Donor's Tax Cases

Stevenson S. Yu, XU Law, 2nd Semester 2017-2018 Taxation 2 (Atty. Cherry P.
Ibaoc)
Donor’s Tax
1. Pirovano vs CIR
G.R. No. L-19865, July 31, 1965
MARIA CARLA PIROVANO, ETC., ET AL., PETITIONER AND APPELLANTS, VS. THE COMMISSIONER OF
INTERNAL REVENUE, RESPONDENT AND APPELLEE.
DECISION
REYES, J.B.L., J.:
This case is a sequel to the case of Pirovano, vs. De la Rama Steamship Co., 96 Phil. 335.
Briefly, the facts of the aforestated case may be stated as follows:
Enrico Pirovano was the father of the herein petitioners-appellants. Sometime in the early part of 1941, De la
Rama Steamship Co. insured the life of said Enrico Pirovano, who was then its President and General Manager
until the time of his death, with various Philippine and American insurance companies for a total sum of one
million pesos, designating itself as the beneficiary of the policies obtained by it. Due to the Japanese occupation
of the Philippines during the second World War, the Company was unable to pay its premiums on the policies
issued by its Philippine insurers and these policies lapsed, while the policies issued by its American insurers were
kept effective and subsisting, the New York office of the Company having continued paying its premiums from
year to year.
During the Japanese occupation, or more particularly in the latter part of 1944, said Enrico Pirovano died.
After the liberation of the Philippines from the Japanese forces, the Board of Directors of De la Rama Steamship
Co. adopted a resolution dated July 10, 1946 granting and setting aside, out of the proceeds expected to be
collected on the insurance policies taken on the life of said Enrico Pirovano, the sum of P400,000.00 for equal
division among the four (4) minor children of the deceased, said sum of money to be convertible into 4,000 shares
of stock of the Company, at par, or 1,000 shares for each child. Shortly thereafter, the Company received the total
sum of P643,000.00 as proceeds of the said life insurance policies obtained from American insurers.
Upon receipt of the last stated sum of money, the Board of Directors of the Company modified, on January 6,
1947, the above-mentioned resolution by renouncing all its rights, title, and interest to the said amount of
P643,000.00 in favor of the minor children of the deceased, subject to the express condition that said amount
should be retained by the Company in the nature of a loan to it, drawing interest at the rate of five per centum
(5%) per annum, and payable to the Pirovano children after the Company shall have first settled in full the
balance of its present remaining bonded indebtedness in the sum of approximately P5,000,000.00. This latter
resolution was carried out in a Memorandum Agreement on January 10, 1947 and June 17, 1947, respectively,
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Stevenson S. Yu, XU Law, 2nd Semester 2017-2018 Taxation 2 (Atty. Cherry P. Ibaoc)
executed by the Company and Mrs. Estefania R. Pirovano, the latter acting in her capacity as guardian of her
children (petitioners-appellants, herein) and pursuant to an express authority granted her by the court.
On June 24, 1947, the Board of Directors of the Company further modified the last mentioned resolution providing
therein that the Company shall pay the proceeds of said life insurance policies to the heirs of the said Enrico
Pirovano after the Company shall have settled in full the balance of its present remaining bonded indebtedness,
but the annual interests accruing on the principal shall be paid to the heirs of the said Enrico Pirovano, or their
duly appointed representative, whenever the Company is in a position to meet said obligation.
On February 26, 1948, Mrs. Estefania R. Pirovano, in behalf of her children, executed a public document formally
accepting the donation; and, on the same date, the Company, through its Board of Directors, took official notice of
this formal acceptance.
On September 13, 1949, the stockholders of the Company formally ratified the various resolutions hereinabove
mentioned with certain clarifying modifications that the payment of the donation shall not be effected until such
time as the Company shall have first duly liquidated its present bonded indebtedness in the amount of
P3,260,855.77 with the National Development Company, or fully redeemed the preferred shares of stock in the
amount which shall be issued to the National Development Company in lieu thereof; and that, any and all taxes,
legal fees, and expenses in any way connected with the above transaction shall be chargeable, and deducted
from the proceeds of the life insurance policies mentioned in the resolutions of the Board of Directors.
On March 8, 1951, however, the majority stockholder of the Company voted to revoke the resolution approving
donation in favor of the Pirovano children.
As a consequence of this revocation and refusal of the Company to pay the balance of the donation amounting to
P564,980.90 despite demands therefor, the herein petitioners-appellants, represented by their natural guardian,
Mrs. Estefania R. Pirovano, brought an action for the recovery of said amount, plus interest and damages against
De la Rama Steamship Co., in the Court of First Instance of Rizal, which case ultimately culminated to an appeal
to this Court. On December 29, 1954, this Court rendered its decision in the appealed case (v. 96 Phil. 385)
holding that the donation was valid and remunerative in the dispositive part of which reads:
"Wherefore, the decision appealled from should be modified as follows: (a) the, the donation in favor of the
children of the late Enrico Pirovano of the proceeds of the insurance policies taken on his life is valid and binding
on the defendant corporation, (b) that said donation which amounts to a total of P583,813.59, including interest,
as it appears in the, books of the corporation as of August 31, 1951, plus interest thereon at the rate of 5 per cent
per annum from the filing of the complaint, should be paid to the plaintiff after the defendant corporation shall
have fully redeemed the preferred shares issued to the National Development Company under the terms and
conditions stated in the resolutions of the Board of Directors of January 6, 1947 and June 24, 1947, as amended
by the resolution of the stockholders adopted on September 13, 1949; and (c) defendant shall pay to plaintiff an
additional amount equivalent to 10 per cent of said amount of P583,813.59 as damages by way of attorney's fees,
and to pay the costs of action."
(Pirovana, et al vs. De la Rama Steamship Co., 96 Phil. 367-368)
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The above decision become final and executory. In compliance therewith, De la Rama Steamship Co. made on
April 6, 1955, a partial payment on the amount of the judgment and paid the balance thereof on May 12, 1955.
On March 6, 1955, respondent Commissioner of Internal Revenue assessed the amount of P60,869.67 as
donee's gift tax, inclusive of surcharges, interests and other penalties, against each of the petitioners-appellants,
or for the total sum of P243,478.68; and, on April 23, 1955 a donor's gift tax in the total amount of P34,871.76 was
also assessed against De la Rama Steamship Co., which the latter paid.
Petitioners-appellants herein contested respondent Commisioner's assessment and imposition of the donee's gift
taxes and donor's gift tax and also made a claim for refund of the donor's gift tax so collected. Respondent
Commissioner overruled petitioners' claim; hence, the latter presented two (2) petitions for review against
respondent's rulings before the Court of Tax Appeala, said petitions having been docketed as CTA Cases Nos.
347 and 375, CTA Case No. 347 relates to the petition disputing the legality of the assessment of donees’s gift
taxes and donor's gift tax while CTA Case No. 375 refers to the claim for refund of the donor's gift tax already
paid.
After the filing of respondent's usual answers to the claim for petitions, the two cases, being interrelated to each
other, were tried jointly and terminated.
On January 31, 1962, the Court of Tax Appeals rendered its decision in the two cases, the dispositive part of
which reads:
"In resume, we are of the opinion, that (1) the donor's gift tax in the sum of P34,371.76 was erroneously assessed
and collected hence, petitioners are entitled to the refund thereof; (2) the donees' gift taxes were correctly
assessed; (3) the imposition of the surcharge of 25% is not proper; (4) the surcharge of 5% is legally due and (5)
the interest of 1 per cent per month on the deficiency donees' gift taxes is due from petitioners from March 8,
1955 until the taxes are paid.
"IN LINE WITH THE FOREGOING OPINION, petitioners are hereby ordered to pay the donees' gift taxes as
assessed by respondent, plus 5% surcharge and interest at the rate of 1% per month from March 8, 1955 to the
date of payment of said donees' gift taxes. Respondent is ordered to apply the sum of P34,371.76 which in
refundable to petitioners, against the amount due from petitioners. With cost against petitioners in Case No. 347."
Petitioners-appellants herein filed a motion to reconsider the above decision which the lower court denied. Hence,
this appeal before us.
In the instant appeal, petitioners-appellants herein question only that portion of the decision of the lower court
ordering the payment of donees' gift taxes as assessed by respondent as well as the imposition of surcharge and
interest on the amount of donees' gift taxes.
In their brief and memorandum, they dispute the factual finding of the lower court that De la Rama Steamship
Company's renunciation of its rights, title, and interest over the proceeds of said life insurance policies in favor of
the Pirovano children "was motivated solely and exclusively by its sense of gratitude, an act of pure liberality, and
not to pay additional compensation for services: inadequately paid for". Petitioners now contend that the lower
court's finding was erroneous in seemingly considering the disputed grant as a simple donation, since our
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previous decision (96 Phil. 335) had already declared that the transfer to the Pirovano children was a
remuneration donation. Petitioners further contend that the same was not for an insufficient or inadequate
consideration but rather it was made for a full and adequate compensation for the valuable services rendered by
the late Enrico Pirovano to the De la Rama Steamship Co.; hence, the donation does not constitute a taxable gift
under the provisions of Section 108 of the National Internal Revenue Code.
The argument for petitioners-appellants fails to take into account the fact that neither in Spanish nor Anglo-
American law was it considered that past services, rendered without relying on a coetaneous promise, express or
implied, that such services would be paid for the future, constituted cause or consideration that would make a
conveyance of property anything else but a gift or donation. This conclusion flows from the text of Article 619 of
the Code of 1889 (identical with Article 726 of the present Civil Code of the Philippines):
"A thing given to a person in consideration of his merits oar for services rendered to the donor provided they do
not constitute recoverable debts, is also a donation" * * *."
There is nothing on record to show that when the late Enrico Pirovano rendered services as President and
General Manager of the De la Rama Steamship Co, he was not fully compensated for such services, or that,
because they were "largely responsible for the rapid and very successful development of the activities of the
company" (Resol. of July 10, 1946), Pirovano expected or was promised further compensation over and in
addition to his regular emoluments as President and General Manager. The fact that his services contributed in a
large measure to the success of the company did not give rise to a recoverable debt, and the conveyances made
by the company to his heirs remain a gift or donation. This is emphasized by the director's Resolution of January
6, 1947, that "out of gratitude" the company decided to renounce in favor of Pirovano's heirs the proceeds of the
life insurance policies in question. The true consideration for the donation was, therefore, the company's gratitude
for his services, and not the services themselves.
That the tax court regarded the conveyance as a simple donation, instead of a remuneratory one as it was
declared to be in our previous decision, is but innocuous error; whether remuneratory or simple, the conveyance
remained a gift, taxable under Chapter 2, Title III, of the Internal Revenue Code.
But then, appellants contend, the entire properly or right donated should not be considered as a gift for taxation
purposes; only that portion of the value of the property or right transferred, if any, which is in excess of the value
of the services rendered should be considered as a taxable gift. They cite in support Section III of the Tax Code
which provides that—
"when property is transferred for less than the adequate and full consideration in money or money's worth, then
the amount by which the value of the property exceeded the value of the consideration shall, for the purpose of
the tax imposed by this chapter, be deemed a gift."
The flaw in this argument lies in the fact that, as copied from American law, the term consideration used in this
section, refers to the technical "consideration" defined by the American Law Institute (Restatement of Contracts)
as "anything that is bargained for by the promisor and given by the promisee in exchange for the promise" (Also,
v. Corbin on Contracts, vol. I, p. 359). But, as we have seen, Pirovano's successful activities as of the De la Rama
Steamship Co. can not be such consideration for the gift to his heirs, since the services were rendered long
before the Company ceded the value of the life policies to said heirs; cession services were not the result of one
bargain or of a mutual exchange of promises.
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And the Anglo-American law treats a subsequent promise to pay for past services (like one to pay for
improvements already made without prior request from the promisor) to be a Nudum pactum (Roscorla vs.
Thomas, 3 O.B. 234; Peters vs. Poro, 25 ALR 615; Carson vs. Clark 25 Am. Dec. 79; Boston vs. Dodge, 12 Am.
Dec. 205), i.e. one that is unenforceable in view of the common law rule that consideration must consist in a legal
benefit to the promise or some legal detriment to the promisor.
What is more, the actual consideration for the cession of the policies, as previously shown, was the Company's
gratitude to Pirovano; so that under section III of the Tax Code there is no consideration the value Of which be
