ESTATE TAX
respect the irrevocability of the donation.
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.
G.R. No. 187056, September 20, 2010, Decision (ABAD, J.)
A donation mortis causa has the following
characteristics: 1) It conveys no title or ownership to the
transferee before the death of the transferor; 2) That before his
death, the transfer should be revocable by the transferor at will,
ad nutum; and 3) That the transfer should be void if the transferor
should survive the transferee.
FACTS:
On August 27, 1968, the spouses Leopoldo and
Guadalupe Gonzales executed a document entitled "Donation
Mortis Causa" covering a 126-square meter house and lot in
Pandacan, Manila in favor of Asuncion, Emiliano and Jarabini.
One of the clauses in said deed provided for the irrevocability of
the same.
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.
In 1998, petitioner Jarabini filed a "petition for the
probate of the August 27, 1968 deed of donation mortis causa"
before the RTC of Manila. This was, however, opposed to by
respondent Asuncion invoking his father Leopoldo’s assignment
of his rights and interests in the property to her.
After trial, the RTC rendered a decision 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,
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.
On appeal, the CA reversed the RTC decision. It held
that the said donation is mortis causa and is void for non-
compliance with the formalities required by law.
ISSUE:
Whether or not the document executed by the spouses
Leopoldo and Guadalupe Gonzales entitled "Deed of Donation
Mortis Causa" is in fact a donation mortis causa.
RULING:
No. The donation is classified as inter vivos.
In Austria-Magat v. Court of Appeals, 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. Accordingly, 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.
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." In this case,
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
Consequently, the donation was in reality a donation
inter vivos.
PABLO LORENZO, as trustee of the estate of Thomas Hanley,
deceased, plaintiff-appellant,
vs. JUAN POSADAS, JR., Collector of Internal Revenue,
defendant-appellant.
G.R. No. L-43082, June 18, 1937(Laurel, J)
Estate tax laws rest in their essence upon the principle
that death of an individual is the generating source from which
the taxing power takes its being, and that it is the power to
transmit or the transmission from the dead to the living on which
the tax is more immediately based.
FACTS:
On May 27, 1922, one Thomas Hanley died in
Zamboanga leaving a will and a considerable amount of real
and personal properties. The will was subjected to probate and
was subsequently admitted. Among the provisions of the will,
item number 5 provides for a restriction in the disposition of
Thomas his real estate for a period of 10 years after his death.
Pursuant to said restriction in the disposition of Thomas his real
properties, the CFI of Zamboanga appointed Pablo Lorenzo, as
trustee, during the interim period.
During the incumbency of plaintiff Lorenzo as trustee,
defendant Posadas, then Collector of Internal Revenue, filed a
motion in the testamentary proceedings pending before the CFI
of Zamboanga for the payment of inheritance tax in the sum of
P2,052.74. Said motion was granted.
Plaintiff Lorenzo paid under protest and claimed for a
refund of the same. The court however, denied the same.
Plaintiff Lorenzo appealed and contends that the lower
court erred in holding that the inheritance tax in question be
based upon the value of the estate upon the death of the
testator, and not, as it should have been held, upon the value
thereof at the expiration of the period of ten years after which,
according to the testator's will, the property could be and was to
be delivered to the instituted heir.
ISSUE:
Whether or not the inheritance tax should be
computed on the basis of the value of the estate at the time of
the testator's death.
RULING:
Yes. The inheritance tax should be computed on the
basis of the value of the estate at the time of the testator's
death.
If death is the generating source from which the power
of the state to impose inheritance taxes takes its being and if
upon the death of the decedent, succession takes place and
the right of the state to tax vests instantly, the tax should be
measured by the value of the estate as it stood at the time of
the decedent's death. The tax is computed regardless of any
subsequent contingency value or any subsequent increase or
decrease in value.
Hence, the right of the state to an inheritance tax
accrues at the moment of death. Subsequent appreciation or
depreciation is immaterial.
IDONAH SLADE PERKINS, petitioner, vs.
ARSENIO P. DIZON, Judge of First Instance of Manila, EUGENE
ARTHUR PERKINS, and BENGUET CONSOLIDATED MINING
COMPANY, respondents.
G.R. No. 46631, November 16, 1939, MORAN, J
A "proceeding in rem" is one taken directly against
property, and has for its object the disposition of the property,
without reference to the title of individual claimants; in a larger
sense, the term is applied to actions between parties, where the
direct object is to reach and dispose of property owned by
Taxation Law II | Transfer Taxes| 1
them, or of some interest therein. Jurisdiction over non-resident
parties to in rem proceedings may be acquired thru publication.
FACTS:
On July 6, 1938, respondent Eugene Arthur Perkins,
instituted an action in the CFI of Manila against the Benguet
Consolidated Mining Company(BCMC) for dividends amounting
to P71,379.90 on 52,874 shares of stock registered in his name,
payment of which was being withheld by the company. Further,
he prayed for the recognition of his right to control and dispose
of said shares, to the exclusion of all others.
BCMC filed its answer alleging, by way of defense, that
the withholding of such dividends and the non-recognition of
Eugene Arthur Perkins right to the disposal and control of the
shares were due to certain demands made with respect to said
shares by adverse claimants petitioner Idonah Slade Perkins and
by one George H. Engelhard. The answer prays that the adverse
claimants be made parties to the action and served with notice
thereof by publication, and that thereafter all such parties be
required to interplead and settle the rights among themselves.
The trial court acted on the motion to include the non-
resident defendants, petitioner Idonah Slade Perkins and George
H. Engelhard. Consequently, summons by publication were
served upon the said non-resident defendants pursuant to the
order of the trial court.
On December 10, 1938, petitioner Idonah Slade Perkins,
through counsel, filed her pleading entitled "objection to venue,
motion to quash, and demurrer to jurisdiction" wherein she
challenged the jurisdiction of the lower court over her person.
The CFI denied the motions and demurrer of petitioner.
Hence, this appeal.
ISSUE:
Whether or not the CFI of Manila has acquired
jurisdiction over the person of non-resident defendant petitioner
Idonah Slade Perkins thru publication.
RULING:
Yes. The CFI of Manila has acquired jurisdiction over the
person of non-resident defendant petitioner Idonah Slade
Perkins thru publication.
Section 398 of our Code of Civil Procedure provides
that when a non-resident defendant is sued in the Philippine
courts and it appears, by the complaint or by affidavits, that the
action relates to real or personal property within the Philippines in
which said defendant has or claims a lien or interest, actual or
contingent, or in which the relief demanded consists, wholly or in
part, in excluding such person from any interest therein, service
of summons may be made by publication.
In the instant case, there can be no question that the
action brought by respondent Eugene Arthur Perkins in his
amended complaint against petitioner Idonah Slade Perkins,
seeks to exclude the latter from any interest in the property
located in the Philippines. That property consists in certain shares
of stocks of the BCMC, a sociedad anonima, organized in the
Philippines under the provisions of the Spanish Code of
Commerce, with its principal office in the City of Manila and
which conducts its mining activities therein. The situs of the shares
is in the jurisdiction where the corporation is created, whether
the certificate evidencing the ownership of those shares are
within or without that jurisdiction.
Under these circumstances, we hold that the action
thus brought is quasi in rem, for while the judgement that may be
rendered therein is not strictly a judgment in rem, "it fixes and
settles the title to the property in controversy and to that extent
partakes of the nature of the judgment in rem." As held by the
Supreme Court of the United States in Pennoyer v. Neff:
It is true that, in a strict sense, a proceeding in rem is
one taken directly against property, and has for its
object the disposition of the property, without
reference to the title of individual claimants; but, in a
large and more general sense, the terms are applied to
actions between parties, where the direct object is to
reach and dispose of property owned by them, or of
some interest therein.
Hence, the action being quasi in rem, the CFI of Manila
has jurisdiction over the person of the non-resident by satisfying
the constitutional requirement of due process thru the service of
summons upon her person by publication.
CALALANG v REGISTER OF DEEDS
G.R No. 76265, April 22, 1992, EN BANC, (Labrador, J)
It is well established that in rem proceedings constitute
constructive notice to the whole world.
FACTS:
In 1984, the Supreme Court decided a land ownership
case where a parcel of land in Diliman was held to be owned by
Lucia dela Cruz, who then sold it to Iglesia ni Kristo. Later,
Calalang also claimed to be the registered owner of the same
lot. (It appears that Calalang’s title stemmed from a
reconstituted title which overlapped with the dela Cruz
property). When INC started development of the property,
Calalang filed for an injunction, which was denied by the lower
court, citing as reason the decided dela Cruz case. Calalang
argues that the dela Cruz case cannot be applied as they were
not parties to the case, nor were they notified of any such
proceedings.
ISSUE: Whether or not the decided dela Cruz case may be
applied to the Calalang case. YES
RULING:
YES. The Court's ruling has long been final and the issue
on ownership of Lot 671 finally disposed of several years ago. This
declaration must be respected and followed in the instant case
applying the principle of res judicata or, otherwise, the rule on
conclusiveness of judgment. The less familiar concept or less
terminological usage of res judicata as a rule on conclusiveness
of judgment refers to the situation where the judgment in the
prior action operates as an estoppel only as to the matters
actually determined therein or which were necessarily included
therein.The factual inquiry with regards to the history of Lot 671
has already been laid to rest and may no longer be disturbed.
Likewise, the INK was also issued a Torrens Title over Lot
671 as a result of the sale made to it by the rightful owner, Lucia
dela Cruz in 1975. Under the Torrens System of registration, the
Torrens Title became indefeasible and incontrovertible one year
from its final decree. To reopen or to question the legality of INK's
title would defeat the purpose of our Torrens system which seeks
to insure stability by quieting titled lands and putting to a stop
forever any question of the legality of the registration in the
certificate or questions which may arise therefrom.
MARCOS II v COURT OF APPEALS
G.R No. 120880, JUNE 5, 1997, SECOND DIVISION (Torres, Jr, J.)
The approval of the probate court is not a mandatory
requirement in the collection of estate taxes. Such taxes are
exempt from the application of the statute of non-claims, with
such exemption justified by the necessity of government funding,
immortalized in the maxim that taxes are the lifeblood of the
government.
FACTS:
In 1989, former President Ferdinand Marcos died in the
USA. In 1991, the CIR issued deficiency estate (23B pesos) and
income taxes against the former President and his estate. These
assessments later became final, as the CIR in 1993 issued notices
of levy on real property owned by the Marcoses to satisfy the
alleged deficiencies.
Marcos’ eldest son, Bongbong, questioned the said
orders of the BIR, arguing that the government cannot collect
estate taxes during the pendency of the special proceeding for
the allowance of Marcos’ will. Bongbong claims that the
pending probate proceeding placed all of the late President’s
estate in custodia legis of the probate court to the exclusion of
all other courts and administrative agencies.
Taxation Law II | Transfer Taxes| 2
ISSUE: May the BIR collect estate taxes by the summary remedy
of levy without the cognition and authority of the probate court?
RULING:
YES. Strictly speaking, the assessment of an inheritance
tax does not directly involve the administration of a decedent's
estate, although it may be viewed as an incident to the
complete settlement of an estate, and, under some statutes, it is
made the duty of the probate court to make the amount of the
inheritance tax a part of the final decree of distribution of the
estate. It is not against the property of decedent, nor is it a claim
against the estate as such, but it is against the interest or
property right which the heir, legatee, devisee, etc., has in the
property formerly held by decedent. Further, under some
statutes, it has been held that it is not a suit or controversy
between the parties, nor is it an adversary proceeding between
the state and the person who owes the tax on the inheritance.
However, under other statutes it has been held that the hearing
and determination of the cash value of the assets and the
determination of the tax are adversary proceedings. The
proceeding has been held to be necessarily a proceeding in
rem.
Thus, the court has recognized the liberal treatment of
claims for taxes charged against the estate of the decedent.
Such taxes, are exempted from the application of the statute of
non-claims, and this is justified by the necessity of government
funding, immortalized in the maxim that taxes are the lifeblood
of the government. Such liberal treatment of internal revenue
taxes in the probate proceedings extends so far, even to
allowing the enforcement of tax obligations against the heirs of
the decedent, even after distribution of the estate's properties.
From the foregoing, it is discernible that the approval of
the court, sitting in probate, or as a settlement tribunal over the
deceased is not a mandatory requirement in the collection of
estate taxes.
BEAM v YATCO
G.R No. 48122, OCTOBER29, 1948, EN BANC (Perfecto, J.)
Shares issued by any corporation or sociedad anonima
organized in the Philippines among properties subject to [estate]
tax.
FACTS:
The Beam family (spouses X and Y and their children A
and B) are American citizens. They own shares of stock in several
domestic corporations in the Philippines. In 1934, the family
relocated to California. Later that year, Y died. According to
California law, upon the death of a wife one-half of the
community property shall go to the surviving spouse, the other
half being subject to the testamentary disposition of the
decedent, and that in the absence thereof, that half shall go to
the surviving spouse by inheritance. X, A, and B paid estate taxes
for one-half of Y’s properties.
They later asked for a refund of the estate taxes paid
by them, alleging that they were not citizens of California, but of
Utah. According to Utah law, properties acquired by the spouses
during marriage belong to them separately.
ISSUE: Whether or not the Beam family is liable to pay estate
taxes?
Are inherited shares of stock subject to estate taxes? YES
RULING:
YES. California law may be invoked as the personal law
of the deceased applicable to her personal property in the
Philippines in accordance with article 10 of the Civil Code. In this
case, the Court held that there was no evidence at all of the
Beam family’s alleged Utah citizenship.
Accordingly, the properties in question which have
been acquired by X and Y during their marriage, should be
considered as community property and upon the death of the
wife, the one that belonged to her passed by succession to her
heirs, in accordance with law, and therefore is subject to the
estate tax.
Even granting the contention that the deceased
became a resident of California only in 1934, she was a citizen of
that state at the time of her death and her national law
applicable to the case, in accordance with article 10 of the Civil
Code, is the law of California which, in the absence of contrary
evidence, is to be presumed to be the same as the Philippine
law.
As to the situs of the property in question (shares of
stock), according to the Revised Administrative Code, shares
issued by any corporation or sociedad anonima organized in the
Philippines among properties subject to inheritance tax. In this
case, the corresponding certificates of stock were in the
Philippines before and after the death of Y, the owners were
represented by proxy at the stockholders' meetings and their
shares voted by their attorney in fact who had the power to
collect dividends corresponding to the share.
BLAS v SANTOS
G.R No. L-14070, MARCH 21, 1961, EN BANC (Labrador, J.)
It will be noted that what is prohibited to be the subject
matter of a contract under Article 1271 of the Civil Code is
"future inheritance." To us future inheritance is any property or
right not in existence or capable of determination at the time of
the contract, that a person may in the future acquire by
succession.
FACTS:
Simeon Blas contracted two marriages in his lifetime:
first, to Marta Cruz, and then to Maxima Santos. When Simeon
was married to Maxima, there was no liquidation of the conjugal
properties from his first marriage. In 1936, Simeon executed a will
to the effect that one-half of all his properties “constitutes the
share of Maxima.” Subsequently, Maxima executed a document
to the effect that she recognized Simeon’s testament and that
she would give half of her portion to the heirs, legatees and
beneficiaries named in Simeon’s will.
The heirs of Marta Cruz now claim under the document
left executed by Maxima during the settlement of her estate. The
administrator of Maxima’s estate argues that the heirs of Marta
cannot claim since the heirs did not object to the project of
partition, and that the document executed by Maxima is a
worthless piece of paper as it was not a will, nor a donation, nor
a contract.
ISSUE: Whether or not the heirs of the first marriage may claim in
the share of the second wife who inherited the unliquidated
conjugal properties from the first marriage.
What is the nature of Maxima’s executed document? TRUST
RULING:
YES. The agreement or promise that Maxima Santos
made is to hold one-half of her said share in the conjugal assets
in trust for the heirs and legatees of her husband in his will, with
the obligation of conveying the same to such of his heirs or
legatees as she may choose in her last will and testament. It is a
compromise and at the same time a contract with a sufficient
cause or consideration. It is not a contract on future inheritance
as the conjugal properties were in existence at the time of the
execution of the document.
As this private document contains the express promise
made by Maxima Santos to convey in her testament, upon her
death, one-half of the conjugal properties she would receive as
her share in the conjugal properties, the action to enforce the
said promise did not arise until and after her death when it was
found that she did not comply with her above-mentioned
promise.
A. L. VELILLA, administrator of the estate of Arthur Graydon
Moody, Plaintiff-Appellant, v. JUAN POSADAS, JR., Collector of
Internal Revenue, Defendant-Appellee,
G.R. No. 43314. December 19, 1935, SECOND DIVISION (BUTTE, J.)
To effect the abandonment of one’s domicile, there
must be a deliberate and provable choice of a new domicile,
coupled with actual residence in the place chosen, with a
declared or provable intent that it should be one’s fixed and
permanent place of abode, one’s home. There is a complete
dearth of evidence in the record that M ever established a new
domicile in a foreign country.
FACTS:
Arthur Graydon Moody died in Calcutta, India in 1931. He left
properties in the Philippines consisting of bonds, shares of stock
Taxation Law II | Transfer Taxes| 3
and other intangibles. He bequeathed all his properties in favor
of his only sister, Ida Palmer.
ISSUE: Whether or not Moody was legally domiciled in the
Philippines at the time of his death?
RULING: YES.
Moody was never married and there is no doubt that he had his
legal domicile in the Philippine Islands from 1902 or 1903 forward
during which time he accumulated a fortune from; his business in
the Philippine Islands. He lived in the Elks' Club in Manila for many
years and was living there up to the date he left Manila the latter
part of February, 1928.
There was no statement from Moody, oral or written, that he had
the intention of changing his domicile. His presence in Clacutta,
the appellant does not claim that Moody had a domicile there.
It was also not shown that he established a legal domicile in Paris
in February 1929 where he sought to have hi leprosy treated.
There is no evidence that he acquired any property in Paris or
engaged in any settled business on his own account there. His
short stay of three months in Paris is entirely consistent with the
view that he was a transient in Paris for the purpose of receiving
treatments at the Pasteur Institute.
Consequence of being a resident deedent: his intangible
properties are subject to the estate tax here in the Philippines.
THE COLLECTOR OF INTERNAL REVENUE, petitioner,
vs.
DOMINGO DE LARA, as ancilliary administrator of the estate of
HUGO H. MILLER (Deceased), and the COURT OF TAX
APPEALS, respondents.
G.R. Nos. L-9456 and L-9481, January 6, 1958, EN BANC
(MONTEMAYOR, J.)
In determining the "gross estate" of a decedent, under
Section 122 in relation to section 88 of our Tax Code, it is first
necessary to decide whether the decedent was a resident or a
non-resident of the Philippines at the time of his death.
The prevailing construction given by the courts to the
"residence" was synonymous with domicile. and that the two
were used intercnangeabiy.
FACTS:
Hugo Miller, an American citizen, was born in Santa Cruz,
California, U.S.A. From 1922 up to December 7, 1941, he was
stationed in the Philippines as a representative of a company
selling books specially written for Philippine schools.
Miller stayed in Hotel and never lived in any residential house in
the Philippines.
He executed his last will and testament in Santa Cruz, California,
in which he declared that he was a resident ‘of Santa Cruz,
California’.
The Collector of Internal Revenue assessed the estate of Miller for
estate and inheritance taxes. This was protested by the estate of
Miller contending that Miller was not a resident of the Philippines
and some of the items in the gross estate should not have been
included for purposes of determining his estate tax liability.
ISSUE: Whether or not Miller was a resident of the Philippines?
RULING: No! He is not a resident of the Philippines!
During his stay in the country, Miller never acquired a house for
residential purposes for he stayed at the Manila Hotel and later
on at the Army and Navy Club.
In November, 1940, Miller took out a property insurance policy
and indicated therein his address as Santa Cruz, California, this
aside from the fact that Miller, as already stated, executed his
will in Santa Cruz, California, wherein he stated that he was "of
Santa Cruz, California".
From the foregoing, it is clear that as a non-resident of the
Philippines, the only properties of his estate subject to estate and
inheritance taxes are those shares of stock issued by Philippines
corporations.
As to the taxability of intangible property
Considering the State of California as a foreign country
in relation to section 122 of Our Tax Code we believe and hold,
as did the Tax Court, that the Ancilliary Administrator is entitled to
exemption from the tax on the intangible personal property
found in the Philippines. Incidentally, this exemption granted to
non-residents under the provision of Section 122 of our Tax Code,
was to reduce the burden of multiple taxation, which otherwise
would subject a decedent's intangible personal property to the
inheritance tax, both in his place of residence and domicile and
the place where those properties are found.
MAMERTO C. CORRE, Plaintiff-Appellant, vs. GUADALUPE TAN
CORRE, Defendant-Appellee.
G.R. No. L-10128. November 13, 1956, EN BANC (BAUTISTA
ANGELO,J.)
Rresidence as used in said rule is synonymous with
domicile. This is define as “the permanent home, the place to
which, whenever absent for business or pleasure, one intends to
return, and depends on facts and circumstances, in the sense
that they disclose intent
FACTS:
Plaintiff is an American citizen and resident of Las Vegas,
Nevada, USA.
Defendant is a Filipino and resident of Municipality of
Catbalogan, Samar, Philippines.
It was alleged that the Plaintiff “for the purpose of filing and
maintaining this suit, temporarily resides at 576 Paltoc, Santa
Mesa, Manila”
ISSUE: Whether or not the plaintiff may file the suit in Santa Mesa,
Manila?
RULING: NO.
Section 1, Rule 5, of the Rules of Court provides that Civil actions
in Courts of First Instance may be commenced and tried where
the Defendant or any of the Defendants resides or may be
found, or where the Plaintiff or any of the Plaintiffs resides, at the
election of the Plaintiff.” From this rule it may be inferred that
Plaintiff can elect to file the action in the court he may choose if
both the Plaintiff and the Defendant have their residence in the
Philippines. Otherwise, the action can only be brought in the
place where either one resides.
It the present case, it clearly appears in the complaint that the
Plaintiff is a resident of Las Vegas, Nevada, U. S. A. while the
Defendant is a resident of the municipality of Catbalogan,
province of Samar. Such being the case, Plaintiff has no choice
other than to file the action in the court of first instance of the
latter province. The allegation that the Plaintiff “for the purpose
of filing and maintaining this suit, temporarily resides at 576
Paltoc, Santa Mesa, Manila” cannot serve as basis for the
purpose of determining the venue for that is not the residence
contemplated by the rule. If that were allowed, we would
create a situation where a person may have his residence in one
province and, to suit his convenience, or to harass the
Defendant, may bring the action in the court of any other
province. That cannot be the intendment of the rule.
RAFAEL ARSENIO S. DIZON, in his capacity as the Judicial
Administrator of the Estate of the deceased JOSE P. FERNANDEZ,
Petitioner vs. COURT OF TAX APPEALS and COMMISSIONER OF
INTERNAL REVENUE, Respondents.
G.R. No. 140944, April 30, 2008, THIRD DIVISION (Nachura, J.)
Any doubt on whether a person, article or activity is
taxable is generally resolved against taxation.
FACTS:
On November 7, 1987, Jose P. Fernandez (Jose) died. Thereafter,
a petition for the probate of his will was filed with Branch 51 of
the Regional Trial Court (RTC) of Manila (probate court). The
probate court then appointed retired Supreme Court Justice
Arsenio P. Dizon (Justice Dizon) and petitioner, Atty. Rafael
Arsenio P. Dizon (petitioner) as Special and Assistant Special
Administrator, respectively, of the Estate of Jose (Estate).
Petitioner alleged that several requests for extension of the
period to file the required estate tax return were granted by the
BIR since the assets of the estate, as well as the claims against it,
had yet to be collated, determined and identified.
Taxation Law II | Transfer Taxes| 4
ISSUES:
1. Whether or not the CTA and the CA gravely erred in allowing
the admission of the pieces of evidence which were not formally
offered by the BIR; and
2. Whether the actual claims of the aforementioned creditors
may be fully allowed as deductions from the gross estate of Jose
despite the fact that the said claims were reduced or condoned
through compromise agreements entered into by the Estate with
its creditors Or Whether or not the CA erred in affirming the CTA
in the latter's determination of the deficiency estate tax imposed
against the Estate.
RULING:
1. Yes. While the CTA is not governed strictly by technical rules of
evidence, as rules of procedure are not ends in themselves and
are primarily intended as tools in the administration of justice, the
presentation of the BIR's evidence is not a mere procedural
technicality which may be disregarded considering that it is the
only means by which the CTA may ascertain and verify the truth
of BIR's claims against the Estate. The BIR's failure to formally offer
these pieces of evidence, despite CTA's directives, is fatal to its
cause
2. Yes. The claims existing at the time of death are significant to,
and should be made the basis of, the determination of
allowable deductions. Also, as held in Propstra v. U.S., where a
lien claimed against the estate was certain and enforceable on
the date of the decedent's death, the fact that the claimant
subsequently settled for lesser amount did not preclude the
estate from deducting the entire amount of the claim for estate
tax purposes. This is called the date-of-death valuation rule.
CONCEPCION VIDAL DE ROCES and her husband,
MARCOS ROCES, and ELVIRA VIDAL DE RICHARDS, plaintiff-
appellants,
vs.
JUAN POSADAS, JR., Collector of Internal Revenue, defendant-
appellee.
G.R. No. L-34937, March 13, 1933, EN BANC (Imperial, J)
The expression "all gifts" refers to gifts inter
vivos inasmuch as the law considers them as advances on
inheritance, in the sense that they are gifts inter vivos made in
contemplation or in consideration of death.
