Chapter 2: Express Trusts

Tuesday, September 20, 2022 10:14 PM

Art. 1443. No express trusts concerning an immovable or any interest therein may be
proved by parol evidence.
Art. 1444. No particular words are required for the creation of an express trust, it being
sufficient that a trust is clearly intended.
Art. 1445. No trust shall fail because the trustee appointed declines the designation,
unless the contrary should appear in the instrument constituting the trust.
Art. 1446. Acceptance by the beneficiary is necessary. Nevertheless, if the trust imposes
no onerous condition upon the beneficiary, his acceptance shall be presumed, if there is
no proof to the contrary.

1. Nature of Express Trust (Mindanao Development Authority v. Court of Appeals)

○ It is fundamental in the law of trust that certain requirements must exist before an
express trust will be recognized.
 Elements of Trust:
1) competent trustor and trustee
2) an ascertainable trust res
3) sufficiently certain beneficiaries
 Stilted formalities are unnecessary.
 There must be a present and complete disposition of the trust property,
notwithstanding that the enjoyment in the beneficiary will take place in the future.
 It is essential that the purpose be an active one to prevent trust from being
executed into a legal estate or interest.
 It should not be in contravention of some prohibition of statute or rule of public
policy.
 There must also be some power of administration other than a mere duty to perform
a contract, although the contract is for a third party beneficiary.
 A declaration of terms is essential. This must be stated with reasonable certainty in
order that the trustee may administer and that the court may enforce the trust when
called upon to do so.
○ Trust is a relationship with respect to property.
 Trust agreements are typically entered into for the purpose of holding of assets or
of wealth, generally land and other real property, and to derive income therefrom.
 The modern concept of trust emerged within the context of family settlements of the
mentioned assets.
 Trusts later evolved further and went beyond holding of estates.
 The holding of investment assets emerged as a common function of trusts.
 These trusts are in the nature of business trusts in the sense that the investment
assets such as shares, bond,s and other similar assets are managed by the
trustees.
 The trustees participate in the commercial and financial markets using the assets of
the trust.
○ An example of an express trusts with asset holding as its purpose is:
- a situation involved in one case where a grandparent conveyed her real properties
in trust for the benefit of her grandchildren.
- upon the instructions of the grandparent the trustee executed a declaration of trust
with her husband as witness expressly stating that:
"trustee desires to acknowledge and declare that she is not the true owner of
the three lands described in the first Whereas but she is holding them in trust
for the beneficiaries."

SC RULING:

There is no contest that since the trust is now considered as terminated after
the trustee's death, the properties should be transferred to the names of the
respondents as the beneficiaries of the said trust.

both the RTC and the CA ordered the transfer of possession of the laNds to
the respondents. t\this finding, however, should not prejudice an action if any
which would involve the settlement of the state of Consuelo and Nelidia given
that Efraim claim that disinheritance or preterition may occur.

Such matter should be resolved in a separate probate or intestate proceeding

whichever is applicable and not in the case at bench.
 Pursuant to the declaration of trust, the respondents have a superior right to
reconveyance (the return of title to the original owner) of the subject properties
in their favor
○ A trust agreement is a contract that is nominate, principal, preparatory, and unilateral. it
is unilateral because only the trustee has an obligation the moment the trust is
constituted.

2. Essential Requisites (Mindanao Development Authority v. Court of Appeals)

○ It is fundamental in the law of trust that certain requirements must exist before an
express trust will be recognized.
 Elements of Trust:
1) There must be a competent trustor and trustee
2) There must be an ascertainable trust res
3) There must be sufficiently certain beneficiaries
4) There must be trust intent - the intention of the trustor to make a present and
complete disposition of the trust property by conveying legal title and fiduciary
duties to the trustee and the equitable title to the beneficiary
5) The purpose must be an active one to prevent trust from being executed into a
legal estate or interest and one that is not in contravention of some prohibition
of statute or rule of public policy
○ The trustee must have some power of administration other than a mere duty to
perform a contract, although the contract is for a third party beneficiary.
 The intent is to split legal and equitable title and impose duties on the holder of the
legal title, notwithstanding that the enjoyment of the beneficiary will take place in the
future.
 A declaration of terms is essential and this be stated with reasonable certainty in
order that the trustee may administer and that the court may enforce the trust when
called upon to do so.
○ The presence of consideration is not one of the essential elements of an expressed
trust.
 In American law, a trust is deemed a type of gratuitous property transfer and
not a simple contractual agreement.
 Such that the beneficiary does not need to give consideration to the trustor for the
property transfer.
○ There can be no trust if the legal title and equitable title belong to the same person.
 However, the trustor may be the beneficiary so long as there is a different trustee.
 The trustor may also be the trustee by recognizing the equitable title of another who
will be the beneficiary.
○ Capacity
 A trust or cannot create a trust if he or she is incapacitated.
 A trustee must also have legal capacity.
 Thus, a minor can either be a trust or nor a trustee.
 However, an incapacitated person may be a beneficiary.
 The trust can for instance be created for the benefit of an insane person.

