G.R. No.

172804 January 24, 2011

GONZALO VILLANUEVA, represented by his heirs, Petitioner,

vs.
SPOUSES FROILAN and LEONILA BRANOCO, Respondents.

DECISION

CARPIO, J.:

The Case

This resolves the petition for review1 of the ruling2 of the Court of Appeals dismissing a suit to recover a realty.

The Facts

Petitioner Gonzalo Villanueva (petitioner), here represented by his heirs,3 sued respondents, spouses Froilan and
Leonila Branoco (respondents), in the Regional Trial Court of Naval, Biliran (trial court) to recover a 3,492 square-
meter parcel of land in Amambajag, Culaba, Leyte (Property) and collect damages. Petitioner claimed ownership
over the Property through purchase in July 1971 from Casimiro Vere (Vere), who, in turn, bought the Property from
Alvegia Rodrigo (Rodrigo) in August 1970. Petitioner declared the Property in his name for tax purposes soon after
acquiring it.

In their Answer, respondents similarly claimed ownership over the Property through purchase in July 1983 from
Eufracia Rodriguez (Rodriguez) to whom Rodrigo donated the Property in May 1965. The two-page deed of
donation (Deed), signed at the bottom by the parties and two witnesses, reads in full:

KNOW ALL MEN BY THESE PRESENTS:

That I, ALVEGIA RODRIGO, Filipino, of legal age, widow of the late Juan Arcillas, a resident of Barrio Bool,
municipality of Culaba, subprovince of Biliran, Leyte del Norte, Philippines, hereby depose and say:

That as we live[d] together as husband and wife with Juan Arcillas, we begot children, namely: LUCIO, VICENTA,
SEGUNDINA, and ADELAIDA, all surnamed ARCILLAS, and by reason of poverty which I suffered while our
children were still young; and because my husband Juan Arcillas aware as he was with our destitution separated us
[sic] and left for Cebu; and from then on never cared what happened to his family; and because of that one
EUFRACIA RODRIGUEZ, one of my nieces who also suffered with our poverty, obedient as she was to all the
works in our house, and because of the love and affection which I feel [for] her, I have one parcel of land located at
Sitio Amambajag, Culaba, Leyte bearing Tax Decl. No. 1878 declared in the name of Alvegia Rodrigo, I give
(devise) said land in favor of EUFRACIA RODRIGUEZ, her heirs, successors, and assigns together with all the
improvements existing thereon, which parcel of land is more or less described and bounded as follows:

1. Bounded North by Amambajag River; East, Benito Picao; South, Teofilo Uyvico; and West, by Public land; 2. It
has an area of 3,492 square meters more or less; 3. It is planted to coconuts now bearing fruits; 4. Having an
assessed value of ₱240.00; 5. It is now in the possession of EUFRACIA RODRIGUEZ since May 21, 1962 in the
concept of an owner, but the Deed of Donation or that ownership be vested on her upon my demise.

That I FURTHER DECLARE, and I reiterate that the land above described, I already devise in favor of EUFRACIA
RODRIGUEZ since May 21, 1962, her heirs, assigns, and that if the herein Donee predeceases me, the same land
will not be reverted to the Donor, but will be inherited by the heirs of EUFRACIA RODRIGUEZ;

That I EUFRACIA RODRIGUEZ, hereby accept the land above described from Inay Alvegia Rodrigo and I am much
grateful to her and praying further for a longer life; however, I will give one half (1/2) of the produce of the land to
Apoy Alve during her lifetime.4

Respondents entered the Property in 1983 and paid taxes afterwards.

The Ruling of the Trial Court

The trial court ruled for petitioner, declared him owner of the Property, and ordered respondents to surrender
possession to petitioner, and to pay damages, the value of the Property’s produce since 1982 until petitioner’s
repossession and the costs.5 The trial court rejected respondents’ claim of ownership after treating the Deed as a
donation mortis causa which Rodrigo effectively cancelled by selling the Property to Vere in 1970.6 Thus, by the
time Rodriguez sold the Property to respondents in 1983, she had no title to transfer.

