Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No.

L-16962 February 27, 1962

hacerles entrega de la participacion que a cada legatario corresponda en las rentas netas de la administracion. ,a ad inistracion sobre un grupo cesara cuando todos isnietos de dicho grupo llegare a su a!oria de edad, ! una a!oria de los is os acordaren la ter inacion de la ad inistracion. Por nietos, debe entederse no sola ente a los nietos varones sino ta bien a los nietos ujeres. *n confor it! (ith this provision of said (ill, the present trusteeship proceedings (as instituted and certain properties of the estate of the deceased, valued P$22,22 (ere turned over in #$32 to .. Antonio Araneta, as trustee for the benefit of Benigno, Angela and Antonio, all surna ed Pere1 ! 'uason, the grandchildren of the decedent referred to in her afore entioned (ill. Portions of said properties constituting the trust (ere sold in #$34, #$35 and #$3& at prices e6ceedingl! b! P#7,%#&.%8, P%,287.38 and P&#,7&4.$%, respectivel! 9 aggregating P$&,&8&.&& 9 the original appraised value thereof. :n "epte ber 8&, #$3$, the judicial guardian and father of said inors filed a otion in the trusteeship proceedings alleging that said su of P$&,&8&.&& represents profits or inco e of the trusteeship to (hich said inors are entitled, pursuant to the above +uoted provision of the (ill, and pra!ing that the trustee be accordingl! instructed to deliver said su to the ovant. 'he trustee objected to the otion, (hich, after due hearing, (as denied b! an order dated March #2, #$42, fro (hich said guardian has appealed. 'he appeal hinges on (hether or not the aforesaid su of P$&,&8&.&& is a profit or inco e (hich should be turned over to the guardian of said inors according to the provisions of the (ill +uoted above. Appellant aintains that it is, because said su (as included as profit in the state ents of profits and losses attached to the corresponding inco e ta6 returns. 'his pretense is untenable. 'o begin (ith, the issue as to is a atter dependent e6clusivel! upon the conditions upon (hich the trust had been established, as provided in the above +uoted paragraph of the (ill of the decedent, (hich in turn depends upon the latter;s intent, as set forth in said paragraph. <pon the other hand, the +uestion (hether the su in +uestion is a profit or not (ithin the purvie( of our internal revenue la( depends upon the provisions of the latter, regardless of the (ill of the decedent.
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TRUSTEESHIP OF THE MINORS ENIGNO, !NGEL! a"# !NTONIO, a$$ %ur"a&e# PERE' ( TU!SON, !NTONIO M. PERE', judicial-guardian-appellant, vs. ). !NTONIO !R!NET!, trustee-appellee. Alfonso L. Felix, Jr. for judicial-guardian-appellant. Araneta and Araneta for trustee-appellee. CONCEPCION, J.: Appeal fro an order den!ing a otion.

"o eti e in #$%&, Angela ". 'uason died leaving a (ill, paragraph % of (hich reads) *nstitu!o co o is unicos herederos a is encionados tres hijos, a rason de una novena parte del caudal hereditario +ue dejare para cada uno de ellos. ,ego a i hijo Antonio otra porcion e+uivalente a dos novenas partes del caudal hereditario. ,ego asi is o a is nietos +ue fueren de i hija Nieves, otra porcion e+uivalente a dos novenas partes del caudal hereditario. Y finalmente lego a mis nietos que fueren hijos de mi hija Angela otra porcion equivalente de dos novenas partes del caudal hereditario. -ichos tres legados, sin e bargo, estan sujetos a la anda +ue se enciona en el parrafo siguiente. ,os dos legados, a favor de is encionados nietos seran ad inistrados por i albacea, .. Antonio Araneta /! en defecto de este, su her ano, "alvador Araneta0, con a plios poderes de vender los is os, ! con suproducto ad+uirir otros bienes, ! con derecho a cobrar por su ad inistracion, honorarios ra1onables. ,os poderos de dicho ad inistrador seran los de un trustee con los poderes as a plios per itidos por la le!. -eberasin e bargo, rendir tri estral ente, cuenta de su ad inistracion a los legatarious +ue fueren a!ores de edad. Y asimismo, debera

