SECTION 27 The new trustee shall subrogate the rights and duties of the former trustee or exercise the rights and duties jointly with the surviving trustee, as the case may be, and become a co-party in a lawsuit or a party to whom the court’s judgment is bound, when the new trustee is completely vested with the trust property.

SECTION 28 The new trustee shall notify in writing to the third person known to the new trustee as the party in the agreement made with the former trustee or the surviving trustee, that the new trustee has subrogated the rights and liabilities of the former trustee or, together with the surviving trustee, retains the rights and liabilities as such.

In cases where the failure of the new trustee to perform the duties under the first paragraph causes damage, the new trustee shall compensate the trust property or the third person for such damage, as the case may be.

SECTION 29 In cases where there is a cause of alteration of trustee but the appointment of a new trustee cannot be proceeded due to an inevitable cause, an interested party may file a motion with the court for the appointment of the new trustee. If the new trustee cannot be appointed by the court, the court shall terminate the trust and appoint any person to manage the trust property in accordance with Section 52.

An appeal of court’s ruling under the first paragraph shall be submitted to the supreme court.

Chapter 3
Right, Duty and Liability of Trustee

SECTION 30 For the highest benefit of beneficiaries, a trustee has the duty to manage a trust with integrity and prudence as a professional with expertise by providing fair treatment to beneficiaries.

In furtherance of the performance of the trustee’s duty under the first paragraph, the SEC shall have the power to specify in details the trustee’s duty.

A trust instrument shall contain no clauses exempting the trustee from liability arising from failure to perform the duty under the first paragraph with intention, dishonesty or gross negligence.

SECTION 31 In managing a trust, a trustee shall be prohibited to act in conflict of interest with the trust regardless of whether such act is done for the benefit of its own or others’, except where it is the trustee’s claim for its remuneration or where the trustee is able to show that the trust is managed with fairness under which all related information has been sufficiently disclosed to beneficiaries who thereafter hold no objection to the act. The
disclosure and objection shall subject to the rules specified in the notification of the SEC Office.

SECTION 32 A trustee shall be prohibited to set off the obligation arising beyond the performance in trusteeship owed by the trustee to a third person against the obligation arising from the management of trust owed to the trust by the third person.

The set-off in contravention of the first paragraph is void.

SECTION 33 In making a juristic act or a transaction with a third person, a trustee shall notify the third party in writing that it acts in trusteeship and expressly stipulates the information as such in the evidence of the juristic act or the transaction.

SECTION 34 A trustee shall prepare an account of trust property separately from any other accounts under its responsibility. In cases where a trustee manages several trusts, the trustee shall prepare the account of trust property of each trust separately. In doing so, the trustee shall keep such account correct and up-to-date.

In managing a trust, a trustee shall segregate the trust property from those held in its own capacity and any property in its possession. In cases where the trustee manages several trusts, the trustee shall segregate the trust property of one trust from another.

SECTION 35 In cases where a trustee fails to perform the duty under Section 34 which causes the trust property to be commingled with the property held in its own capacity in the manner that it is unable to distinguish the trust property from those held in the trustee’s own capacity, it shall be presumed that:
(1) the commingled property is held in trust;
(2) the damage and liability arising from the management of commingled property are the trustee’s own bearing;
(3) the benefit arising from commingled property belongs to the trust.

The commingled property under the first paragraph shall include the property that is transformed into a different form or state.

SECTION 36 In cases where a trustee fails to perform duty under Section 34 which causes the trust property of two or more trusts to be commingled in the manner that it is unable to identify to which respective trust the property belongs, it shall be presumed that the commingled property, including property that is transformed into a different form or state, and any benefits or obligations incurred from the management of such commingled property shall belong to each trust in proportion of an amount brought to commingle.

SECTION 37 Management of trust is a trustee’s personal duty.
A trustee shall not delegate its duty to other persons except where:
(1) the trust instrument provides otherwise;
(2) it is a transaction that is not personal in nature and needs no capability of trustee’s profession;
(3) it is a transaction that a reasonable prudent owner of the property of the same characteristics as the trust property, who manages such property with similar objectives to those of the trust, may delegate a third person to manage such property;
(4) any other cases as specified by the SEC in its notification as delegable matters.

In cases where the trustee contravenes the first paragraph, the management shall bind the trustee personally, and not bind the trust.

SECTION 38 In cases where a trustee delegates any other person to manage trust property under Section 37, the trustee shall thoroughly and carefully select such person as well as supervise and audit the delegated management adequately. The SEC shall have the power to prescribe in its notifications details for compliance of the trustee in the said matter.

SECTION 39 In cases where several trustees are appointed, the trustees shall jointly manage the trust unless the trust instrument provides the duties of each trustee specifically.

The trustees’ joint management of trust shall be as follows:
(1) in cases where there is title deed or document of title of trust property, all trustees shall be named as the co-owners of real right or any rights in such deed or document;
(2) in cases where a resolution is required, such resolution shall be unanimous unless the trust instrument provides otherwise.

The trustee shall be bound personally for any obligations or liabilities incurred from the juristic act done in breach of the resolution specified in subsection (2).

SECTION 40 In case of alteration of a trustee, if the new trustee finds that the previous management of the trust has contravened the trust instrument or this Act and caused damage to the trust, the new trustee shall have the following duties:
(1) to claim damages from a liable trustee;
(2) to recover a property from a third person regardless of whether such third person directly acquired such property from the former trustee and whether such property is transformed into a different form or state, except the acquisition of the property was done in good faith and for value, providing further that the person acquired that property did not know or should not have known that the acquired property has been disposed or transferred
in breach of trust.

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