G.R. No. L-18872 July 15, 1966
In the Matter of the Trusteeship of Minors Benigno, Angela and Antonio, all surnamed Perez y Tuason. J. ANTONIO ARANETA, petitioner and appellee, vs. ANTONIO PEREZ, Judicial Guardian of Angela and ANTONIO PEREZ Y TUASON, oppositor and appellant.

FACTS

This is an appeal from an order of the Court of First Instance of Rizal dated April 4, 1957, in trusteeship proceeding No. Q-73. The trust was established pursuant to the will of the late Angela S. Tuason, who appointed appellee J. Antonio Araneta as trustee for the benefit of her grandchildren Benigno, Angela, and Antonio Perez y Tuason. The trustee was granted the broadest powers of a trustee permitted by law. On March 24, 1950, Araneta was appointed trustee and qualified on May 5, 1950. On April 30, 1955, the trustee executed a deed of donation in favor of the City of Manila covering a lot with an area of 853.1 square meters that pertained to the trust estate. The lower court approved this donation over the opposition of appellant Antonio Perez, the father and judicial guardian of two of the minor beneficiaries. The court found that the lot had long been used as a street providing access to other trust properties, that it was included in the street layouts of a plan to convert the trust properties into a residential subdivision, and that the donation would save the trust from paying realty taxes and maintaining the street. The appellant opposed the donation, arguing it was invalid under Article 736 of the new Civil Code, which prohibits guardians and trustees from donating properties entrusted to them.

ISSUE

Whether the donation of trust property by the trustee to the City of Manila is valid despite the prohibition in Article 736 of the Civil Code.

RULING

The Supreme Court affirmed the lower court’s order approving the donation. The Court held that Article 736 of the new Civil Code, which took effect on August 30, 1950, does not apply retroactively to the testamentary trust established upon the death of the testatrix on March 20, 1948. The old Civil Code contained no such prohibition, and the testatrix, in conferring plenary powers upon the trustee, must have contemplated the law in force at that time. Furthermore, the Court reasoned that the prohibition in Article 736 aims to protect beneficiaries from gifts of pure liberality. In this case, the donation was clearly beneficial and necessary for the trust, as it facilitated the development of a residential subdivision, relieved the trust of tax and maintenance burdens, and was subject to court supervision. Therefore, the donation was valid and in the interest of the beneficiaries.