3. Proof of Trust
○ The burden of proving the existence of a trust is on the property asserting its existence.
○ Such proof must be clear and satisfactorily show the existence of the trust and its
elements.
○ While implied trusts may be proved by oral evidence the evidence must be
trustworthy and received by the courts with extreme caution and should not be made to
rest on loose equivocal or indefinite declarations.
○ Trustworthy evidence is required because oral evidence can easily be fabricated.
 No particular words are required to create an express trust, it being sufficient that a
trust is clearly intended.
 If there is no written agreement, the person who alleges that there is a trust must
measure up to the yardstick that a trust must be proven very clear, satisfactory, and
convincing evidence.
 Establishing the existence of a trust cannot rest on vague and uncertain evidence,
or on loose, equivocal, or indefinite declarations.

○ CASE 1: Salo v. Salao

 In order to establish a trust in real property by parole evidence, the proof should be
as fully convincing as if the act giving rise to the trust obligation were proven by an
authentic document.
 Such a trust cannot be established upon testimony consisting in large part of
insecure surmises based on ancient hearsay.
○ CASE 2: Julio v. Dalandan
 Familiar rules of interpretation of documents tell us that in asserting the intention of
the parties, the contents thereof should not be interpreted piece meal;
- all parts, provisions, or terms are to be considered
- each paragraph, clause, or phrase must be read not in isolation but in the light
of the entire writing
- doubtful ones should be given that sense which may result from all of them
considered as a whole
 Such construction will be adopted as will result from an overall view of the
document itself.
 Technical or particular forms of words or phrases are not essential to the
manifestation of intention to create a trust or to the establishment thereof.
 Nor would the use of some such words as "trust" or "trustee" be essential to the
constitution of a trust.
 The mere fact that the word "trust" or "trustee" was employed would not necessarily
prove an intention to create a trust.
 What is important is whether the trust are manifested and intention to create the
kind of relationship which in law is known as a trust.
 It is unimportant that the trustor should know that the relationship which he intends
to create is called the trust and whether or not he knows the precise characteristics
of the relationship which is called the trust.
 In this case, the trust is effective as against defendants and in favor of the
beneficiary thereof who accepted it in the document itself.