FACTS:
Sometime in 1925, plaintiffs Concepcion Vidal de Roces
and her husband, as well as one Elvira Richards, received as
donation several parcels of land from Esperanza Tuazon. They
took possession of the lands thereafter and likewise obtained the
respective transfer certificates.
The donor died a year after without leaving any forced
heir. In her will, which was admitted to probate, she bequeathed
to each of the donees the sum of P5,000. After the distribution of
the estate but before the delivery of their shares, the CIR
(appellee) ruled that plaintiffs as donees and legatees should
pay inheritance taxes. The plaintiffs paid the taxes under protest.
CIR filed a demurrer on ground that the facts alleged
were not sufficient to constitute a cause of action. The court
sustained the demurrer and ordered the amendment of the
complaint but the appellants failed to do so. Hence, the trial
court dismissed the action on ground that plaintiffs, herein
appellants, did not really have a right of action.
Plaintiffs (appellant) contend that  Sec. 1540 of the
Administrative Code does not include donation inter vivos and if
it does, it is unconstitutional, null and void for violating SEC. 3 of
the Jones Law (providing that no law shall embrace more than
one subject and that the subject should be expressed in its titles ;
that the Legislature has no authority to tax donation inter vivos;
finally, that said provision violates the rule on uniformity of
taxation.
CIR however contends that the word 'all gifts' Â refer
clearly to donation inter vivos and cited the doctrine in Tuason
v. Posadas.
ISSUE: Whether or not the donations should be subjected to
inheritance tax
RULING:
YES. Sec. 1540 of the Administrative Code clearly refers to those
donation inter vivos that take effect immediately or during the
lifetime of the donor, but made in consideration of the death of
the decedent. Those donations not made in contemplation of
the decedent's death are not included as it would be equivalent
to imposing a direct tax on property and not on its transmission.
The  phrase 'all gifts' as held in Tuason v. Posadas refers to gifts
inter vivos as they are considered as advances in anticipation of
inheritance since they are made in consideration of death.
THE BANK OF THE PHILIPPINE ISLANDS, administrator of the estate
of the late Adolphe Oscar Schuetze,plaintiff-appellant,
vs.
JUAN POSADAS, JR., Collector of Internal Revenue, defendant-
appellee.
G.R. No. L-34583, October 22, 1931, EN BANC (Villa-Real, J)
The proceeds of a life-insurance policy whereon the
premiums were paid with conjugal money, belong to the
conjugal partnership.
FACTS:
BPI, as administrator of the estate of deceased Adolphe
Schuetze, appealed to CFI Manila absolving defendant,
Collector of Internal Revenue, from the complaint filed against
him in recovering the inheritance tax amounting to P1209 paid
by the plaintiff, Rosario Gelano Vda de Schuetze, under protest,
and sum of P20,150Â representing the proceeds of the
insurance policy of the deceased.
Rosario and Adolphe were married in January 1914. The wife was
actually residing and living in Germany when Adolphe died in
December 1927. The latter while in Germany, executed a will in
March 1926, pursuant with its law wherein plaintiff was named his
universal heir.
The deceased possessed not only real property situated in the
Philippines but also personal property consisting of shares of
stocks in 19 domestic corporations. Included in the personal
property is a life insurance policy issued at Manila on January
1913 for the sum of $10,000 by the Sun Life Assurance Company
of Canada, Manila Branch.
In the insurance policy, the estate of the deceased was named
the beneficiary without any qualification. Rosario is the sole and
only heir of the deceased. BPI, as administrator of the
decedent’s estate and attorney in fact of the plaintiff,
having been demanded by Posadas to pay the inheritance tax,
paid under protest. Notwithstanding various demands made
by plaintiff, Posadas refused to refund such amount.
ISSUE: WON the plaintiff is entitled to the proceeds of the
insurance.
RULING:
SC ruled that(1)the proceeds of a life-insurance policy payable
to the insured's estate, on which the premiums were paid by the
conjugal partnership, constitute community property, and
belong one-half to the husband and the other half to the wife,
exclusively; (2)if the premiums were paid partly with paraphernal
and partly conjugal funds, the proceeds are likewise in like
proportion paraphernal in part and conjugal in part; and (3)the
proceeds of a life-insurance policy payable to the insured's
estate as the beneficiary, if delivered to the testamentary
administrator of the former as part of the assets of said estate
under probate administration, are subject to the inheritance tax
according to the law on the matter, if they belong to the
assured exclusively, and it is immaterial that the insured was
domiciled in these Islands or outside.
Hence, the defendant was ordered to return to the plaintiff one-
half of the tax collected upon the amount of P20,150, being the
proceeds of the insurance policy on the life of the late Adolphe
Oscar Schuetze, after deducting the proportional part
corresponding to the first premium.
Testate Estate of the Late Felix J. de Guzman. VICTORINO G. DE
GUZMAN, administrator-appellee,
vs.
CRISPINA DE GUZMAN-CARILLO, ARSENIO DE GUZMAN and
HONORATA DE GUZMAN-MENDIOLA, oppositors-appellants.
G.R. No. L-29276, May 18, 1978, SECOND DIVISION (Aquino, J)
Administration expenses should be those which are
necessary for the management of the estate, for protecting it
Taxation Law II | Transfer Taxes| 5
against destruction or deterioration, and, possibly, for the
production of fruits. They are expenses entailed for the
preservation and productivity of the estate and its management
for purposes of liquidation, payment of debts, and distribution of
the residue among the persons entitled thereto.
FACTS:
The late Felix J. de Guzman was survived by 8 children. Letters
of administration were issued to his son, Doctor Victorino G. de
Guzman. One of the properties left by the decedent was a
residential house located in the poblacion of which 8 children
were given a 1/8 proindiviso share in the project of partition.Â
Three heirs Crispina de Guzmans-Carillo Honorata de Guzman-
Mendiola and Arsenio de Guzman interposed objections to the
administrator's disbursements in the total sum of P13,610.48.
Expense for the improvement and renovation of the
decedent's residential house
Living expenses of Librada de Guzman while
occupying the family home without paying rent
Other expenses: Lawyer's subsistence, Gratuity pay in
lieu of medical fee, stenographic notes, decedent's first death
anniversary, representation expenses
Irrigation fee
The Lower court allowed the expenses
ISSUE: WON they were allowable administration expenses
RULING: Some yes and some no. Affirmed with modification.
An executor or administrator is allowed the necessary expenses
in the care, management, and settlement of the estate. He is
entitled to possess and manage the decedent's real and
personal estate as long as it is necessary for the payment of the
debts and the expenses of administration. He is accountable for
the whole decedent's estate which has come into his possession,
with all the interest, profit, and income thereof, and with the
proceeds of so much of such estate as is sold by him, at the
price at which it was sold (Sec. 3, Rule 84; Secs. 1 and 7, Rule 85,
Rules of Court).
* One of the Conditions of the administrator's bond is that he
should render a true and just account of his administration to the
court
* A hearing is usually held before an administrator's account is
approved, especially if an interested Party raises objections to
certain items in the accounting report
* Expenses:
Expense for the improvement and renovation of the decedent's
residential house – allowable
The 5 out of 8 co-owners consented to the use of the funds of
the estate for repair and improvement of the family home. It is
obvious that the expenses in question were incurred to preserve
the family home and to maintain the family's social standing in
the community.
The Living expenses of Librada de Guzman while occupying the
family home without paying rent – disallowed
Other expenses:
Lawyer's subsistence - allowable
Gratuity pay in lieu of medical fee - allowable
stenographic notes - disallowed
decedent's first death anniversary - disallowed
Representation expenses - unexplained - disallowed
Irrigation fee - allowable since unquestioned though duplicate
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. COURT OF
APPEALS, COURT OF TAX APPEALS and JOSEFINA P. PAJONAR, as
Administratrix of the Estate of Pedro P. Pajonar, respondents
G.R. No. 123206, March 22, 2000, THIRD DIVISION (Gonzaga-
Reyes, J)
Attorney's fees are allowable deductions if incurred for
the settlement of the estate.
FACTS:
Pedro Pajonar, a member of the Philippine Scout, Bataan
Contingent, during the second World War, was a part of the
infamous Death March by reason of which he suffered shock
and became insane. His sister Josefina Pajonar became the
guardian over his person, while his property was placed under
the guardianship of the Philippine National Bank (PNB) by the
RTC of Dumaguete City.
He died on January 10, 1988. He was survived by his two brothers
Isidro P. Pajonar and Gregorio Pajonar, his sister Josefina Pajonar,
nephews ConcordioJandog and Mario Jandog and niece
ConchitaJandog.
On May 19, 1988, Josefina Pajonar filed a petition with the RTC of
Dumaguete City for the issuance in her favor of letters of
administration of the estate of her brother which was granted.
On December 19, 1988, pursuant to a second assessment by the
BIR for deficiency estate tax, the estate of Pedro Pajonar paid
estate tax in the amount of P1,527,790.98. Josefina Pajonar, filed
a protest on January 11, 1989 with the BIR praying that the estate
tax payment in the amount of P1,527,790.98, or at least some
portion of it, be returned to the heirs. However, on August 15,
1989, without waiting for her protest to be resolved by the BIR,
Josefina Pajonar filed a petition for review with the CTA praying
for the refund of P1,527,790.98, or in the alternative, P840,202.06,
as erroneously paid estate tax.
CTA ordered the CIR to refund Josefina Pajonar the amount of
P252,585.59, representing erroneously paid estate tax for the
year 1988. Among the deductions from the gross estate allowed
by the CTA were the amounts of P60,753 representing the
notarial fee for the Extrajudicial Settlement and the amount of
P50,000 as the attorney's fees in Special Proceedings No. 1254 for
guardianship.
On June 15, 1993, the CIR filed a motion for reconsideration of
the CTA's May 6, 1993 decision asserting, among others, that the
notarial fee for the Extrajudicial Settlement and the attorney's
fees in the guardianship proceedings are not deductible
expenses.
CTA upheld the validity of the deductions. CIR appealed with
the CA which was denied; hence, present petition.
CIR maintains that only judicial expenses of the testamentary or
intestate proceedings are allowed as a deduction to the gross
estate. The amount of P60,753.00 is quite extraordinary for a
mere notarial fee.
Petitioner contends that said amount are not expenses of the
testamentary or intestate proceedings as the guardianship
proceeding was instituted during the lifetime of the decedent
when there was yet no estate to be settled.
ISSUE: WON the notarial fee paid for the extrajudicial settlement
in the amount of P60,753 and the attorney's fees in the
guardianship proceedings in the amount of P50,000 may be
allowed as deductions from the gross estate of decedent in
order to arrive at the value of the net estate. YES.
RULING:
The attorney's fees of P50,000.00, which were already incurred
but not yet paid, refers to the guardianship proceeding filed by
PNB, as guardian over the ward of Pedro Pajonar.
Attorney's fees in order to be deductible from the gross estate
must be essential to the collection of assets, payment of debts or
the distribution of the property to the persons entitled to it. The
services for which the fees are charged must relate to the proper
settlement of the estate.
In this case, the guardianship proceeding was necessary for the
distribution of the property of the late Pedro Pajonar to his rightful
heirs. PNB was appointed as guardian over the assets of the late
Pedro Pajonar, who, even at the time of his death, was
incompetent by reason of insanity. The expenses incurred in the
guardianship proceeding was but a necessary expense in the
settlement of the decedent's estate. Therefore, the attorney's fee
incurred in the guardianship proceedings amounting to
P50,000.00 is a reasonable and necessary business expense
deductible from the gross estate of the decedent.
Attorneys' and guardians' fees incurred in a trustee's accounting
of a taxable inter vivos trust attributable to the usual issues
involved in such an accounting was held to be proper
deductions because these are expenses incurred in terminating
an inter vivos trust that was includible in the decedent's estate.
Taxation Law II | Transfer Taxes| 6

Attorney's fees are allowable deductions if incurred for the
settlement of the estate. It is noteworthy to point that PNB was
appointed the guardian over the assets of the deceased.
Necessarily the assets of the deceased formed part of his gross
estate. Accordingly, all expenses incurred in relation to the
estate of the deceased will be deductible for estate tax
purposes provided these are necessary and ordinary expenses
for administration of the settlement of the estate.
Coming to the case at bar, the notarial fee paid for the
extrajudicial settlement is clearly a deductible expense since
such settlement effected a distribution of Pedro Pajonar's estate
to his lawful heirs. Similarly, the attorney's fees paid to PNB for
acting as the guardian of Pedro Pajonar's property during his
lifetime should also be considered as a deductible
administration expense. PNB provided a detailed accounting of
decedent's property and gave advice as to the proper
settlement of the latter's estate, acts which contributed towards
the collection of decedent's assets and the subsequent
settlement of the estate.
In the matter of the testate estate of the late DA.MARGARITA
DAVID. CARLOS MORAN SISON, Judicial Administrator, petitioner-
appellant, vs. NARCISA F. TEODORO, heiress, oppositor-
appellee.
G.R. No. L-9271, March 29, 1957, EN BANC (Bautista Angelo, J)
Expenses or premiums paid or incurred by an executor
or administrator serving without compensation to procure a
bond is not a proper charge against the estate. Section 7 Rule 86
of the Rules of Court does not authorize the executor or
administrator to charge against the estate the money paid for
premium.
FACTS:
On December 20, 1948, the CFI of Manila, which has jurisdiction
over the estate of the late Margarita David, issued an order
appointing Carlos Moran Sison as judicial administrator, without
compensation, after filing a bond in the amount of P5,000.
On January 19, 1955, the judicial administrator filed an
accounting of his administration which consists of the premiums
paid on his bond.
Narcisa F. Teodoro, one of the heirs, objected to the approval of
the above- quoted items on the grounds that they are not
necessary expenses of administration and should not be
charged against the estate.
On February 25, 1955, the court approved the report of the
administrator but disallowed the items objected to on the
ground that they cannot be considered as expenses of
administration.
Sison filed a motion for reconsideration which was denied.
Hence, the present petition.
ISSUE: WON a judicial administrator, serving without
compensation, is entitled to charge as an expense of
administration the premiums paid on his bond. NO.
RULING:
We rule that the expense incurred by an execution or
administrator to procure a bond is not a proper charge against
the estate, and that section 680 of the Code of Civil Procedure
does not authorize the executor or administrator to charge
against the estate the money spent for the presentation, filing,
and substitution of a bond.
it was there stated that the position of an executor or
administrator is one of trust: that it is proper for the law to
safeguard the estates of deceased persons by requiring the
administrator to give a suitable bond, and that the ability to give
this bond is in the nature of a qualification for the office. It is also
intimated therein that "If an individual does not desire to assume
the position of executor or administrator, he may refuse to do
so," and it is far-fetched to conclude that the giving of a bond
by an administrator is an necessary expense in the care,
management and settlement of the estate within the meaning
of the law, because these expenses are incurred "after the
executor or administrator has met the requirement of the law
and has entered upon the performance of his duties.
Of course, a person may accept the position of executor or
administrator with all the incident appertaining thereto having in
mind the compensation which the law allows for the purpose,
but he may waive this compensation in the same manner as he
may refuse to serve without it. Appellant having waived
compensation, he cannot now be heard to complain of the
expenses incident to his qualification.
B. E. JOHANNES, as principal administrator of the estate of
Carmen Theodora Johannes, relator, vs. CARLOS A. IMPERIAL, as
judge of the Court of First Instance, City of Manila, respondent.
G.R. No. L-19153, June 30, 1922, EN BANC (Johns, J.)
Claims against the estate should only be for just debts
or expense for administration of the estate itself.
FACTS:
Petitioner is the husband of Carmen Theodora Johannes,
deceased, who, at the time of her death, was a resident of
Singapore, Straits Settlements, and a citizen of Great Britain; that
he is also a foreigner and a citizen of Great Britain and an actual
resident to Singapore.
Alfred D'Almeida is a brother of the deceased Carmen Theodora
Johannes, and a bona fide resident of the City of Manila; that at
the time of her death Carmen Theodora Johannes had
P109,722.55 on deposit in one of the banks in the City of Manila.
The petitioner, her surviving husband, was indebted to a bank in
Manila for about P20,000. That the deceased left no will in the
absence of which the petitioner claims to be her sole heir and
entitled to all of her estate. That there were no debts against the
estate of the deceased.
Upon the death of his wife, the petitioner was duly appointed as
administrator of her estate by the court at Singapore, and
qualified and entered upon the discharge of his duties. After the
decision was rendered by this court in case No. 18600, supra, the
petitioner came to Manila and claims to have established a
temporary residence at the Manila Hotel, based upon which, in
legal effect, he asked for an order of court that Alfred D'Almeida
be removed as ancillary administrator, and that he be
appointed.
The lower court denied the petition. Hence, the present appeal.
ISSUE: WON Alfred D'Almeida should be removed and the
petitioner substituted as ancillary administrator. NO.
RULING:
The ancillary administration is proper, whenever a person dies,
leaving in a country other than that of his last domicile, property
to be administered in the nature of assets of the decedent, liable
for his individual debts or to be distributed among his heirs. It is
almost a universal rule to give the surviving spouse a preference
when and administrator is to be appointed, unless for strong
reason it is deemed advisable to name someone else.
Undoubtedly, if the husband should come into this jurisdiction,
the court give consideration to his petition that he be named the
ancillary administrator for local purposes. Ancillary letters should
ordinarily be granted to the domiciliary representative, if he
applies therefor, or to his nominee, or attorney; but in the
absence of express statutory requirement the court may in its
discretion appoint some other person.
The real contention of the petitioner is that, because he had the
legal right to apply for and be appointed in the first instance,
such right is continuous, and that he could be appointed any
time on his own application. That is not the law. Although it is true
that in the first instance everything else being equal and upon
the grounds of comity, in ordinary case, the court would appoint
the petitioner or his nominee as ancillary administrator, but even
then, as stated in the above opinion the appointment is one of
more or less legal discretion. But that is not this case. Here, in
legal effect, it is sought to oust an administrator who was
Taxation Law II | Transfer Taxes| 7
appointed without protest or objection where the court had
jurisdiction of the petitioner and of the subject matter.
At time of the appointment here, the court had primary and
original jurisdiction, and no objections were then made. The
question as to who should have been appointed ancillary
administrator, if presented at the proper time and in the proper
way, is not before this court. Here, the appointment was made
on the 1st day of October, 1921, and no formal objections were
made until 21st day of January, 1922.
If, as claimed, the real dispute here is whether the brothers and
sisters of the deceased are entitled to share in her estate, or
whether the petitioner only, as the surviving husband, is entitle to
all of it, that question is not one of administration, and any
expense and attorneys' fees incurred by either party for the
settlement of that question is a personal matter to them, and
should not be allowed as claims against the estate. Claims
against the estate should only be for just debts or expense for
administration of the estate itself.
JESUS V. OCCEÑA and SAMUEL C. OCCEÑA, petitioners,
vs.
HON. PAULINO S. MARQUEZ, District Judge, Court of First Instance
of Bohol, Branch I, respondent. I.V. BINAMIRA, Co-Executor,
Estate of W.C. Ogan, Sp. Proc. No. 423, CFI of Bohol, Intervenor.
G.R. No. L-27396, September 30, 1974, SECOND DIVISION
(Antonio, J)
The rule is that when a lawyer has rendered legal
services to the executor or administrator to assist him in the
execution of his trust, his attorney's fees may be allowed as
expenses of administration. The estate is, however, not directly
liable for his fees, the liability for payment resting primarily on the
executor or administrator.
FACTS:
OCCENA are the lawyers for estate executrix, Mrs. NECITAS
OGAN OCCENA. Defended the estate against claims and
protecting the interests of the estate.
OCCENA seek to nullify order of Judge MARQUEZ: In the matter
of testate estate of William Ogan”, in relation to OCCENA’s claim
for partial payment of attorney fees P30,000 (November 2, 1966),
fixing at P20,000 GROSS VALUE OF OGAN ESTATE IS P2,000,000.
Estate and inheritance taxes were settled by executrix. Requisite
tax clearance and discharge from liability was issued by
Commissioner of Internal Revenue.
OCCENA FILED MOTION FOR PARTIAL PAYMENT OF ATTORNEY
FEES (1965) to approve payment of P30,000 as counsel since
1963; authorize executrix to withdraw amount from deposits of
estate.
Judge MARQUEZ denied motion for reconsideration and also
modified lawyer fees to P20,000.
OCCENA CONTEND THAT MARQUEZ ACTED WITH GRAVE ABUSE
OF DISCRETION/ EXCESS OF JURISDICTION:
MARQUEZ said he based the P20,000 on records of the case but
amount of attorney fees cannot be determined on sole basis of
records for there are other circumstances that should be taken
into consideration.
Contrary to MARQUEZ opinion, the fact that one of OCCENA is
the husband of executrix does not deny them the right to fees to
which they are entitled.
ISSUE:
1. WON the Court made a grave abuse of
discretion upon modifying attorney fees?
2. Is there a conflict of interest on the testate
proceedings considering one of petitioners is
husband of executrix?
RULING:
1. PETITION FOR CERTIORARI GRANTED. COURT A
QUO IS DIRECTED TO HOLD A HEARING TO
DETERMINE HOW MUCH TOTAL ATTORNEY FEES
PETITIONERS ARE ENTITLED TO.
GENERAL RULE: When lawyer rendered legal services to
executor/administrator to assist in execution of his trust, attorney
fees may be allowed as expenses of administration.
a. Estate not directly liable for his fees.
b. Liability of payment rests on executor.
c. If executor/administrator pays, he may
reimburse from the estate.
d. In case of failure to pay:
1. File an action against him in his personal capacity and not as
administrator.
2. File a petition in testate or intestate proceedings asking court
to direct payment of fees as expenses of administration.
However, in the present case, in fixing attorney fees
solely on basis of records of the case, without allowing OCCENA
to bring evidence to prove what is the proper amount of
attorney fee’s they are entitled to, MARQUEZ has committed a
grave abuse of discretion correctable by certiorari.
2. There is no conflict of interest. The following
factors are the basis in assessing lawyer fees:
a) Amount and character of service rendered
b) Labor, time and trouble involved
c) Nature and importance of litigation or business
services were rendered
d) Responsibility imposed
SOCIEDAD DE LIZARRAGA HERMANOS, plaintiffs-appellants,
vs.
FELICISIMA ABADA, ET AL., defendants-appellants.
G.R. No. 13910, September 17, 1919, SECOND DIVISION, (Moir, J)
The court could not charge it with debts that were
never owed by it. The administratrix could only charge the estate
with the reasonable and proper expenses of administration.
FACTS:
Francisco Caponong died owing the plaintiffs a sum of money
which was then less than the amount allowed by the
commissioners. His widow, FelicisimaAbada, was appointed
administratrix of the estate. Commissioners to appraise the estate
and to pass on the claims against the estate were duly
appointed, and plaintiffs presented their claim which was
allowed by the commissioners in the sum of P12,783.74.
Nearly seven years after the death of Caponong, the plaintiffs
herein filed a suit in the Court of First Instance of Occidental
Negros against FelicisimaAbada personally and as administratrix
of the estate of Francisco Caponong, alleging that Francisco
Caponong owed plaintiffs P12,783.74, and that FelicisimaAbada
in her own name and as administratrix, had been receiving from
the plaintiffs money and effects from 1908 to 1912 which money
and effects were used by the defendant in "the expense of
cultivation and the exploitation of the Hacienda 'Coronacion,'
The defendant's answer admits she owed P8,555.78 as
administratrix, and alleges that the balance was due by her
personally.
Subsequently, the parties, including the guardian of the minors,
presented a motion in court stating that they had made an
amicable settlement of the litigation, and prayed the court to
dismiss the action, which was done.
Taxation Law II | Transfer Taxes| 8
The settlement agreed upon was, that the defendants, including
the guardian of the minor children, "recognized that the
deceased Francisco Caponong's estate was indebted to the
plaintiffs, , in the sum of P68,611.01, which was to be paid with 10
per cent interest in seven equal annual installments;" and to
secure this debt, the defendants agreed to give plaintiffs a first
mortgage on all the property of Francisco Caponong, except
the growing sugar cane, and on all the property belonging
exclusively to FelicisimaAbada, and the defendants agreed to
secure judicial approval of the settlement. The defendants also
agreed to mortgage the carabaos then on the hacienda to
plaintiffs.
The compromise was approved by the court as well as the
mortgage.
Coming now to the present action, the plaintiffs allege in the
complaint in this suit that defendants had let two installments go
by without paying anything and, that the amount due them with
accrued interest was P90,383.49. Hence, they are praying that
the properties levied on under the attachment be sold.
The court granted the attachment order the 24th of July, 1916,
and the provincial sheriff attached one parcel of land, the
growing crops, certain products of the soil, and various animals.
ISSUE:
Whether or not the court erred in holding that the obligation
should be understood as limited to the sum of P8,555.78, instead
of the sum of P68, 611.01 therein stated in the compromise
agreement.
RULING:
Yes. It is to be noted that the claim of the plaintiffs against the
estate of Francisco Caponong had been fixed by the
commissioners. The amount so determined was all the estate
owed plaintiffs. It is argued that "this is sheer and unequivocal
repudiation of a solemn and formal act" of the court.
The law declares that commissioners shall pass upon all claims
against the estate. They had done so in this case. The law fixed
the limit of the estate's liability. The court could not charge it with
debts that were never owed by it. The administratrix could only
charge the estate with the reasonable and proper expenses of
administration.
The estate owed plaintiffs less than P13,000 when the
commissioners passed on their claim. Part of this has been paid,
and there was a balance due plaintiffs of P8,555.78 at the time
of the trial, plus interest.
It is urged that the major part of this debt of P68,000
is administration expenses, and as such is chargeable against
the assets of the estate. No reason is given why the expense of
administration should be so great, and the evidence fails to
sustain this position.