Respondents appealed to the Court of Appeals (CA), imputing error in the trial court’s interpretation of the Deed as
a testamentary disposition instead of an inter vivos donation, passing title to Rodriguez upon its execution.
 Ruling of the Court of Appeals

The CA granted respondents’ appeal and set aside the trial court’s ruling. While conceding that the "language of the
[Deed is] x x x confusing and which could admit of possible different interpretations,"7 the CA found the following
factors pivotal to its reading of the Deed as donation inter vivos: (1) Rodriguez had been in possession of the
Property as owner since 21 May 1962, subject to the delivery of part of the produce to Apoy Alve; (2) the Deed’s
consideration was not Rodrigo’s death but her "love and affection" for Rodriguez, considering the services the latter
rendered; (3) Rodrigo waived dominion over the Property in case Rodriguez predeceases her, implying its inclusion
in Rodriguez’s estate; and (4) Rodriguez accepted the donation in the Deed itself, an act necessary to effectuate
donations inter vivos, not devises.8 Accordingly, the CA upheld the sale between Rodriguez and respondents, and,
conversely found the sale between Rodrigo and petitioner’s predecessor-in-interest, Vere, void for Rodrigo’s lack of
title.

In this petition, petitioner seeks the reinstatement of the trial court’s ruling. Alternatively, petitioner claims ownership
over the Property through acquisitive prescription, having allegedly occupied it for more than 10 years.9

Respondents see no reversible error in the CA’s ruling and pray for its affirmance.

The Issue

The threshold question is whether petitioner’s title over the Property is superior to respondents’. The resolution of
this issue rests, in turn, on whether the contract between the parties’ predecessors-in-interest, Rodrigo and
Rodriguez, was a donation or a devise. If the former, respondents hold superior title, having bought the Property
from Rodriguez. If the latter, petitioner prevails, having obtained title from Rodrigo under a deed of sale the
execution of which impliedly revoked the earlier devise to Rodriguez.

The Ruling of the Court

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

Naked Title Passed from Rodrigo to Rodriguez Under a Perfected Donation

We examine the juridical nature of the Deed – whether it passed title to Rodriguez upon its execution or is effective
only upon Rodrigo’s death – using principles distilled from relevant jurisprudence. Post-mortem dispositions typically
–

(1) Convey no title or ownership to the transferee before the death of the transferor; or, what amounts to the
same thing, that the transferor should retain the ownership (full or naked) and control of the property while
alive;

(2) That before the [donor’s] death, the transfer should be revocable by the transferor at will, ad nutum; but
revocability may be provided for indirectly by means of a reserved power in the donor to dispose of the
properties conveyed;

(3) That the transfer should be void if the transferor should survive the transferee.10

Further –

[4] [T]he specification in a deed of the causes whereby the act may be revoked by the donor indicates that
the donation is inter vivos, rather than a disposition mortis causa[;]

[5] That the designation of the donation as mortis causa, or a provision in the deed to the effect that the
donation is "to take effect at the death of the donor" are not controlling criteria; such statements are to be
construed together with the rest of the instrument, in order to give effect to the real intent of the transferor[;]
[and]

(6) That in case of doubt, the conveyance should be deemed donation inter vivos rather than mortis causa,
in order to avoid uncertainty as to the ownership of the property subject of the deed.11

It is immediately apparent that Rodrigo passed naked title to Rodriguez under a perfected donation inter vivos.
First. Rodrigo stipulated that "if the herein Donee predeceases me, the [Property] will not be reverted to the Donor,
but will be inherited by the heirs of x x x Rodriguez," signaling the irrevocability of the passage of title to Rodriguez’s
estate, waiving Rodrigo’s right to reclaim title. This transfer of title was perfected the moment Rodrigo learned of
Rodriguez’s acceptance of the disposition12 which, being reflected in the Deed, took place on the day of its execution
on 3 May 1965. Rodrigo’s acceptance of the transfer underscores its essence as a gift in presenti, not in futuro, as
only donations inter vivos need acceptance by the recipient.13 Indeed, had Rodrigo wished to retain full title over the
Property, she could have easily stipulated, as the testator did in another case, that "the donor, may transfer, sell, or
encumber to any person or entity the properties here donated x x x"14 or used words to that effect. Instead, Rodrigo
expressly waived title over the Property in case Rodriguez predeceases her.

In a bid to diffuse the non-reversion stipulation’s damning effect on his case, petitioner tries to profit from it,
contending it is a fideicommissary substitution clause.15 Petitioner assumes the fact he is laboring to prove. The
question of the Deed’s juridical nature, whether it is a will or a donation, is the crux of the present controversy. By
treating the clause in question as mandating fideicommissary substitution, a mode of testamentary disposition by
which the first heir instituted is entrusted with the obligation to preserve and to transmit to a second heir the whole or
part of the inheritance,16 petitioner assumes that the Deed is a will. Neither the Deed’s text nor the import of the
contested clause supports petitioner’s theory.