○ CASE 3: Rizal Surety & Insurance Co. v. Court of Appeals

 The issue in this case is whether or not the petitioner alchemy early as an insurer or
was it also a trustee.
 The Court ruled that the petitioner acted as a trustee. It cited Article 1441 of the
Civil Code which provides that express trusts are created by the intention of the
trustor or of the parties. The intent of the parties in this case is to create a trust.
 It is basic in law that a trust is:
- the right enforceable solely in equity
- to the beneficial enjoyment of property
- the legal title to which is vested in another.
 It is a fiduciary relationship concerning property which obliges a person whole thing
to deal with the property for the benefit of another.
 the evidence on the record is clear that petitioner held onto the dollar balance of the
insurance proceeds because:
1) Private respondent and REPACOM requested it to do so as they had not yet
agreed on the amount of their respective claims and the final compromise
agreement was yet to be executed
2) They had not signed the laws and subrogation receipt in favor of petitioner.
 Furthermore, Central Bank (CB) expressly stated that the deposit in Prudential
Bank was being made in its name for the joint account of the private respondent
and REPACOM. Petitioner never claimed ownership over the funds in the said
deposit.
 Petitioner held onto the dollar balance of the insurance proceeds to protect its
interests as it was not yet granted the right of subrogation over the total loss of the
vessel.
 As petitioner continued holding onto the deposit for the benefit of private
respondent and REPACOM, petitioner obviously recognized its fiduciary
relationship with the said parties.
 This is the essence of the trust flowing from the actions and communications of
petitioner.
 All elements of expressed trust are present in the instant case.
□ Petitioners argument that it was never a party to the partial compromise
agreement is unavailing since:
 Upon being furnished a copy of the same, it undoubtedly became aware
that the parties to said agreement considered petitioner as their trustee in
respect of said dollar balance.
 In short, it is all too evident that petitioner fully grasped the situation and
realized that private respondent and REPACOM were constituting
petitioner their trustee.
 Yet, petitioner not only did not manifest any objection thereto but it
instead proceeded to accept its role and responsibility as such trustee by
implementing the compromise agreement.
 Equally as significant, petitioner never committed any act amounting to
an equivocal reputation of its role as trustee.
□ Petitioner's desperate attempt to establish a viable defense by way of its
 allegation that no fiduciary relationship could have existed because of the joint
insured's adversary position with respect to the insurance proceeds deserves
scant consideration.
 The so-called adversary positions of the parties had no effect on the
trust as it never changed the position of the parties in relation to
each other into the dollar proceeds (petitioner held it for private
respondent and ripple home which were the real owners of the money).

4. Formality
○ There is no required formality for an express trust agreement.
○ Strict formalities are not required but all elements of interest previously enumerated must
be established to exist.
○ If any element is absent it is fatal to the trust.
○ Article 1444 of the Civil Code provides that "no particular words are required for the
creation of an express trust it being sufficient that a trust is clearly intended."
○ With respect to implied trust, the trust is not obviously in a written agreement. However,
the evidence of the existence of a trust can be in writing.
○ Immovables
 Article 1443 of the Civil Code provides that "no express trusts concerning and
immovable or any interest therein may be proved by parol evidence." (parol
evidence - any agreement that is not contained within the written contract)
 This provision means that they express trust must be established by
documentary evidence and not by mere testimonial evidence.
 However, a written proof of the express trust is necessary only to make it
enforceable and not to make it valid.
 By analogy, Article 1443 may be included under the Statute of Frauds.
 It follows, however, that an implied trust can be established by parol evidence if the
trust involves real property.

5. Creation and Perfection

○ There is no provision on the law and trust under the Civil Code regarding the perfection
of a trust agreement or an expressed trust.
 "Express trusts are created by direct and positive acts of the parties, by some
writing, or deed, or will, or by words either expressly or impliedly evincing an
intention to create trust."
 Article 1315 provides that "contracts are perfected by mere consent, and from the
moment the parties are bound not only to the fulfillment of what has been expressly
stipulated but also all the consequences, which according to their nature may be in
keeping with good faith usage and law."
□ There is, however, an opinion to the effect that a trust agreement is real in
nature.
□ It was explained that by its very definition, an express trust constitutes a
real contract, that is, it is not merely perfected by mere meeting of the
minds between the trustor and the trustee to constitute a trust.
□ Indeed, no trust relationship exists unless the property constituting the res is
conveyed to the trustee.
 It should be pointed out that a contract or agreement between two or more parties
is not the only way of creating a binding trust.
□ A trust can be binding even if there is no transfer of legal title to a trustee
as in the case contemplated under article 1445 which provides that "no trust
shall fail because the trustee appointed declines the designation, unless the
contrary should appear in the instrument constituting the trust."
□ In such a case, the trust is binding even if it is created by the sole will of
the trustor only.
□ This is consistent with the explanation of the Code Commission that "a trust
can be constituted by the intention of the trustor or of the parties."
□ It is believed that the Code Commission specified an alternative mode of
creation of an express trust .
 The Code Commission explanation reveals the idea that an express
trust is not always contractually created.
 It is not in essence and at all times based on contract.
 An expressed trust created through the intent of the trustor only is an
alternative mode of creating the trust.
◊ An example of this is a trust created through a will.
◊ It should be noted that in American law and in common law, a trust
is even treated as a separate form of contract and not all the
rules on contracts can be applied to trusts.
 An expressed trust can be created by:
1) agreement
 2) will of the trustor which can be expressed in a last will and testament or
through a declaration of trust.
 Conveyance in Trust - the agreement that transfers property in trust
inter vivos (while alive, between the living)
 Testamentary Trust - testamentary disposition must comply with the
requirements of a will and shall take effect mortis causa (the awareness
that the death is approaching)
 On the other hand, a unilateral declaration of trust like the express trust
contemplated under article 1445 is also binding even if there is still no
consent and transfer of title to the trustee.
 Trust can also be created through the declaration of the trustee.
□ In this case, the trustor or creator of the trust is the trustee.
□ Through a declaration of trust inter vivos the owner of the property declares
that he or she holds the property in trust for a beneficiary.
□ A declaration of trust has been defined as "an act by which a person
acknowledges that the property title to which he holds is held by him for the
use of another."
□ Declaration of Trust or Self-declaration is one of the modes of creating trust
under American law.
 In Daniel v. Magkaisa: to comply with the instruction of the deceased owner of the
properties, the trustee executed a declaration of trust with the conformity of her
husband, who likewise signed the declaration. In the said document, the trustee
acknowledged that she held in trust that three parcels of land in favor of the
beneficiaries.