The court could not approve a settlement saddling upon the
estate debts it never owed, and if it did, its approval would be a
nullity.
To give effect to the compromise as written would result in great
wrong, and destroy every chance the minor children had to
participate in the inheritance of their father.
The contract was clearly a dead letter, and the approval of the
court could not breathe the breath of life into it.
RAFAEL ARSENIO S. DIZON, in his capacity as the Judicial
Administrator of the Estate of the deceased JOSE P.
FERNANDEZ, petitioner,
vs.
COURT OF TAX APPEALS and COMMISSIONER OF INTERNAL
REVENUE, respondents.
G.R. No. 140944, April 30, 2008, THIRD DIVISION (Nachuram J)
FACTS:
On November 7, 1987, Jose P. Fernandez (Jose) died. Thereafter,
a petition for the probate of his will was filed with Branch 51 of
the Regional Trial Court (RTC) of Manila (probate court). The
probate court then appointed retired Supreme Court Justice
Arsenio P. Dizon (Justice Dizon) and petitioner, Atty. Rafael
Arsenio P. Dizon (petitioner) as Special and Assistant Special
Administrator, respectively, of the Estate of Jose (Estate).
Petitioner alleged that several requests for extension of the
period to file the required estate tax return were granted by the
BIR since the assets of the estate, as well as the claims against it,
had yet to be collated, determined and identified.
ISSUES:
1. Whether or not the CTA and the CA gravely erred in allowing
the admission of the pieces of evidence which were not formally
offered by the BIR; and
2. Whether the actual claims of the aforementioned creditors
may be fully allowed as deductions from the gross estate of Jose
despite the fact that the said claims were reduced or condoned
through compromise agreements entered into by the Estate with
its creditors Or Whether or not the CA erred in affirming the CTA
in the latter's determination of the deficiency estate tax imposed
against the Estate.
RULING:
1. Yes. While the CTA is not governed strictly by technical rules of
evidence, as rules of procedure are not ends in themselves and
are primarily intended as tools in the administration of justice, the
presentation of the BIR's evidence is not a mere procedural
technicality which may be disregarded considering that it is the
only means by which the CTA may ascertain and verify the truth
of BIR's claims against the Estate. The BIR's failure to formally offer
these pieces of evidence, despite CTA's directives, is fatal to its
cause
2. Yes. The claims existing at the time of death are significant to,
and should be made the basis of, the determination of
allowable deductions. Also, as held in Propstra v. U.S., where a
lien claimed against the estate was certain and enforceable on
the date of the decedent's death, the fact that the claimant
subsequently settled for lesser amount did not preclude the
estate from deducting the entire amount of the claim for estate
tax purposes. This is called the date-of-death valuation rule.
RICARDO M. GUTIERREZ, plaintiff-appellant,
vs.
LUCIA MILAGROS BARRETTO-DATU, Executrix of the Testate Estate
of the deceased MARIA GERARDO VDA. DE
BARRETTO, defendant-appellee.
G.R. No. L-17175 , July 31, 1962, THIRD DIVISION (Makalintal, J)
The only actions that may be instituted against the
executor or administrator are those to recover real or personal
property from the estate, or to enforce a lien thereon, and
actions to recover damages for an injury to person or property,
real or personal.
FACTS:
In 1940, Maria Gerardo Vda. de Barretto, owner of hectares of
fishpond lands in Pampanga, leased the same to appellant
Gutierrez for a term to expire on May 1, 1947. On November 1,
1941, pursuant to a decision of Department of Public Works
rendered after due investigation the dikes of the fishponds were
opened at several points, resulting in their destruction and in the
loss great quantities of fish inside, to the damage and prejudice
of the lessee.
In 1956, the lessor having died in 1948 and the corresponding
testate proceeding to settle her estate having been opened,
Gutierrez filed a claim therein for two items: first, for the sum of
P32,000.00 representing advance rentals he had to the
decedent; and second, the sum of P60,000.00 as damages in
the concept of earned profits, that is, profits which the claimant
failed to realize because of the breach of the lease contract
allegedly committed by the lessor.
Subsequently, appellant commenced the instant ordinary civil
action in the Court of First Instance of Rizal against the executrix
of the testate for the recovery of the same amount of P60,000
referred to as the second item claimed in the administration
Taxation Law II | Transfer Taxes| 9
proceeding. The complaint specifically charges decedent
Manila Gerardo Vda. de Barretto, is lessor, was having violated a
warranty in the lease contract again any damages the lessee
might suffer by reason of the claim of the government that
several rivers and creeks of the public domain were included in
the fishponds.
Thereafter, appellant amended his claim in the testate
proceeding by withdrawing therefrom the item of P60,000.00,
leaving only the one for refund of advance rentals in the sum of
P32,000.00.
ISSUE:
Whether or not his claim for damages based on unrealized
profits is a money claim against the estate of the deceased
Maria Gerardo Vda. de Barretto within the purview of Rule 87,
Section 5. This section states:
RULING:
SEC. 5. Claims which must be filed under the notice. If
not filed, barred; exception. — All claims for money
against the decedent, arising from contract, express or
implied, whether the same be due, not due, or
contingent, all claims for funeral expenses and
expenses of the last sickness of the decedent, and
judgment for money against the decedent, must be
filed within the time limited in the notice; otherwise they
are barred forever, except that they may be set forth
as counterclaims in any action that the executor or
administrator may bring against the claimants. Where
an executor or administrator commences an action, or
prosecutes an action already commenced by the
deceased in his lifetime, the debtor may set forth by
answer the claims he has against the decedent,
instead of presenting them independently to the court
as herein provided, and mutual claims may be set off
against each other in such action; and if final judgment
is rendered in favor of the defendant, the amount so
determined shall be considered the true balance
against the estate, as though the claim had been
presented directly before the court in the
administration proceedings. Claims not yet due, or
contingent, may be approved at their present value.
The word "claims" as used in statutes requiring the presentation of
claims against a decedent's estate is generally construed to
mean debts or demands of a pecuniary nature which could
have been enforced against the deceased in his lifetime and
could have been reduced to simple money judgments; and
among these are those founded upon contract. 21 Am. Jur. 579.
The claim in this case is based on contract — specifically, on a
breach thereof. It falls squarely under section 5 of Rule 87 "Upon
all contracts by the decedent broken during his lifetime, even
though they were personal to the decedent in liability, the
personal representative is answerable for the breach out of the
assets." 3 Schouler on Wills, Executors and Administrators, 6th Ed.,
2395. A claim for breach of a covenant in a deed of the
decedent must be presented under a statute requiring such
presentment of all claims grounded on contract. Id.
2461; Clayton v. Dinwoody, 93 P. 723; James v. Corvin, 51 P. 2nd
689.1
The only actions that may be instituted against the executor or
administrator are those to recover real or personal property from
the estate, or to enforce a lien thereon, and actions to recover
damages for an injury to person or property, real or personal.
Rule 88, section 1. The instant suit is not one of them.
MARIA G. AGUAS, FELIX GUARDINO and FRANCISCO
SALINAS, plaintiffs-appellants,
vs.
HERMOGENES LLEMOS, deceased defendant substituted by his
representatives,
PERPETUA YERRO-LLEMOS, HERMENEGILDO LLEMOS, FELINO
LLEMOS and AMADO LLEMOS,defendants-appellees.
G.R. No. L-18107 , August 30, 1962, EN BANC (Reyes, JBL)
Claims against the estate or indebtedness in respect of
property may arise out of: (1) Contract; (2) Tort; or (3) By
operation of law.
FACTS:
Francisco Salinas and the spouses Felix Guardino and Maria
Aguas(petitioner) jointly filed an action in the Court of First
Instance of Catbalogan, Samar, to recover damages from
HermogenesLlemos, averring that the latter had served them by
registered mail with a copy of a petition for a writ of possession,
with notice that the same would be submitted to the said court
of Samar on February 23, 1960 at 8: 00 a.m.; that in view of the
copy and notice served, plaintiffs proceeded to the court from
their residence in Manila accompanied by their lawyers, only to
discover that no such petition had been filed; and that
defendant Llemos maliciously failed to appear in court, so that
plaintiffs' expenditure and trouble turned out to be in vain,
causing them mental anguish and undue embarrassment.
On 1 April 1960, before he could answer the complaint, the
defendant died. Upon leave of court, plaintiffs amended their
complaint to include the heirs of the deceased. On 21 July 1960,
the heirs filed a motion to dismiss, and by order of 12 August
1960, the court below dismissed it, on the ground that the legal
representative, and not the heirs, should have been made the
party defendant; and that anyway the action being for recovery
of money, testate or intestate proceedings should be initiated
and the claim filed therein.
Motion for reconsideration having been denied, the case was
appealed to us on points of law.
ISSUE: Whether or not Rule 87, sec. 5 (those concerning claims
that are barred if not filed in the estate settlement proceedings)
or Rule 88, sec. 1 those defining actions that survive and may be
prosecuted against the executor or administrator.
RULING:
It is apparent that actions for damages caused by tortious
conduct of a defendantsurvive the death of the latter. Rule 88,
section 1, enumerates actions that survive against a decedent's
executors or administrators, and they are: (1) actions to recover
real and personal property from the estate; (2) actions to
enforce a lien thereon; and (3) actions to recover damages for
an injury to person or property. The present suit is one for
damages under the last class, it having been held that "injury to
property" is not limited to injuries to specific property, but extends
to other wrongs by which personal estate is injured or diminished.
To maliciously cause a party to incur unnecessary expenses, as
charged in this case, is certainly injurious to that party's property.
The word “claims” is generally construed to mean debts or
demands of a pecuniary nature which could have been
enforced against the deceased in his lifetime and could have
been reduced to simple money judgments. Claims against the
estate or indebtedness in respect of property may arise out of:
(1) Contract; (2) Tort; or (3) By operation of law.
COMMISSIONER OF INTERNAL REVENUE, petitioner,
vs.
THE COURT OF APPEALS, CENTRAL VEGETABLE MANUFACTURING
CO., INC., and THE COURT OF TAX APPEALS, respondents
G.R. No. 107135, February 23, 1999, THIRD DIVISION (Purisima, J)
FACTS:
Petitioner: (private respondent CENVOCO herein) is a
manufacturer of edible and coconut/coprameal cake and such
other coconut related oil subject to the miller's tax of 3%.
Petitioner also manufactures lard, detergent and laundry soap
subject to the sales tax of 10%.
In 1986, petitioner purchased a specified number of containers
and packaging materials for its edible oil from its suppliers and
paid the sales tax due thereon.
After an investigation conducted by respondent's Revenue
Examiner, Assessment Notice was issued against petitioner for
deficiency miller's tax in the total amount of P1,575,514.70 . .
On June 29, 1988, petitioner filed with respondent a letter dated
June 27, 1988 requesting for reconsideration of the above
deficiency miller's tax assessments, contending that the final
Taxation Law II | Transfer Taxes| 10
provision of Section 168 of the Tax Code does not a apply to
sales tax paid on containers and packaging materials, hence,
the amount paid therefor should have been credited against
the miller's tax assessed against it. Again, thru letter dated
September 28, 1988, petitioner reiterated its request for
reconsideration.
Dissatisfied with the adverse action taken by the BIR, CENVOCO
filed a petition for review with the Court of Tax Appeals, which
the latter ruled in favor with CENVOCO, that it is not liable for
deficiency miller’s tax.
The CA affirmed the decision in toto. The CA agreed with
respondent Court that containers and packages cannot be
considered "raw materials" utilized in the milling process.
Tested in the light of the foregoing statutory definition, it is
evident that containers and packages used by Cenvoco are not
"raw materials" and do not fall within the purview of the final
proviso of Section 168 of the NIRC. . . . As a coup de grace, it is
pertinent to note the case of Caltex (Phils.) Inc. vs. Manila Port
Service (17 SCRA 1075) where the Supreme Court aptly defined
containers and/or packages.
. . . a package or a bundle made up for transportation; a
packet; a bale; a parcel; or that in which anything is
packed: box, case, barrel, crate , etc. in which goods are
packed; a container. (Emphasis Ours)
The definition is an emphatic rejection of petitioner's construction
that Cenvoco's containers and packages are raw materials used
in the milling process. . . .
. . . Moreover, Section 168 of the Revenue Code expressly limits
the articles subject to percentage tax (miller's tax) to: "rope,
sugar, coconut oil, palm oil, cassava flour or starch, desiccated
coconuts, manufactured, processed or milled by them, including
the by-product of the raw materials, from which said articles are
produced, processed or manufactured
ISSUE:
WHETHER OR NOT THE SALES TAX PAID BY CENVOCO WHEN IT
PURCHASED CONTAINERS AND PACKAGING MATERIALS FOR ITS
MILLED PRODUCTS CAN BE CREDITED AGAINST THE DEFICIENCY
MILLER'S TAX DUE THEREON.
RULING:
Notably, the law relied upon by the BIR Commissioner as the
basis for not allowing Cenvoco's tax credit is just a proviso of
Section 168 of the old Tax Code. The restriction in the said
proviso, however, is limited only to sales, miller's or excise taxes
paid "on raw materials used in the milling process".
Under the rules of statutory construction, exceptions, as a
general rule, should be strictly but reasonably construed. They
extend only so far as their language fairly warrants, and all
doubts should be resolved in favor of the general provisions
rather than the exception. Where a general rule is established by
statute with exceptions, the court will not curtail the former nor
add to the latter by implication. . . .
The exception provided for in Section 168 of the old Tax Code
should thus be strictly construed. Conformably, the sales, miller's
and excise taxes paid on all Other materials (except on raw
materials used in the milling process), such as the sales taxes
paid on containers and packaging materials of the milled
products under consideration, may be credited against the
miller's tax due therefor.
THE PROVINCE OF BULACAN, ROBERTO M. PAGDANGANAN,
FLORENCE CHAVES, and MANUEL DJ SIAYNGCO in their capacity
as PROVINCIAL GOVERNOR, PROVINCIAL TREASURER,
PROVINCIAL LEGAL ADVISER, respectively, petitioners,
vs.
THE HONORABLE COURT OF APPEALS (FORMER SPECIAL 12TH
DIVISION), REPUBLIC CEMENT CORPORATION, respondents.
G.R. No. 126232, November 27, 1998, THIRD DIVISION (Romero, J)
A province may not, therefore, levy excise taxes on
articles already taxed by the National Internal Revenue Code.
FACTS: On June 26, 1992,
theSangguniangPanlalawiganof Bulacan passed Provincial
Ordinance No. 3, known as "An Ordinance Enacting the
Revenue Code of the Bulacan Province." Section 21 of the
ordinance provides as follows:
Sec. 21 Imposition of Tax. There is hereby
levied and collected a tax of 10% of the fair
market value in the locality per cubic meter of
ordinary stones, sand, gravel, earth and other
quarry resources, such, but not limited to
marble, granite, volcanic cinders, basalt, tuff
and rock phosphate, extracted from public
lands or from beds of seas, lakes, rivers,
streams, creeks and other public waters within
its territorial jurisdiction.
Pursuant thereto, the Provincial Treasurer of Bulacan, in a letter
dated November 11, 1993, assessed private respondent
Republic Cement Corporation P2,524,692.13 for extracting
limestone, shale and silica from several parcels of private land in
the province during the third quarter of 1992 until the second
quarter of 1993. Believing that the province, on the basis of
above-said ordinance, had no authority to impose taxes on
quarry resources extracted from private lands, Republic Cement
formally contested the same on December 23, 1993 but was
denied by the Provincial Treasurer on January 17, 1994. Republic
Cement consequently filed a petition for declaratory relief with
the RTC of Bulacan on February 14, 1994. The province filed a
motion to dismiss Republic Cement's petition, which was granted
by the trial court on May 13, 1993, which ruled that declaratory
relief was improper, allegedly because a breach of the
ordinance had been committed by Republic Cement.
On July 11, 1994, Republic Cement filed a petition for certiorari
with the Supreme Court seeking to reverse the trial court's
dismissal of their petition. The Court, in a resolution dated July 27,
1994, referred the same to the Court of Appeals. In the interim,
the Province of Bulacan issued a warrant of levy against
Republic Cement, allegedly because of its unpaid tax liabilities.
Negotiations between Republic Cement and petitioners resulted
in an agreement and modus vivendi (temporary agreement) on
December 12, 1994, whereby Republic Cement agreed to pay
under protest P1,262,346.00, 50% of the tax assessed by
petitioner, in exchange for the lifting of the warrant of levy. CA
ruled that Province of Bulacan had no legal authority.
ISSUE:
W/N the provincial government could impose and/or assess
taxes on quarry resources extracted by Republic Cement from
private lands pursuant to Section 21 of Provincial Ordinance No.
3? No, a province may not levy excise taxes on articles already
taxed by the National Internal Revenue Code.
RULING:
First, with regard to the remedial issue. Petitioners assert that the
Court of Appeals could only rule on the propriety of the trial
court's dismissal of Republic Cement's petition for declaratory
relief, allegedly because that was the sole relief sought by the
latter in its petition for certiorari. Petitioners claim that the
appellate court overstepped its jurisdiction when it declared null
and void the assessment made by the Province of Bulacan
against Republic Cement. However, the SC declared that under
the principle of estoppel, the petitioners can no longer attack
the modus Vivendi approved by the CA.
Second and more importantly, is the issue on the validity of the
ordinance. The pertinent provisions of the Local Government
Code are as follows:
Sec. 134.Scope of Taxing Powers. — Except as
otherwiseprovided in this Code, the province
may levy only the taxes, fees, and charges as
provided in this Article.
Taxation Law II | Transfer Taxes| 11
 Sec. 158.Tax on Sand, Gravel and Other
Quarry Resources. — The province may levy
and collect not more than ten percent (10%)
of fair market value in the locality per cubic
meter of ordinary stones, sand, gravel, earth,
and other quarry resources, as defined under
the National Internal Revenue Code, as
amended, extracted from public lands or
from the beds of seas, lakes, rivers, streams,
creeks, and other public waters within its
territorial jurisdiction.
xxxxxxxxx
The CA on the basis of Section 134, ruled that a province was
empowered to impose taxes only on sand, gravel, and other
quarry resources extracted from public lands, its authority to tax
being limited by said provision only to those taxes, fees and
charges provided in Article I, Chapter 2, Title 1 of Book II of the
Local Government Code. On the other hand, petitioners claim
that Sections 129 and 186 of the Local Government Code
authorizes the province to impose taxes other than those
specifically enumerated under the Local Government Code. The
CA erred in ruling that a province can impose only the taxes
specifically mentioned under the Local Government Code. As
correctly pointed out by petitioners, Section 186 allows a
province to levy taxes other than those specifically enumerated
under the Code, subject to the conditions specified therein.
However, in spite of this, province of Bulacan is still prohibited
from imposing taxes on stones, sand, gravel, earth and other
quarry resources extracted from private lands. The tax imposed
by the Province of Bulacan is an excise tax, being a tax upon the
performance, carrying on, or exercise of an activity. The Local
Government Code provides:
Sec. 133. — Common Limitations on the
Taxing Powers of Local Government Units. —
Unless otherwise provided herein, the exercise
of the taxing powers of provinces, cities,
municipalities, and barangays shall not
extend to the levy of the following:
xxxxxxxxx
(h) Excise taxes on articles enumerated under
the National Internal Revenue Code, as
amended, and taxes, fees or charges on
petroleum products;
xxxxxxxxx
A province may not, therefore, levy excise taxes on articles
already taxed by the National Internal Revenue Code. The
National Internal Revenue Code levies a tax on all quarry
resources, regardless of origin, whether extracted from public or
private land. Thus, a province may not ordinarily impose taxes on
stones, sand, gravel, earth and other quarry resources, as the
same are already taxed under the National Internal Revenue
Code. The province can, however, impose a tax on stones, sand,
gravel, earth and other quarry resources extracted from public
land because it is expressly empowered to do so under the Local
Government Code. As to stones, sand, gravel, earth and other
quarry resources extracted from private land, however, it may
not do so, because of the limitation provided by Section 133 of
the Code in relation to Section 151 of the National Internal
Revenue Code.
REPUBLIC OF THE PHILIPPINES v.INTERMEDIATE APPELLATE COURT
and SPOUSES ANTONIO and CLARA PASTOR
G.R. No. L-69344, April 26, 1991, GRIÑO-AQUINO, J.
The rule is that in case of doubt, tax statutes are to be
construed strictly against the Government and liberally in favor
of the taxpayer, for taxes, being burdens, are not to be
presumed beyond what the applicable statute (in this case P.D.
213) expressly and clearly declares (Commission of Internal
Revenue vs. La Tondena, Inc. and CTA, 5 SCRA 665, citing Manila
Railroad Company vs. Collector of Customs, 52 Phil, 950).
FACTS:
On April 15, 1980, the Republic of the Philippines,
through the Bureau of Internal Revenue, commenced an action
in the Court of First Instance (now Regional Trial Court) of Manila,
Branch XVI, to collect from the spouses Antonio Pastor and Clara
Reyes-Pastor deficiency income taxes for the years 1955 to 1959
in the amount of P17,117.08 with a 5% surcharge and 1% monthly
interest, and costs.
Spouses contended that they had availed of the tax
amnesty under P.D.'s Nos. 23, 213 and 370 and had paid the
corresponding amnesty taxes amounting to P10,400 or 10% of
their reported untaxed income under P.D. 23, P2,951.20 or 20% of
the reported untaxed income under P.D. 213, and a final
payment on October 26, 1973 under P.D. 370 evidenced by the
Government's Official Receipt No. 1052388.
Petitioner alleged that the private respondents were
not qualified to avail of the tax amnesty under P.D. 213 for the
benefits of that decree are available only to persons who had
no pending assessment for unpaid taxes, as provided in Revenue
Regulations Nos. 8-72 and 7-73. Since the Pastors did in fact have
a pending assessment against them, they were precluded from
availing of the amnesty granted in P.D.'s Nos. 23 and 213.
ISSUE:
Whether the payment of deficiency income taxes by
the Pastors under PD. No. 213, and the acceptance thereof by
the Government, operated to divest the government of its right
to further recover deficiency income taxes from the private
respondents pursuant to the existing deficiency tax assessment
against them.
RULING:
YES.A tax amnesty, being a general pardon or
intentional overlooking by the State of its authority to impose
penalties on persons otherwise guilty of evasion or violation of a
revenue or tax law, partakes of an absolute forgiveness or waiver
by the Government of its right to collect what otherwise would
be due it, and in this sense, prejudicial thereto, particularly to
give tax evaders, who wish to relent and are willing to reform a
chance to do so and thereby become a part of the new society
with a clean slate (Commission of Internal Revenue vs. Botelho
Corp. and Shipping Co., Inc., 20 SCRA 487).
The finding of the appellate court that the deficiency
income taxes were paid by the Pastors, and accepted by the
Government, under P.D. 213, granting amnesty to persons who
are required by law to file income tax returns but who failed to
do so, is entitled to the highest respect and may not be
disturbed except under exceptional circumstances enumerated
under Rule 45, Sec. 4, Rules of Court.
The rule is that in case of doubt, tax statutes are to be
construed strictly against the Government and liberally in favor
of the taxpayer, for taxes, being burdens, are not to be
presumed beyond what the applicable statute (in this case P.D.
213) expressly and clearly declares (Commission of Internal
Revenue vs. La Tondena, Inc. and CTA, 5 SCRA 665, citing Manila
Railroad Company vs. Collector of Customs, 52 Phil, 950).
COMMISSIONER OF INTERNAL REVENUE v. FIREMAN'S FUND
INSURANCE COMPANY and the COURT OF TAX APPEALS
G.R. No. L-30644, March 9, 1987, PARAS, J.
It is a general rule in the interpretation of statutes
levying taxes or duties, that in case of doubt, such statutes are to
be construed most strongly against the government and in favor
of the subjects or citizens, because burdens are not to be
imposed, nor presumed to be imposed beyond what statutes
expressly and clearly import (Manila Railroad Co. v. Collector of
Customs, 52 Phil. 950 [1929]).
Taxation Law II | Transfer Taxes| 12

FACTS:
Private respondent is a resident foreign insurance
corporation organized under the laws of the United States,
authorized and duly licensed to do business in the Philippines. It is
a member of the American Foreign Insurance Association,
through which its business is cleared
From January, 1952 to December, 1958, herein private
respondent Fireman's Fund Insurance Company entered into
various insurance contracts involving casualty, fire and marine
risks, for which the corresponding insurance policies were issued.
From January, 1952 to 1956, documentary stamps were
bought and affixed to the monthly statements of policies issues;
and from 1957 to 1958 documentary stamps were bought and
affixed to the corresponding pages of the policy register, instead
of on the insurance policies issued.
On July 3, 1959, respondent company discovered that
its monthly statements of business and policy register were lost.
Herein respondent company informed petitioner of
such loss through its auditors, Sycip, Gorres and Velayo, in a letter
dated July 14, 1959.
After conducting an investigation of said loss,
petitioner's examiner ascertained that respondent company
failed to affix the required documentary stamps to the insurance
policies issued by it and failed to preserve its accounting records
within the time prescribed by Section 337 of the Revenue Code
by using loose leaf forms as registers of documentary stamps
without written authority from the Commissioner of Internal
Revenue as required by Section 4 of Revenue Regulations No. V-
1.
As a consequence of these findings, petitioner assessed
and demanded from respondent company the payment of
documentary stamp taxes for the years 1952 to 1958 in the total
amount of P 79,806.87 and plus compromise penalties, a total of
P 81,406.87.
ISSUE:
Whether respondent company may be required to pay
again the documentary stamps it has actually purchased,
affixed and cancelled.