Second. What Rodrigo reserved for herself was only the beneficial title to the Property, evident from Rodriguez’s
undertaking to "give one [half] x x x of the produce of the land to Apoy Alve during her lifetime."17 Thus, the Deed’s
stipulation that "the ownership shall be vested on [Rodriguez] upon my demise," taking into account the non-
reversion clause, could only refer to Rodrigo’s beneficial title. We arrived at the same conclusion in Balaqui v.
Dongso18 where, as here, the donor, while "b[inding] herself to answer to the [donor] and her heirs x x x that none
shall question or disturb [the donee’s] right," also stipulated that the donation "does not pass title to [the donee]
during my lifetime; but when I die, [the donee] shall be the true owner" of the donated parcels of land. In finding the
disposition as a gift inter vivos, the Court reasoned:

Taking the deed x x x as a whole, x x x x it is noted that in the same deed [the donor] guaranteed to [the donee] and
her heirs and successors, the right to said property thus conferred. From the moment [the donor] guaranteed the
right granted by her to [the donee] to the two parcels of land by virtue of the deed of gift, she surrendered such right;
otherwise there would be no need to guarantee said right. Therefore, when [the donor] used the words upon which
the appellants base their contention that the gift in question is a donation mortis causa [that the gift "does not pass
title during my lifetime; but when I die, she shall be the true owner of the two aforementioned parcels"] the donor
meant nothing else than that she reserved of herself the possession and usufruct of said two parcels of
land until her death, at which time the donee would be able to dispose of them freely.19 (Emphasis supplied)

Indeed, if Rodrigo still retained full ownership over the Property, it was unnecessary for her to reserve partial
usufructuary right over it.20

Third. The existence of consideration other than the donor’s death, such as the donor’s love and affection to the
donee and the services the latter rendered, while also true of devises, nevertheless "corroborates the express
irrevocability of x x x [inter vivos] transfers."21 Thus, the CA committed no error in giving weight to Rodrigo’s
statement of "love and affection" for Rodriguez, her niece, as consideration for the gift, to underscore its finding.

It will not do, therefore, for petitioner to cherry-pick stipulations from the Deed tending to serve his cause (e.g. "the
ownership shall be vested on [Rodriguez] upon my demise" and "devise"). Dispositions bearing contradictory
stipulations are interpreted wholistically, to give effect to the donor’s intent. In no less than seven cases featuring
deeds of donations styled as "mortis causa" dispositions, the Court, after going over the deeds, eventually
considered the transfers inter vivos,22 consistent with the principle that "the designation of the donation as mortis
causa, or a provision in the deed to the effect that the donation is ‘to take effect at the death of the donor’ are not
controlling criteria [but] x x x are to be construed together with the rest of the instrument, in order to give effect to the
real intent of the transferor."23 Indeed, doubts on the nature of dispositions are resolved to favor inter vivos transfers
"to avoid uncertainty as to the ownership of the property subject of the deed."24

Nor can petitioner capitalize on Rodrigo’s post-donation transfer of the Property to Vere as proof of her retention of
ownership. If such were the barometer in interpreting deeds of donation, not only will great legal uncertainty be
visited on gratuitous dispositions, this will give license to rogue property owners to set at naught perfected transfers
of titles, which, while founded on liberality, is a valid mode of passing ownership. The interest of settled property
dispositions counsels against licensing such practice.25

Accordingly, having irrevocably transferred naked title over the Property to Rodriguez in 1965, Rodrigo "cannot
afterwards revoke the donation nor dispose of the said property in favor of another."26 Thus, Rodrigo’s post-donation
sale of the Property vested no title to Vere. As Vere’s successor-in-interest, petitioner acquired no better right than
him. On the other hand, respondents bought the Property from Rodriguez, thus acquiring the latter’s title which they
may invoke against all adverse claimants, including petitioner.

