon, Rizal, and other religious activities mentioned in the will. No particular persons were named as beneficiaries. Casimiro Tiangco was appointed trustee upon probate of the will, and Maria Tiangco was later appointed co-trustee on March 16, 1922, to act with him in supervising the affairs of the trust. Proceso Francisco appeared as oppositor to the trustees' accounts.

Petrona Francisco's last will provided that the income derived from the one-half portion of her fishpond in the barrio of Gasak, Navotas, Rizal, shall be devoted to the celebration of the "Flores de Mayo" in Malabon, Rizal, and for other religious activities mentioned in the will. Upon probate of the will, the Court of First Instance of Rizal appointed Casimiro Tiangco as trustee. Shortly afterwards, on March 16, 1922, Maria Tiangco was also appointed co-trustee to act with Casimiro Tiangco in supervising the affairs of the trust. The will created a continuing trust, but no particular persons were named as beneficiaries. The appellants themselves did not have anything to do with the trust until their appointment by the lower court, and they were commissioned not because of any beneficial interest they had in the estate but because their selection was approved by the lower court in the belief that they would faithfully perform their obligations.

The records of the case disclosed that from the beginning the submission of annual reports to the court was very irregular. When the accounts for the year 1935 were submitted, Proceso Francisco, the oppositor-appellee, filed an opposition. Meanwhile, the court appointed the clerk of court as commissioner to make a detailed examination of the accounts already submitted, and declared its order of January 30, 1937, approving the said accounts over the objection of Proceso Francisco, of no legal force and effect. The trustees entered an opposition to this decree. On March 22, 1937, the oppositor-appellee requested for the temporary substitution of the trustees. The report for the year 1936 having been filed on April 13, 1937, an order for the joint hearing of the two annual accounts was issued. Again, Proceso Francisco made several objections to the accounts for the year 1936 with reference to certain items. In the meantime, the clerk of court submitted his report.

On April 26, 1938, the court issued an order requiring the resignation of the trustees within ten days and appointed Father L.R. Arcaira as temporary trustee. The order stated that it appeared from the evidence submitted by the commissioner, regarding the account of the trustees, that the said trustees had not faithfully discharged their duties and that their continuance in office would cause further prejudice to the estate under trusteeship. They were given ten days within which to submit their resignation, with action on the resignation to be taken by the court upon the filing and settlement of their account to be submitted pursuant to the order of the court dated April 20, 1938. In the meantime, the parish priest of Malabon, Father L.A. Arcaira, was appointed temporarily trustee to take immediate possession of the property under trust and manage the same until a regular trustee was duly appointed.

The lower court found that the trustees had not faithfully discharged their duties and that their continuance in office would cause further prejudice to the estate under trusteeship. That finding, based on the evidence submitted by the commissioner, was the factual basis for the order requiring their resignation and for the temporary appointment.

• Power to Require Resignation: Appellants, the fiduciaries-appellants, assigned as error the lower court's power to require the resignation of the trustees, questioning the legal authority of the order for that purpose.
• Sufficiency of Findings: Appellants contended that the order appealed from did not contain a finding of facts as required by section 133 of the Code of Civil Procedure, and that for this reason the order was ineffectual.
• Grave Abuse of Discretion: Appellants contended that the trial court committed grave abuse of discretion in ordering the resignation of the trustees-appellants.

• Power to Require Resignation: Whether the lower court had the power to require the resignation of the trustees.
• Sufficiency of Findings: Whether the order requiring resignation was legally sufficient under section 133 of the Code of Civil Procedure, which requires a finding of facts.
• Grave Abuse of Discretion: Whether the trial court committed grave abuse of discretion in ordering the resignation of the trustees-appellants.

• Power to Require Resignation: Yes. The probate court has discretionary power to appoint and remove trustees, and upon proper showing that the interests of justice require removal, it may order the incumbent trustees to resign under section 587 of the Code of Civil Procedure.
• Sufficiency of Findings: Yes. The order, read in conjunction with the commissioner's report, exhibited a finding upon all the evidence and sufficiently complied with section 133 of the Code of Civil Procedure.
• Grave Abuse of Discretion: No. The lower court's finding that the trustees had not faithfully discharged their duties and that their continuance would prejudice the trust estate was not shown to be a clear, whimsical, or capricious exercise of discretion.

• Power to Require Resignation: The will created a continuing trust, but no particular persons were named as beneficiaries. The appellants did not have anything to do with the trust until their appointment by the lower court, and they were commissioned not because of any beneficial interest in the estate but because their selection was approved by the lower court in the belief that they would faithfully perform their obligations. The same court later found that they "have not faithfully discharged their duties and that their continuance in office would cause further prejudice to the estate under trusteeship." The Supreme Court held it could not, on appeal, override the action of the lower court by reversing its finding and indirectly sanction the violation of an unquestioned and legally existing trust. The power to appoint a trustee is discretionary with the court before whom application is made, and the Supreme Court will decline to interfere except in case of clear abuse. Thereafter, upon proper showing that the interests of justice would be adequately served with the removal of the incumbent trustees, it is likewise within the court's discretion to do so under section 587 of the Code of Civil Procedure, and the Supreme Court will refuse to interfere absent a showing of grave abuse or whimsical and capricious exercise of that discretion.