RULING:
NO. There is no argument to petitioner's contention that
the insurance policies with the corresponding documentary
stamps affixed are the best evidence to prove payment of said
documentary stamp tax. This rule however does not preclude
the admissibility of other proofs which are uncontradicted and of
considerable weight, such as: copies of the applications for
manager's checks, copies of the manager's check vouchers of
the bank showing the purchases of documentary stamps
corresponding to the various insurance policies issued during the
years 1952-1958 duly and properly Identified by the witnesses for
respondent company during the hearing and admitted by the
respondent Court of Tax Appeals.
It is a general rule in the interpretation of statutes
levying taxes or duties, that in case of doubt, such statutes are to
be construed most strongly against the government and in favor
of the subjects or citizens, because burdens are not to be
imposed, nor presumed to be imposed beyond what statutes
expressly and clearly import (Manila Railroad Co. v. Collector of
Customs, 52 Phil. 950 [1929]).
COMMISSIONER OF INTERNAL REVENUE v. THE COURT OF APPEALS
and EFREN P. CASTANEDA
G.R. No. 96016, October 17, 1991, PADILLA, J.
The Court has already ruled that the terminal leave pay
received by a government official or employee is not subject to
withholding (income) tax.
FACTS:
Private respondent Efren P. Castaneda retired from the
government service as Revenue Attache in the Philippine
Embassy in London, England, on 10 December 1982 under the
provisions of Section 12 (c) of Commonwealth Act 186, as
amended.
Upon retirement, he received, among other benefits,
terminal leave pay from which petitioner Commissioner of
Internal Revenue withheld P12,557.13 allegedly representing
income tax thereon.
Castaneda filed a formal written claim with petitioner
for a refund of the P12,557.13, contending that the cash
equivalent of his terminal leave is exempt from income tax.
ISSUE:
Whether terminal leave pay received by a government
official or employee is subject to withholding income tax.
RULING:
NO. The Court has already ruled that the terminal leave
pay received by a government official or employee is not
subject to withholding (income) tax.
. . . commutation of leave credits, more commonly
known as terminal leave, is applied for by an officer or employee
who retires, resigns or is separated from the service through no
fault of his own. (Manual on Leave Administration Course for
Effectiveness published by the Civil Service Commission, pages
16-17). In the exercise of sound personnel policy, the
Government encourages unused leaves to be accumulated.
The Government recognizes that for most public servants,
retirement pay is always less than generous if not meager and
scrimpy. A modest nest egg which the senior citizen may look
forward to is thus avoided. Terminal leave payments are given
not only at the same time but also for the same policy
considerations governing retirement benefits (Jesus N. Borromeo
vs. The Hon. Civil Service Commission).
Not being part of the gross salary or income of a
government official or employee but a retirement benefit,
terminal leave pay is not subject to income tax.
MANILA INTERNATIONALAIRPORT AUTHORITY v. COURT OF
APPEALS, CITY OF TINGA, PARAAQUE, CITY MAYOR OFPARAAQUE,
SANGGUNIANGPANGLUNGSOD NG PARAAQUE, CITY ASSESSOR
OF PARAAQUE, and CITY TREASURER OFPARAAQUE
G.R. No. 155650, July 20, 2006, CARPIO, J.
When local governments invoke the power to tax on
national government instrumentalities, such power is construed
strictly against local governments. The rule is that a tax is never
presumed and there must be clear language in the law
imposing the tax. Any doubt whether a person, article or activity
is taxable is resolved against taxation. This rule applies with
greater force when local governments seek to tax national
government instrumentalities.
Taxation Law II | Transfer Taxes| 13
 Another rule is that a tax exemption is strictly construed
against the taxpayer claiming the exemption. However, when
Congress grants an exemption to a national government
instrumentality from local taxation, such exemption is construed
liberally in favor of the national government instrumentality.
FACTS:
Petitioner Manila International Airport Authority (MIAA)
operates the Ninoy Aquino International Airport (NAIA) Complex
in Paraaque City under Executive Order No. 903, otherwise
known as the Revised Charter of the Manila International Airport
Authority (MIAA Charter).
The MIAA Charter transferred to MIAA approximately
600 hectares of land, including the runways and buildings
(Airport Lands and Buildings) then under the Bureau of Air
Transportation. The MIAA Charter further provides that no portion
of the land transferred to MIAA shall be disposed of through sale
or any other mode unless specifically approved by the President
of the Philippines.
On 21 March 1997, the Office of the Government
Corporate Counsel (OGCC) issued Opinion No. 061. The OGCC
opined that the Local Government Code of 1991 withdrew the
exemption from real estate tax granted to MIAA under Section
21 of the MIAA Charter. Thus, MIAA negotiated with respondent
City of Paraaque to pay the real estate tax imposed by the City.
MIAA then paid some of the real estate tax already due.
On 17 July 2001, the City of Paraaque, through its City
Treasurer, issued notices of levy and warrants of levy on the
Airport Lands and Buildings. The Mayor of the City of Paraaque
threatened to sell at public auction the Airport Lands and
Buildings should MIAA fail to pay the real estate tax delinquency.
ISSUE:
Whether the Airport Lands and Buildings of MIAA are
exempt from real estate tax under existing laws.
RULING:
YES. First, MIAA is not a government-owned or
controlled corporation but an instrumentality of the National
Government and thus exempt from local taxation. Second, the
real properties of MIAA are owned by the Republic of the
Philippines and thus exempt from real estate tax.
When local governments invoke the power to tax on
national government instrumentalities, such power is construed
strictly against local governments. The rule is that a tax is never
presumed and there must be clear language in the law
imposing the tax. Any doubt whether a person, article or activity
is taxable is resolved against taxation. This rule applies with
greater force when local governments seek to tax national
government instrumentalities.
Another rule is that a tax exemption is strictly construed
against the taxpayer claiming the exemption. However, when
Congress grants an exemption to a national government
instrumentality from local taxation, such exemption is construed
liberally in favor of the national government instrumentality.
ANTONIO QUIRINO, as Special Administrator, Testate Estate of
Natividad C. Raquiza, and Intestate Estate of Carmen M.
Castellvi, petitioner,
vs.
HON. NATHANAEL M. GROSPE, in his capacity as Presiding Judge,
Branch VI, Court of First Instance of Pampanga, Fifth Judicial
District, and WILFREDO M. GOINGCO, Administrator, Testate
Estate of Don Alfonso
G.R. No. L-58797 January 3l,1989
To allow intervenors instead of the estate of the
instituted heir to receive the residue of the estate would be not
only prejudicial to the creditors of the instituted heir but also to
the government in the form of non-payment of taxes required by
law.
FACTS:
Separate motions for reconsideration, motion for intervention,
motion for clarificatory order and omnibus motion for early
resolution and immediate release of funds were filed.
Motion for Reconsideration of Juan F. Gomez.
Gomez’ claims are for attorney's fees equivalent to 12%
of one-third (1/3) of the estate of Don Alfonso Castellvi and
P30,000.00 representing transportation and representation
expenses, for services admittedly rendered to the heirs of Don
Juan Castellvi. These claims may not be properly charged
against the estate of Don Alfonso Castellvi.
As held in Gabin v. Malleja (84 Phil. 794), the term
"claims" required to be presented against a decedent's estate is
generally construed to mean debts or demands of a pecuniary
nature which could have been enforced against the deceased
in his lifetime or liability contracted by the deceased before his
death. It is important to note that movant’s claims for attorney's
fees and transportation as well as representation expenses are
for services rendered to the alleged substituted heirs of Don Juan
Castellvi and such services did not inure to the benefit of Don
Alfonso Castellvi or his estate. The court charged with the
settlement of the estate of Don Alfonso Castellvi is bound to
protect the estate from any disbursements based on
claims not chargeable to the estate.
Motion for Reconsideration of Jesus T. David.
The claim for attorney's fees of intervenor Jesus T. David
is for services rendered for the benefit of Doña Carmen Castellvi,
and not for the benefit of Don Alfonso Castellvi or his estate. As
discussed earlier, only claims which could have been enforced
against the deceased in his lifetime are allowed to be presented
against his estate, with the exception of funeral expenses,
expenses for the last sickness and administration expenses in the
ordinary course thereof.
As to the alleged attachment and levy of Doña
Carmen's alleged administratrix' fees and share in the estate of
Don Alfonso Castellvi, the same cannot be given force and
effect in the special proceedings for the settlement of Don
Alfonso's estate. It must be stressed that the subject of settlement
in this case is not the estate of Doña Carmen Castellvi. For
intervenor to insist on enforcing in this proceeding his claim
against Doña Carmen's alleged fees as administratrix and share
in the estate of Don Alfonso Castellvi, would be irregular and
untenable. It should be borne in mind that the respondent court
is one of limited jurisdiction, and it has no authority to determine
as to who are the heirs of Don Juan Castellvi and/or decide the
claims or demands which may be properly paid out of the funds
of the estate of Doña Carmen Castellvi. Such issues have to be
determined in separate proceedings.
Motion for Reconsideration of the Raquiza children
Movants would like to impress upon this Court that the
award of attorney's fees to Atty. Mendoza equivalent to 12% of
the gross value of the estate of Don Alfonso Castellvi is not valid
on the ground that they never gave their consent thereto, nor
did Doña Carmen Castellvi, then administratix of the estate of
Don Alfonso Castellvi. However, the record of this case shows
that Natividad Castellvi-Raquiza, the instituted heir to two- third
(2/3) of the estate of Don Alfonso Castellvi, gave her conformity
to such award of attorney's fees in favor of Atty.
Mendoza. Moreover, movants, through their father and general
guardian Atty. Antonio V. Raquiza, had agreed to grant said
attorney's fees. In fact, separate manifestations were filed by
Atty. Raquiza and Carmen Castellvi with the court aquo stating
that they were withdrawing their oppositions to said claim.
With regard to Floro's claim for payment for services rendered to
the estate of Don Alfonso Castellvi, the rule is that where the
monetary claim against the administrator has a relation to his
Taxation Law II | Transfer Taxes| 14
acts of administration in the ordinary course thereof, such claims
can be presented for payment with the court where a special
proceeding for the settlement of the estate is pending, although
said claims were not incurred by the deceased during his lifetime
and collectible after his death. This is so, because the
administration is under the direct supervision of the court and the
administrator is subject to its authority.
Motion for Reconsideration of Antonio Quirino
As discussed earlier, Natividad Castellvi-Raquiza and
Doña Carmen Castellvi (as administratrix of the estate of Don
Alfonso Castellvi) had given their conformity to the award of
attorney's fees to Atty. Mendoza. Petitioner who now is acting as
special administrator of the estates of Natividad Castellvi-
Raquiza and Carmen Castellvi is estopped from questioning said
award.
Insofar as payment of service fees to Exequiel Floro, the
same was allowed for services rendered by claimant for the
benefit of the estate of Don Alfonso Castellvi and the same falls
under the category of "administration expense" which may be
paid out of the finds of the estate. Moreover, the heirs of Don
Alfonso Castellvi had dropped their opposition to said claim,
thus, they are barred from questioning the same at this stage.
Motion for Intervention of Carmen Castellvi, et al.
Intervenors (as alleged substituted heirs of Don Juan
Castellvi) seek clarification of the term "instituted heirs' and a
modification of the decision dated 25 April 1988, so that the term
"instituted heirs' would include the substituted heirs of Don Juan
Castellvi. They likewise move for the setting aside of the portion
of the decision which provides for the final settlement and
distribution of the estate of Don Alfonso to the instituted heirs or
their respective estates, if it would mean that delivery of the one
third (1/3) share of the estate of Don Alfonso is to be made only
to Don Juan Castellvi or his estate.
They further claim that for this Court to order the
delivery of the residue of the estate of Don Alfonso to the 'estate
of Don Juan Castellvi (to the extent of (1/3 as decreed in Don
Alfonso's last will) instead of his substituted heirs, will result in the
latter re-litigating among themselves and/or with other parties for
their respective shares over the estate of Don Juan Castellvi,
when they had already ventilated the issue of heirship over the
same before the court a quo, and they were declared heirs of
Don Juan Castellvi and substituted heirs to his one-third (1/3)
share in the estate of Don Alfonso Castellvi.
ISSUE:
Whether or not the intervenors, instead of the instituted
heirs, should be allowed to receive the residue of the estate.
RULING:
No, the intervenors should not be allowed to receive
the residue of the estate. To allow intervenors instead of the
estate of the instituted heir, Don Juan Castellvi to receive the
residue of the estate of Don Alfonso would be not only
prejudicial to the creditors of Don Juan but also to the
government in the form of non-payment of taxes required by
law. The transfer of the estate of Don Alfonso Castellvi to his
instituted heirs (Natividad Castellvi-Raquiza and Don Juan
Castellvi) is subject to payment of estate taxes. Before the
estates of Don Juan Castellvi (and Natividad Castellvi-Raquiza)
can be transferred to their heirs, again, estate taxes must first be
paid to the government. To allow intervenors, as substituted heirs
of Don Juan Castellvi, to receive directly from the estate of Don
Alfonso, the share pertaining to Don Juan, could result in a single
transfer of property and a single payment of estate taxes, in
fraud of the government.
Moreover, the court a quo has no jurisdiction to determine who
are the heirs of Don Juan Castellvi; said issue has to be ventilated
in a separate proceeding.
Motion for Clarificatory Order of Juan F. Gomez
Movant seeks clarification of the decision of this Court, dated 25
April 1988, denying his claim for attorney's fees, as to whether or
not it is meant to annul not only the order fixing his fees but also
the contract for services approved in the order issued by the
court a quo, dated 5 October 1981.
Movant's claim is chargeable to the heirs of Don Juan Castellvi,
his clients, and the court a quo has no jurisdiction to fix such fees
for services rendered not to the estate of Don Alfonso, but to the
heirs of Don Juan. It follows that the court a quo has no
jurisdiction to approve a contract of legal services between
claimant and the heirs of Don Juan. The court a quo is of limited
jurisdiction, empowered to settle only the estate of Don Alfonso
Castellvi: any act done in excess of such limits may not be given
force and effect.
Testate estate of the deceased Raymundo Melliza y Angulo.
LAUREANA GABIN, claimant-appellant,
vs.
MARIA MELLIZA, ET AL., oppositors-appellees.
G.R. No. L-1849 October 25, 1949
By money claims, is meant any claim for "money, debt,
or interest thereon," according to section 21 of Rule 3 and
section 1 of Rule 88. Not all money claims may, however, be
presented, but only those which are proper against the
decedent, that is, claim upon a liability contracted by the
decedent before his death. Accordingly, claims arising after his
death cannot thus presented, except funeral expenses." (Moran
on the Rules of Court, Volume 2, second edition, p. 347.)
FACTS:
On January 19, 1944, Raymundo Melliza and Laureana Gabin
entered into a written agreement whereby the former
contracted the personal services of the latter to administer
certain haciendas owned by Raymundo Melliza for a period of
thirty years from said date, at the option of Laureana Gabin. As
compensation for said personal services Melliza agreed to pay
Gabin 350 cavans of palay every agricultural year. It was further
stipulated that Laureana Gabin cannot be dismissed from the
service without just and legal cause during the time she cared to
serve within the said period of thirty years, and in case of
dismissal she shall have the right to be indemnified for the rest of
the period at the rate of 150 cavans of palay for each
agricultural year.
Raymundo Melliza died on December 11, 1945, and
testamentary proceedings were thereafter instituted in t he
Court of First Instance of Iloilo for the administration and
distribution of his estate. Having been deprived by the executrix
Remedios S. de Villanueva of the administration of the
haciendas in question, Laureana Gabin presented to the
probate court a claim against the estate of the deceased
Raymundo Melliza for the payment to her by the executrix of 150
cavans of palay beginning the agricultural year 1945-1946 until
the termination of the testamentary proceedings, and that
thereafter the heir or heirs to whom the haciendas may be
adjudicated be ordered to pay the claimant the same amount
of palay every year until the expiration of thirty years from the
agricultural year 1945-1946.
ISSUE:
Whether or not appellant’s claim is a proper claim which may be
allowed in the testamentary proceedings.
RULING:
No, the claim may not be allowed since Rule 87, provides that
immediately after the granting of letters testamentary or of
administration the court shall issue a notice requiring all person
having money claims against the decedent to file them in the
office of the clerk of said court; and section 5 provides that
all claims for money against the decedent arising from contract,
express or implied, whether the same be due, not due, or
Taxation Law II | Transfer Taxes| 15
contingent, all claims for funeral expenses and expenses of the
last sickness of the decedent, and judgment for money against
the decedent, must be filed within the time limited in the notice.
"'By money claims, is meant any claim for "money, debt, or
interest thereon," according to section 21 of Rule 3 and section 1
of Rule 88. Not all money claims may, however, be presented,
but only those which are proper against the decedent, that is,
claim upon a liability contracted by the decedent before his
death. Accordingly, claims arising after his death cannot thus
presented, except funeral expenses." (Moran on the Rules of
Court, Volume 2, second edition, p. 347.)
Upon the facts and the law involved in this case, we find no valid
reason to reverse the order appealed from.
In the first place, the claim in question arose after the death of
the decedent. Assuming without deciding that the contract on
which the claim is based is valid, the decedent appears to have
complied with it up to the time of his death. It was the executrix
who dismissed the claimant from the service as administratrix or
manager of the haciendas of the deceased.
In the second place, the claim is not for money, debt, or interest
thereon but for 150 cavans of palay a year for twenty-nine
agricultural years (one agricultural year having elapsed before
the death of Raymundo Melliza). Even if it wanted to, the
probate court could not determine in advance the value of the
palay in money because the price of palay varies from year to
year.
It appears from the record that before presenting the claim in
question the claimant filed a motion in the probate court
praying that she be appointed coadministratrix of the estate of
the deceased on the strength of the contract of service
hereinabove mentioned. But Judge Blanco denied said motion
without prejudice to the right of the claimant to present a claim
in due form against the estate. Appellant now contends in her
third assignment of error that said order of Judge Blanco not
having been appealed from, "the lower court erred in not
holding that the question of the presentation and admission of
the claimant's claim has become res judicata." This assignment
of error is without merit because the mere reservation by Judge
Blanco to the claimant of her right to present the claim in
question in lieu of her appointment as coadministratrix of the
estate of the deceased did not preclude the court from denying
said claim if, after hearing, it found the same to be improper or
not allowable in these proceedings.
In re estate of the deceased DIEGO DE LA VIÑA.
JOSE MA. DE LA VIÑA Y DE LA ROSA, ex-administrator-appellant,
vs.
THE COLLECTOR OF INTERNAL REVENUE, creditor-appellee.
G.R. No. 46242 October 20, 1939
The necessary expenses of administration whose
payment is given preference in the said section 735 of the Code
of Civil Procedure are those which the administrator may have
incurred in the care, administration and liquidation of the
properties of the estate and the commissions due to him for
collections and disbursements which he may have made, and
not those which he could or might have wished to make out of
his own pocket or but of the funds of the estate.
"Administration expenses," says Corpus Juris, volume 24, page
424, "include expenditures in discovering and preserving assets,
attorneys fees incurred in connection with the administration of
the estate, incurred in connection with the administration of the
estate, cost recovered against the representative in an action to
recover assets, to established a claim against the estate, to try
title to land, and insurance premiums expended for the
protection of the property and it has even been considered that
expenditures in carrying on decedent's business may be
regarded as expenses of administration."
FACTS:
On April 8, 1920, after the death of Diego de la Viña, his brother,
Dr. Jose Ma. de la Viña, was appointed by the Court of First
Instance of Negros Oriental as special administrator of the estate
of the deceased; and on the 20th of the same month and year
he was appointed executor.
On January 23, 1926, this Court issued an order approving the
accounts of the said Dr. Jose de la Viña, as outgoing
administrator of the estate of Diego de la Viña. It appears from
the decision of this Court rendered in said Civil Case G.R. No.
23747 that the following items were approved:
Special per diems of Jose de la Viña as
former adminstrator .............................. P12,552.00
Legal Commission ............................... 4,141.33
Total ............................................................ 16,693.33
In the bill of exceptions in said case it also appears that the
following expenses of Jose de la Viña were approved:
Balance in his favor as executor .................... P1,165.86
Balance on his aparceria ................................ 7,528.64
Total
...................................................................... 8,694.50
On July 16, 1927, the said Court of First Instance of Negros
Oriental ordered in the present case the payment to Dr. Jose de
la Viña of the amount of 146.025 piculs of sugar belonging to
him, which product was applied to the payment of the
administration expenses of the estate of Diego de la Viña. The
price of said sugar was fixed at P20 per picul by a subsequent
order. Adding the sum of P2,925, the value of said 146.025 piculs
of sugar, to the sum of P25,387.83, the result is a total of
P28,312.83. As the amount of P9,228.65 has been paid on
account, there remains a balance of P19,048.18 in favor of the
appellant.
It also appears that on February 23, 1932, this Court rendered
judgment in G.R. No. 33870, entitled "The Collector of Internal
Revenue vs. Espiridion Villegas, as administrator of the estate of
Diego de la Viña", ordering the said administrator to pay the
Insular Government, by way of income tax for the year 1925, the
sum of P18,420.93, with interest from August 20, 1939 until fully
paid, and the costs.
The estate of Diego de la Viña does not have sufficient funds or
property to pay fully both judgments. When the Insular
Government attempted to collect the amount of the said
judgment in its favor, Dr. Jose de la Viña objected on the ground
that the judgments obtained by him are preferred under section
735 of Act No. 190, and should first be paid. After the
corresponding trial, the trial court overruled the opposition and
entered the above-quoted order.
ISSUE:
Whether or not the income tax which an estate owes the Insular
Government partakes of the nature of administration expenses
for purposes of the order of payment established by section 735
of Act No. 190
RULING:
No, the income tax which an estate owes the insular
Government did not partake of the nature of administration
expenses for purposes of the order of payment established by
section 735. Section 735 of the Code of Civil Procedure, as
amended by Act No. 3960, provides as follows:
SEC. 735. Order of payment if estate insolvent. — If the assets
which can be appropriated for the payment of debts are not
sufficient for that purpose, the executor or administrator shall,
after pay the debts against the estate in the following order:
1. The necessary funeral expenses;
Taxation Law II | Transfer Taxes| 16
2. The expenses of the last sickness;
3. What is owing to the laborer for salaries and wages earned
and for indemnities due to him, for the last year;
4. Debts due to the United States;
5. Taxes and assessments due to the Government, or any branch
or subdivision thereof;
6. Debts due to the province;
7. Debts due to other creditors.
Section 680 of the same code of Civil Procedure provides as
follows:
SEC. 680. — How allowed for services. — The executor or
administrator shall be allowed necessary expenses in the care,
management, and settlement of the estate, and for his services,
two dollars per day for the time actually and necessarily
employed, and a commission of three per cent upon all sums
disbursed in the payment of debts, expenses, and distributive
shares, if the amount of such disbursements does not exceed
one thousand dollars. If the amount exceeds one thousand
dollars and does not exceed five thousand dollars and one-half
per cent upon the excess, if the whole amount does not exceed
five thousand dollars, then the percentage as above provided,
and one per cent on the excess above five thousand dollars. But
in any special case, where the estate is large, and the
settlement has been attended with great difficulty, and has
required a high degree of capacity on the part of the executor
or administrator, a greater sum may be allowed. But if objection
to the fees allowed be taken, the allowance may be re-
examined by the Supreme Court on appeal.
When the administrator or executor is a lawyer, he shall not be
allowed to charge against the estate any professional fees, as
such, for services rendered by himself. When the deceased by
will makes some other provision for compensation to his
executor, the provision shall be full satisfaction for his services,
unless by a written instrument filed in the court he renounces all
claim to the compensation provided by the will.
The legal provision just quoted enumerates the services for which
the administrator should be paid and the commission to which
he is entitled for collections and disbursement made by him.
Among these payments, which constitutes the expenses of
administration, are not included pending debts of the estate,
whatever may be their nature. According to the said legal
provision, only payments which the executor or administration
may have made in the discharge of his office and the
commissions to which he may be entitled, partakes of the nature
of administration expenses. The expenses of administration are
due only to the executor or administrator, and he alone, and no
other, may collect them.
As we have said, the necessary expenses of administration
whose payment is given preference in the said section 735 of the
Code of Civil Procedure are those which the administrator may
have incurred in the care, administration and liquidation of the
properties of the estate and the commissions due to him for
collections and disbursements which he may have made, and
not those which he could or might have wished to make out of
his own pocket or but of the funds of the estate.
"Administration expenses," says Corpus Juris, volume 24, page
424, "include expenditures in discovering and preserving assets,
attorneys fees incurred in connection with the administration of
the estate, incurred in connection with the administration of the
estate, cost recovered against the representative in an action to
recover assets, to established a claim against the estate, to try
title to land, and insurance premiums expended for the
protection of the property and it has even been considered that
expenditures in carrying on decedent's business may be
regarded as expenses of administration." And Woerner, volume
2, page 1197, paragraph 362, third edition, of his work entitled
"The American Law of Administration of the Estate," says the
following:
It has already been stated, that for the expenses attending the
accomplishment of the purpose of administration growing out of
the contract or obligation entered into by the personal
representative he is to be reimbursed out of the estate, and that
his claim to reimbursed must be superior to the rights of the
beneficiaries. They are subject only to the lien of a mortgage
executed on specific property by the deceased in his lifetime.