deducted from that of the property transferred as a gift. Like "love and affection", gratitude has no economic value
and is not "consideration" in the sense that the word is used in this section of the Tax Code.
As stated by Chief Justice Griffith of the Supreme Court of Mississippi in his well-known book, ''Outline of the Law'
(p. 204)—
"Love and affection are not considerations of value-they are not estimable in terms of value. Nor are sentiments of
gratitude for gratuitous past favors or kindnesses; nor are obligations which are merely moral. It has been well
said that if a moral obligation were alone sufficient it would remove the necessity for any consideration at all, since
the fact of making a promise imposes the moral obligation to perform it."
It is of course perfectly possible that a donation or gift should at the same time impose a burden or condition on
the donee involving some economic liability for him. A, for example, may donate a parcel of land to B on condition
that the latter assume a mortgage existing on the donated land. In this case the donee may rightfully insist that
the gift tax be computed only on the value of the land less the value of the mortgage. This, in fact, is contemplated
by Article 619 of the Civil Code of 1889 (Art. 726) of the New Code) when it provides that there is also a donation
"when the gift imposes upon the donee a burden which is less than the value of the thing given". Section III of the
Tax Code has in view situations of this kind, since it also prescribes that "the amount by which the value of the
property exceeded the value of the Consideration" shall be deemed a gift for the purpose of the tax.
Petitioners finally contend that, even assuming that the donation in question is subject to donees’s gift taxes, the
imposition of the surcharge of 5% and interest of 1% per month from March 8, 1955 was not justified because the
proceeds of the life insurance policies were actually received on April 6, 1955 and May 12, 1955 only and in
accordance with Section 115(c) of the Tax Code; the filing of the returns of such tax became due on March 1,
1956 and the tax became payable on May 15, 1956, as provided for in Section 116(a) of the same Code. In other
words, petitioners maintain that the assessment and demand for donees' gift taxes was prematurely made and of
no legal effect; hence, they should not be held liable for such surcharge and interest.
It is well to note, and it is not disputed, that petitioners-donee have failed to file any gift tax return and that they
also failed to pay the amount of the assessment made against them by respondent in 1955. This situation is
covered by Section 119(b) (1) and (c) and Section 120 of the Tax Code.
"(b) Deficiency.
(1) Payment not extended.—Where a deficiency, or any interest Assessed in connection therewith, or any
addition to the tax provided in section one hundred twenty is not paid in full within thirty days from the date of the
notice and demand from the Collector, there shall be collected as a part of the taxes, interest upon the unpaid
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amount at the rate of one per centum a month from the date of such notice and demand until it is paid, (section
119)
"(c) Surcharge.—If any amount of the taxes included in the notice and demand from the Collector of Internal
Revenue is not paid in full within thirty days after such notice and demand, there shall be collected in addition to
the interest prescribed above as a part of the taxes a surcharge of five per centum of the unpaid amount."
(sec.119)
The failure to file a return was found by the lower court to be due to reasonable cause and not to willful neglect.
On this score, the elimination by the lower court of the 25% surcharge as ad valorem penalty which respondent
Commissioner had imposed pursuant to Section 120 of the Tax Code was proper, since said Section 120 vests in
the Commissioner of Internal Revenue or in the tax court power and authority to impose or not to impose such
penalty depending upon whether or not reasonable cause has been shown in the non-filing of such return.
On the other hand, unlike said Section 120, Section 119, paragraphs (b) (1) and (c) of the Tax Code, does not
confer on the Commissioner of Internal Revenue or on the courts any power and discretion not to impose such
interest and surcharge. It is likewise provided for by law that an appeal to the Court of Tax Appeals from a
decision of the Commissioner of Internal Revenue shall not suspend the payment or collection of the tax liability of
the taxpayer unless a motion to that effect shall have been presented to the court and granted by it on the ground
that such collection will jeopardize the interest of the taxpayer (Sec. 11, Republic Act No. 1125; Rule 12, Rules of
the Court of Tax Appeals). It should further be noted that—
"It has been the uniform holding of this Court that no suit for adjoining the collection of a tax, disputed or
undisputed, can be brought, the remedy being to pay the tax first, formerly under protest and now without need of
protest, Ale the claim with the Collector, and if he denies it, bring an action for recovery against him." (David vs.
Ramos, et al., .90 Phil. 351)
"Section 306 of the National Internal Revenue Code * * * lays down the procedure to be followed in those cases
wherein a tax payer entertains some doubt about the correctness of a tax sought to be collected. Said section
provides that the tax should first be paid and the taxpayer should sue for its recovery afterwards. The purpose of
the law obviously is to prevent delay in the collection of taxes upon which the Government depends for its
existence. To allow a taxpayer to first secure a ruling as regards the validity of the tax before paying it would be to
defeat this purpose." (National Dental Supply Co. vs. Meer 90 Phil. 265)
Petitioners did not file in the lower court any motion for the suspension of payment or collection of the amount of
assessment made against them.
On the basis of the above stated provisions of law and applicable authorities, it is evident that the imposition of
1% interest monthly and 5% surcharge is justified and legal. As succinctly stated by the court below, said
imposition is "mandatory and may not be waived by the Commissioner of Internal Revenue or by the courts"
(Resolution on petitioners' motion for reconsideration, Annex XIV, petition). Hence, said imposition of interest and
surcharge by the lower court should be upheld.
Wherefore, the decision of the Court of Tax Appeals is affirmed. Costs against petitioners Pirovano.
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2. Gestopa vs CA
G.R. No. 111904, October 05, 2000
SPS. AGRIPINO GESTOPA AND ISABEL SILARIO GESTOPA, PETITIONERS, VS. COURT OF APPEALS
AND MERCEDES DANLAG Y PILAPIL, RESPONDENTS.
DECISION
QUISUMBING, J.:
This petition for review,[1] under Rule 45 of the Rules of Court, assails the decision[2] of the Court of Appeals
dated August 31, 1993, in CA-G.R. CV No. 38266, which reversed the judgment[3] of the Regional Trial Court of
Cebu City, Branch 5.
The facts, as culled from the records, are as follows:
Spouses Diego and Catalina Danlag were the owners of six parcels of unregistered lands. They executed three
deeds of donation mortis causa, two of which are dated March 4, 1965 and another dated October 13, 1966, in
favor of private respondent Mercedes Danlag-Pilapil.[4] The first deed pertained to parcels 1 & 2 with Tax
Declaration Nos. 11345 and 11347, respectively. The second deed pertained to parcel 3, with TD No. 018613.
The last deed pertained to parcel 4 with TD No. 016821. All deeds contained the reservation of the rights of the
donors (1) to amend, cancel or revoke the donation during their lifetime, and (2) to sell, mortgage, or encumber
the properties donated during the donors' lifetime, if deemed necessary.
On January 16, 1973, Diego Danlag, with the consent of his wife, Catalina Danlag, executed a deed of donation
inter vivos[5] covering the aforementioned parcels of land plus two other parcels with TD Nos. 11351 and 11343,
respectively, again in favor of private respondent Mercedes. This contained two conditions, that (1) the Danlag
spouses shall continue to enjoy the fruits of the land during their lifetime, and that (2) the donee can not sell or
dispose of the land during the lifetime of the said spouses, without their prior consent and approval. Mercedes
caused the transfer of the parcels' tax declaration to her name and paid the taxes on them.
On June 28, 1979 and August 21, 1979, Diego and Catalina Danlag sold parcels 3 and 4 to herein petitioners, Mr.
and Mrs. Agripino Gestopa. On September 29, 1979, the Danlags executed a deed of revocation[6] recovering
the six parcels of land subject of the aforecited deed of donation inter vivos.
On March 1, 1983, Mercedes Pilapil (herein private respondent) filed with the RTC a petition against the
Gestopas and the Danlags, for quieting of title[7] over the above parcels of land. She alleged that she was an
illegitimate daughter of Diego Danlag; that she lived and rendered incalculable beneficial services to Diego and
his mother, Maura Danlag, when the latter was still alive. In recognition of the services she rendered, Diego
executed a Deed of Donation on March 20, 1973, conveying to her the six (6) parcels of land. She accepted the
donation in the same instrument, openly and publicly exercised rights of ownership over the donated properties,
and caused the transfer of the tax declarations to her name. Through machination, intimidation and undue
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influence, Diego persuaded the husband of Mercedes, Eulalio Pilapil, to buy two of the six parcels covered by the
deed of donation. Said donation inter vivos was coupled with conditions and, according to Mercedes, since its
perfection, she had complied with all of them; that she had not been guilty of any act of ingratitude; and that
respondent Diego had no legal basis in revoking the subject donation and then in selling the two parcels of land to
the Gestopas.
In their opposition, the Gestopas and the Danlags averred that the deed of donation dated January 16, 1973 was
null and void because it was obtained by Mercedes through machinations and undue influence. Even assuming it
was validly executed, the intention was for the donation to take effect upon the death of the donor. Further, the
donation was void for it left the donor, Diego Danlag, without any property at all.
On December 27, 1991, the trial court rendered its decision, thus:
"WHEREFORE, the foregoing considered, the Court hereby renders judgment in favor of the defendants and
against the plaintiff:
Declaring the Donations Mortis Causa and Inter Vivos as revoked, and, therefore, has (sic) no legal effect and
force of law.
Declaring Diego Danlag the absolute and exclusive owner of the six (6) parcels of land mentioned in the Deed of
revocation (Exh. P-plaintiff, Exh. 6-defendant Diego Danlag).
Declaring the Deeds of Sale executed by Diego Danlag in favor of spouses Agripino Gestopa and Isabel Gestopa
dated June 28, 1979 (Exh. S-plaintiff; Exh. 18-defendant); Deed of Sale dated December 18, 1979 (Exh. T
plaintiff; Exh. 9-defendant); Deed of Sale dated September 14, 1979 (Exh. 8); Deed of Sale dated June 30, 1975
(Exh. U); Deed of Sale dated March 13, 1978 (Exh. X) as valid and enforceable duly executed in accordance with
the formalities required by law.
Ordering all tax declaration issued in the name of Mercedes Danlag Y Pilapil covering the parcel of land donated
cancelled and further restoring all the tax declarations previously cancelled, except parcels nos. 1 and 5
described, in the Deed of Donation Inter Vivos (Exh. "1") and Deed of Sale (Exh. "2") executed by defendant in
favor of plaintiff and her husband.
[5.]
With respect to the contract of sale of abovestated parcels of land, vendor Diego Danlag and spouse or their
estate have the alternative remedies of demanding the balance of the agreed price with legal interest, or
rescission of the contract of sale.
SO ORDERED."[8]
In rendering the above decision, the trial court found that the reservation clause in all the deeds of donation
indicated that Diego Danlag did not make any donation; that the purchase by Mercedes of the two parcels of land
covered by the Deed of Donation Inter Vivos bolstered this conclusion; that Mercedes failed to rebut the
allegations of ingratitude she committed against Diego Danlag; and that Mercedes committed fraud and
machination in preparing all the deeds of donation without explaining to Diego Danlag their contents.
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Mercedes appealed to the Court of Appeals and argued that the trial court erred in (1) declaring the donation
dated January 16, 1973 as mortis causa and that the same was already revoked on the ground of ingratitude; (2)
finding that Mercedes purchased from Diego Danlag the two parcels of land already covered by the above
donation and that she was only able to pay three thousand pesos, out of the total amount of twenty thousand
pesos; (3) failing to declare that Mercedes was an acknowledged natural child of Diego Danlag.
On August 31, 1993, the appellate court reversed the trial court. It ruled:
"PREMISES CONSIDERED, the decision appealed from is REVERSED and a new judgment is hereby rendered
as follows:
Declaring the deed of donation inter vivos dated January 16, 1973 as not having been revoked and consequently
the same remains in full force and effect;
Declaring the Revocation of Donation dated June 4, 1979 to be null and void and therefore of no force and effect;
Declaring Mercedes Danlag Pilapil as the absolute and exclusive owner of the six (6) parcels of land specified in
the above-cited deed of donation inter vivos;
Declaring the Deed of Sale executed by Diego Danlag in favor of spouses Agripino and Isabel Gestopa dated
June 28, 1979 (Exhibits S and 18), Deed of Sale dated December 18, 1979 (Exhibits T and 19), Deed of Sale
dated September 14, 1979 (Exhibit 8), Deed of Sale dated June 30, 1975 (Exhibit U), Deed of Sale dated March
13, 1978 (Exhibit X) as well as the Deed of Sale in favor of Eulalio Danlag dated December 27, 1978 (Exhibit 2)
not to have been validly executed;
Declaring the above-mentioned deeds of sale to be null and void and therefore of no force and effect;
Ordering spouses Agripino Gestopa and Isabel Silerio Gestopa to reconvey within thirty (30) days from the finality
of the instant judgment to Mercedes Danlag Pilapil the parcels of land above-specified, regarding which titles
have been subsequently fraudulently secured, namely those covered by O.C.T. T-17836 and O.C.T. No. 17523.