• Sufficiency of Findings: Appellants contended that the order appealed from did not contain a finding of facts as required by section 133 of the Code of Civil Procedure, and that for this reason the order was ineffectual. The Supreme Court found that the order, read in conjunction with the report of the clerk of court as commissioner, exhibited a finding upon all the evidence presented during the trial, and was sufficient compliance with the requirements of the law. It cited Aringo vs. Arena, 14 Phil., 263, 266, in support.

• Grave Abuse of Discretion: The lower court's order was based on evidence submitted by the commissioner regarding the account of the trustees. The court found that the trustees had not faithfully discharged their duties and that their continuance in office would cause further prejudice to the estate under trusteeship. On appeal, no clear abuse, whimsical, or capricious exercise of discretion was shown. The Supreme Court therefore declined to interfere with the lower court's discretionary action.

• Discretionary removal or resignation of trustees — A probate court has discretionary power to appoint a trustee and, upon proper showing that the interests of justice would be adequately served, to remove incumbent trustees or require their resignation under section 587 of the Code of Civil Procedure. Appellate courts will not interfere absent clear abuse, or a whimsical and capricious exercise of discretion. Applied: the lower court found the trustees unfaithful and their continuance prejudicial; the Supreme Court confirmed the order.
• Findings of fact in a probate order — Section 133 of the Code of Civil Procedure requires an order to contain a finding of facts. Such a finding need not be isolated in the order itself; the order may be read in conjunction with the commissioner's report, and if together they exhibit a finding upon all the evidence, the requirement is satisfied. Applied: the order requiring resignation, read with the clerk of court's commissioner report, sufficiently complied.
• Continuing trust with no named beneficiaries — Where a will creates a continuing trust but names no particular beneficiaries, the trustees hold office not by beneficial interest but by court appointment, and the court retains supervisory authority over their performance. Applied: the appellants had no beneficial interest and were appointed only because the court believed they would faithfully perform their obligations; the court could therefore act when they failed to do so.
• Grave abuse of discretion as standard of review — An appellate court will not reverse a lower court's discretionary removal of trustees unless the lower court clearly abused its discretion, or exercised it whimsically and capriciously. Applied: no such abuse was shown.

• "It appearing from the evidence submitted by the commissioner, regarding the account of the trustees, that the said trustees have not faithfully discharged their duties and that their continuance in office would cause further prejudice to the estate under trusteeship, they are hereby given ten days within which to submit their resignation." — This passage is from the April 26, 1938 order quoted in the decision; it states the lower court's factual basis for requiring resignation and shows the finding later reviewed by the Supreme Court.
• "The power to appoint a trustee is discretionary with the court before whom application is made, and this court will decline to interfere except in case of clear abuse. Thereafter, upon proper showing that the interests of justice would be adequately served with the removal of the incumbent trustees, it is likewise within its discretion to do so (section 587, Code of Civil Procedure), and this court will refuse to interfere in the absence of a showing of grave abuse or whimsical and capricious exercise of that discretion." — This is the ratio decidendi on the probate court's power to remove or require the resignation of trustees and the standard of appellate review.
• "We find that the order read in conjunction with the report of the clerk of court as commissioner, exhibits a finding upon all the evidence presented during the trial, and is sufficient compliance with the requirements of the law. (Aringo vs. Arena, 14 Phil., 263, 266.)" — This passage resolves the claim that the order lacked the findings of fact required by section 133 of the Code of Civil Procedure.
• "The same court found later that they "have not faithfully discharged their duties and that their continuance in office would cause further prejudice to the estate under trusteeship," and we cannot, on appeal, override the action of the lower court by reversing its finding, and indirectly sanction the violation of an unquestioned and legally existing trust." — This passage articulates the appellate deference owed to the lower court's factual finding and its discretionary action in trust administration.

• Aringo vs. Arena, 14 Phil., 263, 266 — Cited by the Supreme Court to support the holding that the order appealed from, read in conjunction with the commissioner's report, sufficiently complied with the requirement of a finding of facts under section 133 of the Code of Civil Procedure.

• Section 587, Code of Civil Procedure — The provision cited as the source of the court's discretionary power to remove incumbent trustees upon a proper showing that the interests of justice would be adequately served. Applied: the lower court's order requiring the trustees to resign was within that discretionary power.
• Section 133, Code of Civil Procedure — The provision requiring an order to contain a finding of facts. Applied: the order, read with the commissioner's report, exhibited a finding upon all the evidence and satisfied the requirement.

Avanceña, C.J., Villa-Real, Imperial, Diaz, Concepcion, and Moran, JJ., concur.