Petitioner Acquired No Title Over the Property

Alternatively, petitioner grounds his claim of ownership over the Property through his and Vere’s combined
possession of the Property for more than ten years, counted from Vere’s purchase of the Property from Rodrigo in
1970 until petitioner initiated his suit in the trial court in February 1986.27 Petitioner anchors his contention on an
unfounded legal assumption. The ten year ordinary prescriptive period to acquire title through possession of real
property in the concept of an owner requires uninterrupted possession coupled with just title and good faith.28 There
is just title when the adverse claimant came into possession of the property through one of the modes recognized by
law for the acquisition of ownership or other real rights, but the grantor was not the owner or could not transmit any
right.29 Good faith, on the other hand, consists in the reasonable belief that the person from whom the possessor
received the thing was the owner thereof, and could transmit his ownership.30

Although Vere and petitioner arguably had just title having successively acquired the Property through sale, neither
was a good faith possessor. As Rodrigo herself disclosed in the Deed, Rodriguez already occupied and possessed
the Property "in the concept of an owner" ("como tag-iya"31) since 21 May 1962, nearly three years before Rodrigo’s
donation in 3 May 1965 and seven years before Vere bought the Property from Rodrigo. This admission against
interest binds Rodrigo and all those tracing title to the Property through her, including Vere and petitioner. Indeed,
petitioner’s insistent claim that Rodriguez occupied the Property only in 1982, when she started paying taxes, finds
no basis in the records. In short, when Vere bought the Property from Rodrigo in 1970, Rodriguez was in
possession of the Property, a fact that prevented Vere from being a buyer in good faith.

Lacking good faith possession, petitioner’s only other recourse to maintain his claim of ownership by prescription is
to show open, continuous and adverse possession of the Property for 30 years.32 Undeniably, petitioner is unable to
meet this requirement. 1avvphil

Ancillary Matters Petitioner Raises Irrelevant

Petitioner brings to the Court’s attention facts which, according to him, support his theory that Rodrigo never passed
ownership over the Property to Rodriguez, namely, that Rodriguez registered the Deed and paid taxes on the
Property only in 1982 and Rodriguez obtained from Vere in 1981 a waiver of the latter’s "right of ownership" over the
Property. None of these facts detract from our conclusion that under the text of the Deed and based on the
contemporaneous acts of Rodrigo and Rodriguez, the latter, already in possession of the Property since 1962 as
Rodrigo admitted, obtained naked title over it upon the Deed’s execution in 1965. Neither registration nor tax
payment is required to perfect donations. On the relevance of the waiver agreement, suffice it to say that Vere had
nothing to waive to Rodriguez, having obtained no title from Rodrigo. Irrespective of Rodriguez’s motivation in
obtaining the waiver, that document, legally a scrap of paper, added nothing to the title Rodriguez obtained from
Rodrigo under the Deed.

WHEREFORE, we DENY the petition. We AFFIRM the Decision dated 6 June 2005 and the Resolution dated 5 May
2006 of the Court of Appeals.

G.R. No. L-19201 June 16, 1965

REV. FR. CASIMIRO LLADOC, petitioner,

vs.
The COMMISSIONER OF INTERNAL REVENUE and The COURT of TAX APPEALS, respondents.

Hilado and Hilado for petitioner.

Office of the Solicitor General for respondents.

PAREDES, J.:

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. The total amount was actually spent for the purpose intended.

On March 3, 1958, the donor M.B. Estate, Inc., filed the donor's gift tax return. Under date of April 29, 1960, 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. The protest and the motion for
reconsideration presented to the Commissioner of Internal Revenue were denied. The petitioner appealed to the
Court of Tax Appeals on November 2, 1960. In the petition for review, the Rev. Fr. Casimiro Lladoc claimed, 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, the pertinent portions of which are quoted below:
 ... . Parish priests of the Roman Catholic Church under canon laws are similarly situated as its Archbishops
and Bishops with respect to the properties of the church within their parish. They are the guardians,
superintendents or administrators of these properties, with the right of succession and may sue and be
sued.

xxx xxx xxx

The petitioner impugns the, fairness of the assessment with the argument that he should not be held liable
for gift taxes on donation which he did not receive personally since he was not yet the parish priest of
Victorias in the year 1957 when said donation was given. It is intimated that if someone has to pay at all, it
should be petitioner's predecessor, the Rev. Fr. Crispin Ruiz, who received the donation in behalf of the
Catholic parish of Victorias or the Roman Catholic Church. Following petitioner's line of thinking, we should
be equally unfair to hold that the assessment now in question should have been addressed to, and collected
from, the Rev. Fr. Crispin Ruiz to be paid from income derived from his present parish where ever it may be.
It does not seem right to indirectly burden the present parishioners of Rev. Fr. Ruiz for donee's gift tax on a
donation to which they were not benefited.

xxx xxx xxx

We saw no legal basis then as we see none now, to include within the Constitutional exemption, taxes which
partake of the nature of an excise upon the use made of the properties or upon the exercise of the privilege
of receiving the properties. (Phipps vs. Commissioner of Internal Revenue, 91 F [2d] 627; 1938, 302 U.S.
742.)