Failing to do so, ordering the Branch Clerk of Court of the Regional Trial Court (Branch V) at Cebu City to effect
such reconveyance of the parcels of land covered by O.C.T. T-17836 and 17523.
SO ORDERED."[9]
The Court of Appeals held that the reservation by the donor of lifetime usufruct indicated that he transferred to
Mercedes the ownership over the donated properties; that the right to sell belonged to the donee, and the donor's
right referred to that of merely giving consent; that the donor changed his intention by donating inter vivos
properties already donated mortis causa; that the transfer to Mercedes' name of the tax declarations pertaining to
the donated properties implied that the donation was inter vivos; and that Mercedes did not purchase two of the
six parcels of land donated to her.
Hence, this instant petition for review filed by the Gestopa spouses, asserting that:
"THE HONORABLE COURT OF APPEALS, TWELFTH DIVISION, HAS GRAVELY ERRED IN REVERSING THE
DECISION OF THE COURT A QUO."[10]
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Before us, petitioners allege that the appellate court overlooked the fact that the donor did not only reserve the
right to enjoy the fruits of the properties, but also prohibited the donee from selling or disposing the land without
the consent and approval of the Danlag spouses. This implied that the donor still had control and ownership over
the donated properties. Hence, the donation was post mortem.
Crucial in resolving whether the donation was inter vivos or mortis causa is the determination of whether the
donor intended to transfer the ownership over the properties upon the execution of the deed.[11]
In ascertaining the intention of the donor, all of the deed's provisions must be read together.[12] The deed of
donation dated January 16, 1973, in favor of Mercedes contained the following:
"That for and in consideration of the love and affection which the Donor inspires in the Donee and as an act of
liberality and generosity, the Donor hereby gives, donates, transfer and conveys by way of donation unto the
herein Donee, her heirs, assigns and successors, the above-described parcels of land;
That it is the condition of this donation that the Donor shall continue to enjoy all the fruits of the land during his
lifetime and that of his spouse and that the donee cannot sell or otherwise, dispose of the lands without the prior
consent and approval by the Donor and her spouse during their lifetime.
xxx
That for the same purpose as hereinbefore stated, the Donor further states that he has reserved for himself
sufficient properties in full ownership or in usufruct enough for his maintenance of a decent livelihood in
consonance with his standing in society.
That the Donee hereby accepts the donation and expresses her thanks and gratitude for the kindness and
generosity of the Donor."[13]
Note first that the granting clause shows that Diego donated the properties out of love and affection for the donee.
This is a mark of a donation inter vivos.[14] Second, the reservation of lifetime usufruct indicates that the donor
intended to transfer the naked ownership over the properties. As correctly posed by the Court of Appeals, what
was the need for such reservation if the donor and his spouse remained the owners of the properties? Third, the
donor reserved sufficient properties for his maintenance in accordance with his standing in society, indicating that
the donor intended to part with the six parcels of land.[15] Lastly, the donee accepted the donation. In the case of
Alejandro vs. Geraldez, 78 SCRA 245 (1977), we said that an acceptance clause is a mark that the donation is
inter vivos. Acceptance is a requirement for donations inter vivos. Donations mortis causa, being in the form of a
will, are not required to be accepted by the donees during the donors' lifetime.
Consequently, the Court of Appeals did not err in concluding that the right to dispose of the properties belonged to
the donee. The donor's right to give consent was merely intended to protect his usufructuary interests. In
Alejandro, we ruled that a limitation on the right to sell during the donors' lifetime implied that ownership had
passed to the donees and donation was already effective during the donors' lifetime.
The attending circumstances in the execution of the subject donation also demonstrated the real intent of the
donor to transfer the ownership over the subject properties upon its execution.[16] Prior to the execution of
10
donation inter vivos, the Danlag spouses already executed three donations mortis causa. As correctly observed
by the Court of Appeals, the Danlag spouses were aware of the difference between the two donations. If they did
not intend to donate inter vivos, they would not again donate the four lots already donated mortis causa.
Petitioners' counter argument that this proposition was erroneous because six years after, the spouses changed
their intention with the deed of revocation, is not only disingenious but also fallacious. Petitioners cannot use the
deed of revocation to show the spouses' intent because its validity is one of the issues in this case.
Petitioners aver that Mercedes' tax declarations in her name can not be a basis in determining the donor's intent.
They claim that it is easy to get tax declarations from the government offices such that tax declarations are not
considered proofs of ownership. However, unless proven otherwise, there is a presumption of regularity in the
performance of official duties.[17] We find that petitioners did not overcome this presumption of regularity in the
issuance of the tax declarations. We also note that the Court of Appeals did not refer to the tax declarations as
proofs of ownership but only as evidence of the intent by the donor to transfer ownership.
Petitioners assert that since private respondent purchased two of the six parcels of land from the donor, she
herself did not believe the donation was inter vivos. As aptly noted by the Court of Appeals, however, it was
private respondent's husband who purchased the two parcels of land.
As a rule, a finding of fact by the appellate court, especially when it is supported by evidence on record, is binding
on us.[18] On the alleged purchase by her husband of two parcels, it is reasonable to infer that the purchase was
without private respondent's consent. Purchase by her husband would make the properties conjugal to her own
disadvantage. That the purchase is against her self-interest, weighs strongly in her favor and gives credence to
her claim that her husband was manipulated and unduly influenced to make the purchase, in the first place.
Was the revocation valid? A valid donation, once accepted, becomes irrevocable, except on account of
officiousness, failure by the donee to comply with the charges imposed in the donation, or ingratitude.[19] The
donor-spouses did not invoke any of these reasons in the deed of revocation. The deed merely stated:
"WHEREAS, while the said donation was a donation Inter Vivos, our intention thereof is that of Mortis Causa so
as we could be sure that in case of our death, the above-described properties will be inherited and/or succeeded
by Mercedes Danlag de Pilapil; and that said intention is clearly shown in paragraph 3 of said donation to the
effect that the Donee cannot dispose and/or sell the properties donated during our life-time, and that we are the
one enjoying all the fruits thereof."[20]
Petitioners cited Mercedes' vehemence in prohibiting the donor to gather coconut trees and her filing of instant
petition for quieting of title. There is nothing on record, however, showing that private respondent prohibited the
donors from gathering coconuts. Even assuming that Mercedes prevented the donor from gathering coconuts,
this could hardly be considered an act covered by Article 765 of the Civil Code.[21] Nor does this Article cover
respondent's filing of the petition for quieting of title, where she merely asserted what she believed was her right
under the law.
Finally, the records do not show that the donor-spouses instituted any action to revoke the donation in
accordance with Article 769 of the Civil Code.[22] Consequently, the supposed revocation on September 29,
1979, had no legal effect.
11
WHEREFORE, the instant petition for review is DENIED. The assailed decision of the Court of Appeals dated
August 31, 1993, is AFFIRMED.
Costs against petitioners.
SO ORDERED.
12
3. Villanueva vs Branoco
G.R. No. 172804, January 24, 2011
GONZALO VILLANUEVA, REPRESENTED BY HIS HEIRS, PETITIONER, VS. SPOUSES FROILAN AND
LEONILA BRANOCO, RESPONDENTS.
DECISION
CARPIO, J.:
The Case
This resolves the petition for review[1] of the ruling[2] of the Court of Appeals dismissing a suit to recover a realty.
The Facts
Petitioner Gonzalo Villanueva (petitioner), here represented by his heirs,[3] sued respondents, spouses Froilan
and Leonila Branoco (respondents), in the Regional Trial Court of Naval, Biliran (trial court) to recover a 3,492
square-meter parcel of land in Amambajag, Culaba, Leyte (Property) and collect damages. Petitioner claimed
ownership over the Property through purchase in July 1971 from Casimiro Vere (Vere), who, in turn, bought the
Property from Alvegia Rodrigo (Rodrigo) in August 1970. Petitioner declared the Property in his name for tax
purposes soon after acquiring it.
In their Answer, respondents similarly claimed ownership over the Property through purchase in July 1983 from
Eufracia Rodriguez (Rodriguez) to whom Rodrigo donated the Property in May 1965. The two-page deed of
donation (Deed), signed at the bottom by the parties and two witnesses, reads in full:
KNOW ALL MEN BY THESE PRESENTS:
That I, ALVEGIA RODRIGO, Filipino, of legal age, widow of the late Juan Arcillas, a resident of Barrio Bool,
municipality of Culaba, subprovince of Biliran, Leyte del Norte, Philippines, hereby depose and say:
That as we live[d] together as husband and wife with Juan Arcillas, we begot children, namely: LUCIO, VICENTA,
SEGUNDINA, and ADELAIDA, all surnamed ARCILLAS, and by reason of poverty which I suffered while our
children were still young; and because my husband Juan Arcillas aware as he was with our destitution separated
us [sic] and left for Cebu; and from then on never cared what happened to his family; and because of that one
EUFRACIA RODRIGUEZ, one of my nieces who also suffered with our poverty, obedient as she was to all the
works in our house, and because of the love and affection which I feel [for] her, I have one parcel of land located
at Sitio Amambajag, Culaba, Leyte bearing Tax Decl. No. 1878 declared in the name of Alvegia Rodrigo, I give
(devise) said land in favor of EUFRACIA RODRIGUEZ, her heirs, successors, and assigns together with all the
improvements existing thereon, which parcel of land is more or less described and bounded as follows:
13
1. Bounded North by Amambajag River; East, Benito Picao; South, Teofilo Uyvico; and West, by Public land; 2. It
has an area of 3,492 square meters more or less; 3. It is planted to coconuts now bearing fruits; 4. Having an
assessed value of P240.00; 5. It is now in the possession of EUFRACIA RODRIGUEZ since May 21, 1962 in the
concept of an owner, but the Deed of Donation or that ownership be vested on her upon my demise.
That I FURTHER DECLARE, and I reiterate that the land above described, I already devise in favor of EUFRACIA
RODRIGUEZ since May 21, 1962, her heirs, assigns, and that if the herein Donee predeceases me, the same
land will not be reverted to the Donor, but will be inherited by the heirs of EUFRACIA RODRIGUEZ;
That I EUFRACIA RODRIGUEZ, hereby accept the land above described from Inay Alvegia Rodrigo and I am
much grateful to her and praying further for a longer life; however, I will give one half (1/2) of the produce of the
land to Apoy Alve during her lifetime.[4]
Respondents entered the Property in 1983 and paid taxes afterwards.
The Ruling of the Trial Court
The trial court ruled for petitioner, declared him owner of the Property, and ordered respondents to surrender
possession to petitioner, and to pay damages, the value of the Property's produce since 1982 until petitioner's
repossession and the costs.[5] The trial court rejected respondents' claim of ownership after treating the Deed as
a donation mortis causa which Rodrigo effectively cancelled by selling the Property to Vere in 1970.[6] Thus, by
the time Rodriguez sold the Property to respondents in 1983, she had no title to transfer.
Respondents appealed to the Court of Appeals (CA), imputing error in the trial court's interpretation of the Deed
as a testamentary disposition instead of an inter vivos donation, passing title to Rodriguez upon its execution.
Ruling of the Court of Appeals
The CA granted respondents' appeal and set aside the trial court's ruling. While conceding that the "language of
the [Deed is] x x x confusing and which could admit of possible different interpretations,"[7] the CA found the
following factors pivotal to its reading of the Deed as donation inter vivos: (1) Rodriguez had been in possession
of the Property as owner since 21 May 1962, subject to the delivery of part of the produce to Apoy Alve; (2) the
Deed's consideration was not Rodrigo's death but her "love and affection" for Rodriguez, considering the services
the latter rendered; (3) Rodrigo waived dominion over the Property in case Rodriguez predeceases her, implying
its inclusion in Rodriguez's estate; and (4) Rodriguez accepted the donation in the Deed itself, an act necessary to
effectuate donations inter vivos, not devises.[8] Accordingly, the CA upheld the sale between Rodriguez and
respondents, and, conversely found the sale between Rodrigo and petitioner's predecessor-in-interest, Vere, void
for Rodrigo's lack of title.
In this petition, petitioner seeks the reinstatement of the trial court's ruling. Alternatively, petitioner claims
ownership over the Property through acquisitive prescription, having allegedly occupied it for more than 10
years.[9]
14
Respondents see no reversible error in the CA's ruling and pray for its affirmance.
The Issue
The threshold question is whether petitioner's title over the Property is superior to respondents'. The resolution of
this issue rests, in turn, on whether the contract between the parties' predecessors-in-interest, Rodrigo and
Rodriguez, was a donation or a devise. If the former, respondents hold superior title, having bought the Property
from Rodriguez. If the latter, petitioner prevails, having obtained title from Rodrigo under a deed of sale the
execution of which impliedly revoked the earlier devise to Rodriguez.
The Ruling of the Court
We find respondents' title superior, and thus, affirm the CA.
Naked Title Passed from Rodrigo to Rodriguez Under a

