trustestatelogoa.jpg (8498 bytes)


Lectures &

News $ Views

Law &



Trust Products
& Practice

About the Guru


Email Feedback

Guest Register









Revised Rules on Guardianship of Minors

(Article published in the Apr 14,2003 issue of TODAY, Business Section)    
Following the heels of three resolutions of the Supreme Court prescribing new rules of procedure on the dissolution of marriage (see Trusts and Estates column in TODAY’s issue of April 8) is A.M. No. 03-02-05-SC, this time on guardianship proceedings over minors. 

Effective starting May 1, A.M. No. 03-02-05-SC incorporates into Rules 92 to 97 of the Rules of Court the changes in substantive law relating to children since 1964.  These substantive changes have the common objective of making what is in the best interest of the child the paramount concern in the resolution of various issues under consideration.

Sadly, however, A.M. No. 03-02-05-SC also reflects the failure in the law to recognize the need to deal with the management of the estate of minors as a separate issue from the care over his person, a failure that is mainly due to the Philippine trust industry’s inability to play a dominant role in the management of estates of minors.

A.M. No. 03-02-05-SC begins with the affirmation of the joint authority of father and mother over the person and property of their minor child without need of court appointment.

While the parents’ authority over the person of their minor children has been joint since the 1950 Civil Code and affirmed in the Child and Youth Welfare Code (P.D. 603), joint authority over the minor’s property is of more recent vintage.  It was introduced for the first time in our law in 1988 by the Family Code (Article 225).  The prior rule made the father the legal administrator of the property of his minor child (Article 320, Civil Code).

Doing away with the need for court appointment was also the handiwork of the Family Code.  Prior to that, Section 7 of Rule 93 required court appointment when the property of the child was worth more than P2,000.00 (a princely sum in good old days of 1964) even if Article 320 of the Civil Code required only, under those circumstances, the filing of a bond subject to the approval of the Court of First Instance, now the regional trial court. 

Inflation has since set in and the threshold amount was raised by the Family Code to P50,000.00.  Court appointment was dispensed with but the filing of a bond remained.  The idea is to avoid the expenses and delays of a judicial appointment but, at the same time, ensure fidelity in the performance of the guardian’s obligation by the filing of a bond in a summary proceeding where, in addition, all incidents and issues regarding the conduct of the guardianship were to be heard and resolved.

After the affirmation of the parents’ privileged position, A.M. No. 03-02-05-SC proceeds to the lawyerly concerns of who may file the petition, where it is to be filed, the grounds that can be invoked, the qualification of guardians, and what the petition must contain.  Not much is new in this regard, being as they are demanded by existing substantive law, except probably a minor procedural change on who among the relatives of the minor must be named in the petition and thus given notice of the proceedings.  Section 2 of Rule 93 used to require the naming of relatives, without specifying up to how distant.  Section 6 of A.M. No. 03-02-05-SC now says everyone within the 4th civil degree of the minor should be named in the petition.

A guardianship proceeding is not conducted under a combat paradigm.  Thus, the court is given wide discretion in fixing the time and place for its hearing and in determining to whom notices should be sent.  Moreover, the court asks a social worker to conduct a case study and make a report before the scheduled hearing.  The case study report has been a feature of family cases since 1974.  Article 23 of the Child and Youth Welfare Code (PD 603), in particular, makes the social worker’s report and recommendation necessary in minor child guardianship cases. Furthermore, as provided in Article 25 of Presidential Decree 903, the hearing may be closed to the public and, in any case, the records are not to be released without the court’s approval.

The Court’s heavy hand of supervision over the guardian’s actuations, a carry-over from the old rules, is evident all throughout the period of the guardianship, but there are also indications of intent to give the court some room for flexibility. Thus, new rule seems strict on the presence of the ward. Under the previous rule, the ward had to be present only “if able to attend” (Section 5, Rule 93).  In contrast, Section 11 of A.M. No. 03-02-05-SC says “the prospective ward shall be presented to the court”.  But in other areas, there is laxity.  For instance, Section 1 of the old Rule 94 says that a guardian “shall give a bond…”.  But now, under Section 14 of A.M. No. 03-02-05-SC, “an appointed guardian may be required to post a bond…”

But the general thrust is still, and correctly so, court intervention in the affairs of the guardianship.  Thus, sale of the property of the ward, even to pay off just debts, requires court approval.  So do releasing of debtors, encumbrances on the ward’s property, consenting to partition of property held in common, investments of the funds of the ward, etc.

The new rules, though, fail to address the fundamental difference between the management of the ward’s property by an individual whose suitability as guardian, barring moral defects, physical inabilities, and financial incapacities, is determined by closeness of blood ties (as shown by the listing in Section 6 of who may be appointed guardians) and the management that is provided by an institutional guardian, such as a trust company authorized to conduct trust business in the country.

There is absolutely no indication that those revising the rules, just like their predecessors, were aware of trust industry, the mission of which is precisely to manage the funds and properties of those who are not able or inclined to do so.  They have, at the very least, seem to have forgotten that Section 83, subsection 83.2, authorizes a trust entity to act under the order or appointment of any court as guardian of the estate of a minor.  Only in general terms are trust entities embraced in “any other person, who in the sound discretion of the court, would serve the best interests of the minor” as among those who may be appointed as guardian.  And even if a trust entity is arguably covered by such general description, it remains last in the order of priority.  The irony is, based on technical expertise and professionalism, trust entities should be on the top of the list.

Another indication that the revisers were not familiar with the trust industry of the country is Section 18 (b) of the new rules.  This subsection authorizes the court to pay the guardian, other than a parent, as much compensation for his services as the court may deem just.  However, the compensation is not to exceed ten per centum of the net income of the ward, if any.

This limitation of the fees to a percentage of the income is an unsound restriction because it shows a bias for an income driven investment posture.  This type of strategy may be good for some, particularly the aged, but not for the young.  As a general proposition, the investment need of the young is for capital appreciation.  This means sacrificing present income for future gains.  Thus, the BSP regulations have taken the neutral standard of requiring only that the fees “be determined on the basis of the costs of services rendered and the responsibilities assumed” (Section X423, manual of Regulations for Banks).

A third telltale sign is in the question of the guardian’s bond.  Nowhere in the new rules is a recognition that, because a trust entity already has a bond filed with the BSP for its faithful performance, no other bond shall be required by a court, except for special cause (Section 86, RA 8791).

The blame for these omissions in the new rules, of course, lies in the trust industry itself.  Over the years, particularly after the business from the US Veterans Administration had run out, the trust industry turned its attention away from guardianship accounts and focused more and more on the investment management of big institutional funds, rather than the care of small personal funds.  To the latter, the industry players offered only their plain vanilla deposit products, requiring very little attention and premised on generalized administration.  They, for the most part, abandoned the needy, those who were in the first place why the trust industry came into being.