○ When the trustee declines.

 Consent of the trustee is necessary. Even if the trustee initially consented to his
appointment as a trustee he or she can resign later.
 Article 1445 of the Civil Code provides that "no trust shall fail because the trustee
appointed declines the designation, unless the contrary should appear in the
instrument constituting the trust."
 Despite the opinion to the contrary, it is believed that there is a binding and
enforceable trust even without the acceptance of the trustee.
□ For instance, a trust that is created through testamentary disposition is
binding and enforceable even if the trustee has not yet accepted the trust.
□ While the trustee is an essential element of the express trust, this only means
that the interests of the beneficiary should be protected even if the
express trust is not yet complete in the absence of one indispensable
component.
□ The decision of the trustor to create a trust is already binding subject to the
appointment of the trustee.
□ By way of exception, it is believed that if by its wordings, the trust agreement is
conditioned on the acceptance of the specifically named trustee, the express
rationale trust shall fail if the specified trustee declines the appointment.
 If the trustor is no longer around as in the case where the trust is
created through a will, but the trustee declines the appointment, it is the
court that will appoint the trustee under Rule 98 of the Rules of Court.
◊ Section 1 of Rule 98 provides that a trustee necessary to carry into
effect the provisions of a will or written instrument shall be appointed
by the court.
◊ The 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 on whose place he is
substituted.

○ Acceptance by beneficiary
 Article 1446 of the Civil Code provides that acceptance by the beneficiary is
necessary.
 Article 1446 further provides for a presumption, that "if the trust imposes no
onerous condition upon the beneficiary, his acceptance shall be presumed if there
is no proof to the contrary."
 Thus, acceptance of the beneficiary can be:
1) actual acceptance
2) implied acceptance
3) presumed acceptance
 The acceptance need not comply with the formalities of a donation.
 Thus, in one case, it was argued that the conveyance of the property was void
 because it was allegedly a donation and as such the donation must be accepted in
a public document.
- The court rejected that argument because the transaction should not be
viewed in the light of an intended donation, but as an expressed trust
(Cristobal v. Gomez).

6. Duties of Trustee
○ Fiduciary is required to be faithful to the following duties:
1) duty of fair representation
2) duty of good faith
3) duty of knowledge or skill
4) duty of loyalty
5) duty of prudent investment
6) duty to avoid conflict of interest
7) duty to investigate
 These duties apply to a trustee in a trust agreement.
 In trust, it is the trustee, not the trustor who owes fiduciary duty to the beneficiary.
□ The Restatement of the Law on Trust in the United states provides that the
trustee is under a duty to the beneficiary to administer the trust solely in the
interest of the beneficiary.
□ Section 182 thereof also states that the duty of the trustee is to pay income to
the beneficiary.
 In the case of court appointed trustees under rule 98, the trustee is required to
post a bond.
□ Section 6 of rule 98 provides that the following conditions shall be deemed
to be 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
- 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 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
thereto.
 Section 6 of Rule 98 further provides that "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.
 A court appointed trustee cannot sell or encumber the property held in trust on his
own.
□ Section 9 of rule 98 provides that "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 well 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 maybe to the provisions concerning
the sale or encumbrance by guardians of the property of minors or other
wards."