"econdl!, the proceeds of the sale of portions of the real estate held in trust, erel! ta=e the place of the propert! sold. >hat is ore, the provision of the (ill of the decedent e6plicitl! authori1ing the trustee to

sell the propert! held in trust and to ac+uire, (ith the proceeds of the sale, other propert! /?con a plios poderos de vender los is os, ! con su producto ad+uirir otros bienes,?0 leaves no roo for doubt about the intent of the testatri6 to =eep, as part of the trust, said proceeds of the sale, and not to turn the sa e over to the beneficiar! as net rentals /?rentas netas?0. 'hirdl!, under the principles of general la( on trust, insofar as not in conflict (ith the Civil Code, the Code of Co erce, the Rules of Court and "pecial la(s, are no( part of our la(s /Article #%%8, Civil Code of the Philippines0. Pursuant to the general la( on trust, ?a provision in the instru ent to the effect that the beneficiar! shall be entitled to the ;inco e and profits of; of the trust estate is not ordinaril! sufficient to indicate an intention that he should be entitled to receive gains arising fro the sale of trust propert! ...? / *n re Account of @ouston;s 'rustees, #43 Atl. #78A ,au an v. Boster, 32 A.,.R. 37#A Cuthrie;s 'rustee v. A=ers, #35 D!. 4%$A Estate of Cartenlaule, #$& Cal. 82%, 8%% Pac. 7%&, %& A.,.R. EM.". 5$7F0. *ndeed). 'he corpus of the estate, no atter (hat changes of for it undergoes, should be regarded as the sa e propert!. 'hat the trust propert! is originall! one!, later beco es bonds, and still later real estate, ought not to affect the status of the propert! as the capital fund. /*n re Craha ;s Estate, #$& Pa. 8#4, 8#$, %5 A. ##2&A "ee Bogert on 'rusts, 8d Ed., p. %74.0 @ence, it is (ell settled that profits reali1ed in the sale of trust properties are part of the capital held in trust to (hich the beneficiaries are not entitled as inco e. /Birst Nat. Ban= of Carlisle v. ,ee, 87 D!. ,. Rep. #&$5A Cole an vs. Cri es, 77 D!. ,. Rep. %33A Bains v. Clobe Ban= G 'rust Co., #74 D!. 778A " ith v. @ooper, $3 Md. #4A Chase v. <nion National Ban=, 853 Mass. 327A Birst National Ban= of Canton vs. Mulholland, #7 A.,.R. #222 E#$82F ElandFA "te(art v. Phelps, 53 N. G "upp. 384 Rathbun v. Colton, #3 Pic=. %5#A Cibson v. Coo=e, # Met. 53A "ee "cott on 'rusts Hol. 8 p. #83$.0 *n the language of the Restate ent of the ,a(). "ubject to the allocation of receipts fro unproductive or (asting propert!, and e6cept as stated in Co ent c, one! or other propert! received b! the trustee as the proceeds of a sale or e6change of the principal of trust propert! is principal. "i ilarl!, (here trust propert! is ta=en on e inent do ain, the proceeds received b! the trustee are principal. *f trust propert! is destro!ed b! fire or other casualt!, the proceeds of insurance thereon

received b! the trustee are principal. .... ?>here it is provided b! the ter s of the trust that the ;inco e and profits; of the trust estate shall be paid to the life beneficiar!, it is a +uestion of interpretation (hether the life beneficiar! is to receive ore than he (ould receive if it (ere provided that the ;inco e; should be paid to hi . :rdinaril! the inference is that he is not to receive ore, and if trust propert! is sold at a profit, the profit is principal. /Restate ent of the ,a(, 'rusts, Hol. *, pp. 4&8 and 4$#.0 >@EREB:RE, the order appealed fro is hereb! affir ed, (ith costs against appellant, Antonio M. Pere1. *t is so ordered. &eng'on, (.J., )adilla, &autista Angelo, Labrador, *e+es, J.&.L., &arrera, )aredes, ,i'on and ,e Leon, JJ., concur.