Perfected Donation
We examine the juridical nature of the Deed - whether it passed title to Rodriguez upon its execution or is
effective only upon Rodrigo's death - using principles distilled from relevant jurisprudence. Post-mortem
dispositions typically -
(1) Convey no title or ownership to the transferee before the death of the transferor; or, what amounts to the same
thing, that the transferor should retain the ownership (full or naked) and control of the property while alive;
(2) That before the [donor's] death, the transfer should be revocable by the transferor at will, ad nutum; but
revocability may be provided for indirectly by means of a reserved power in the donor to dispose of the properties
conveyed;
(3) That the transfer should be void if the transferor should survive the transferee.[10]
Further -
[4] [T]he specification in a deed of the causes whereby the act may be revoked by the donor indicates that the
donation is inter vivos, rather than a disposition mortis causa[;]
[5] That the designation of the donation as mortis causa, or a provision in the deed to the effect that the donation
is "to take effect at the death of the donor" are not controlling criteria; such statements are to be construed
together with the rest of the instrument, in order to give effect to the real intent of the transferor[;] [and]
(6) That in case of doubt, the conveyance should be deemed donation inter vivos rather than mortis causa, in
order to avoid uncertainty as to the ownership of the property subject of the deed.[11]
15
It is immediately apparent that Rodrigo passed naked title to Rodriguez under a perfected donation inter vivos.
First. Rodrigo stipulated that "if the herein Donee predeceases me, the [Property] will not be reverted to the
Donor, but will be inherited by the heirs of x x x Rodriguez," signaling the irrevocability of the passage of title to
Rodriguez's estate, waiving Rodrigo's right to reclaim title. This transfer of title was perfected the moment Rodrigo
learned of Rodriguez's acceptance of the disposition[12] which, being reflected in the Deed, took place on the day
of its execution on 3 May 1965. Rodrigo's acceptance of the transfer underscores its essence as a gift in presenti,
not in futuro, as only donations inter vivos need acceptance by the recipient.[13] Indeed, had Rodrigo wished to
retain full title over the Property, she could have easily stipulated, as the testator did in another case, that "the
donor, may transfer, sell, or encumber to any person or entity the properties here donated x x x"[14] or used
words to that effect. Instead, Rodrigo expressly waived title over the Property in case Rodriguez predeceases her.
In a bid to diffuse the non-reversion stipulation's damning effect on his case, petitioner tries to profit from it,
contending it is a fideicommissary substitution clause.[15] Petitioner assumes the fact he is laboring to prove. The
question of the Deed's juridical nature, whether it is a will or a donation, is the crux of the present controversy. By
treating the clause in question as mandating fideicommissary substitution, a mode of testamentary disposition by
which the first heir instituted is entrusted with the obligation to preserve and to transmit to a second heir the whole
or part of the inheritance,[16] petitioner assumes that the Deed is a will. Neither the Deed's text nor the import of
the contested clause supports petitioner's theory.
Second. What Rodrigo reserved for herself was only the beneficial title to the Property, evident from Rodriguez's
undertaking to "give one [half] x x x of the produce of the land to Apoy Alve during her lifetime."[17] Thus, the
Deed's stipulation that "the ownership shall be vested on [Rodriguez] upon my demise," taking into account the
non-reversion clause, could only refer to Rodrigo's beneficial title. We arrived at the same conclusion in Balaqui v.
Dongso[18] where, as here, the donor, while "b[inding] herself to answer to the [donor] and her heirs x x x that
none shall question or disturb [the donee's] right," also stipulated that the donation "does not pass title to [the
donee] during my lifetime; but when I die, [the donee] shall be the true owner" of the donated parcels of land. In
finding the disposition as a gift inter vivos, the Court reasoned:
Taking the deed x x x as a whole, x x x x it is noted that in the same deed [the donor] guaranteed to [the donee]
and her heirs and successors, the right to said property thus conferred. From the moment [the donor] guaranteed
the right granted by her to [the donee] to the two parcels of land by virtue of the deed of gift, she surrendered
such right; otherwise there would be no need to guarantee said right. Therefore, when [the donor] used the words
upon which the appellants base their contention that the gift in question is a donation mortis causa [that the gift
"does not pass title during my lifetime; but when I die, she shall be the true owner of the two aforementioned
parcels"] the donor meant nothing else than that she reserved of herself the possession and usufruct of said two
parcels of land until her death, at which time the donee would be able to dispose of them freely.[19] (Emphasis
supplied)
Indeed, if Rodrigo still retained full ownership over the Property, it was unnecessary for her to reserve partial
usufructuary right over it.[20]
Third. The existence of consideration other than the donor's death, such as the donor's love and affection to the
donee and the services the latter rendered, while also true of devises, nevertheless "corroborates the express
16
irrevocability of x x x [inter vivos] transfers."[21] Thus, the CA committed no error in giving weight to Rodrigo's
statement of "love and affection" for Rodriguez, her niece, as consideration for the gift, to underscore its finding.
It will not do, therefore, for petitioner to cherry-pick stipulations from the Deed tending to serve his cause (e.g. "the
ownership shall be vested on [Rodriguez] upon my demise" and "devise"). Dispositions bearing contradictory
stipulations are interpreted wholistically, to give effect to the donor's intent. In no less than seven cases featuring
deeds of donations styled as "mortis causa" dispositions, the Court, after going over the deeds, eventually
considered the transfers inter vivos,[22] consistent with the principle that "the designation of the donation as
mortis causa, or a provision in the deed to the effect that the donation is `to take effect at the death of the donor'
are not controlling criteria [but] x x x are to be construed together with the rest of the instrument, in order to give
effect to the real intent of the transferor."[23] Indeed, doubts on the nature of dispositions are resolved to favor
inter vivos transfers "to avoid uncertainty as to the ownership of the property subject of the deed."[24]
Nor can petitioner capitalize on Rodrigo's post-donation transfer of the Property to Vere as proof of her retention
of ownership. If such were the barometer in interpreting deeds of donation, not only will great legal uncertainty be
visited on gratuitous dispositions, this will give license to rogue property owners to set at naught perfected
transfers of titles, which, while founded on liberality, is a valid mode of passing ownership. The interest of settled
property dispositions counsels against licensing such practice.[25]
Accordingly, having irrevocably transferred naked title over the Property to Rodriguez in 1965, Rodrigo "cannot
afterwards revoke the donation nor dispose of the said property in favor of another."[26] Thus, Rodrigo's post-
donation sale of the Property vested no title to Vere. As Vere's successor-in-interest, petitioner acquired no better
right than him. On the other hand, respondents bought the Property from Rodriguez, thus acquiring the latter's title
which they may invoke against all adverse claimants, including petitioner.
Petitioner Acquired No Title Over the Property
Alternatively, petitioner grounds his claim of ownership over the Property through his and Vere's combined
possession of the Property for more than ten years, counted from Vere's purchase of the Property from Rodrigo in
1970 until petitioner initiated his suit in the trial court in February 1986.[27] Petitioner anchors his contention on an
unfounded legal assumption. The ten year ordinary prescriptive period to acquire title through possession of real
property in the concept of an owner requires uninterrupted possession coupled with just title and good faith.[28]
There is just title when the adverse claimant came into possession of the property through one of the modes
recognized by law for the acquisition of ownership or other real rights, but the grantor was not the owner or could
not transmit any right.[29] Good faith, on the other hand, consists in the reasonable belief that the person from
whom the possessor received the thing was the owner thereof, and could transmit his ownership.[30]
Although Vere and petitioner arguably had just title having successively acquired the Property through sale,
neither was a good faith possessor. As Rodrigo herself disclosed in the Deed, Rodriguez already occupied and
possessed the Property "in the concept of an owner" ("como tag-iya"[31]) since 21 May 1962, nearly three years
before Rodrigo's donation in 3 May 1965 and seven years before Vere bought the Property from Rodrigo. This
admission against interest binds Rodrigo and all those tracing title to the Property through her, including Vere and
petitioner. Indeed, petitioner's insistent claim that Rodriguez occupied the Property only in 1982, when she started
17
paying taxes, finds no basis in the records. In short, when Vere bought the Property from Rodrigo in 1970,
Rodriguez was in possession of the Property, a fact that prevented Vere from being a buyer in good faith.
Lacking good faith possession, petitioner's only other recourse to maintain his claim of ownership by prescription
is to show open, continuous and adverse possession of the Property for 30 years.[32] Undeniably, petitioner is
unable to meet this requirement.
Ancillary Matters Petitioner Raises Irrelevant
Petitioner brings to the Court's attention facts which, according to him, support his theory that Rodrigo never
passed ownership over the Property to Rodriguez, namely, that Rodriguez registered the Deed and paid taxes on
the Property only in 1982 and Rodriguez obtained from Vere in 1981 a waiver of the latter's "right of ownership"
over the Property. None of these facts detract from our conclusion that under the text of the Deed and based on
the contemporaneous acts of Rodrigo and Rodriguez, the latter, already in possession of the Property since 1962
as Rodrigo admitted, obtained naked title over it upon the Deed's execution in 1965. Neither registration nor tax
payment is required to perfect donations. On the relevance of the waiver agreement, suffice it to say that Vere
had nothing to waive to Rodriguez, having obtained no title from Rodrigo. Irrespective of Rodriguez's motivation in
obtaining the waiver, that document, legally a scrap of paper, added nothing to the title Rodriguez obtained from
Rodrigo under the Deed.
WHEREFORE, we DENY the petition. We AFFIRM the Decision dated 6 June 2005 and the Resolution dated 5
May 2006 of the Court of Appeals.
SO ORDERED.
18
4. Del Rosario vs Ferrer
G.R. No. 187056, September 20, 2010
JARABINI G. DEL ROSARIO, PETITIONER, VS. ASUNCION G. FERRER, SUBSTITUTED BY HER HEIRS,
VICENTE, PILAR, ANGELITO, FELIXBERTO, JR., ALL SURNAMED G. FERRER, AND MIGUELA FERRER
ALTEZA, RESPONDENTS.
DECISION
ABAD, J.:
This case pertains to a gift, otherwise denominated as a donation mortis causa, which in reality is a donation inter
vivos made effective upon its execution by the donors and acceptance thereof by the donees, and immediately
transmitting ownership of the donated property to the latter, thus precluding a subsequent assignment thereof by
one of the donors.
The Facts and the Case
On August 27, 1968 the spouses Leopoldo and Guadalupe Gonzales executed a document entitled "Donation
Mortis Causa"[1] in favor of their two children, Asuncion and Emiliano, and their granddaughter, Jarabini
(daughter of their predeceased son, Zoilo) covering the spouses' 126-square meter lot and the house on it in
Pandacan, Manila[2] in equal shares. The deed of donation reads:
It is our will that this Donation Mortis Causa shall be irrevocable and shall be respected by the surviving spouse.
It is our will that Jarabini Gonzales-del Rosario and Emiliano Gonzales will continue to occupy the portions now
occupied by them.
It is further our will that this DONATION MORTIS CAUSA shall not in any way affect any other distribution of other
properties belonging to any of us donors whether testate or intestate and where ever situated.
It is our further will that any one surviving spouse reserves the right, ownership, possession and administration of
this property herein donated and accepted and this Disposition and Donation shall be operative and effective
upon the death of the DONORS.[3]
Although denominated as a donation mortis causa, which in law is the equivalent of a will, the deed had no
attestation clause and was witnessed by only two persons. The named donees, however, signified their
acceptance of the donation on the face of the document.