It is a cardinal rule in taxation that exemptions from payment thereof are highly disfavored by law, and the
party claiming exemption must justify his claim by a clear, positive, or express grant of such privilege by law.
(Collector vs. Manila Jockey Club, G.R. No. L-8755, March 23, 1956; 53 O.G. 3762.)

The phrase "exempt from taxation" as employed in Section 22(3), Article VI of the Constitution of the
Philippines, should not be interpreted to mean exemption from all kinds of taxes. Statutes exempting
charitable and religious property from taxation should be construed fairly though strictly and in such manner
as to give effect to the main intent of the lawmakers. (Roman Catholic Church vs. Hastrings 5 Phil. 701.)

xxx xxx xxx

WHEREFORE, in view of the foregoing considerations, the decision of the respondent Commissioner of
Internal Revenue appealed from, is hereby affirmed except with regard to the imposition of the compromise
penalty in the amount of P20.00 (Collector of Internal Revenue v. U.S.T., G.R. No. L-11274, Nov. 28,
1958); ..., and the petitioner, the Rev. Fr. Casimiro Lladoc is hereby ordered to pay to the respondent the
amount of P900.00 as donee's gift tax, plus the surcharge of five per centum (5%) as ad valorem penalty
under Section 119 (c) of the Tax Code, and one per centum (1%) monthly interest from May 15, 1958 to the
date of actual payment. The surcharge of 25% provided in Section 120 for failure to file a return may not be
imposed as the failure to file a return was not due to willful neglect.( ... ) No costs.

The above judgment is now before us on appeal, petitioner assigning two (2) errors allegedly committed by the Tax
Court, all of which converge on the singular issue of 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 Victorias Parish Church.

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.

The next issue which readily presents itself, in view of petitioner's thesis, and Our finding that a tax liability exists, is,
who should be called upon to pay the gift tax? Petitioner postulates that he should not be liable, because at the time
of the donation he was not the priest of Victorias. We note the merit of the above claim, and in order to put things in
their proper light, this Court, in its Resolution of March 15, 1965, ordered the parties to show cause why the Head of
the Diocese to which the parish of Victorias pertains, should not be substituted in lieu of petitioner Rev. Fr. Casimiro
Lladoc it appearing that the Head of such Diocese is the real party in interest. The Solicitor General, in
representation of the Commissioner of Internal Revenue, interposed no objection to such a substitution. Counsel for
the petitioner did not also offer objection thereto.

On April 30, 1965, in a resolution, We ordered the Head of the Diocese to present whatever legal issues and/or
defenses he might wish to raise, to which resolution counsel for petitioner, who also appeared as counsel for the
Head of the Diocese, the Roman Catholic Bishop of Bacolod, manifested that it was submitting itself to the
jurisdiction and orders of this Court and that it was presenting, by reference, the brief of petitioner Rev. Fr. Casimiro
Lladoc as its own and for all purposes.

In view here of 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 Victorias Pertains, is liable for the
payment thereof.

The decision appealed from should be, as it is hereby affirmed insofar as tax liability is concerned; it is modified, in
the sense that petitioner herein is not personally liable for the said gift tax, and that the Head of the Diocese, herein
substitute petitioner, should pay, as he is presently ordered to pay, the said gift tax, without special, pronouncement
as to costs.

G.R. No. 111904 October 5, 2000

SPS. AGRIPINO GESTOPA and ISABEL SILARIO GESTOPA, petitioners,

vs.
COURT OF APPEALS and MERCEDES DANLAG y PILAPIL, respondents.

DECISION

QUISUMBING, J.:

This petition for review, under Rule 45 of the Rules of Court, assails the decision of the Court of Appeals dated
1 2

August 31, 1993, in CA-G.R. CV No. 38266, which reversed the judgment of the Regional Trial Court of Cebu City,
3

Branch 5.

