Trident Development Corporation

August 28, 1984 Trident Development Corporation 202 13th St.,Port Area Metro Manila Attention : Mr . Bienvenido E . Somera Officer-in-Charge Sir : This has reference to your letter dated June 11, 1984, requesting for the opinion of this Commission on whether or not a member of the Board of Trustees of the Trust Fund established by Trident Development Corporation would be prohibited from borrowing from existing funds under the provisions of Sections 31 and 32 of the Corporation Code or other laws being enforced by this Office. LexLib It appears from your letter that the Trust Fund which is funded solely from contributions of your corporation for the benefit of its officers and employees, is duly registered with the BIR. There is no explicit provision in the Trust Agreement creating the Trust Fund which prohibits a Trustee from borrowing; nor is there a specific provision allowing a Trustee to borrow. However, under Section 5 of Revenue Regulations No. 1-68 ,it is clearly implied that any part of the Trust Fund's income or corpus may be loaned, and under Paragraph II of the Trust Agreement, the Trustees are authorized to hold, invest and re-invest the Fund. Hence, your request. Please be informed that Trust Fund is not covered by the provisions of the Corporation Code but by the provisions of the Civil Code on Trust, Chapter V * ,Book IV. Under the general provisions of the Civil Code on Trust, it is an elementary rule that a trustee should not profit out of the handling of trust estates. This rule springs from the duty of the trustees to protect the interest of the beneficiary and not to permit his personal interest to conflict with his duty in this respect. (Magruder vs. Drury, 33 V.S. 106 cited in Tolentino, Civil C od e of the Philippines, p. 615). In respect of trust investments in loan or mortgage securities, the trustee must exercise good faith and avoid self-dealing with respect thereto. (Re Binder, 137 Ohio St. 26, 27 NE (2d) 939, 129 ALR 130) He cannot, at least without the consent of the beneficiary, properly borrow for himself from the trust estate .(Driver v. Blakely, 165 Or 312, 107 P (2d) 524, 131 ALR 985 cited in Am. Jur. Vol. 54, p. 323; Emphasis supplied) Considering the same, you have to secure the consent of the beneficiaries of your Trust Fund who, in this instance, would be the officers and employees of your corporation, before a member of the Board of Trustees thereof can borrow from said Fund. Please be advised accordingly. cdlex Very truly yours, (SGD.) MANUEL G. ABELLO Chairman * Copied verbatim from documents obtained directly from the Securities and Exchange Commission .