Guadalupe, the donor wife, died in September 1968. A few months later or on December 19, 1968, Leopoldo, the
donor husband, executed a deed of assignment of his rights and interests in subject property to their daughter
Asuncion. Leopoldo died in June 1972.
19
In 1998 Jarabini filed a "petition for the probate of the August 27, 1968 deed of donation mortis causa" before the
Regional Trial Court (RTC) of Manila in Sp. Proc. 98-90589.[4] Asuncion opposed the petition, invoking his father
Leopoldo's assignment of his rights and interests in the property to her.
After trial, the RTC rendered a decision dated June 20, 2003,[5] finding that the donation was in fact one made
inter vivos, the donors' intention being to transfer title over the property to the donees during the donors' lifetime,
given its irrevocability. Consequently, said the RTC, Leopoldo's subsequent assignment of his rights and interest
in the property was void since he had nothing to assign. The RTC thus directed the registration of the property in
the name of the donees in equal shares.[6]
On Asuncion's appeal to the Court of Appeals (CA), the latter rendered a decision on December 23, 2008,[7]
reversing that of the RTC. The CA held that Jarabini cannot, through her petition for the probate of the deed of
donation mortis causa, collaterally attack Leopoldo's deed of assignment in Asuncion's favor. The CA further held
that, since no proceeding exists for the allowance of what Jarabini claimed was actually a donation inter vivos, the
RTC erred in deciding the case the way it did. Finally, the CA held that the donation, being one given mortis
causa, did not comply with the requirements of a notarial will,[8] rendering the same void. Following the CA's
denial of Jarabini's motion for reconsideration,[9] she filed the present petition with this Court.
Issue Presented
The key issue in this case is whether or not the spouses Leopoldo and Guadalupe's donation to Asuncion,
Emiliano, and Jarabini was a donation mortis causa, as it was denominated, or in fact a donation inter vivos.
The Court's Ruling
That the document in question in this case was captioned "Donation Mortis Causa" is not controlling. This Court
has held that, if a donation by its terms is inter vivos, this character is not altered by the fact that the donor styles
it mortis causa.[10]
In Austria-Magat v. Court of Appeals,[11] the Court held that "irrevocability" is a quality absolutely incompatible
with the idea of conveyances mortis causa, where "revocability" is precisely the essence of the act. A donation
mortis causa has the following characteristics:
1. It conveys no title or ownership to the transferee before the death of the transferor; or, what amounts to the
same thing, that the transferor should retain the ownership (full or naked) and control of the property while alive;
2. That before his death, the transfer should be revocable by the transferor at will, ad nutum; but revocability may
be provided for indirectly by means of a reserved power in the donor to dispose of the properties conveyed; and
3. That the transfer should be void if the transferor should survive the transferee.[12] (Underscoring supplied)
20
The Court thus said in Austria-Magat that the express "irrevocability" of the donation is the "distinctive standard
that identifies the document as a donation inter vivos." Here, the donors plainly said that it is "our will that this
Donation Mortis Causa shall be irrevocable and shall be respected by the surviving spouse." The intent to make
the donation irrevocable becomes even clearer by the proviso that a surviving donor shall respect the
irrevocability of the donation. Consequently, the donation was in reality a donation inter vivos.
The donors in this case of course reserved the "right, ownership, possession, and administration of the property"
and made the donation operative upon their death. But this Court has consistently held that such reservation
(reddendum) in the context of an irrevocable donation simply means that the donors parted with their naked title,
maintaining only beneficial ownership of the donated property while they lived.[13]
Notably, the three donees signed their acceptance of the donation, which acceptance the deed required.[14] This
Court has held that an acceptance clause indicates that the donation is inter vivos, since acceptance is a
requirement only for such kind of donations. Donations mortis causa, being in the form of a will, need not be
accepted by the donee during the donor's lifetime.[15]
Finally, as Justice J. B. L. Reyes said in Puig v. Peñaflorida,[16] in case of doubt, the conveyance should be
deemed a donation inter vivos rather than mortis causa, in order to avoid uncertainty as to the ownership of the
property subject of the deed.
Since the donation in this case was one made inter vivos, it was immediately operative and final. The reason is
that such kind of donation is deemed perfected from the moment the donor learned of the donee's acceptance of
the donation. The acceptance makes the donee the absolute owner of the property donated.[17]
Given that the donation in this case was irrevocable or one given inter vivos, Leopoldo's subsequent assignment
of his rights and interests in the property to Asuncion should be regarded as void for, by then, he had no more
rights to assign. He could not give what he no longer had. Nemo dat quod non habet.[18]
The trial court cannot be faulted for passing upon, in a petition for probate of what was initially supposed to be a
donation mortis causa, the validity of the document as a donation inter vivos and the nullity of one of the donor's
subsequent assignment of his rights and interests in the property. The Court has held before that the rule on
probate is not inflexible and absolute.[19] Moreover, in opposing the petition for probate and in putting the validity
of the deed of assignment squarely in issue, Asuncion or those who substituted her may not now claim that the
trial court improperly allowed a collateral attack on such assignment.
WHEREFORE, the Court GRANTS the petition, SETS ASIDE the assailed December 23, 2008 Decision and
March 6, 2009 Resolution of the Court of Appeals in CA-G.R. CV 80549, and REINSTATES in toto the June 20,
2003 Decision of the Regional Trial Court of Manila, Branch 19, in Sp. Proc. 98-90589.
SO ORDERED.
21
5. Siochi vs Gozo
G.R. No. 169900, March 18, 2010
MARIO SIOCHI, PETITIONER, VS. ALFREDO GOZON, WINIFRED GOZON, GIL TABIJE, INTER-
DIMENSIONAL REALTY, INC., AND ELVIRA GOZON, RESPONDENTS.
[G.R. NO. 169977]
INTER-DIMENSIONAL REALTY, INC., PETITIONER, VS. MARIO SIOCHI, ELVIRA GOZON, ALFREDO
GOZON, AND WINIFRED GOZON, RESPONDENTS.
RESOLUTION
CARPIO, J.:
This is a consolidation of two separate petitions for review,[1] assailing the 7 July 2005 Decision[2] and the 30
September 2005 Resolution[3] of the Court of Appeals in CA-G.R. CV No. 74447.
This case involves a 30,000 sq.m. parcel of land (property) covered by TCT No. 5357.[4] The property is situated
in Malabon, Metro Manila and is registered in the name of "Alfredo Gozon (Alfredo), married to Elvira Gozon
(Elvira)."
On 23 December 1991, Elvira filed with the Cavite City Regional Trial Court (Cavite RTC) a petition for legal
separation against her husband Alfredo. On 2 January 1992, Elvira filed a notice of lis pendens, which was then
annotated on TCT No. 5357.
On 31 August 1993, while the legal separation case was still pending, Alfredo and Mario Siochi (Mario) entered
into an Agreement to Buy and Sell[5] (Agreement) involving the property for the price of P18 million. Among the
stipulations in the Agreement were that Alfredo would: (1) secure an Affidavit from Elvira that the property is
Alfredo's exclusive property and to annotate the Agreement at the back of TCT No. 5357; (2) secure the approval
of the Cavite RTC to exclude the property from the legal separation case; and (3) secure the removal of the notice
of lis pendens pertaining to the said case and annotated on TCT No. 5357. However, despite repeated demands
from Mario, Alfredo failed to comply with these stipulations. After paying the P5 million earnest money as partial
payment of the purchase price, Mario took possession of the property in September 1993. On 6 September 1993,
the Agreement was annotated on TCT No. 5357.
Meanwhile, on 29 June 1994, the Cavite RTC rendered a decision[6] in the legal separation case, the dispositive
portion of which reads:
WHEREFORE, judgment is hereby rendered decreeing the legal separation between petitioner and respondent.
Accordingly, petitioner Elvira Robles Gozon is entitled to live separately from respondent Alfredo Gozon without
dissolution of their marriage bond. The conjugal partnership of gains of the spouses is hereby declared
22
DISSOLVED and LIQUIDATED. Being the offending spouse, respondent is deprived of his share in the net profits
and the same is awarded to their child Winifred R. Gozon whose custody is awarded to petitioner.
Furthermore, said parties are required to mutually support their child Winifred R. Gozon as her needs arises.
SO ORDERED.[7]
As regards the property, the Cavite RTC held that it is deemed conjugal property.
On 22 August 1994, Alfredo executed a Deed of Donation over the property in favor of their daughter, Winifred
Gozon (Winifred). The Register of Deeds of Malabon, Gil Tabije, cancelled TCT No. 5357 and issued TCT No. M-
10508[8] in the name of Winifred, without annotating the Agreement and the notice of lis pendens on TCT No. M-
10508.
On 26 October 1994, Alfredo, by virtue of a Special Power of Attorney[9] executed in his favor by Winifred, sold
the property to Inter-Dimensional Realty, Inc. (IDRI) for P18 million.[10] IDRI paid Alfredo P18 million,
representing full payment for the property.[11] Subsequently, the Register of Deeds of Malabon cancelled TCT
No. M-10508 and issued TCT No. M-10976[12] to IDRI.
Mario then filed with the Malabon Regional Trial Court (Malabon RTC) a complaint for Specific Performance and
Damages, Annulment of Donation and Sale, with Preliminary Mandatory and Prohibitory Injunction and/or
Temporary Restraining Order.
On 3 April 2001, the Malabon RTC rendered a decision,[13] the dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered as follows:
01. On the preliminary mandatory and prohibitory injunction:
1.1 The same is hereby made permanent by:
1.1.1 Enjoining defendants Alfredo Gozon, Winifred Gozon, Inter-Dimensional Realty, Inc. and Gil Tabije, their
agents, representatives and all persons acting in their behalf from any attempt of commission or continuance of
their wrongful acts of further alienating or disposing of the subject property;
1.1.2. Enjoining defendant Inter-Dimensional Realty, Inc. from entering and fencing the property;
1.1.3. Enjoining defendants Alfredo Gozon, Winifred Gozon, Inter-Dimensional Realty, Inc. to respect plaintiff's
possession of the property.
02. The Agreement to Buy and Sell dated 31 August 1993, between plaintiff and defendant Alfredo Gozon is
hereby approved, excluding the property and rights of defendant Elvira Robles-Gozon to the undivided one-half
share in the conjugal property subject of this case.
03. The Deed of Donation dated 22 August 1994, entered into by and between defendants Alfredo Gozon and
Winifred Gozon is hereby nullified and voided.
23
04. The Deed of Absolute Sale dated 26 October 1994, executed by defendant Winifred Gozon, through
defendant Alfredo Gozon, in favor of defendant Inter-Dimensional Realty, Inc. is hereby nullified and voided.
05. Defendant Inter-Dimensional Realty, Inc. is hereby ordered to deliver its Transfer Certificate of Title No. M-
10976 to the Register of Deeds of Malabon, Metro Manila.
06. The Register of Deeds of Malabon, Metro Manila is hereby ordered to cancel Certificate of Title Nos. 10508
"in the name of Winifred Gozon" and M-10976 "in the name of Inter-Dimensional Realty, Inc.," and to restore
Transfer Certificate of Title No. 5357 "in the name of Alfredo Gozon, married to Elvira Robles" with the Agreement
to Buy and Sell dated 31 August 1993 fully annotated therein is hereby ordered.
07. Defendant Alfredo Gozon is hereby ordered to deliver a Deed of Absolute Sale in favor of plaintiff over his
one-half undivided share in the subject property and to comply with all the requirements for registering such deed.
08. Ordering defendant Elvira Robles-Gozon to sit with plaintiff to agree on the selling price of her undivided one-
half share in the subject property, thereafter, to execute and deliver a Deed of Absolute Sale over the same in
favor of the plaintiff and to comply with all the requirements for registering such deed, within fifteen (15) days from
the receipt of this DECISION.
09. Thereafter, plaintiff is hereby ordered to pay defendant Alfredo Gozon the balance of Four Million Pesos
(P4,000,000.00) in his one-half undivided share in the property to be set off by the award of damages in plaintiff's
favor.
10. Plaintiff is hereby ordered to pay the defendant Elvira Robles-Gozon the price they had agreed upon for the
sale of her one-half undivided share in the subject property.
11. Defendants Alfredo Gozon, Winifred Gozon and Gil Tabije are hereby ordered to pay the plaintiff, jointly and
severally, the following:
11.1 Two Million Pesos (P2,000,000.00) as actual and compensatory damages;