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

Spouses Diego and Catalina Danlag were the owners of six parcels of unregistered lands. They executed three
deeds of donation mortis causa, two of which are dated March 4, 1965 and another dated October 13, 1966, in
favor of private respondent Mercedes Danlag-Pilapil. The first deed pertained to parcels 1 & 2 with Tax Declaration
4

Nos. 11345 and 11347, respectively. The second deed pertained to parcel 3, with TD No. 018613. The last deed
pertained to parcel 4 with TD No. 016821. All deeds contained the reservation of the rights of the donors (1) to
amend, cancel or revoke the donation during their lifetime, and (2) to sell, mortgage, or encumber the properties
donated during the donors' lifetime, if deemed necessary.

On January 16, 1973, Diego Danlag, with the consent of his wife, Catalina Danlag, executed a deed of
donation inter vivos covering the aforementioned parcels of land plus two other parcels with TD Nos. 11351 and
5

11343, respectively, again in favor of private respondent Mercedes. This contained two conditions, that (1) the
Danlag spouses shall continue to enjoy the fruits of the land during their lifetime, and that (2) the donee can not sell
or dispose of the land during the lifetime of the said spouses, without their prior consent and approval. Mercedes
caused the transfer of the parcels' tax declaration to her name and paid the taxes on them.

On June 28, 1979 and August 21, 1979, Diego and Catalina Danlag sold parcels 3 and 4 to herein petitioners, Mr.
and Mrs. Agripino Gestopa. On September 29, 1979, the Danlags executed a deed of revocation recovering the six
6

parcels of land subject of the aforecited deed of donation inter vivos.

On March 1, 1983, Mercedes Pilapil (herein private respondent) filed with the RTC a petition against the Gestopas
and the Danlags, for quieting of title over the above parcels of land. She alleged that she was an illegitimate
7

daughter of Diego Danlag; that she lived and rendered incalculable beneficial services to Diego and his mother,
Maura Danlag, when the latter was still alive. In recognition of the services she rendered, Diego executed a Deed of
Donation on March 20, 1973, conveying to her the six (6) parcels of land. She accepted the donation in the same
instrument, openly and publicly exercised rights of ownership over the donated properties, and caused the transfer
of the tax declarations to her name. Through machination, intimidation and undue influence, Diego persuaded the
husband of Mercedes, Eulalio Pilapil, to buy two of the six parcels covered by the deed of donation. Said
donation inter vivos was coupled with conditions and, according to Mercedes, since its perfection, she had complied
with all of them; that she had not been guilty of any act of ingratitude; and that respondent Diego had no legal basis
in revoking the subject donation and then in selling the two parcels of land to the Gestopas.

In their opposition, the Gestopas and the Danlags averred that the deed of donation dated January 16, 1973 was
null and void because it was obtained by Mercedes through machinations and undue influence. Even assuming it
was validly executed, the intention was for the donation to take effect upon the death of the donor. Further, the
donation was void for it left the donor, Diego Danlag, without any property at all.

On December 27, 1991, the trial court rendered its decision, thus:

"WHEREFORE, the foregoing considered, the Court hereby renders judgment in favor of the defendants and
against the plaintiff:

1. Declaring the Donations Mortis Causa and Inter Vivos as revoked, and, therefore, has (sic) no legal effect
and force of law.

2. Declaring Diego Danlag the absolute and exclusive owner of the six (6) parcels of land mentioned in the
Deed of revocation (Exh. P-plaintiff, Exh. 6-defendant Diego Danlag).

3. Declaring the Deeds of Sale executed by Diego Danlag in favor of spouses Agripino Gestopa and Isabel
Gestopa dated June 28, 1979 (Exh. S-plaintiff; Exh. 18-defendant); Deed of Sale dated December 18, 1979
(Exh. T plaintiff; Exh. 9-defendant); Deed of Sale dated September 14, 1979 (Exh. 8); Deed of Sale dated
June 30, 1975 (Exh. U); Deed of Sale dated March 13, 1978 (Exh. X) as valid and enforceable duly
executed in accordance with the formalities required by law.

4. Ordering all tax declaration issued in the name of Mercedes Danlag Y Pilapil covering the parcel of land
donated cancelled and further restoring all the tax declarations previously cancelled, except parcels nos. 1
and 5 described, in the Deed of Donation Inter Vivos (Exh. "1") and Deed of Sale (Exh. "2") executed by
defendant in favor of plaintiff and her husband.

