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Q. What are the good traditions of the Filipinos that you

want to embrace?
A. The hospitality of the Filipinos." (transcript pp. 40-41)

Nos. L-16185-86. May 31, 1962.

TRUSTEESHIP OF THE MINORS BENIGNO, ANGELA

and ANTONIO, all surnamed PEREZ Y TUASON,
PHILIPPINE NATIONAL BANK, Judicial Guardian, J.
ANTONIO ARANETA, trustee-appellee, vs. ANTONIO M.
PEREZ, judicial guardian-appellant.

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VOL. 5, MAY 31, 1962 339

Araneta vs. Perez

Trust and Trustee; Section 7 of Rule 86 of the Rules of Court

does not exactly refer to trustee.—Section 7 of Rule 86 refers only
to "executors and administrators" of the estate of deceased
persons and does not necessarily apply to trustees.
Same; Executors and Administrators; Duties are compared.—
The duties of executors and administrators are fixed and/or
limited by law, whereas those of trustees of an express trust are
usually governed by the intention of the trustor or of the parties if
established by contract (Art. 1441, Civil Code of the Philippines)'.
The duties of trustees may cover a much wider range than those
of executors or administrators of the estate of deceased persons.
Same; To pay attorney's fees at the sound judgment of court.—
The better policy is to acknowledge the authority of courts of
justice to exercise a sound judgment in determining in the light of
the peculiar circumstances obtaining in each case whether or not
a trustee shall be allowed to pay attorney's fees and charge the
same against the trust estate, independently of his compensation
as a trustee.
Same; Trustee entitled to reimbursement for expenses from
trust estate.—Atrustee may be indemnified out of the trust estate
for his expenses in rendering and proving his accounts and for

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costs and counsel's fees in connection therewith. (54 Am. Jur. 415-
416).

APPEAL from the orders of the Court of First Instance of

Rizal (Quezon City Branch).

The facts are stated in the opinion of the Court.

     Araneta & Araneta for trustee-appellee.
     Alfonso Felix, Jr. for judicial guardian-appellant.

CONCEPCION, J.:

These are two (2) incidents of the trusteeship of the minors

Benigno, Angela and Antonio, all surnamed Perez y
Tuason. The issue in G.R. No. L-16185 is whether or not
the trustee, J. Antonio Araneta—hereinafter referred to as
the appellee—may be allowed to pay a sum of money to the
law firm, Araneta & Araneta, of which he is a member, for
services rendered to him, in his aforementioned capacity as
such trustee, in several judicial proceedings, whereas G.R.
No. L-16186 concerns the question whether the purchase of
certain shares of stock made by the appellee for the benefit
of the trusteeship merits judicial approval. Both questions
were decided by the

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340 SUPREME COURT REPORTS ANNOTATED

Araneta vs. Perez

Court of First Instance of Rizal (Quezon City Branch) in

the affirmative. Hence, this appeal by Antonio M. Perez—
hereinafter referred to as the appellant—as guardian of the
person of said minors.
With respect to G.R. No. L-16185, it appears that the
law firm Araneta & Araneta, through its assistant, Atty.
Francisco T. Papa, had rendered services, as counsel for the
appellee, in connection with the following:

1. The approval of his accounts for January to March,

1956, which were objected to by the appellant. Said
objection was, on October 19, 1956, overruled by the
lower court, the action of which was affirmed by
this Court in G.R. No. L-11788, on May 16, 1958, on
appeal taken by appellant.
2. The appellee's accounts for April to June, 1957;
which were approved by the lower court on July 13,
1957, despite appellant's objection thereto.

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Although appellant appealed to the Supreme Court,

he, subsequently, withdrew the appeal.
3. In 1958, appellant instituted CA-G.R. No. 22810-R
of the Court of Appeals for a writ of certiorari and
mandamus against the appellee and the lower
court, the latter having sustained the action of the
appellee in withholding certain sums from the
shares of the minors aforementioned in the net
income of the trust estate for July to September,
1957, in view of the appellant's refusal to reimburse
to said estate identical sums received in the form of
allowances for the period from April to June, 1957,
in excess of the shares of said minors in the net
income for that period. After appropriate
proceedings, the Court of Appeals rendered a
decision on June 25, 1958, dismissing said petition.

The lower court authorized the payment of P5,500.00 for

the services thus rendered by Araneta & Araneta, which
appellant assails upon the ground that, pursuant to Section
7 of Rule 86 of the Rules of Court:

"When the executor or administrator is an attorney he shall not

charge against the estate any professional fees for legal services
rendered by him".