11.2 One Million Pesos (P1,000,000.00) as moral damages;
11.3 Five Hundred Thousand Pesos (P500,000.00) as exemplary damages;
11.4 Four Hundred Thousand Pesos (P400,000.00) as attorney's fees; and
11.5 One Hundred Thousand Pesos (P100,000.00) as litigation expenses.
11.6 The above awards are subject to set off of plaintiff's obligation in paragraph 9 hereof.
12. Defendants Alfredo Gozon and Winifred Gozon are hereby ordered to pay Inter-Dimensional Realty, Inc.
jointly and severally the following:
12.1 Eighteen Million Pesos (P18,000,000.00) which constitute the amount the former received from the latter
pursuant to their Deed of Absolute Sale dated 26 October 1994, with legal interest therefrom;
12.2 One Million Pesos (P1,000,000.00) as moral damages;
12.3 Five Hundred Thousand Pesos (P500,000.00) as exemplary damages; and
12.4 One Hundred Thousand Pesos (P100,000.00) as attorney's fees.
13. Defendants Alfredo Gozon and Winifred Gozon are hereby ordered to pay costs of suit.
SO ORDERED.[14]
24
On appeal, the Court of Appeals affirmed the Malabon RTC's decision with modification. The dispositive portion of
the Court of Appeals' Decision dated 7 July 2005 reads:
WHEREFORE, premises considered, the assailed decision dated April 3, 2001 of the RTC, Branch 74, Malabon
is hereby AFFIRMED with MODIFICATIONS, as follows:
1. The sale of the subject land by defendant Alfredo Gozon to plaintiff-appellant Siochi is declared null and void
for the following reasons:
a) The conveyance was done without the consent of defendant-appellee Elvira Gozon;
b) Defendant Alfredo Gozon's one-half (½) undivided share has been forfeited in favor of his daughter, defendant
Winifred Gozon, by virtue of the decision in the legal separation case rendered by the RTC, Branch 16, Cavite;
2. Defendant Alfredo Gozon shall return/deliver to plaintiff-appellant Siochi the amount of P5 Million which the
latter paid as earnest money in consideration for the sale of the subject land;
3. Defendants Alfredo Gozon, Winifred Gozon and Gil Tabije are hereby ordered to pay plaintiff-appellant Siochi
jointly and severally, the following:
a) P100,000.00 as moral damages;