○ Delegation
  If so allowed by the terms of the trust, there can be delegation by the trustee of the
performance of specific acts which otherwise form part of the said trustee's
functions.
 So held the Supreme Court in one case, stating that "under the general principles of
trust, a trustee by the terms, of the agreement
- may be permitted to delegate to agents or
- To co-trustees or
- to other persons the administration of the trust for the performance of act
which could not otherwise be properly delegated.
 Thus, by the terms of the trust, a trustee may be authorized or permit an agent to
do acts such as the delivery of the benefits out of the trust fund.
 In this case, the trustor was deemed the agent of the trustee for the purpose of
delivering the benefits to the beneficiaries.

7. Employee's Trust
○ An employee's trust is a trust maintained by an employer to provide retirement,
pension, or other benefits to its employees.
○ It is a separate taxable entity established for the exclusive benefit of the employees.
○ The right of the employees to claim their gratuities from the funds of the trust is still
inchoate (just began and so not fully formed or developed; rudimentary) because
employees are allowed to receive their gratuities only when they retire.
○ It was noted that it is not always necessary that the cestui que trust (the beneficiary of a
trust) should be named or even in esse (essential nature or essence) at the time the trust
is created in his favor.
○ It is enough that beneficiaries are sufficiently certain or identifiable.

8. Business and Investment Trust

○ An express trust may be created to continue a business.
 For example, in one case a Hong Kong company transferred its business to a new
Philippine corporation (Wise & Co., Inc. v. Meer)
- the contract of sale expressly provides that the transfer will take effect on and
from the first day of June 1937, and until completion thereof
- The Hong Kong "company all stand possessed of the property hereby agreed
to be transferred and shall carry on its business in trust for the Corporation.
- The entity referred to as the "Company" is the Hong Kong company
- and the "Corporation" is the Manila company.
 For the Company to carry on the business in trust for the Corporation, it was
necessary for the latter to be the owner of the business.
 It is plain that the parties considered the sale as made on and from June 1, 1937.
 Later the Hong Kong company was dissolved and ceased to exist in its own right as
a going concern during its more or less brief administration of the business as
trustee for the Manila Company, and finally disappeared even as such trustee.
○ An express trust may be used to preserve the management of investment without going
through estate proceedings.
 For example, Commissioner of Internal Revenue v. Manning involved
MANTRASCO cooperation with authorized capital stock of 2,500,000 divided into
25,000 common shares.
- 24,700 of the shares were owned by Julius S. Reese
- And the rest, at 100 shares each by three respondents.
 On February 29 1952 in view of Resse's desire that upon his death MANTRASCO
and its two subsidiaries MANTRASCO (GuaM) iNC. and Port Motors Inc. would
continue under the management of the respondents
- a trust agreement on his and the respondent's interests in MANTRASCO was
executed by and among:
- Reese (referred as the owner),
- MANTRASCO (referred as the company),
- the law firm of Ross, Selph, Carrascoso and Janda (referred as trustees),
and
- The respondents (referred as managers)
○ An express trust may also be used as part of a scheme to raise funds for profit
making activities.
 Home Guaranty Corporation v. La Savoie Development Corporation: involve
respondent La Sovoie (domestic corporation) incorporated on April 2, 1990 which
was engaged in the business of real estate development, subdivision, and
brokering.
 Through the La Savoie Asset Pool Information and Trust Agreement, La Savoie
obtain financing for some of its projects through a secularization process in which
Planters Development Bank (nominal issuer) issued 150 million pesos in asset
participation certificates called the La Savoie Development Certificate or LSD
 certificates to be sold to the investors.
 The same parties were conveyed in trust by the La Sovoie (as trustor) to the
Planters Development Bank (as trustee) and constituted into the Asset Pool.
 The redemption of the LSDC certificates upon maturity and the interest payments
on them were backed or collateralized by the assets that were transferred by the La
Sovoie to the trust.
 Moreover, the LSDC certificates were covered by a guarantee extended by Home
Guaranty Corporation (HGC) through a Contract of Guaranty entered into by HGC
with La Sovoie and Planters Development Bank.
 The Court to explained the nature of the relationship of the parties:
- The (1) landowner/developer has appointed a Planters Development Bank as
trustee and nominal issuer, and
- (2) planters Development Bank through its trust department has agreed to
perform the functions and responsibilities of a trustee.
- The trustee shall act as nominal issuer only of all LSDCs.
- In no case shall trustee be liable for the payment of any amount due to
the holder of the LSDC.
- The trustee shall be free from any liability in the event that the Asset Pool
is not sufficient for the redemption of all LSDCs.
- In the event of no- payment of the LSDCs, the LSD holders exclusive
recourse shall be to claim against the HIGC guarantee.
- The trustee shall not be responsible for the failure of HIGC to pay any
amount due to any holder of the LSDC.