The expenses under this category include those paid for probate
of the will, as well in the Probate court as on appeal, or other
proceeding in a contest, if carried on in good faith; and the
executor nominated in such will is entitled to a settlement of his
account, and reimbursement for his expenses in preserving the
estate and for the funeral, although the will be finally
pronounced invalid; and, generally, all expenses necessary in
the protection and preservation of the estate, which have been
held to include the costs of establishing a claim against the
estate. But the general rule seems rather to be that costs
incurred by the administrator in defense of claims against the
estate, or in prosecuting claims in favor of it, pertain to the
administration, and are to be allowed in full; but costs incurred
by claimants in establishing their claims stand on the same
footing with the claims themselves. The allowance of counsel
fees and costs is discussed in connection with the subject of
accounting. Repairs necessary upon real estate of which the
executor or administrator has lawful possession also constitute
expenses of administration; if the expenses incurred is general,
affecting all the property of the estate, it should be charged
generally, but if attaching to a specific portion or piece of
property, it should be charged against such portion or piece.
The liability of the administrator as such cannot be treated as a
continuation of a running account with the deceased in his
lifetime; nor can the defendant in an action by an administrator
upon a contract made by him as such, or to recover assets of
the estate, set off or counterclaim a debt due him from the
deceased. And it is held that one who renders services for a trust
has no recourse against the trust, except to subject an equitable
demand of the trustee to the payment of the debt.
The mere fact, therefore, that the income tax claimed by the
Collector of Internal Revenue had been imposed upon the
profits obtained by the administrator of the estate in the sale of
certain properties of the deceased Diego de la Viña, after the
latter's death, does not make the said tax a necessary expense
of administration, unless the administrator had paid it either from
his own pocket or out of the funds of the estate: in the first case
the tax paid is converted into an expense of administration
which the administrator may fully recover, plus his commission; in
the second case, he may only collect his commission, which
partakes of the nature of an expense of administration.
In view of the foregoing consideration, we are of the opinion
and so hold: (1) that the income tax which an estate owes to the
insular government for profits obtained in the sale of properties
belonging to it, after the death of the testator, does not partake
of the nature of necessary expenses of administration; (2) that
the lien created by section 1588 of the Revised Administrative
Code for internal revenue tax on properties subject to it, being
general in character, yields to the preference established by
section 735 of the Code of Civil Procedure, as amended by Act
No. 3960, in favor of the necessary expenses of administration of
the estate of a deceased person; and, (3) that the claim of an
administrator for the necessary expenses of administration enjoys
preference over the claim for payment of income tax.
Wherefore, the remedy prayed for is granted, the appealed
decision is reversed, and it is held that the claim of the appellant,
Dr. Jose Ma. de la Viña y de la Rosa, as ex-administrator of the
estate of the deceased Diego de la Viña has preference over
that of the Collector of Internal Revenue for income tax.
JOSE MODEQUILLO, petitioner,
vs.
HON. AUGUSTO V. BREVA FRANCISCO SALINAS, FLORIPER
ABELLAN-SALINAS, JUANITO CULAN-CULAN and DEPUTY SHERIFF
FERNANDO PLATA respondents.
G.R. No. 86355, May 31, 1990, THIRD DIVISION (Gancayco, J)
Under the Family Code, a family home is deemed
constituted on a house and lot from the time it is occupied as a
family residence. There is no need to constitute the same
judicially or extrajudicially as required in the Civil Code. If the
family actually resides in the premises, it is, therefore, a family
Taxation Law II | Transfer Taxes| 17
home as contemplated by law. Thus, the creditors should take
the necessary precautions to protect their interest before
extending credit to the spouses or head of the family who owns
the home.
FACTS:
Petitioners Jose Modequillo and Benito Malubay were ordered to
pay jointly and severally to plaintiff-appellants pertaining to
damages arising from a vehicular accident killing Audie Salinas
and injuring Renato Culan.
On July 7, 1988, the sheriff levied on a parcel of residential land
located at Poblacion Malalag, Davao del Sur registered in the
name of Jose Modequillo.
A motion to quash and/or to set aside levy of execution was filed
by defendant Jose Modequillo alleging therein that the
residential land located at Poblacion Malalag is where the
family home is built since 1969 prior to the commencement of
this case and as such is exempt from execution, forced sale or
attachment under Articles 152 and 153 of the Family Code
except for liabilities mentioned in Article 155 thereof; and that
the judgment debt sought to be enforced against the family
home of defendant is not one of those enumerated under
Article 155 of the Family Code.
Respondents on the other hand say that the said house and lot
only became a family home in 1988 when the Family Code took
effect. They say that under the Civil Code, he house and lot did
not qualify as a family home since the Family Code provision on
family homes has no retroactive effect.
ISSUE
Whether or not the FC provision on family homes have
retroactive application.
RULING
NO. Under Article 162 of the Family Code, it is provided that "the
provisions of this Chapter shall also govern existing family
residences insofar as said provisions are applicable." It does not
mean that Articles 152 and 153 of said Code have a retroactive
effect such that all existing family residences are deemed to
have been constituted as family homes at the time of their
occupation prior to the effectivity of the Family Code and are
exempt from execution for the payment of obligations incurred
before the effectivity of the Family Code. Article 162 simply
means that all existing family residences at the time of
the effectivity of the Family Code, are considered family homes
and are prospectively entitled to the benefits accorded to a
family home under the Family Code. Article 162 does not state
that the provisions of Chapter 2, Title V have a retroactive effect.
ISSUE:
Is the family home of petitioner exempt from execution of the
money judgment aforecited?
RULING:
No. The debt or liability which was the basis of the judgment
arose or was incurred at the time of the vehicular accident on
March 16, 1976 and the money judgment arising therefrom was
rendered by the appellate court on January 29, 1988. Both
preceded the effectivity of the Family Code on August 3,
1988. This case does not fall under the exemptions from
execution provided in the Family Code.
CONSOLACION FLORENTINO DE CRISOLOGO, ET AL., plaintiffs-
appellees,
vs.
DR. MANUEL SINGSON, defendant-appellant.
G.R. No. L-13876, February 28, 1962, EN ANC (Dizon, J)
Testator may not only designate heirs who’ll succeed
him, but also substitutes in the event that said heirs don’t accept
or are in no position to accept inheritance or legacies, or die
ahead of him.
FACTS:
This involves a lot and improvements thereon. Complaint alleged
that Singson owned half pro indiviso of said property and that
Florentino owned the other half by virtue of the duly probated
last will of Singson (original owner). Defendant's defense was that
ConsolacionFlorentino was a mere usufructuary of and not
owner of one-half pro-indiviso of the property in question, and
that therefore, she was not entitled to demand partition thereof.
Lower court rendered judgment in favor of plaintiff. Singson
appealed. At the time of the execution of the will, the nearest
living relatives of the original owner were her brothers Evaristo,
Manuel and DionisioSingson, her nieces Rosario, Emilia and
Trinidad, and her grandniece Consolation, all surnamed
Florentino.
ISSUE:
Whether the testamentary disposition provided for sustitucion
vulgar or for sustitucion fideicomisaria?
RULING:
The old Civil Code governs this case. Testator may not only
designate heirs who’ll succeed him, but also substitutes in the
event that said heirs don’t accept or are in no position to
accept inheritance or legacies, or die ahead of him.
Testator may also bequeath his properties to particular person
with obligation, on part of latter, to deliver the same to another,
totally or partially, upon occurrence of particular event. The
particular testamentary clause provides for substitution of heir in
this manner: upon death of ConsolacionFlorentino, whether
before or after that of testatrix, property bequeathed to her shall
be delivered or shall belong in equal parts to testatrix's three
brothers, Evaristo, Manuel, Dionisio, or their forced heirs, should
anyone of them die ahead of ConsolacionFlorentino. If this
created sustitucion vulgar, necessary result would be that
ConsolacionFlorentino, upon death of testatrix, became owner
of one undivided half of the property,but if it provided for
sustitutionfideicomisaria, she would have acquired nothing more
than usufructuary rights over same half. In the former, she would
be entitled to partition, but not in the latter.
As Manresa says, a careful perusal of the testamentary
clause under consideration shows that the substitution of heirs
provided for therein is not expressly made of the fideicommissary
kind, nor does it contain a clear statement to the effect that
appellee, during her lifetime, shall only enjoy usufructuary rights
over the property bequeathed to her, naked ownership thereof
being vested in the brothers of the testatrix. As already stated, it
merely provides that upon appellee's death whether this
happens before or after that of the testatrix. Her share shall
belong to the brothers of the testatrix. In the light of the
foregoing, we believe, and so hold, that the last will of the
deceased Dña. Leona Singson, established a mere sustitucion
vulgar, the substitution ConsolacionFlorentino by the brothers of
the testatrix to be effective or to take place upon the death of
the former, whether it happens before or after that of the
testatrix.
DALISAY E. OCAMPO, VINCE E. OCAMPO, MELINDA CARLA E.
OCAMPO, and LEONARDO E. OCAMPO, JR., Petitioners,
vs.
RENATO M. OCAMPO and ERLINDA M. OCAMPO, Respondents.
Taxation Law II | Transfer Taxes| 18
 G.R. No. 187879 , July 5, 2010, SECOND DIVISION (Nachura, J)
A special administrator is an officer of the court who is
subject to its supervision and control, expected to work for the
best interest of the entire estate, with a view to its smooth
administration and speedy settlement.
FACTS:
Spouses Vicente and Maxima died intestate leaving
behind properties which were then controlled, managed and
administered by their children Leonardo, Renato and Erlinda. In
2004, Leonardo died. Subsequently, Leonardo’s heirs (the
petitioners) initiated a petition for intestate proceedings of
Vicente, Maxima and Leonardo’s estates, alleging that after
Leonardo’s death, the surviving siblings Renato and Erlinda took
possession and control of the estate to the exclusion of the
petitioners. The petition likewise prayed for the appointment of
an administrator to apportion, divide and award the two estates
among the lawful heirs of the decedents.
The probate court appointed Leonardo’s widow as
special administrator. Renato and Erlinda protested, asserting
their priority in right to be appointed as administrators.
Subsequently, the widow’s appointment was revoked by the
court and was substituted by Erlinda. Erlinda filed a Motion to be
exempted from the payment of the required Administrator’s
Bond.
Later, the petitioners filed a motion to revoke Erlinda’s
appointment and prayed for the partition of the estate or the
appointment of a regular administrator, alleging that special
administration was unnecessary as the estate was neither vast
nor complex, and the properties of the estate having been
identified. The RTC revoked Erlinda’s appointment as special
administrator for having failed to comply with its order to post
the required Administrator’s Bond and to enter their duties and
responsibilities as special administrators, i.e., the submission of an
inventory of the properties and of an income statement of the
estate. The RTC then appointed the widow as regular
administratrix.
The CA ruled that the RTC erred in revoking Erlinda’s
appointment as special administrator without ruling on their
motion for exemption from the bond, and for appointing the
widow Melinda as regular administratrix without conducting a
formal hearing to determine her competence as such.
ISSUES:
Whether or not the appointment of special administrator was
proper. YES
Whether or not Erlinda and Renato had priority in right to be
appointed special administrator. NO
Whether or not the Court erred in revoking Erlinda’s appointment
despite
RULING:
A special administrator is an officer of the court who is
subject to its supervision and control, expected to work for the
best interest of the entire estate, with a view to its smooth
administration and speedy settlement.When appointed, he or
she is not regarded as an agent or representative of the parties
suggesting the appointment.The principal object of the
appointment of a temporary administrator is to preserve the
estate until it can pass to the hands of a person fully authorized
to administer it for the benefit of creditors and heirs, pursuant to
Section 2 of Rule 80 of the Rules of Court.
The probate court may appoint or remove special
administrators based on grounds other than those enumerated
in the Rules at its discretion, such that the need to first pass upon
and resolve the issues of fitness or unfitnessand the application of
the order of preference under Section 6 of Rule 78,as would be
proper in the case of a regular administrator, do not obtain. As
long as the discretion is exercised without grave abuse, and is
based on reason, equity, justice, and legal principles,
interference by higher courts is unwarranted. Being the nearest
of kin to the decedents may be considered by the Court but it is
not a mandatory requirement for appointment.
The appointment or removal of special administrators,
being discretionary, is thus interlocutory and may be assailed
through a petition for certiorari under Rule 65 of the Rules of
Court. Even if special administrators had already been
appointed, once the probate court finds the appointees no
longer entitled to its confidence, it is justified in withdrawing the
appointment and giving no valid effect thereto.
ADMINISTRATOR’S BOND: The RTC did not err in revoking Erlinda’s
appointment considering that among others they failed to post
the required bond. As to the issue involving the administrator’s
bond, the Court said that pursuant to Section 1 of Rule 81, the
bond secures the performance of the duties and obligations of
an administrator namely:
(1) to administer the estate and pay the debts;
(2) to perform all judicial orders;
(3) to account within one (1) year and at any other time
when required by the probate court; and
(4) to make an inventory within three (3) months.
More specifically, per Section 4 of the same Rule, the
bond is conditioned on the faithful execution of the
administration of the decedent’s estate requiring the special
administrator to (1) make and return a true inventory of the
goods, chattels, rights, credits, and estate of the deceased
which come to his possession or knowledge; (2) truly account for
such as received by him when required by the court; and (3)
deliver the same to the person appointed as executor or regular
administrator, or to such other person as may be authorized to
receive them.
COMMISSIONER OF INTERNAL REVENUE, petitioner,
vs.
LILIA YUSAY GONZALES and THE COURT OF TAX
APPEALS, respondents
G.R. No. L-19495, November 24, 1966, EN BANC (Bengzon, JP)
The liability of the executor or administrator is personal.
Even if the properties of the estate have been distributed to the
heirs, the executor or administrator can still be held liable for the
unpaid tax.
FACTS:
Matias Yusay, a resident of Pototan, Iloilo, died intestate on May
13, 1948, leaving two heirs, namely, Jose S. Yusay, a legitimate
child, and Lilia Yusay Gonzales, an acknowledged natural child.
Intestate proceedings for the settlement of his estate were
instituted in the Court of First Instance of Iloilo (Special
Proceedings No. 459). Jose S. Yusay was therein appointed
administrator.
On May 11, 1949, Jose Yusay filed with the BIR an estate and
inheritance tax return. The return mentioned no heirs. Upon
investigation, the BIR found additional personal (like the Packard
car and aparador) and real properties ( like 92 parcels of land )
which were not included in the return.
The estate and inheritance tax assessment were increased.
In view of the demise of Jose Yusay, the assessment was sent to
his widow, Florencia, you succeeded him in the administration of
the estate of Matias Yusay. Florencia was made administrator of
2/3 of the estate, while Lilia Yusay adnministered 1/3 of the
estate.
Taxation Law II | Transfer Taxes| 19
No payment has been made despite repeated demands made
by the CIR. June 1, 1959, Lilia Yusay, through counsel alleged the
non-receipt of the assessment of Feb. 13, 1958. She was willing to
pay the taxes corresponding to 1/3, which is her share of the
property under her administration.
On Nov. 17, 1959, Lilia disputed the legality of the assessment
dated Feb. 13, 1958. She claimed that the right to make the
assessment had prescribed since more than five years had
elapsed since the filing of the estate and inheritance tax return
on May 11, 1949. She wanted to have the assessment declared
invalid and without force and effect. The Commissioner rejected
her demand for the following reasons:
(a) that the right to assess the taxes in question has not
been lost by prescription since the return which did not
name the heirs cannot be considered a true and
complete return sufficient to start the running of the
period of limitations of five years under Section 331 of the
Tax Code and pursuant to Section 332 of the same Code
he has ten years within which to make the assessment
counted from the discovery on September 24, 1953 of the
identity of the heirs; and
(b) that the estate's administrator waived the defense
of prescription when he filed a surety bond on March 3,
1955 to guarantee payment of the taxes in question and
when he requested postponement of the payment of the
taxes pending determination of who the heirs are by the
settlement court.
Lilia filed a petition for review in the Court of Tax Appeals (CTA).
The CTA declared that the right of the CIR to assess the estate
and inheritance taxes in question has prescribed.
ISSUE:
Was the petition for review in the CTA made within the 30 day
period provided for in Sec. 11 of RA 1125?
RULING: Yes.
Nov. 17, 1959- Lilia Yusay disputed the legality of the assessment
of Feb. 13, 1958.
March 14, 1960- she received the decision of the CIR on the
disputed assessment
April 13, 1960- she filed her petition for review in the CTA.
The CTA has correctly held that the appeal was seasonably
interposed pursuant to Sec. 11 of RA 1125. As ruled in the case
of ST. Stephen’s Association vs. CIR, the counting of the 30 days
within which to institute an appeal in the CTA should commence
from the date of receipt of the decision of the CIR on the
disputed assessment and not from the date the assessment was
issued.
The 30 day period should begin running from March 14, 1960, the
date Lilia received the appealable decision. From said date to
April 13, 1960, when she filed her appeal in the CTA is exactly 30
days. Hence, her appeal was timely
ISSUE: Lilia Yusay questions the legality of the assessment. Where
should she file her appeal?
RULING:
In the Court of Tax Appeals
An action involving a disputed assessment for internal revenue
taxes falls within the exclusive jurisdiction of the CTA. It is in that
forum, to the exclusions of the Court of First Instance (CFI, now
RTC), where she could ventilate her defenses against the
assessment.
Under the Rules of Court, the jurisdiction of the CFI relates only
with the settlement of estates and probate of wills of deceased
persons. It has no jurisdiction to adjudicate the tax assessment.
ISSU:
Lila Yusay claims that the latest assessment was issued only on
Feb 13, 1958 or 8 years, 9 months and 2 days from the filing of the
estate and inheritance tax. Because of prescription, the CIR’s
right has expired.
RULING:
Not prescribed, due to substantial defect in the returns.
Based on Sec. 331 of the Tax Code, the CIR is limited to make an
assessment within five years from the filing of the return.
However, the CIR claims that fraud attended the filing of the
return. The CIR, however, raised the point of fraud for the first
time in the proceedings, only in his memorandum filed with the
Tax Court subsequent to resting his case.
The Tax Court rejected the plea of fraud for lack of allegation
and proof and ruled that the return, although not accurate, was
sufficient to start the period of prescription.
The Supreme Court, however ruled that the state and
inheritance tax return filed by Jose Yusay was substantially
defective, based on the following:
a. It was incomplete. It declared only ninety-three parcels of
land representing about 400 hectares and left out ninety-two
parcels covering 503 hectares. Said huge under declaration
could not have been the result of an over-sight or mistake. Jose
S. Yusay very well knew of the existence of the omitted
properties. Perhaps his motive in under declaring the inventory of
properties attached to the return was to deprive Lilia Yusay from
inheriting her legal share in the hereditary estate, but certainly
not because he honestly believed that they did not form part of
the gross estate.
b. Second, the return mentioned no heir. Thus, no inheritance
tax could be assessed. As a matter of law, on the basis of the
return, there would be no occasion for the imposition of estate
and inheritance taxes. When there is no heir - the return showed
none - the intestate estate is escheated to the State.The State
taxes not itself.
The filing of the wrong form does not make much difference if
the necessary information for the assessment of the tax would be
missing.
The return filed was so deficient that it prevented the CIR from
computing the proper taxes. The CIR had to use other sources of
information, other than the return
Accordingly, for purposes of determining whether or not the
Commissioner's assessment of February 13, 1958 is barred by
prescription, Section 332(a) which is an exception to Section 331
of the Tax Code finds application.We quote Section 332(a):
SEC. 332. Exceptions as to period of limitation of assessment and
collection of taxes.— (a) In the case of a false or fraudulent
return with intent to evade tax or of a failure to file a return, the
tax may be assessed, or a proceeding in court for the collection
of such tax may be begun without assessment, at any time
within ten years after the discovery of the falsity, fraud or
omission.
As stated, the Commissioner came to know of the identity of the
heirs on September 24, 1953 and the huge underdeclaration in
the gross estate on July 12, 1957. From the latter date, Section 94
of the Tax Code obligated him to make a return or amend one
already filed based on his own knowledge and information
obtained through testimony or otherwise, and subsequently to
assess thereon the taxes due. The running of the period of
limitations under Section 332(a) of the Tax Code should therefore
be reckoned from said date for, as aforesaid, it is from that time
that the Commissioner was expected by law to make his return
and assess the tax due thereon. From July 12, 1957 to February
13, 1958, the date of the assessment now in dispute, less than ten
years have elapsed. Hence, prescription did not abate the
Commissioner's right to issue said assessment.
Taxation Law II | Transfer Taxes| 20
ISSUE: Can Lilia Yusay Gonzales pay her 1/3 share of the estate
and inheritance taxes only?
RULING: NO.
Estate and inheritance taxes are satisfied from the estate of the
decedent and are to be paid by the executor or administrator
thereof. Where there are two or more executors, all of them are
severally liable for the payment of the estate tax. The
inheritance tax, although charged against the account of each
beneficiary, should be paid by the executor or administrator.
WHEREFORE, the judgment appealed from is set aside and
another entered affirming the assessment of the Commissioner of
Internal Revenue dated February 13, 1958. Lilia Yusay Gonzales,
as administratrix of the intestate estate of Matias Yusay, is hereby
ordered to pay the sums of P16,246.04 and P39,178.12 as estate
and inheritance taxes, respectively, plus interest and surcharge
for delinquency in accordance with Section 101 of the National
Internal Revenue Code, without prejudice to reimbursement
from her co-administratrix, Florencia Piccio Vda. de Yusay for the
latter's corresponding tax liability. No costs. So ordered.
THE COLLECTOR OF INTERNAL REVENUE, petitioner,
vs.
ELLEN WOOD McGRATH, respondent.
G.R. No. L-12710 February 28, 1961
x---------------------------------------------------------x
ELLEN WOOD McGRATH, petitioner,
vs.
COLLECTOR OF INTERNAL REVENUE, and COURT OF TAX
APPEALS, respondents.
G.R. No. L-12721 February 28, 1961.
EN BANC (Labrador, J)
Taxes are fixed by law and are not subject to contract
between the taxpayer and the tax officer, except when there is
an actual compromise, which in the case at bar does not exist.
The acceptance of any amount by employees or officials, which
does not constitute a full payment of the amount fixed by law, is
no ground or reason for the claim for exemption by the taxpayer
from liability for the remaining amount due under the law. Taxes
are not subject to agreements between the taxpayer and the
tax officer, and if any such agreements are made, they cannot
serve to defeat or discharge the liability that the law fixes as the
full amount of the tax. Furthermore, any error made by a tax
official in the assessment or computation of taxes does not have
the effect of relieving the taxpayer from the full amount of
liability as fixed by law. Errors of tax officers or officials of the
Government do not bind the Government or prejudice its right to
the taxes or dues collectible by it from its citizens. (Canlubang
Sugar Estate v. Standard Alcohol Co. [Phil.], Inc., G.R. No. L-
10887, April 16, 1958; Philippine American Drug Co. v. Collector
of Internal Revenue, et al., G.R. No. L-13032, August 31, 1959;
Teodore Lewin v. Emilio Galang, G.R. No. L-15253, Oct. 31, 1960.).
FACTS:
Appeal by the Collector of Internal Revenue in G.R. No. L-12710
from a decision of the Court of Tax Appeals, declaring the estate
of Dora Anna Wood exempt from the payment of the
inheritance tax, and by Ellen Wood McGrath administratrix of the
estate of Dora Anna Wood, in G.R. No. 12721 against the same
decision of the Court of Tax Appeals, dismissing her claim of
having been discharged from paying the taxes assessed by the
Collector of Internal Revenue on the estate of the deceased.
On March 9, 1956, upon petition of counsel for McGrath, the
Collector of Internal Revenue, in answer to the objections of
counsel for McGrath against the original assessment made by
the Collector of Internal Revenue, rendered a final decision on
the said subject, which reads as follows:.
In view thereof, you are requested to urge your client to
pay the sum of P36,144.91 as inheritance tax and
penalties, plus the corresponding interest from
December 23, 1955 up to the date of payment in order
that this case may be closed, without prejudice,
however, to your filing of a request for refund in
accordance with section 309 of the Tax Code in the
event that the decision of the Court of Tax Appeals in
the aforesaid Miller case is affirmed by the Supreme
Court. (p. 15, ROA).
The Collector of Internal Revenue insists in his appeal before Us
that the Court of Tax Appeals erred in two principal respects,
namely, (1) in holding that there exists reciprocity between the
California and Philippine laws on the matter of the death tax on
intangible personal property, (2) in holding that the estate of
Dora Anna Wood is not liable for the payment of the inheritance
tax, and (3) in ordering him to refund the amount of P7,411.04,
with interest from the date of payment.
ISSUE 1:
Whether or not there exists reciprocity between the
California and Philippine laws on the matter of the death tax on
intangible personal property.
ISSUE 2:
Whether or not estate of Dora Anna Wood is not liable
for the payment of the inheritance tax.
RULING 1:
No, there is no reciprocity between the California and Philippine
laws in matter of death tax on intangible personal property. In
the cases of the Collector of Internal Revenue vs. Fisher, et al.,
G.R. No. L-11622 and Fisher, et al. vs. The Collector of Internal
Revenue, et al., G.R. No. L-11668, promulgated on January 30,
1961, penned by Mr. Justice Barrera, and we have come to the
conclusion that no reciprocity can be extended in the case of
the estate of Dora Anna Wood because the law of California
does not grant full exemption from the estate and inheritance
taxes to Filipino residents in that state. Here is what this Court
declared in said case:
Section 122 of our National Internal Revenue Code, in
pertinent part, provides:
. . . And, provided, further, That no tax shall be
collected under this Title in respect of intangible
personal property (a) if the decedent at the time of his
death was a resident of a foreign country which at the
time of his death did not impose a transfer tax or death
tax of any character in respect of intangible personal
property of citizens of the Philippines not residing in the
foreign country, or (b) if the laws of the foreign country
of which the decedent was a resident at the time of his
death allow a similar exemption from transfer taxes or
death taxes of every character in respect of intangible
personal property owned by citizens of the Philippines
not residing in that foreign country.' (Emphasis
supplied.).