that the services above referred to inured to the benefit,

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Araneta vs. Perez

not of the trust estate, but of the trustee; that the amount
of the award is excessive; and that the lower court should
have required the introduction of evidence on the extent of
the services rendered by the aforementioned law firm
before making said award.
Appellant's pretense is untenable. Said Section 7 of Rule
86 refers only to "executors or administrators" of the estate
of deceased persons, and does not necessarily apply to
trustees. It is true that some functions of the former bear a
close analogy with those of the latter. Moreover, a trustee,
like, an executor or administrator, holds an office of trust,
particularly when, as in the case of appellee herein, the
trustee acts as such under judicial authority. Hence,
generally, the policy set forth in said Section 7 of Rule 86—
basically sound and wise as it is—should be applicable to
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trustees. The duties of executors or administrators are,

however, fixed and/or limited by law, whereas those of
trustee of an express trust—like that which we have under
consideration—are, usually, governed by the intention of
the trustor or of the parties, if established by contract (Art.
1441, Civil Code of the Philippines). Besides, the duties of
trustees may cover a much wider range than those of
executors or administrators of the estate of deceased
persons. Again the application of Section 7 of Rule 86 to all
trusteeships without distinction may dissuade deserving
persons from accepting the position of trustee and
consequently have a deterrent effect upon the
establishment of trusts, at a time when a sizeable part of
the burden to undertake important and even essential
activities in advanced and/or developing communities or
states, particularly in the field of education, science and
social welfare, is borne by foundations or other similar
organizations based upon the principles of trust. We believe
it, therefore, to be the better policy to acknowledge the
authority of courts of justice to exercise a sound judgment
in determining, in the light of the peculiar circumstances
obtaining in each case, whether or not a trustee shall be
allowed to pay attorney's fees and charge the same against
the trust estate, independently of his compensation as a
trustee.
In the case at bar, considering that the appellee was

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Araneta vs. Perez

merely defending himself in the proceedings that required

the services of counsel; that in each case the stand taken by
the appellee was upheld by the court; that the will creating
the trust and designating the appellee as trustee explicitly
grants him the right to collect for his services such
reasonable fees; that, in view of the nature of the relations
between the trustor and the trustee, on the one hand, and
the trustor and appellant on the other, there can be little
doubt but that the trustor would have sanctioned the
payment of the attorney's fees involved in this incident;
and that it may have been more costly for the trust estate
to engage the services of a law firm other than that of
Araneta & Araneta, we are not prepared to hold that the
lower court has erred in authorizing the payment of said
attorney's fees by herein appellee.

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For the rest, it is well settled that "a trustee may be

indemnified out of the trust estate for his expenses in
rendering and proving his accounts and for costs and
counsel fees"in connection therewith (54 Am. Jur. 415-416),
apart from the fact that the nature of the professional
services in question appeared in the records before the
lower court and that the amount of P5,500 fixed by the
same as compensation for such services is not excessive.
Referring now to G.R. No. L-16186, it appears that from
July to September, 1958, the appellee had bought for the
trust estate, through a broker (Pedro Nolasco da Silva &
Co.), a total of 118 common shares of stock of the
Philippine-American Drug Co. at P100 each, and that,
upon submission of appellee's accounts for said period,
appellant objected to the items of expenses relative to the
acquisition of said common shares, upon the ground that
the investment therein is "unwise in that (the operation of)
said company has not, to our knowledge, proved profitable
and unlawful in that it is actually an act of selfdealing
between the trustee and the beneficiaries of the trust",
because the former (appellee) is, also, a stockholder of said
company. After the introduction of the evidence of both
parties, the lower court overruled the objection and
approved said accounts.
It is not disputed that appellee holds, in his individual
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Araneta vs. Perez

capacity, 199 out of 30,000 common shares of stock of the

Philippine-American Drug Co., whereas his children own
270 out of 5,000 preferred shares of stock of the same
enterprise. As a consequence, the interest of appellees and
his children in said company is not such as to warrant the
charge that the purchase of 118 common stocks for the
trust estate amounts to self-dealing by the appellee with
himself. What is more, said purchase by the trustee may be
considered as an indication that he had displayed in the
management of the trust estate the same interest he had in
the protection of his own property.
Upon the other hand, it has, also, been established that
the book value of each of said 118 common shares of stock,
purchased by the trustee at P100 each, is P202.80; that in
1954 the Philippine-American Drug Co. had paid a cash
dividend of 6%, aside from declaring a 33-1/3% stock
dividend for its common shares; and that 6-1/2% and 4%
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cash dividends were paid in 1955 and 1957, respectively.

Furthermore, the statement of accounts of the company for
the years 1954, 1955, 1956 and 1957, satisfied the lower
court that the enterprise "is financially stable and sound".
Under the circumstances, we cannot say that the
investment in question is unwise.
Appellant's allegation to the effect that shares of stock of
the San Miguel Brewery pay higher returns, even if true,
does not establish his pretense. Whether an investment is
good or not does not depend upon the general, abstract
possibility of better investments. Again, one factor that
should be taken into account is the degree of influence that
the investor may have upon the management of the
enterprise concerned, which appellee admittedly has in the
Philippine-American Drug Co., but which it is not claimed
he wields in the San Miguel Brewery Co.
WHEREFORE, the orders appealed from are hereby
affirmed, with costs against the appellant. It is so ordered.

     Padilla, Reyes, J.B.L., Barrera, Paredes and Dizon,

JJ., concur.
     Bengzon, C.J., is on leave.
     Bautista Angelo, J., concurs in the result.

Orders affirmed.
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