b) P100,000.00 as exemplary damages;
c) P50,000.00 as attorney's fees;
d) P20,000.00 as litigation expenses; and
e) The awards of actual and compensatory damages are hereby ordered deleted for lack of basis.
4. Defendants Alfredo Gozon and Winifred Gozon are hereby ordered to pay defendant-appellant IDRI jointly and
severally the following:
a) P100,000.00 as moral damages;

b) P100,000.00 as exemplary damages; and
c) P50,000.00 as attorney's fees.
Defendant Winifred Gozon, whom the undivided one-half share of defendant Alfredo Gozon was awarded, is
hereby given the option whether or not to dispose of her undivided share in the subject land.
The rest of the decision not inconsistent with this ruling stands.
SO ORDERED.[15]
Only Mario and IDRI appealed the decision of the Court of Appeals. In his petition, Mario alleges that the
Agreement should be treated as a continuing offer which may be perfected by the acceptance of the other spouse
before the offer is withdrawn. Since Elvira's conduct signified her acquiescence to the sale, Mario prays for the
Court to direct Alfredo and Elvira to execute a Deed of Absolute Sale over the property upon his payment of P9
million to Elvira.
25
On the other hand, IDRI alleges that it is a buyer in good faith and for value. Thus, IDRI prays that the Court
should uphold the validity of IDRI's TCT No. M-10976 over the property.
We find the petitions without merit.
This case involves the conjugal property of Alfredo and Elvira. Since the disposition of the property occurred after
the effectivity of the Family Code, the applicable law is the Family Code. Article 124 of the Family Code provides:
Art. 124. The administration and enjoyment of the conjugal partnership property shall belong to both spouses
jointly. In case of disagreement, the husband's decision shall prevail, subject to the recourse to the court by the
wife for a proper remedy, which must be availed of within five years from the date of the contract implementing
such decision.
In the event that one spouse is incapacitated or otherwise unable to participate in the administration of the
conjugal properties, the other spouse may assume sole powers of administration. These powers do not include
the powers of disposition or encumbrance which must have the authority of the court or the written consent of the
other spouse. In the absence of such authority or consent, the disposition or encumbrance shall be void.
However, the transaction shall be construed as a continuing offer on the part of the consenting spouse and the
third person, and may be perfected as a binding contract upon the acceptance by the other spouse or
authorization by the court before the offer is withdrawn by either or both offerors. (Emphasis supplied)
In this case, Alfredo was the sole administrator of the property because Elvira, with whom Alfredo was separated
in fact, was unable to participate in the administration of the conjugal property. However, as sole administrator of
the property, Alfredo still cannot sell the property without the written consent of Elvira or the authority of the court.
Without such consent or authority, the sale is void.[16] The absence of the consent of one of the spouse renders
the entire sale void, including the portion of the conjugal property pertaining to the spouse who contracted the
sale.[17] Even if the other spouse actively participated in negotiating for the sale of the property, that other
spouse's written consent to the sale is still required by law for its validity.[18] The Agreement entered into by
Alfredo and Mario was without the written consent of Elvira. Thus, the Agreement is entirely void. As regards
Mario's contention that the Agreement is a continuing offer which may be perfected by Elvira's acceptance before
the offer is withdrawn, the fact that the property was subsequently donated by Alfredo to Winifred and then sold to
IDRI clearly indicates that the offer was already withdrawn.
However, we disagree with the finding of the Court of Appeals that the one-half undivided share of Alfredo in the
property was already forfeited in favor of his daughter Winifred, based on the ruling of the Cavite RTC in the legal
separation case. The Court of Appeals misconstrued the ruling of the Cavite RTC that Alfredo, being the offending
spouse, is deprived of his share in the net profits and the same is awarded to Winifred.
The Cavite RTC ruling finds support in the following provisions of the Family Code:
Art. 63. The decree of legal separation shall have the following effects:
26
(1) The spouses shall be entitled to live separately from each other, but the marriage bonds shall not be severed;
(2) The absolute community or the conjugal partnership shall be dissolved and liquidated but the offending
spouse shall have no right to any share of the net profits earned by the absolute community or the conjugal
partnership, which shall be forfeited in accordance with the provisions of Article 43(2);
(3) The custody of the minor children shall be awarded to the innocent spouse, subject to the provisions of Article
213 of this Code; and
The offending spouse shall be disqualified from inheriting from the innocent spouse by intestate succession.
Moreover, provisions in favor of the offending spouse made in the will of the innocent spouse shall be revoked by
operation of law.
Art. 43. The termination of the subsequent marriage referred to in the preceding Article shall produce the following
effects:
xxx
(2) The absolute community of property or the conjugal partnership, as the case may be, shall be dissolved and
liquidated, but if either spouse contracted said marriage in bad faith, his or her share of the net profits of the
community property or conjugal partnership property shall be forfeited in favor of the common children or, if there
are none, the children of the guilty spouse by a previous marriage or, in default of children, the innocent spouse;
(Emphasis supplied)
Thus, among the effects of the decree of legal separation is that the conjugal partnership is dissolved and
liquidated and the offending spouse would have no right to any share of the net profits earned by the conjugal
partnership. It is only Alfredo's share in the net profits which is forfeited in favor of Winifred. Article 102(4) of the
Family Code provides that "[f]or purposes of computing the net profits subject to forfeiture in accordance with
Article 43, No. (2) and 63, No. (2), the said profits shall be the increase in value between the market value of the
community property at the time of the celebration of the marriage and the market value at the time of its
dissolution." Clearly, what is forfeited in favor of Winifred is not Alfredo's share in the conjugal partnership
property but merely in the net profits of the conjugal partnership property.
With regard to IDRI, we agree with the Court of Appeals in holding that IDRI is not a buyer in good faith. As found
by the RTC Malabon and the Court of Appeals, IDRI had actual knowledge of facts and circumstances which
should impel a reasonably cautious person to make further inquiries about the vendor's title to the property. The
representative of IDRI testified that he knew about the existence of the notice of lis pendens on TCT No. 5357
and the legal separation case filed before the Cavite RTC. Thus, IDRI could not feign ignorance of the Cavite
RTC decision declaring the property as conjugal.
Furthermore, if IDRI made further inquiries, it would have known that the cancellation of the notice of lis pendens
was highly irregular. Under Section 77 of Presidential Decree No. 1529,[19] the notice of lis pendens may be
cancelled (a) upon order of the court, or (b) by the Register of Deeds upon verified petition of the party who
27
caused the registration of the lis pendens. In this case, the lis pendens was cancelled by the Register of Deeds
upon the request of Alfredo. There was no court order for the cancellation of the lis pendens. Neither did Elvira,
the party who caused the registration of the lis pendens, file a verified petition for its cancellation.
Besides, had IDRI been more prudent before buying the property, it would have discovered that Alfredo's
donation of the property to Winifred was without the consent of Elvira. Under Article 125[20] of the Family Code, a
conjugal property cannot be donated by one spouse without the consent of the other spouse. Clearly, IDRI was
not a buyer in good faith.
Nevertheless, we find it proper to reinstate the order of the Malabon RTC for the reimbursement of the P18 million
paid by IDRI for the property, which was inadvertently omitted in the dispositive portion of the Court of Appeals'
decision.
WHEREFORE, we DENY the petitions. We AFFIRM the 7 July 2005 Decision of the Court of Appeals in CA-G.R.
CV No. 74447 with the following MODIFICATIONS:
(1) We DELETE the portions regarding the forfeiture of Alfredo Gozon's one-half undivided share in favor of
Winifred Gozon and the grant of option to Winifred Gozon whether or not to dispose of her undivided share in the
property; and
(2) We ORDER Alfredo Gozon and Winifred Gozon to pay Inter-Dimensional Realty, Inc. jointly and severally the
Eighteen Million Pesos (P18,000,000) which was the amount paid by Inter-Dimensional Realty, Inc. for the
property, with legal interest computed from the finality of this Decision.
SO ORDERED.
28