"On the other hand, Section 13851 of the California
Inheritance Tax Law, insofar as pertinent, reads:.
'SEC. 13851. Intangibles of nonresident: Conditions.
Intangible personal property is exempt from the tax
imposed by this part if the decedent at the time of his
death was a resident of a Territory or another State of
the United States of a foreign state or country which
then imposed a legacy, succession, or death tax in
respect to intangible personal property of its own
residents, but either:
Taxation Law II | Transfer Taxes| 21
 '(a) Did not impose a legacy, succession, or death tax
of any character in respect to intangible personal
property of residents of this State, or .
'(b) Had in its laws a reciprocal provision under which
intangible personal property of a non-resident was
exempt from legacy, succession, or death taxes of
every character if the Territory or other State of the
United States or foreign state or country in which the
nonresident resided allows a similar exemption in
respect to intangible personal property of residents of
the Territory or State of the United States or foreign state
or country of residence of the decedent.' (Id.).
"It is clear from both these quoted provisions that the
reciprocity must be total, that is, with respect to transfer
or death taxes of any and every character, in the case
of the Philippine law, and to legacy, succession, or
death tax of any and every character, in the case of
the California law. Therefore, if any of the two states
collects or imposes and does not exempt any transfer,
death, legacy, or succession tax of any character, the
reciprocity does not work. This is the underlying principle
of the reciprocity clauses in both laws."
RULING 2:
Following the above-quoted decision, the judgment of the Court
of Tax Appeals should be reversed insofar as it exempts the state
of Dora Anna Wood from the inheritance tax assessed by the
Collector of Internal Revenue against said estate. The
inheritance tax as found by the Court of Tax Appeals is
P24,041.96, and together with the 5% surcharge and interest
thereon, and the P20 compromise for late payment, amounts to
a total of P29,612.15. There having been a payment of P6,249.26,
the amount due on September 23, 1956 is hereby fixed at
P23,362.79.
In her appeal petitioner McGrath claims that since the Collector
of Internal Revenue accepted a check tendered by her in the
amount of P6,901.46, "in full settlement of all death taxes due
and payable," the Collector of Internal Revenue, after
accepting said payment, can no longer collect the alleged
deficiency taxes because the acceptance by the Collector of
petitioner's tender of the above amount on February 2, 1955,
constitutes a compromise on the obligation of the estate of the
deceased Dora Anna Wood, which compromise extinguished
petitioner's obligation to pay additional death taxes.
We find no merit in this contention. It is true that the check for
P6,901.46 forwarded to the Collector of Internal Revenue on
January 22, 1954, and which was received by him on February 2,
1954, was offered by counsel for the petitioner McGrath "in full
settlement of estate tax due the above estate." The letter of
acceptance of the amount made by the Collector of Internal
Revenue on February 2, 1954 is to the effect that the amount
should be accounted for as part payment of the estate tax due.
There was, therefore, no agreement between the taxpayer and
the Collector of Internal Revenue that the amount offered was
to be accepted to compromise a tax liability. Taxes are fixed by
law and are not subject to contract between the taxpayer and
the tax officer, except when there is an actual compromise,
which in the case at bar does not exist. The acceptance of any
amount by employees or officials, which does not constitute a
full payment of the amount fixed by law, is no ground or reason
for the claim for exemption by the taxpayer from liability for the
remaining amount due under the law. Taxes are not subject to
agreements between the taxpayer and the tax officer, and if
any such agreements are made, they cannot serve to defeat or
discharge the liability that the law fixes as the full amount of the
tax. Furthermore, any error made by a tax official in the
assessment or computation of taxes does not have the effect of
relieving the taxpayer from the full amount of liability as fixed by
law. Errors of tax officers or officials of the Government do not
bind the Government or prejudice its right to the taxes or dues
collectible by it from its citizens. (Canlubang Sugar Estate v.
Standard Alcohol Co. [Phil.], Inc., G.R. No. L-10887, April 16, 1958;
Philippine American Drug Co. v. Collector of Internal Revenue, et
al., G.R. No. L-13032, August 31, 1959; Teodore Lewin v. Emilio
Galang, G.R. No. L-15253, Oct. 31, 1960.).
In short, we find that the claim of release of the taxpayer
because of the acceptance of an amount offered by the
taxpayer, even if the taxpayer made the offer in full payment of
the tax liability, which payment was not in pursuance of
compromise under Section 309 of the National Internal Revenue
Code, is without any merit and the same is hereby overruled.
It is next claimed that the failure of the Collector of Internal
Revenue to make a revised assessment pursuant to Section 96
and 97 of the National Internal Revenue Code relieves the
administratrix from paying any deficiency in the inheritance
taxes. We also find no merit in this contention. Section 97 of the
National Internal Revenue Code, upon which the claim is
founded, refers to the personal liability of an administratrix from
any deficiency tax, not the liability of the estate under
administration. Granting that the administratrix may not be
personally liable, it does not follow therefrom that the estate
under administration would also be free from liability.
In the last assignment of error, counsel for petitioner McGrath
claims that the estate is exempt from the payment of any
deficiency tax because of the failure of the Collector to make
the assessment of the deficiency death taxes and to demand
their payment, in accordance with Section 94 of the National
Internal Revenue Code. Section 94 of the National Internal
Revenue Code applies to a case where there is no return filed or
where one is filed but is false or fraudulent. In the case at bar
there was a return and the same was not false or fraudulent.
Hence the assessment indicated in Section 94 of the National
Internal Revenue Code is not required. In any case, the
assessment made in the letters of the respondent Collector,
dated January 10, 1956 and March 9, 1956, are sufficiently clear
and specific, and are a valid assessment of the taxes on the
estate upon the facts and figures given by the counsel for
petitioner McGrath. This assignment of error must also be
dismissed for lack of merit.
INTESTATE ESTATE OF THE DECEASED CLODUALDO VITUG,
DONATA MONTEMAYOR, administratrix-appellant,
vs.
HEIRS OF EDUARDO D. GUTIERREZ, heirs-appellees.
G.R. No. L-16959 January 30, 1962
EN BANC (Labrador, J)
A surety on the official bond of an administrator or
executor, where there is no statute or stipulation in the bond to
the contrary, obligates himself only to account for losses
occasioned by the failure of the fiduciary to use due diligence in
pursuing and collecting claims owing to the estate, and to make
proper application of the assets that come into his hands. State
ex rel. Farmer v. Citizens' Trust & G. Co. & ALR 79, W Va. 729, 100
SE 685." .
It has been held that surety on an administration bond
is bound only for faithful administration of the estate, and not for
the return of money which the administrator in good faith spent
and which he is unable to repay." (34 CJS 1186).
FACTS:
Herein administratrix-appellant, Donata Montemayor was
appointed administratrix of the estate of her late husband,
Clodualdo Vitug, and before she assumed office as
administratrix she filed a bond the terms of which were as
follows: .
(a) To make and return to the Court within three months, a true
and complete inventory of all goods, chattels, rights, credits and
estate of the deceased which shall come to his possession or
knowledge or to the possession of any other person for him; .
(b) To administer according to these rules, and, if an executor,
according to the will of the testator, all goods, chattels, rights,
credits, and estate which shall at any time come to his
possession or to the possession of any other firm for him, and from
the proceeds to pay and discharge all debts, legacies, and
charges on the same, or such dividends thereon as shall be
decreed by the court; .
Taxation Law II | Transfer Taxes| 22
(c) To render a true and just account of his administration to the
court within one year, and at any other time when required by
the court; .
(d) To perform all orders of the court by him to be performed."
(pp. 42-43, R.A.; pp. 4-5, brief for administratrix-appellant).
Atty. Eduardo D. Gutierrez served as counsel of the administratrix
of the estate for the period from June, 1936 to December, 1953.
Before the employment of said Atty. Gutierrez, a project of
partition had already been approved by the court as early as
August 23, 1933, wherein the administratrix renounced her rights
to the conjugal properties in favor of her children and the
children of the deceased by a previous marriage, and, in return
for which, the heirs or the children, renounced in favor of the
widow the private properties of her husband. A house valued at
P16,500.00 and another at P235.00, with accessories valued at
P2,000.00 in addition to a Fordson tractor, were not partitioned
and were left in the hands of the administratrix for future
partition. It so happened, however, that the personal properties
were lost, destroyed or looted during World War II. Three cases
filed against the administratrix and the heirs for the recovery of
alleged share or participation in the real properties already
partitioned, and these gave occasion to the employment of the
services of Atty. Gutierrez by the administratrix.
When the claim for attorney's fees was brought, the bondsmen
for the administratrix had died. The Court of First Instance
declared that no claim for attorney's fees could be allowed, but
on appeal to the Court of Appeals (C.A.-G.R. No. 19246-R), this
court declared that the administratrix is liable to pay P9,600.00
attorney's fees. It is in execution of this judgment that this sum
was ordered by the court below to be paid by the administratrix,
personally, with right to reimbursement from the heirs of the
deceased bondsmen.
That services were rendered by the deceased Atty. Eduardo D.
Gutierrez is not questioned. Neither is it denied that services were
rendered on behalf of the estate under administration. Nor is
there any finding or claim that the administratrix was guilty of
any malfeasance, mismanagement or violation of her duties as
administratrix; so it is claimed on this appeal that as there exist no
more funds in her possession belonging to the estate, the said
attorney's fees should be apportioned among the heirs who
have already received their shares of the estate of the
deceased Clodualdo Vitug..
ISSUE:
Whether or not the administratrix can be held
personally responsible.
RULING:
No, the administratix cannot be held personally liable. The
expenses of administration incurred by an administratrix have to
be borne out of the properties under administration, or out of the
income derived therefrom. The administratrix can be held
personally responsible only for any malfeasance,
maladministration or violation of any of her duties as
administratrix.
The undertaking of administrators and their bondsmen is faithfully
to administer the estate and cause to be made just and true
accounts, and to make due and proper settlements thereof,
from time to time, according to law or the lawful order,
sentence, or decree of any court having jurisdiction of the
parties and subject matter. Harper v. Betts, 60 ALR 484, 177 Ark
977, 8 SW 2d 464; (Permanent A. L. R. Digest, Vol. 6, p. 51.)
Under the usual tenor of an administration bond, the principal
and his sureties are only bound to pay creditors, legatees, or
heirs, according to assets which come to hand and the
resources which arise in the course of an honest, prudent, and
well advised administration. (34 CJS 1165).
Such being the case, it is unfair that she should bear personally
the fees of counsel for services rendered to her as administratrix
in the course of the administration. The Rules provide that an
estate left by a deceased may be partitioned even before the
termination of the administration proceedings, like in this case,
and the heirs receiving shares should be responsible for the
expenses proportionately.
Sec. 5. — If such contingent claim becomes absolute and is
presented to the court, or to the executor or administrator, within
two years from the time limited for other creditors to present their
claims, it may be allowed by the court if not disputed by the
executor or administrator, and, if disputed, it may be proved and
allowed or disallowed by the court as the facts may warrant. If
the contingent claim is allowed, the creditor shall receive
payment to the same extent as the other creditors if the estate
retained by the executor or administrator is sufficient. But if the
claim is not so presented, after having become absolute, within
said two years, and allowed, the assets retained in the hands of
the executor or administrator, not exhausted in the payment of
claims, shall be distributed by the order of the court to the
persons entitled to the same; but the assets so distributed may
still be applied to the payment of the claim when established,
and the creditor may maintain an action against the distributees
to recover his debt, and such distributees and their estates shall
be liable for the debt in proportion to the estate they have
respectively received from the property of the deceased." .
Sec. 6. — Where devisees, legatees, or heirs have entered into
possession of portions of the estate before the debts and
expenses have been settled and paid, and have become liable
to contribute for the payment of such debts and expenses, the
court having jurisdiction of the estate may, by order for the
purpose, after hearing, settle the amount of their several
liabilities, and order how much and in what manner each person
shall contribute, and may issue execution if circumstances
require." (Rule 89, Secs. 5 and 6).
In accordance with these provisions, the administratrix in the
case at bar should not be required to pay personally the
counsel's attorney's fees. Neither should her bondsmen on her
bond be responsible as there is nothing in her acts as would
constitute a violation of the guaranty assumed by them in their
bond.
A surety on the official bond of an administrator or executor,
where there is no statute or stipulation in the bond to the
contrary, obligates himself only to account for losses occasioned
by the failure of the fiduciary to use due diligence in pursuing
and collecting claims owing to the estate, and to make proper
application of the assets that come into his hands. State ex rel.
Farmer v. Citizens' Trust & G. Co. & ALR 79, W Va. 729, 100 SE 685."
It has been held that surety on an administration bond is bound
only for faithful administration of the estate, and not for the
return of money which the administrator in good faith spent and
which he is unable to repay." (34 CJS 1186).
MISAEL P. VERA, as Commissioner of Internal Revenue, and JAIME
ARANETA, as Regional Director, Revenue Region No. 14, Bureau
of Internal Revenue, petitioners,
vs.
HON. JOSE F. FERNANDEZ, Judge of the Court of First Instance of
Negros Occidental, Branch V, and FRANCIS A. TONGOY,
Administrator of the Estate of the late LUIS D.
TONGOY respondents.
G.R. No. L-31364 March 30, 1979
FIRST DIVISION (De Castro, J)
The reason for the more liberal treatment of claims for
taxes against a decedent's estate in the form of exception from
the application of the statute of non-claims, is not hard to find.
Taxes are the lifeblood of the Government and their prompt and
certain availability are imperious need. (Commissioner of Internal
Revenue vs. Pineda, G. R. No. L-22734, September 15, 1967, 21
SCRA 105). Upon taxation depends the Government ability to
serve the people for whose benefit taxes are collected. To
safeguard such interest, neglect or omission of government
officials entrusted with the collection of taxes should not be
allowed to bring harm or detriment to the people, in the same
manner as private persons may be made to suffer individually on
account of his own negligence, the presumption being that they
take good care of their personal affairs. This should not hold true
Taxation Law II | Transfer Taxes| 23
to government officials with respect to matters not of their own
personal concern. This is the philosophy behind the government's
exception, as a general rule, from the operation of the principle
of estoppel. As already shown, taxes may be collected even
after the distribution of the estate of the decedent among his
heirs.
FACTS:
The Motion for allowance of claim and for payment of taxes
dated May 28, 1969 was filed on June 3, 1969 in the
abovementioned special proceedings entitled: Intestate Estate
of Luis D. Tongoy. The claim represents the indebtedness to the
Government of the late Luis D. Tongoy for deficiency income
taxes in the total sum of P3,254.80 covered by Assessment
Notices Nos. 11-50-29-1-11061-21-63 and 11-50-291-1 10875-64, to
which motion was attached Proof of Claim (Annex B, Petition,
pp. 21-22, Rollo). The Administrator opposed the motion solely on
the ground that the claim was barred under Section 5, Rule 86 of
the Rules of Court. Finding the opposition well-founded, the
respondent Judge Fernandez, dismissed the motion for
allowance of claim filed by herein petitioner, Regional Director
of the Bureau of Internal Revenue, in an order dated July 29,
1969. On September 18, 1969, a motion for reconsideration was
filed, of the order of July 29, 1969, but was denied in an Order
dated October 7, 1969.
ISSUE:
Whether or not the statute of non-claims Section 5, Rule 86 of the
New Rule of Court, bars claim of the government for unpaid
taxes, still within the period of limitation prescribed in Section 331
and 332 of the National Internal Revenue Code.
RULING:
No, the statute of non-claims does not bar the claim of
the government for unpaid taxes. Section 5, Rule 86, as invoked
by the respondent Administrator in hid Oppositions to the Motion
for Allowance of Claim, etc. of the petitioners reads as follows:
All claims for money against the decedent, arising from
contracts, express or implied, whether the same be due, not
due, or contingent, all claims for funeral expenses and expenses
for the last sickness of the decedent, and judgment for money
against the decedent, must be filed within the time limited in
they notice; otherwise they are barred forever, except that they
may be set forth as counter claims in any action that the
executor or administrator may bring against the claimants.
Where the executor or administrator commence an action, or
prosecutes an action already commenced by the deceased in
his lifetime, the debtor may set forth may answer the claims he
has against the decedents, instead of presenting them
independently to the court has herein provided, and mutual
claims may be set off against each other in such action; and in
final judgment is rendered in favored of the decedent, the
amount to determined shall be considered the true balance
against the estate, as though the claim has been presented
directly before the court in the administration proceedings.
Claims not yet due, or contingent may be approved at their
present value.
A perusal of the aforequoted provisions shows that it makes no
mention of claims for monetary obligation of the decedent
created by law, such as taxes which is entirely of different
character from the claims expressly enumerated therein, such
as: "all claims for money against the decedent arising from
contract, express or implied, whether the same be due, not due
or contingent, all claim for funeral expenses and expenses for
the last sickness of the decedent and judgment for money
against the decedent." Under the familiar rule of statutory
construction of expressio unius est exclusio alterius, the mention
of one thing implies the exclusion of another thing not
mentioned. Thus, if a statute enumerates the things upon which it
is to operate, everything else must necessarily, and by
implication be excluded from its operation and effect
(Crawford, Statutory Construction, pp. 334-335).
The reason for the more liberal treatment of claims for taxes
against a decedent's estate in the form of exception from the
application of the statute of non-claims, is not hard to find. Taxes
are the lifeblood of the Government and their prompt and
certain availability are imperious need. (Commissioner of Internal
Revenue vs. Pineda, G. R. No. L-22734, September 15, 1967, 21
SCRA 105). Upon taxation depends the Government ability to
serve the people for whose benefit taxes are collected. To
safeguard such interest, neglect or omission of government
officials entrusted with the collection of taxes should not be
allowed to bring harm or detriment to the people, in the same
manner as private persons may be made to suffer individually on
account of his own negligence, the presumption being that they
take good care of their personal affairs. This should not hold true
to government officials with respect to matters not of their own
personal concern. This is the philosophy behind the government's
exception, as a general rule, from the operation of the principle
of estoppel. As already shown, taxes may be collected even
after the distribution of the estate of the decedent among his
heirs.
Furthermore, as held in Commissioner of Internal Revenue vs.
Pineda, supra, citing the last paragraph of Section 315 of the Tax
Code payment of income tax shall be a lien in favor of the
Government of the Philippines from the time the assessment was
made by the Commissioner of Internal Revenue until paid with
interests, penalties, etc. By virtue of such lien, this court held that
the property of the estate already in the hands of an heir or
transferee may be subject to the payment of the tax due the
estate. A fortiori before the inheritance has passed to the heirs,
the unpaid taxes due the decedent may be collected, even
without its having been presented under Section 2 of Rule 86 of
the Rules of Court. It may truly be said that until the property of
the estate of the decedent has vested in the heirs, the
decedent, represented by his estate, continues as if he were still
alive, subject to the payment of such taxes as would be
collectible from the estate even after his death. Thus in the case
above cited, the income taxes sought to be collected were due
from the estate, for the three years 1946, 1947 and 1948 following
his death in May, 1945.
Even assuming arguendo that claims for taxes have to be filed
within the time prescribed in Section 2, Rule 86 of the Rules of
Court, the claim in question may be filed even after the
expiration of the time originally fixed therein, as may be gleaned
from the italicized portion of the Rule herein cited which reads:
Section 2. Time within which claims shall be filed. - In the notice
provided in the preceding section, the court shall state the time
for the filing of claims against the estate, which shall not be more
than twelve (12) nor less than six (6) months after the date of the
first publication of the notice. However, at any time before an
order of distribution is entered, on application of a creditor who
has failed to file his claim within the time previously limited the
court may, for cause shown and on such terms as are equitable,
allow such claim to be flied within a time not exceeding one (1)
month. (Emphasis supplied)
In the instant case, petitioners filed an application (Motion for
Allowance of Claim and for an Order of Payment of Taxes)
which, though filed after the expiration of the time previously
limited but before an order of the distribution is entered, should
have been granted by the respondent court, in the absence of
any valid ground, as none was shown, justifying denial of the
motion, specially considering that it was for allowance Of claim
for taxes due from the estate, which in effect represents a claim
of the people at large, the only reason given for the denial that
the claim was filed out of the previously limited period, sustaining
thereby private respondents' contention, erroneously as has
been demonstrated.
PINEDA, ET AL. vs. COURT OF FIRST INSTANCE OF TAYABAS and
COLLECTOR OF INTERNAL REVENUE
G.R. No. L-30921, February 16, 1929
EN BANC
The law imposes on the administrator of a deceased
person the duty to pay taxes assessed against the property of
Taxation Law II | Transfer Taxes| 24
the deceased; and as is well known, in case of insolvency, such
taxes constitute a preferential claim in the distribution of assets
over ordinary debts, under section 735 of the Code of Civil
Procedure.
FACTS:
Before his death, the decedent, Felix Villadiego, had submitted
to the Collector of Internal Revenue the returns corresponding to
his income tax for the years 1925 and 1926;
He had also, before his death, paid the taxes which the
Collector of Internal Revenue had estimated to be due upon
said returns in 1925 and 1926 .
After the death of the said Felix Villadiego on May 7, 1927,
intestate proceedings were duly opened in the matter of his
estate, and the petitioners herein were appointed as his
administratrixes.
While said proceedings were pending, the Collector of Internal
Revenue made a revision of the assessment of the income tax
due from the deceased for the years 1925 and 1926, with the
result that he found that the tax for said years was
underassessed to the extent of P111.30 for the year 1925 and
P128.96 for the year 19326, making a total for the two years of
P240.26.
In view of this fact the provincial fiscal of Tayabas, on behalf of
the Government, filed a motion before the respondent judge in
the intestate proceedings aforesaid, showing that the deceased
Felix Villadiego was indebted to the Government of the
Philippine Islands, upon the account above indicated, to the
extent of P240.26, and asking that, in the adjudication to be
made concerning the property of the deceased in the aforesaid
proceedings, this additional tax should be declared to constitute
a preferential charge in favor of the Government.
Accompanying this motion was Exhibit A, showing to alleged
true status of the tax of the deceased for the years stated, as
reliquidated by the Collector.
On December 8th, thereafter, the respondent judge made the
order which is the subject of complaint in this petition,ordering
the administratrixes to pay the tax as stated in the first, and
declaring that, in case of their failure so to do, the claim should
constitute a preferred charge in favor of the Government.
ISSUES:
1. Whether of not it was proper for the Collector of Internal
Revenue to correct and revise the tax assessment even after the
death of the taxpayer
RULING:
Yes. It was proper. if the original assessment was incorrect, the
Government was not concluded thereby, and it was clearly
within the power of the Collector to reassess and collect any
additional tax due upon the returns for said years, even after the
death of the taxpayer. The Government is never estopped by
mistake or error on the part of its agents. It follows that, in so far
as this record shows, the petitioners have not made it appear
that the additional tax claimed by the Collector is not in fact
due and collectible. The assessment of the tax by the Collector
creates, it must be rendered, a charge that is at least prima
facie valid.
2. Whether or not the court had jurisdiction to order the payment
of the claim in question without the presentation of the same for
allowance in usual course to the committee on claims
RULING:
Yes. The court had jurisdiction. The act of the court in directing
the petitioners to pay this tax does not have the effect of
depriving the petitioners of the remedy, open to every taxpayer,
of paying the tax under the protest and bringing an action to
recover the money; and assuming that leave of the court might
properly be required for the institution of such action, it is to be
assumed that such leave would be granted if the petitioners
should be able to show to the court any plausible ground for
concluding that the tax had been improperly collected.
THE GOVERNMENT OF THE PHILIPPINE ISLANDS vs. JOSE MA.
PAMINTUAN, ET AL.
G.R. No. L-33139, October 11, 1930
EN BANC
Claims for income taxes need not be filed with the
committee on claims and appraisals appointed in the course of
testate proceedings and may be collected even after the
distribution of the decedent's estate among his heirs, who shall
be liable therefor in proportion to their share in the inheritance.
FACTS:
On February 27, 1920, Florentino Pamintuan, represented by J. V.
Ramirez or his attorney-in-fact charged with the administration of
his property, filed income-tax return for the year 1919, paying the
amount of P 672.99 on the basis of said return, and the additional
sum of P151.01 as a result of a subsequent assessment received
from the Collector of Internal Revenue.
On April 24, 1925, Florentino Pamintuan died in Washington, D.
C., U. S. A., leaving the defendants herein as his heirs.
On April 24, 1925, intestate proceedings were instituted in the
Court of First Instance of Manila in civil case No. 27948, intestate
of the late Florentino Pamintuan.
On June 12, 1926, Jose V. Ramirez, the duly appointed judicial
administrator of the estate of the deceased Florentino
Pamintuan presented a proposed partition of the decedent's
estate which proposed partition was approved by the court on
July 6,1926, the court ordering the delivery to the heirs, the
defendants herein, of their respective shares of the inheritance
after paying the corresponding inheritance taxes which were
duly paid on September 2, 1926, in the amount of P25,047.19 as
appears on the official receipt No. 4421361.
During the pendency of the intestate proceedings, the
administrator filed income-tax returns for the estate of the
deceased corresponding to the years 1925 and 1926.
The intestate proceedings in civil case No. 27948 were definitely
closed on October 27, 1926, by order of the court of the same
date.
Subsequent to the distribution of the decedent's estate to the
defendants herein, that is, on February 16, 1927, the plaintiff
discovered the fact that the deceased Florentino Pamintuan has
not paid the amount of four hundred and sixty-two pesos (P462)
as additional income tax and surcharge for the calendar year
1919, on account of the sale made by him on November 14,
1919, of his house and lot located at 922 M. H. del Pilar, Manila,
from which sale he realized a net profit or income of P11,000,
which was not included in his income-tax return filed for said
year 1919.