9. Nature of Possession
○ Possession by a trustee is possession with juridical title in the concept of a holder.
○ The trustee has juridical possession, which is possession independent of ownership.
○ In juridical possession, the right to possess can be asserted even against the
owner .
 Asejo v. People - "In a trust agreement the transfer of the property to the trustee is
mere physical possession and not juridical possession."
 Contract of loan - the debtor acquires juridical possession and is technically the
owner of the amount
 Trust - the obligation of the trustee is fiduciary in nature (i.e. to take care of the
things strictly for the benefit of the trustee in accordance with the purpose of the
express trust).
 It is believed that the observation is erroneous.
- Possession by the borrower of the amount or consumable thing delivered in
simple loan is possession with title in fee simple;
- It is not mere juridical possession.
- On the other hand, the trustee's possession is juridical possession.

10. Trust Function of Banks

○ There are banks that are authorized to conduct trust business.
○ Trust business shall refer to
- any activity resulting from a trust or trust relationship (trusteeship)
- involving the appointment of a trustee by a trustor for
- the administration
- holding
- management of funds and or properties of the trustor by the trustee
- for the use benefit or
- advantage of the trustor or of others called beneficiaries.

11. Trust for Charitable Uses

○ Section 424 of the NIRC provides that the term for charitable uses shall include
- all the real or personal properties or funds as well as
- those acquired with the fruits or income therefrom or
- in exchange or substitution thereof given to received by any
- person
- corporation
- association
- foundation or
- entity
- except the National Government
- its instrumentalities or
- political subdivision
- for charitable
- benevolent
 -educational
-pious
-religious or
-other uses
- for the benefit of the public at large or a particular portion thereof or for the benefit
of an indefinite number of persons.
○ Section 425 of the NI RC provides the term trustee shall include
- any individual
- corporation
- association
- foundation or
- entity
- except the National Government
- its instrumentalities or
- political subdivisions
- in charge of, or acting for, or concerned with, the administration of the
trust referred to in the section immediately preceding and
- with proper application of trust property.
○ On the other hand, Section 426 provides that the term trust property shall include
- all real or personal properties or
- funds pertaining to the trust and
- those acquired the fruits or income therefrom or in exchange substitution thereof.

12. Trust in Liquidation of Corporations

○ If a corporation is dissolved, the corporation has three years to liquidate its assets.
○ Article 139 of the Revised Corporation Code provides that "at anytime during said
three years the corporation is authorized and empowered to convey all of its property to
trustees for the benefit of
- stockholders,
- members,
- creditors, and
- other persons in interest.
○ From and after any such conveyance by the corporation of its property in trust for the
benefit of its stockholders, members, creditors, and others in interests,
- all interests which the corporation had in the property terminates,
- the legal interests vests in the trustees and the beneficial interest in the
stockholders, members, creditors, or other persons in interest.

13. Trust for Pre-Need Companies

○ A pre-need company is required to create a Trust Fund.
○ Section 30 of the Pre-need Code clearly provides that the proceeds of trust funds shall
redound solely to the plan holders.
○ The Trust Fund cannot be used to satisfy the claims of other creditors of the pre-need
company.
○ The court explained:
 The Pre-need code is clear on this it.
 It recognizes the distinction between claims against the pre-need company and
those against the trust fund.
 Section 52(b) states that liquidation "proceedings in the court shall provide should
proceed independently of proceedings in the Commission for the liquidation of
claims, and
 Creditors of the pre-need company shall have no personality whatsoever in
the Commission proceedings to litigate their claims against the trust fund.
 The reason why claims against the trust funds can proceed independently of the
proceedings in the courts is the fact that the latter is directed against a different
person or entity.