Donor's Tax Cases

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Stevenson S. Yu, XU Law, 2nd Semester 2017-2018 Taxation 2 (Atty. Cherry P.

G.R. No. L-19865, July 31, 1965

REYES, J.B.L., J.:

Briefly, the facts of the aforestated case may be stated as follows:

(Pirovana, et al vs. De la Rama Steamship Co., 96 Phil. 367-368)

G.R. No. 111904, October 05, 2000

The facts, as culled from the records, are as follows:

Costs against petitioners.

G.R. No. 172804, January 24, 2011

KNOW ALL MEN BY THESE PRESENTS:

Respondents entered the Property in 1983 and paid taxes afterwards.

The Ruling of the Trial Court

Ruling of the Court of Appeals

The Ruling of the Court

We find respondents' title superior, and thus, affirm the CA.

Naked Title Passed from Rodrigo to Rodriguez Under a

Petitioner Acquired No Title Over the Property

Ancillary Matters Petitioner Raises Irrelevant

G.R. No. 187056, September 20, 2010

The Facts and the Case

The Court's Ruling

G.R. No. 169900, March 18, 2010

[G.R. NO. 169977]

WHEREFORE, premises considered, judgment is hereby rendered as follows:

01. On the preliminary mandatory and prohibitory injunction:

1.1 The same is hereby made permanent by:

11.1 Two Million Pesos (P2,000,000.00) as actual and compensatory damages;

a) P100,000.00 as moral damages;

a) P100,000.00 as moral damages;

We find the petitions without merit.

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