Taxation Law II | Transfer Taxes| 25
The defendants cannot disprove that the deceased Florentino
Pamintuan made a profit of P11,000 in the sale of the house
because they have destroyed the voluminous records and
evidences regarding the sale in question and other similar
transactions which might show repairs on the house,
commissions, and other expenses tending to reduce the profit
obtained as mentioned above.
The demand for the payment of the income tax referred to
herein was made on February 24, 1927, on the defendants but
they refused and still refuse to pay the same either in full or in
part.
ISSUE:
Whether or not even after the partition of an estate, heirs and
distributees are liable individually for the payment of all lawful
outstanding claims against the estate such as an unpaid income
tax on account of a sale of property by the deceased
RULING:
Heirs are not required to respond with their own property for the
debts of their deceased ancestors. But even after the partition of
an estate, heirs and distributees are liable individually for the
payment of all lawful outstanding claims against the estate in
proportion to the amount or value of the property they have
respectively received from the estate. The hereditary property
consists only of that part which remains after the settlement of all
lawful claims against the estate, for the settlement of which the
entire estate is first liable. The heirs cannot, by any act of their
own or by agreement among themselves, reduce the creditors'
security for the payment of their claims.
Claims for income taxes need not be filed with the committee
on claims and appraisals appointed in the course of testate
proceedings and may be collected even after the distribution of
the decedent's estate among his heirs, who shall be liable
therefor in proportion to their share in the inheritance.
COMMISSIONER OF INTERNAL REVENUE vs. MANUEL B. PINEDA, as
one of the heirs of deceased ATANASIO PINEDA
G.R. No. L-22734, September 15, 1967
EN BANC
Pineda is liable for the assessment as an heir and as a
holder-transferee of property belonging to the estate/taxpayer.
As an heir he is individually answerable for the part of the tax
proportionate to the share he received from the inheritance. 3 His
liability, however, cannot exceed the amount of his share
FACTS:
Atanasio Pineda died, survived by his wife, Felicisima Bagtas,
and 15 children, the eldest of whom is Atty. Manuel Pineda.
Estate proceedings were had in Court so that the estate was
divided among and awarded to the heirs. Atty Pineda's share
amounted to about P2,500.00. After the estate proceedings
were closed, the BIR investigated the income tax liability of the
estate for the years 1945, 1946, 1947 and 1948 and it found that
the corresponding income tax returns were not filed. Thereupon,
the representative of the Collector of Internal Revenue filed said
returns for the estate issued an assessment and charged the full
amount to the inheritance due to Atty. Pineda who argued that
he is liable only to extent of his proportional share in the
inheritance.
ISSUE:
Whether or not the State the can require Manuel B. Pineda to
pay the full amount of the taxes assessed instead of only
individually answerable for the part of the tax proportionate to
the share he received from the inheritance
RULING:
Yes. As a holder of property belonging to the estate, Pineda is
liable for he tax up to the amount of the property in his
possession. The reason is that the Government has a lien on the
P2,500.00 received by him from the estate as his share in the
inheritance, for unpaid income taxes4a for which said estate is
liable, pursuant to the last paragraph of Section 315 of the Tax
Code, which we quote hereunder:
If any person, corporation, partnership, joint-account
(cuenta en participacion), association, or insurance
company liable to pay the income tax, neglects or
refuses to pay the same after demand, the amount
shall be a lien in favor of the Government of the
Philippines from the time when the assessment was
made by the Commissioner of Internal Revenue until
paid with interest, penalties, and costs that may accrue
in addition thereto upon all property and rights to
property belonging to the taxpayer: . . .
By virtue of such lien, the Government has the right to subject the
property in Pineda's possession, i.e., the P2,500.00, to satisfy the
income tax assessment in the sum of P760.28. After such
payment, Pineda will have a right of contribution from his co-
heirs, to achieve an adjustment of the proper share of each heir
in the distributable estate.
All told, the Government has two ways of collecting the tax in
question.
One, by going after all the heirs and collecting from each one of
them the amount of the tax proportionate to the inheritance
received. This remedy was adopted in Government of the
Philippine Islands v. Pamintuan, supra.
In said case, the Government filed an action against all the heirs
for the collection of the tax. This action rests on the concept that
hereditary property consists only of that part which remains after
the settlement of all lawful claims against the estate, for the
settlement of which the entire estate is first liable.
The reason why in case suit is filed against all the heirs the tax
due from the estate is levied proportionately against them is to
achieve thereby two results: first, payment of the tax; and
second, adjustment of the shares of each heir in the distributed
estate as lessened by the tax.
Another remedy, pursuant to the lien created by Section 315 of
the Tax Code upon all property and rights to property belonging
to the taxpayer for unpaid income tax, is by subjecting said
property of the estate which is in the hands of an heir or
transferee to the payment of the tax due, the estate. This second
remedy is the very avenue the Government took in this case to
collect the tax. The Bureau of Internal Revenue should be given,
in instances like the case at bar, the necessary discretion to avail
itself of the most expeditious way to collect the tax as may be
envisioned in the particular provision of the Tax Code above
quoted, because taxes are the lifeblood of government and
their prompt and certain availability is an imperious need.
And as afore-stated in this case the suit seeks to achieve only
one objective: payment of the tax. The adjustment of the
respective shares due to the heirs from the inheritance, as
lessened by the tax, is left to await the suit for contribution by the
heir from whom the Government recovered said tax.
INTERPROVINCIAL AUTOBUS CO., INC. vs. COLLECTOR OF
INTERNAL REVENUE
Taxation Law II | Transfer Taxes| 26
 G.R. No. L-6741, January 31, 1956
As comprehending all methods of transportation, a bill
of lading may be defined as a written acknowledgment of the
receipt of goods and an agreement to transport and to deliver
them at a specified place to a person named or on his order.
Such instruments are sometimes called ‘shipping receipts,’
‘forwarders’ receipts’ and ‘receipts for transportation.’ The
designation, however, is not material, and neither is the form of
the instrument. If it contains an acknowledgment by the carrier
of the receipt of goods for transportation, it is, in legal effect, a
bill of lading.”
FACTS:
Plaintiff is a common carrier engaged in transporting passengers
and freight by means of TPU buses in Misamis Occidental and
Northern Zamboanga.
Sometime in the year 1941 the provincial revenue agent for
Misamis Occidental examined the stubs of the freight receipts
that had been issued by the Plaintiff.
He found that the stubs of the receipts issued during the years
1936 to 1938 were not preserved; those for the years 1939 to 1940
were available. By referring, however, to the conductors’ daily
reports for 1936 to 1938, he was able to ascertain the number of
receipts for those years and these, together with those for 1939
to 1940, gave a total during the 5-year period from 1936 to 1940,
of 194,406 freight receipts issued.
Both the said daily reports of Plaintiff’s conductors and the
available stubs did not state the value of the goods transported
thereunder. Pursuant, however, to sections 121 and 127 of the
Revised Documentary Stamp Tax Regulations of the Department
of Finance promulgated on September 16, 1924, he assumed
that the value of the goods covered by each of the above-
mentioned freight receipts amounted to more than P5, and
assessed a documentary stamp tax of P0.04 on each of the
194,406 receipts.
The tax thus assessed amounted to P7,776.24, which was
collected from the deposit of the Plaintiff in the Misamis
Occidental branch of the Philippine National Bank.
Plaintiff demanded the refund of the amount, and upon refusal
of the Defendant, Plaintiff filed the action. The Court of First
Instance of Misamis Occidental having rendered judgment in
favor of the Plaintiff, the Defendant appealed to the Court of
Appeals. This court reversed the decision appealed from and
absolved the Defendant from the complaint. Hence, an appeal
was filed.
ISSUE:
Whether or not the provision of section 121 of the Revised
Documentary Stamp Tax Regulations, to the effect that if the bill
of lading fails to state the value of the goods shipped, it must be
held that the tax is due, is illegal.
RULING:
(Did the Secretary of Finance infringe or violate any right of the
taxpayer when he directed that the tax is to be collected in all
cases where the bill of lading or receipt does not state that the
shipment is worth P5 or less, or, in the language of the Petitioner-
Appellant, when he (Secretary) created a presumption of liability
to the tax if the receipt fails to state such value?)
It cannot be denied that the regulation is merely a directive to
the tax officers; it does not purport to change or modify the law;
it does not create a liability to the stamp tax when the value of
the goods does not appear on the face of the receipt.
The practical usefulness of the directive becomes evident when
account is taken of the fact that tax officers are in no position to
witness the issuance of receipts and check the value of the
goods for which they are issued. If tax officers were to assess or
collect the tax only when they find that the value of the goods
covered by the receipts is more than five pesos, the assessment
and collection of the tax would be well-nigh impossible, as it is
impossible for tax collectors to determine from the receipts
alone, if they do not contain the value of the goods, whether
the goods receipted for exceed P5, or not.
The regulation impliedly required the statement of the value of
the goods in the receipts; so that the collection of the tax can
be enforced.
This is what the Petitioner Appellant failed to do and he now
claims the unreasonableness of the provision as a basis for his
exemption. We find that the regulation is not only useful,
practical and necessary for the enforcement of the law on the
tax on bills of lading and receipts, but also reasonable in its
provisions.
The regulation above quoted falls within the scope of the
administrative power of the Secretary of Finance, as authorized
in Section 79 (B) of the Revised Administrative Code, because it
is essential to the strict enforcement and proper execution of the
law which it seeks to implement. Said regulations have the force
and effect of law. Another reason for sustaining the validity of
the regulation may be found in the principle of legislative
approval by re-enactment. The regulations were approved on
September 16, 1924. When the National Internal Revenue Code
was approved on February 18, 1939, the same provisions on
stamp tax, bills of lading and receipts were reenacted. There is a
presumption that the Legislature reenacted the law on the tax
with full knowledge of the contents of the regulations then in
force regarding bills of lading and receipts, and that it approved
or confirmed them because they carry out the legislative
purpose.
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs.
CONSTRUCTION RESOURCES OF ASIA, INC., and THE COURT OF
TAX APPEAL, respondents
G.R. No. L-68230, November 25, 1986, SECOND DIVISION,
(GUTIERREZ, JR., J.)
On every original issue, whether on organization,
reorganization, or for any lawful purpose, of certificates of stock
by any association, company, or corporation, there shall be
collected a documentary stamp tax of one peso and ten
centavos on each two hundred pesos, or fractional part thereof,
of the par value of such certificates: Provided, that in the case of
the original issue of stock without par value the amount of the
documentary stamp tax herein prescribed shall be based upon
the actual consideration received by the association, company,
or corporation for the issuance of such stock, and in the case of
stock dividends, on the actual value represented by each share.
(As amended by PD No. 1457).
FACTS:
Construction Resources of Asia, Inc. (CRA), is a
domestic corporation, duly registered with the Overseas
Construction Board as an overseas contractor. In July, 1977, it
entered into a contract with the Malaysian government for the
construction of a road at Sabah. In connection therewith, CRA
incurred foreign loans in the amount of $3,900,000.00 at 9-1/16%
interest per annum. For the period from December 7, 1977 to
June 5, 1978, CRA paid the sum of $179,156.25 to the foreign
creditors as interest on its loan.
In an investigation conducted by CIR’s examiners, it
was ascertained that CRA failed to file withholding tax return
and to withhold 15% tax on interest on foreign loans remitted
abroad and to purchase and affix the corresponding
documentary and science stamps on the stock certificates
Taxation Law II | Transfer Taxes| 27
issued by it. Thus, CIR sent a demand letter to CRA for payment
of withholding tax-at-source and documentary and science
stamps tax liability. CRA stating that as a Sea contractor, it is
exempt from the withholding tax-at-source and that it is not
liable for documentary and science stamps tax liability as that
up to the date of the filing of its petition with this Honorable
Court, no actual transfer of ownership of shares has been
effected. CIR denied CRA's protest.
On appeal, the Court of Tax Appeals affirmed the
liability of CRA of withholding tax-at-source. However, it denied
CRA’s liability from documentary and science stamps taxes on
the ground that "there is absolutely nothing in the records which
will show or indicate that the stock certificates on the paid-in-
capital of P17,880,000.00 were issued or delivered, actually or
constructively, to the stockholders, granting that such paid-in-
capital was originally issued." The petitioner filed a motion for
reconsideration but the same was denied. Hence, this present
petition.
ISSUE: Whether or not the liability to pay documentary and
science stamps taxes attaches upon the issuance of certificates
of stocks or upon delivery thereof, actual or constructive.
RULING:
Liability to pay documentary and science stamps taxes will
already attach upon the issuance of certificates of stocks,
irrespective of delivery thereof.
Section 224 of the National Internal Revenue Code
provides:
Stamp tax on original issue of certificates of stock. —
On every original issue, whether on organization,
reorganization, or for any lawful purpose, of certificates
of stock by any association, company, or corporation,
there shall be collected a documentary stamp tax of
one peso and ten centavos on each two hundred
pesos, or fractional part thereof, of the par value of
such certificates: Provided, that in the case of the
original issue of stock without par value the amount of
the documentary stamp tax herein prescribed shall be
based upon the actual consideration received by the
association, company, or corporation for the issuance
of such stock, and in the case of stock dividends, on
the actual value represented by each share. (As
amended by PD No. 1457).
It is clear from the abovequoted provision that for the
aforestated tax to attach, the certificates of stocks only need to
be issued but not delivered. As to the meaning of the word
“issue”, the certificate as issued by the corporation, irrespective
of whether or not it is in the actual or constructive possession of
the stockholder, is considered issued because it is with value and
hence the documentary stamp tax must be paid as imposed by
Section 212 of the National Internal Revenue Code, as
amended.
In the present case, even in the appeal of CRA, it
merely stated that "due to the difficulty in the formal transfer of
the contributed capital of the stockholders to the CRA, the bulk
of them being in capital equipment and capital assets, it is
unable up to the present, to issue the corresponding certificates
of stocks. Furthermore, CRA only asked for further time to be
allowed to settle the documentary and science stamps taxes as
it is now undertaking the speedy transfer of the ownership of the
assets to its capital base. Thus, the private respondent never
disputed the amount of the documentary and science stamps
taxes assessment but only asked that it be given more time to be
able to pay them after it had formally transferred in its favor the
contributed capital of its stockholders. It has also not denied,
until now, that it received a paid-in-capital in the amount of
P17,880,000.00. WHEREFORE, the petition is hereby GRANTED and
the decision of the respondent Court of Tax Appeals is
ANNULLED and SET ASIDE. The private respondent is ordered to
pay the petitioner the amount of EIGHTY NINE THOUSAND FOUR
HUNDRED PESOS (P89,400.00).
BONIFACIA SY PO, petitioner, vs. HONORABLE COURT OF TAX
APPEALS AND HONORABLE COMMISSIONER OF INTERNAL
REVENUE, respondents.
G.R. No. 81446, August 18, 1988, SECOND DIVISION, (SARMIENTO,
J.)
When a report required by law as a basis for the
assessment of an national internal revenue tax shall not be
forthcoming within the time fixed by law or regulation or when
there is reason to believe that any such report is false,
incomplete, or erroneous, the Commissioner of Internal Revenue
shall assess the proper tax on the best evidence obtainable.
FACTS:
Petitioner is the widow of the late Mr. Po Bien Sing who
died on September 7, 1980. In the taxable years 1964 to 1972,
the deceased Po Bien Sing was the sole proprietor of Silver Cup
Wine Factory (Silver Cup for brevity), Talisay, Cebu. He was
engaged in the business of manufacture and sale of
compounded liquors, using alcohol and other ingredients as raw
materials.
On the basis of a denunciation against Silver Cup
allegedly "for tax evasion amounting to millions of pesos" the
then Secretary of Finance Cesar Virata directed the Finance-BIR-
-NBI team to conduct the corresponding investigation. In this
vein, a letter and a subpoena duces tecum were issued against
Silver Cup requesting production of the accounting records and
other related documents for the examination of the team. Mr. Po
Bien Sing did not produce his books of accounts as requested.
This prompted the team with the assistance of the PC Company,
Cebu City, to enter the factory bodega of Silver Cup and seized
different brands, consisting of 1,555 cases of alcohol products as
well as the Inventory lists. On the basis of the team's report of
investigation, the respondent Commissioner of Internal Revenue
assessed Mr. Po Bien Sing deficiency income tax for 1966 to 1970
in the amount of P7,154,685.16 and for deficiency specific tax for
January 2,1964 to January 19, 1972 in the amount of
P5,595,003.68.
Petitioner protested the deficiency assessments thus a
reinvestigation was conducted. Thereafter CIR recommended
the reiteration of the assessments in view of the taxpayer's
persistent failure to present the books of accounts for
examination. In addition, CIR issued warrants of distraint and
levy. The warrants were admittedly received by petitioner which
she deemed respondent's decision denying her protest on the
subject assessments. Hence, this present appeal.
ISSUE Whether or not the assessments of the Investigating Team
have valid and legal basis.
RULING:
YES, the assessment done by the Investigating Team has valid
and legal basis
The applicable legal provision is Section 16(b) of the
National Internal Revenue Code of 1977 as amended. It reads:
Sec. 16. Power of the Commissioner of Internal
Revenue to make assessments.—
xxx xxx xxx
(b) Failure to submit required returns, statements,
reports and other documents. - When a report required
by law as a basis for the assessment of an national
internal revenue tax shall not be forthcoming within the
Taxation Law II | Transfer Taxes| 28
 time fixed by law or regulation or when there is reason
to believe that any such report is false, incomplete, or
erroneous, the Commissioner of Internal Revenue shall
assess the proper tax on the best evidence obtainable.
In case a person fails to file a required return or other
document at the time prescribed by law, or willfully or otherwise,
files a false or fraudulent return or other documents, the
Commissioner shall make or amend the return from his own
knowledge and from such information as he can obtain through
testimony or otherwise, which shall be prima facie correct and
sufficient for all legal purposes. The law is specific and clear. The
rule on the "best evidence obtainable" applies when a tax report
required by law for the purpose of assessment is not available or
when the tax report is incomplete or fraudulent.
Where the taxpayer is appealing to the tax court on
the ground that the Collector's assessment is erroneous, it is
incumbent upon him to prove the correct and just liability, by a
full and fair disclosure of all pertinent data in his possession.
Otherwise, if the taxpayer confines himself to proving that the tax
assessment is wrong, the tax court proceedings would settle
nothing, and the way would be left open for subsequent
assessments and appeals in interminable succession.
In the instant case, the persistent failure of the late Po
Bien Sing and the herein petitioner to present their books of
accounts for examination for the taxable years involved left the
Commissioner of Internal Revenue no other legal option except
to resort to the power conferred upon him under Section 16 of
the Tax Code. WHEREFORE, the Petition is DENIED. The Decision of
the respondent Court of Tax Appeals is hereby AFFIRMED.
ADELA SANTOS GUTIERREZ, plaintiff-appellant, vs.
JOSE D. VILLEGAS and RIZALINA SANTOS RIVERA, defendants-
appellants.
G.R. No. L-17117 July 31, 1963, EN BANC, (REYES, J.B.L., J.)
Real properties appraised by the Bureau of Internal
Revenue for purposes of fixing the amount of estate and
inheritance taxes to be paid, and their fair market value,
determined by the examiner, after an ocular inspection of the
properties and investigation of the deeds of title and tax
declarations covering the same and thereafter submitted and
approved by his superior officers and by the Superintendent and
Senior Revenue Examiners and later confirmed by the
Commissioner of Internal Revenue, attaches to such appraisal
the presumption of good faith and regularity in human affairs.
FACTS:
The plaintiff and the defendants are the only legal heirs
of the late Irene Santos, who died intestate. Irene Santos owned
real properties situated in the City of Manila, and in the
provinces of Laguna, Rizal, Bulacan, and Pampanga. These real
properties were appraised by the Bureau of Internal Revenue as
determined by the examiner, Bernardo Tamese. Herein
defendant, Jose D. Villegas, is the surviving spouse, while the
plaintiff, Adela Santos Gutierrez, and the other defendant,
Rizalina Santos Rivera, are the nieces of the said decedent.
A few days after the death of Irene Santos, a petition
for the administration of her estate was filed with the Court of
First Instance of Rizal, Pasay City Branch, which was granted and
qualified Jose D. Villegas as the administrator of the estate. On
12 January 1955, Adela Santos Gutierrez signed a four-page
"Kasulatan Ng Bilihan At Salinan", purporting to be a sale of her
share and participation in the estate in favor of Rizalina Santos
Rivera, in consideration of P50,000.00, payable in installments. On
this day also, the plaintiff signed a "Manifestation" purporting to
inform the probate court the plaintiff, is no longer entitled to the
service of any pleading, motion, order, or decision filed or
promulgated in the probate court.
On 27 July 1955, the plaintiff filed the present case to
annul the aforesaid deed of sale on grounds of fraud and
mistake, as there was a gross inadequate consideration for the
sale because the inventory of the estate of Irene Santos did not
include certain properties in Rizal (a one-sixth undivided interest
in an estate in Montalban, Rizal, of 1010.9999 has.), and there
was a gross under valuation of the estate properties. The
defendants answered denying the charges, and
counterclaimed for P200,000.00 moral and exemplary damages
and P50,000.00 attorneys' fees, because of the allegedly
malicious charges and filing of the suit. The trial court rejected
the pretensions of both parties, dismissing the complaint as well
on the counterclaim. Hence, plaintiffs and defendants
appealed to this Court directly.
ISSUE:
Whether or not the lower court erred in relying upon the
appraisal made by the Bureau of Internal Revenue Examiner
Bernardo Tamese for the purpose of determining the true and
fair market value of the estate of Irene Santos and the share of
the plaintiff-appellant in such estate.
RULING:
Lower court is correct in relying upon the appraisal made by BIR.
As to the averred undervaluation, the court note that
the trial court preferred to adopt the appraisal of the examiner
of the Bureau of Internal Revenue, Bernardo Tamese, made in
assessing the inheritance taxes due on the estate of Irene Santos,
and approved by the superior officers of the Bureau, over that of
witness Santiago presented by the appellant. In this respect, the
trial court made the following cogent observations in its decision:
It is a fact that Irene Santos owned real properties
situated in the City of Manila, and in the provinces of
Laguna, Rizal, Bulacan, and Pampanga, some of which
are paraphernal and the rest are conjugal. These real
properties were appraised by the Bureau of Internal
Revenue for purposes of fixing the amount of estate
and inheritance taxes to be paid, and their fair market
value was determined by the examiner, Bernardo
Tamese, after an ocular inspection of the properties
and investigation of the deeds of title and tax
declarations covering the same. His findings were
submitted and approved by his superior officers and by
the Superintendent and Senior Revenue Examiners and
was confirmed by the Commissioner of Internal
Revenue, the latter acting through Deputy
Commissioner Misael P. Vera. It is to be observed that in
his report Mr. Tamese valued the property in Famy,
Laguna, at P2,502.00 although in the inventory of
defendant Villegas each parcel was valued only at
P1.00. It is also to be noted that in said Report the
paraphernal properties of Irene Santos were included,
appraised and considered in determining the total
value of the estate of the old woman. These facts belie
the claim of plaintiff that there was undervaluation of
the properties of the deceased. xxx xxx
We find no reversible error in these conclusions of the
court a quo, which had ample opportunity to estimate the
credibility of the contrasting witnesses and evidence. Our review
of the evidence discloses that the evidence for appellant does
not suffice to overcome the presumption of good faith and
regularity in human affairs. Hence, the claim of gross
inadequacy of the price must be rejected as unproved and,
therefore, the conclusion of the court a quo is hereby affirmed.
DONOR’S TAX
REV. FR. CASIMIRO LLADOC, petitioner, vs. The COMMISSIONER
OF INTERNAL REVENUE and The COURT of TAX APPEALS,
respondents.
G.R. No. L-19201 June 16, 1965, EN BANC, (PAREDES, J.)
Taxation Law II | Transfer Taxes| 29
 A gift tax is not a property tax, but an excise tax
imposed on the transfer of property by way of gift inter vivos, the
imposition of which on property used exclusively for religious
purposes, does not constitute an impairment of the Constitution.
FACTS:
Sometime in 1957, the M.B. Estate, Inc., of Bacolod City,
donated P10,000.00 in cash to Rev. Fr. Crispin Ruiz, then parish
priest of Victorias, Negros Occidental, and predecessor of herein
petitioner, for the construction of a new Catholic Church in the
locality. On March 3, 1958, the donor M.B. Estate, Inc., filed the
donor's gift tax return. The respondent Commissioner of Internal
Revenue issued an assessment for donee's gift tax against the
Catholic Parish of Victorias, Negros Occidental, of which
petitioner was the priest. The tax amounted to P1,370.00
including surcharges, interests of 1% monthly from May 15, 1958
to June 15, 1960, and the compromise for the late filing of the
return.
Petitioner lodged a protest to the assessment and
requested the withdrawal thereof. Such protest and the motion
for reconsideration were denied. Thus, petitioner appealed to
the Court of Tax Appeals claiming, among others, that at the
time of the donation, he was not the parish priest in Victorias;
that there is no legal entity or juridical person known as the
"Catholic Parish Priest of Victorias," and, therefore, he should not
be liable for the donee's gift tax. It was also asserted that the
assessment of the gift tax, even against the Roman Catholic
Church, would not be valid, for such would be a clear violation
of the provisions of the Constitution. After hearing, the CTA
rendered judgment against the petitioner. Hence such judgment
is now before us on appeal.
ISSUE: Whether or not petitioner should be liable for the assessed
donee's gift tax on the P10,000.00 donated for the construction
of the Victoria’s Parish Church.
RULING: YES, petitioner should be liable for the gift tax.
Section 22 (3), Art. VI of the Constitution of the
Philippines, exempts from taxation cemeteries, churches and
parsonages or convents, appurtenant thereto, and all lands,
buildings, and improvements used exclusively for religious
purposes. The exemption is only from the payment of taxes
assessed on such properties enumerated, as property taxes, as
contra distinguished from excise taxes. In the present case, what
the Collector assessed was a donee's gift tax; the assessment
was not on the properties themselves. It did not rest upon
general ownership; it was an excise upon the use made of the
properties, upon the exercise of the privilege of receiving the
properties (Phipps vs. Com. of Int. Rec. 91 F 2d 627).
Manifestly, gift tax is not within the exempting provisions
of the section just mentioned. A gift tax is not a property tax, but
an excise tax imposed on the transfer of property by way of gift
inter vivos, the imposition of which on property used exclusively
for religious purposes, does not constitute an impairment of the
Constitution. As well observed by the learned respondent Court,
the phrase "exempt from taxation," as employed in the
Constitution (supra) should not be interpreted to mean
exemption from all kinds of taxes. And there being no clear,
positive or express grant of such privilege by law, in favor of
petitioner, the exemption herein must be denied.
As to who shall pay the gift tax, On April 30, 1965, in a
resolution, the court ordered the Head of the Diocese to present
whatever legal issues and/or defenses he might wish to raise. In
view hereof and considering that as heretofore stated, the
assessment at bar had been properly made and the imposition
of the tax is not a violation of the constitutional provision
exempting churches, parsonages or convents, etc. (Art VI, sec.
22 [3], Constitution), the Head of the Diocese, to which the
parish Victoria’s pertains herein substitute petitioner, should pay,
as he is presently ordered to pay, the said gift tax, without
special, pronouncement as to costs is liable for the payment
thereof.
ELVIRA T. ARANGOTE VS.SPS. MARTIN MAGLUNOB and LOURDES S.
MAGLUNOB, and ROMEO SALIDO, G.R. No. 178906, February 18,
2009, CHICO-NAZARIO, J.
“Title to immovable property does not pass from the donor to the
donee by virtue of a Deed of Donation until and unless it has
been accepted in a public instrument and the donor duly
notified thereof.”
FACTS:
Elvira T. Arangote, herein petitioner married to Ray Mars
E. Arangote, is the registered owner of the subject property.
Respondents Martin (Martin II) and Romeo are first cousins and
the grandnephews of Esperanza Maglunob-Dailisan (Esperanza),
from whom petitioner acquired the subject property.
Esperanza inherited the subject property from her uncle
VictorinoSorrosa by virtue of a notarized Partition Agreement
executed by the latter’s heirs. Thereafter, Esperanza declared
the subject property in her name for real property tax purposes.
On the basis thereof, tax declaration in her favor was cancelled
and a new one was issued in the name of the petitioner and her
husband. The latter, then, constructed a house on the subject
property.
Respondents averred that they co-owned the subject property
with Esperanza. Esperanza and her siblings, Tomas and
Inocencia, inherited the subject property, in equal shares, from
their father Martin Maglunob (Martin I). When Tomas and
Inocencia passed away, their shares passed on by inheritance to
respondents Martin II and Romeo, respectively. Hence, the
subject property was co-owned by Esperanza, respondent
Martin II (together with his wife Lourdes), and respondent Romeo,
each holding a one-third pro-indivisoshare therein. Thus,
Esperanza could not validly waive her rights and interest over the
entire subject property in favor of the petitioner.
ISSUE: Whether or not there was a valid donation of property by
Esperanza in favor of the petitioner?
RULING:
No, there is no valid donation. Esperanza cannot validly waive
her rights and interest over the entire subject property in favor of
the petitioner. The Court affirms the findings of both the RTC and
the Court of Appeals as regards the origin of the subject
property and the fact that respondents, with their grand aunt
Esperanza, were co-heirs and co-owners of the subject
property.While Esperanza’s Affidavit is, in fact, a Donation
wherein she expresses her real intent to donate her share in the
subject property to petitioner and her husband, the same was
not valid.
As no onerous undertaking is required of petitioner and her
husband under the said Affidavit, the donation is regarded as a
pure donation of an interest in a real property covered by Article
749 of the Civil Code.
Art. 749. In order that the donation of an immovable may be
valid, it must be made in a public document, specifying therein
the property donated and the value of the charges which the
donee must satisfy.
The acceptance may be made in the same deed of donation
or in a separate public document, but it shall not take effect
unless it is done during the lifetime of the donor.If the
acceptance is made in a separate instrument, the donor shall
be notified thereof in an authentic form, and this step shall be
noted in both instruments.
From the aforesaid provision, there are three requisites for the
validity of a simple donation of a real property, to wit: (1) it must
be made in a public instrument; (2) it must be accepted, which
acceptance may be made either in the same Deed of Donation
or in a separate public instrument; and (3) if the acceptance is
made in a separate instrument, the donor must be notified in an
authentic form, and the same must be noted in both instruments.
In the present case, the said Affidavit, which is tantamount to a
Deed of Donation, met the first requisite, as it was notarized; thus,
it became a public instrument. Nevertheless, it failed to meet the
aforesaid second and third requisites. The acceptance of the
said donation was not made by the petitioner and her husband
either in the same Affidavit or in a separate public instrument. As
there was no acceptance made of the said donation, there was
also no notice of the said acceptance given to the donor,
Taxation Law II | Transfer Taxes| 30
Esperanza. Therefore, the Affidavit executed by Esperanza in
favor of petitioner and her husband is null and void.
It is true that the acceptance of a donation may be made at
any time during the lifetime of the donor. And granting
arguendo that such acceptance may still be admitted in
evidence on appeal, there is still need for proof that a formal
notice of such acceptance was received by the donor and
noted in both the Deed of Donation and the separate
instrument embodying the acceptance. At the very least, this
last legal requisite of annotation in both instruments of donation
and acceptance was not fulfilled by the petitioner. For this
reason, even Esperanzas one-third share in the subject property
cannot be adjudicated to the petitioner.
In this case, the subject property waived and quitclaimed by
Esperanza to the petitioner and her husband in the Affidavit was
only covered by a tax declaration in the name of Esperanza.
Settled is the rule that a tax declaration does not prove
ownership. It is merely an indicium of a claim of ownership.
Payment of taxes is not proof of ownership; it is, at best, an
indicium of possession in the concept of ownership. Neither tax
receipts nor a declaration of ownership for taxation purposes is
evidence of ownership or of a right to possess realty when not
supported by other effective proofs.
GAUDENCIO GUERRERO vs. REGIONAL TRIAL COURT OF ILOCOS
NORTE, BR. XVI, JUDGE LUIS B. BELLO, JR., PRESIDING, and PEDRO
G. HERNANDO, G.R. No. 109068, January 10, 1994, BELLOSILLO, J.
“The enumeration of "brothers and sisters" as members of the
same family does not comprehend "sisters-in-law".
FACTS:
This case involves parties who are brothers-in-law,
petitioner GaudencioGuerrero and respondent Hernando, they
being married to half-sisters.Petitioner files a petition as an
accionpubliciana against private respondent. On the basis
thereof, respondent Judge gave petitioner five (5) days "to file
his motion and amended complaint" to allege that the parties
were very close relatives, their respective wives being sisters, and
that the complaint to be maintained should allege that earnest
efforts towards a compromise were exerted but failed.
Guerrero moved to reconsider the Order claiming that since
brothers by affinity are not members of the same family, he was
not required to exert efforts towards a compromise. The same
was denied by respondent Judge denied the motion for
reconsideration holding that "[f]ailure to allege that earnest
efforts towards a compromise is jurisdictional such that for failure
to allege same the court would be deprived of its jurisdiction to
take cognizance of the case." The 5-day period having expired
without Guerrero amending his complaint, respondent Judge
dismissed the case, declaring the dismissal however to be
without prejudice.
ISSUE: Whether or not brothers by affinity are considered
members of the same family, thus, earnest efforts towards a
compromise is required before a suit between them may be
instituted and maintained?
RULING:
No, compromise is not required in the instant case. While the
Family Code provides that “No suit between members of the
same family shall prosper unless it should appear from the
verified complaint or petition that earnest efforts toward a
compromise have been made, but that the same had failed. If it
is shown that no such efforts were in fact made, the case must
be dismissed”, the instant case presents no occasion for the
application this provision. As early as two decades ago, we
already ruled in Gayon v. Gayon6 that the enumeration of
"brothers and sisters" as members of the same family does not
comprehend "sisters-in-law". In that case, then Chief Justice
Concepcion emphasized that "sisters-in-law" (hence, also
"brothers-in-law") are not listed under Art. 217 of the New Civil
Code as members of the same family. Consequently, the court a
quo erred in ruling that petitioner Guerrero, being a brother-in-
law of private respondent Hernando, was required to exert
earnest efforts towards a compromise before filing the present
suit.
TANG HO, WILLIAM LEE, HENRI LEE, SOFIA LEE TEEHANKEE, THOMAS
LEE, ANTHONY LEE, JULIA LEE KAW, CHARLES LEE, VALERIANA LEE
YU, VICTOR LEE, SILVINO LEE, MARY LEE, JOHN LEE, and PETER LEE,
for themselves and as heirs of LI SENG GIAP, deceased, vs. THE
BOARD OF TAX APPEALS and THE COLLECTOR OF INTERNAL
REVENUE, G.R. No. L-5949, November 19, 1955, REYES, J.B.L., J.
“For the parent to donate cash to enable the donee to buy from
him shares of equivalent value is, for all intents and purposes, a
donation of such shares to the purchaser donee.”
“Any transfer or agreement upon conjugal property made by
the husband in contravention of its provisions, shall not prejudice
his wife or her heirs. As the conjugal property belongs equally to
husband and wife, the donation of this property made by the
husband prejudices the wife in so far as it includes a part or the
whole of the wife's half, and is to that extent invalid.”
FACTS:
Petitioners Li SengGiap (who died during the pendency of this
appeal) and his wife Tang Ho and their thirteen children appear
to be the stockholder of two close family corporations named Li
SengGiap& Sons, Inc. and Li SengGiap& Co. Examiners of the
Bureau of Internal Revenue, then detailed to the Allas
Committee of the Congress of the Philippines, made an
examination of the books of the two corporation
aforementioned and found that each of Li SengGiap's 13
children had a total investment therein of approximately
P63,195.00, in shares issued to them by their father Li SengGiap
(who was the manager and controlling stockholder of the two
corporations).
The Collector of Internal Revenue regarded these transfers as
undeclared gifts made in the respective years, and assessed
against Li SengGiap and his children donor's and donee's taxes
in the total amount of P76,995.31, including penalties,
surcharges, interests, and compromise fee due to the delayed
payment of the taxes. The petitioners requested the Collector of
Internal Revenue for a revision of their tax assessments, and
submitted donor's and donee's gift tax returns showing that each
child received by way of gift inter vivos, every year from 1939 to
1950 (except in 1947 and 1948). Appellants admit that these gifts
were not reported; but contend that as the cash donated came
from the conjugal funds, they constituted individual donations by
each of the spouses Li SengGiap and Tang Ho of one half of the
amount received by the donees in each instance. They further
alleged that the children's stockholding in the two family
corporations were purchased by them with savings from the
aforesaid cash donations received from their parents.
Claiming the benefit of gift tax at the rate of P2000 a
year for each donation, plus P10,000 for each gift propter
nuptias made by either parent, and appellants' aggregate tax
liability, according to their returns, would only be P4,599.94 for
the year 1949, and P228,28 for the year 1950, or a total of
P4,838.22. The Collector refused to revise his original assessments;
and the petitioners appealed to the then Board of Tax Appeals
insisting that the entries in the books of the corporation do not
prove donations; that the true amount and date of the donation
were those appearing in their tax returns; and that the donees
merely bought stocks in the corporation out of savings made
from the money received from their parents.
ISSUE 1: Whether or not the stock transfers from Li SengGiap to his
children were donations?
RULING:
Yes, the stock transfers are considered donations supported by
the following circumstances
(1) That the transferor Li SengGiap (now deceased) had in
fact conveyed shares to stock to his 13 children on the dates
and in the amounts shown in the table on page 2 of this
decision; (2) That none of the transferees appeared to possess
Taxation Law II | Transfer Taxes| 31
adequate independent means to buy the shares, so much so
that they claim now to have purchased the shares with the cash
donations made to them from time to time; (3) That the total of
the alleged cash donations to each child is practically identical
to the value of the shares supposedly purchased by each done;
(4) That there is no evidence other than the belated sworn gift
tax returns of the spouses Li SengGiap and Ang Tang Ho, and
their children, appellants herein, to support their contention that
the shares were acquired by purchase. No contracts of sale or
other documents were presented, nor any witnesses introduced;
not even the claimants themselves have testified; (5) The claim
that the shares were acquired by the children by purchase was
first advanced only after the assessment of gift taxes and
penalties due thereon (in the sum of P76,995.31) had been
made, and after the appellants had paid P53,434.50 on
account, and had filed a bond to guarantee the balance; and
(6) That for the parent to donate cash to enable the donee to
buy from him shares of equivalent value is, for all intents and
purposes, a donation of such shares to the purchaser donee.
ISSUE 2: Is a donation of community property by the father alone
equivalent in law to a donation of one-half of its value by the
father and one-half by the mother?
RULE: No. Any transfer or agreement upon conjugal property
made by the husband in contravention of its provisions shall not
prejudice his wife or her heirs. As the conjugal property belongs
equally to husband and wife, the donation of this property made
by the husband prejudices the wife in so far as it includes a part
or the whole of the wife's half, and is to that extent invalid. It is
not enough that the property donated should belong to the
conjugal partnership in order that the donation be considered
and taxed as a donation of both husband and wife, even if the
husband should appear as the sole donor. There is no blinking
the fact that, under the old Civil Code, to be a donation by both
spouses, taxable to both, the wife must expressly join the
husband in making the gift; her participation therein cannot be
implied.
The consequence of the husband's legal power to donate
community property is that, where made by the husband alone,
the donation is taxable as his own exclusive act. Hence, only
one exemption or deduction can be claimed for every such gift,
and not two, as claimed by appellants herein.
MARIO SIOCHI vs. ALFREDO GOZON, WINIFRED GOZON, GIL
TABIJE, INTER-DIMENSIONAL REALTY, INC., and ELVIRA GOZON,
G.R. No. 169900, March 18, 2010
x - - - - - - - - - - - - - - - - - - - - - - -x
INTER-DIMENSIONAL REALTY, INC. vs. MARIO SIOCHI, ELVIRA
GOZON, ALFREDO GOZON, and WINIFRED GOZON, G.R. No.
169977, SECOND DIVISION
“A conjugal property cannot be donated by one spouse without
the consent of the other spouse.”
FACTS:
This case involves a 30,000 sq.m. parcel of land
registered in the name of "Alfredo Gozon (Alfredo), married to
Elvira Gozon (Elvira). Elvira filed with the Cavite City Regional Trial
Court (Cavite RTC) a petition for legal separation against her
husband Alfredo. She then filed a notice of lispendens, which
was then annotated on TCT No. 5357.
While the legal separation case was still pending, Alfredo and
Mario Siochi (Mario) entered into an Agreement to Buy and Sell
(Agreement) involving the property. Among the stipulations in
the Agreement were that Alfredo would secure an Affidavit from
Elvira that the property is Alfredo’s exclusive property and to
annotate the Agreement at the back of title. After paying the ₱5
million earnest money as partial payment of the purchase price,
Mario took possession of the property. The Agreement was
annotated on TCT No. 5357.
RTCCavite rendered decreeing the legal separation between
petitioner and respondent. As regards the property, RTC held
that it is deemed conjugal property.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-105088 in the
name of Winifred, without annotating the Agreement and the
notice of lispendens on TCT No.M-10508.
Alfredo, by virtue of a Special Power of Attorney executed in his
favor by Winifred, sold the property to Inter-Dimensional Realty,
Inc. (IDRI) for ₱18 million. Mario then filed with the Malabon
Regional Trial Court (Malabon RTC) a complaint for Specific
Performance and Damages and Annulment of Donation and
Sale of which the same was granted.
ISSUE: Whether or not donation made by Alfredo to his daughter
of the subject property and the sale of the same to Mario Siochi
and Inter-Dimensional Realty, Inc. requires consent of her spouse
Elvira?
RULING: Yes, consent of the spouse is necessary. 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: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.
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. 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. 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. 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.
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.
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 12520
of the Family Code, a conjugal property cannot be donated by
one spouse without the consent of the other spouse.
MANUEL G. ABELLO, JOSE C. CONCEPCION, TEODORO D.
REGALA, AVELINO V. CRUZ, petitioners, vs. COMMISSIONER OF
INTERNAL REVENUE and COURT OF APPEALS, respondents.
G.R. No. 120721, 23 February 2005, (AZCUNA, J.)
Taxation Law II | Transfer Taxes| 32

Political contributions made before the enactment of Republic
Act No. 7166 on November 25, 1991 are subject to the payment
of gift taxes, since the same were made prior to the exempting
legislation, and no retroactive effect is provided. After the
enactment of the said law, political/electoral contributions,
which are duly reported to the Commission on Elections, are not
anymore subject to the payment of any gift tax.
FACTS:
During the 1987 national elections, petitioners, who are partners
in the (ACCRA) law firm, contributed P882,661.31 each to the
campaign funds of Senator Edgardo Angara, then running for
the Senate. In letters dated April 21, 1988, the Bureau of Internal
Revenue (BIR) assessed each of the petitioners P263,032.66 for
their contributions. On August 2, 1988, petitioners questioned the
assessment through a letter to the BIR. They claimed that political
or electoral contributions are not considered gifts under the
National Internal Revenue Code (NIRC), and that, therefore,
they are not liable for donor's tax. The claim for exemption was
denied by the Commissioner.
ISSUE:
Whether petitioners are liable for donor's tax
RULING:
Yes they are liable during this time but today, political/electoral
contributions, duly reported to the Commission on Elections, are
not subject to the payment of any gift tax.
A gift is generally defined as a voluntary transfer of property by
one to another without any consideration or compensation
therefor (28 C.J. 620; Santos vs. Robledo, 28 Phil. 250). In the
instant case, the contributions are voluntary transfers of property
in the form of money from private petitioners to Sen. Angara,
without any material consideration.
The fact that the contributions were given to be used as
campaign funds of Sen. Angara does not affect the character
of the fund transfers as donation or gift. There was thereby no
retention of control over the disposition of the contributions.
There was simply an indication of the purpose for which they
were to be used. For as long as the contributions were used for
the purpose for which they were intended, Sen. Angara had
complete and absolute power to dispose of the contributions.
He was fully entitled to the economic benefits of the
contributions.
The Bureau of Internal Revenue issued Ruling No. 344 on July 20,
1988, which reads: Political Contributions. – For internal revenue
purposes, political contributions in the Philippines are considered
taxable gift rather than taxable income. This is so, because a
political contribution is indubitably not intended by the giver or
contributor as a return of value or made because of any intent
to repay another what is his due, but bestowed only because of
motives of philanthropy or charity. Accordingly, in the absence
of an express exempting provision of law, political contributions
in the Philippines are subject to the donor's gift tax. Petitioners
attempt to place the barrier of mutual exclusivity between
donative intent and the purpose of political contributions
(influence the results of the election). This Court reiterates that
donative intent is not negated by the presence of other
intentions, motives or purposes which do not contradict donative
intent.
BUT NOW – IT IS NO LONGER TAXABLE. Congress approved
Republic Act No. 7166 on November 25, 1991, providing in
Section 13 thereof that political/electoral contributions, duly
reported to the Commission on Elections, are not subject to the
payment of any gift tax. This all the more shows that the political
contributions herein made are subject to the payment of gift
taxes, since the same were made prior to the exempting
legislation, and Republic Act No. 7166 provides no retroactive
effect on this point.
FINLEY J. GIBBS and DIANE P. GIBBS, petitioners, vs.
COMMISSIONER OF INTERNAL REVENUE and COURT OF TAX
APPEALS, respondents.
G.R. No. L-17406, 29 November 1965, (REGALA, J.)
The right of reimbursement is independent of, and foreign to, the
right of the Government to collect the tax in the manner and
under the conditions prescribed by law.
FACTS:
On February 6, 1965, the respondent Commissioner of Internal
Revenue issued against the petitioners Deficiency Income Tax
Assessment with the demand it should be paid on or before
March 15, 1956. On March 14, 1956, Allison Gibbs, signing as
attorney-in-fact for Finley J. Gibbs, his brother, questioned the
disallowance of the items which gave rise to the deficiency
assessment and requested for a correction of it. It was denied.
Allison Gibbs sent to the Commissioner her check, representing
their payment with the demand for its refund. The demand for
refund was denied by the CIR. Allison Gibbs sent another letter to
the Commissioner stating that its deficiency assessment was
illegal, and the CIR’s letter was not a ruling on her client’s claim
for refund and her assertion for certain claims for tax credits
arising allegedly from some previous overpayment made by the
petitioner to the respondent Commissioner. There was no reply.
Petitioners filed with the CTA a “Petition for Review and Refund
of Income Tax with Motion for Suspension of Collection of
Additional Taxes.” The CTA sustained the objection to its
jurisdiction and upheld the respondent Commissioner’s claim
that the two causes of action asserted by the petitioner were
barred by prescription.
ISSUE:
Whether or not the petitioners’ action is barred by prescription.
RULING:
Yes, it is. Anent the insistence of the petitioners that they never
received a copy of the letter of October 26, 1956 denying their
claim for refund, suffice it to say that while they themselves
personally might not have received a copy of it, Allison J. Gibbs,
as their attorney-in-fact and actually as their counsel, received a
copy of the same. Based on the evidence, there is a lawyer-
client-relationship of the petitioners herein and Allison Gibbs.
Besides, Allison Gibbs claimed he would collect, if his demand for
refund for the petitioners were not effected by the respondent
Commissioner, “attorney’s fees of 25% of the amount involved.”
There can be no question, therefore, that the receipt of the
October 26, 1956 letter-decision of the Commissioner by Allison
Gibbs was receipt of the same by the petitioners, the former
being then the latter’s legal counsel. In the premises, the
respondent court cannot be considered to have erred,
therefore, in computing the 30-day prescriptive period in
question from the date the said letter was received by Allison J.
Gibbs.
Petitioners also maintained that the respondent court erred in
ruling that their claim for tax credit had already expired since it
pertained to tax payments made in 1951 and the protest and
claim for demand therefore was made only in 1958. It is bereft of
merit. A taxpayer claiming for refund must comply with the
requirement of both sections, that is, he must file a claim for
refund with the Collector of Internal Revenue within 2 years from
the date of his payment of the tax, as required by Section 306 of
the National Internal Revenue Code.
THE COLLECTOR OF INTERNAL REVENUE, Petitioner, vs. ANTONIO
CAMPOS RUEDA, Respondent.
G.R. No. L-13250, 42 SCRA 23, 30 May 1962, (PAREDES, J.)
Taxation Law II | Transfer Taxes| 33
Even a tiny principality, hardly an international personality in the
sense, if it falls under the exempt category provided for in Sec
122 of the Tax Code, the Philippines must honor such exemption
as provided for by our tax law with respect to the doctrine of
reciprocity.

FACTS:
Maria de la Estrella Soriano Vda. de Cerdeira, (Maria Cerdeira,
for short), died in Tangier, (North Africa), on January 2, 1955. At
the time of her demise, she was married to a Spanish Citizen and
a permanent resident of Tangier from 1931 up to her death. She
left properties in Tangier as well as in the Philippines. Her
properties in the Philippines are several parcels of land and
many shares of stock, accounts receivable and other intangible
personal properties. The real estate situated in the Philippines
had a market value of P1,109,483.50 and her personal properties
also in the Philippines had a value of P396,308.90. On the real
estate, the respondent Antonio Campos Rueda, as administrator
of her estate, paid the sum of P111,582.00 as estate tax and the
sum of P151,791.48 as inheritance tax, on the transfer of her real
properties in the Philippines, but refused to pay the
corresponding deficiency estate and inheritance taxes due on
the transfer of her intangible personal properties, claiming that
the estate is exempt from the payment of said taxes pursuant to
section 122 of the Tax Code.

ISSUE:
Whether or not the testate estate of Maria Cerdeira is exempt for
the payment of deficiency estate and inheritance taxes in the
sum of P161,874.95

Whether the international zone of Tangier, even if it is not

recognized by the Philippine Government as a state, could avail
of the reciprocal provisions of our Tax Code

RULING:

Yes, the said estate is exempt for the payment of deficiency

estate and inheritance taxes and Tangier could avail of the
reciprocal provisions of our Tax Code. The controlling legal
provision as noted is a proviso in section 122 of the NIRC. It reads
thus:
that no tax shall be collected under this title in respect of
intangible personal properties
1. if the decedent at the time of his death was a resident
of a foreign country which at the time of his death did
not impose a transfer tax or death tax of any character
in respect of intangible personal properties of the
Philippines not residing in that foreign country; or
2. if the laws of the foreign country of which the
decedent was a resident at the time of his death allow
a similar exemption from transfer taxes or death taxes
of every character in respect of intangible personal
properties owned by citizens of the Philippines not
residing in that foreign country.

The Court committed itself to the doctrine that even a tiny

principality, hardly an international personality in the sense, did
fall under the exempt category.
The expression “foreign country,” was used in the last proviso of
section 122 of NIRC refers to a government of that foreign power
which although not an international person in the sense of
international law does not impose transfer or death upon
intangible person properties of our citizens not residing therein
whose law allow a similar exemption from such taxes. It is
therefore not necessary that Tangier should have been
recognized by our government in order to entitle the respondent
to the exemption benefits of the proviso of said section 122 of
our tax code.

Taxation Law II | Transfer Taxes| 34