[5.] With respect to the contract of sale of abovestated parcels of land, vendor Diego Danlag and spouse or
their estate have the alternative remedies of demanding the balance of the agreed price with legal interest,
or rescission of the contract of sale.

SO ORDERED." 8

In rendering the above decision, the trial court found that the reservation clause in all the deeds of donation
indicated that Diego Danlag did not make any donation; that the purchase by Mercedes of the two parcels of land
covered by the Deed of Donation Inter Vivos bolstered this conclusion; that Mercedes failed to rebut the allegations
of ingratitude she committed against Diego Danlag; and that Mercedes committed fraud and machination in
preparing all the deeds of donation without explaining to Diego Danlag their contents.

Mercedes appealed to the Court of Appeals and argued that the trial court erred in (1) declaring the donation dated
January 16, 1973 as mortis causa and that the same was already revoked on the ground of ingratitude; (2) finding
that Mercedes purchased from Diego Danlag the two parcels of land already covered by the above donation and
that she was only able to pay three thousand pesos, out of the total amount of twenty thousand pesos; (3) failing to
declare that Mercedes was an acknowledged natural child of Diego Danlag.

On August 31, 1993, the appellate court reversed the trial court. It ruled:

"PREMISES CONSIDERED, the decision appealed from is REVERSED and a new judgment is hereby rendered as
follows:

1. Declaring the deed of donation inter vivos dated January 16, 1973 as not having been revoked and
consequently the same remains in full force and effect;

2. Declaring the Revocation of Donation dated June 4, 1979 to be null and void and therefore of no force
and effect;

3. Declaring Mercedes Danlag Pilapil as the absolute and exclusive owner of the six (6) parcels of land
specified in the above-cited deed of donation inter vivos;

4. Declaring the Deed of Sale executed by Diego Danlag in favor of spouses Agripino and Isabel Gestopa
dated June 28, 1979 (Exhibits S and 18), Deed of Sale dated December 18, 1979 (Exhibits T and 19), Deed
of Sale dated September 14, 1979 (Exhibit 8), Deed of Sale dated June 30, 1975 (Exhibit U), Deed of Sale
dated March 13, 1978 (Exhibit X) as well as the Deed of Sale in favor of Eulalio Danlag dated December 27,
1978 (Exhibit 2) not to have been validly executed;
 5. Declaring the above-mentioned deeds of sale to be null and void and therefore of no force and effect;

6. Ordering spouses Agripino Gestopa and Isabel Silerio Gestopa to reconvey within thirty (30) days from
the finality of the instant judgment to Mercedes Danlag Pilapil the parcels of land above-specified, regarding
which titles have been subsequently fraudulently secured, namely those covered by O.C.T. T-17836 and
O.C.T. No. 17523.

7. Failing to do so, ordering the Branch Clerk of Court of the Regional Trial Court (Branch V) at Cebu City to
effect such reconveyance of the parcels of land covered by O.C.T. T-17836 and 17523.

SO ORDERED." 9

The Court of Appeals held that the reservation by the donor of lifetime usufruct indicated that he transferred to
Mercedes the ownership over the donated properties; that the right to sell belonged to the donee, and the donor's
right referred to that of merely giving consent; that the donor changed his intention by donating inter vivos properties
already donated mortis causa; that the transfer to Mercedes' name of the tax declarations pertaining to the donated
properties implied that the donation was inter vivos; and that Mercedes did not purchase two of the six parcels of
land donated to her.

Hence, this instant petition for review filed by the Gestopa spouses, asserting that:

"THE HONORABLE COURT OF APPEALS, TWELFTH DIVISION, HAS GRAVELY ERRED IN REVERSING THE
DECISION OF THE COURT A QUO." 10

Before us, petitioners allege that the appellate court overlooked the fact that the donor did not only reserve the right
to enjoy the fruits of the properties, but also prohibited the donee from selling or disposing the land without the
consent and approval of the Danlag spouses. This implied that the donor still had control and ownership over the
donated properties. Hence, the donation was post mortem.

Crucial in resolving whether the donation was inter vivos or mortis causa is the determination of whether the donor
intended to transfer the ownership over the properties upon the execution of the deed. 11

In ascertaining the intention of the donor, all of the deed's provisions must be read together. The deed of donation
12

dated January 16, 1973, in favor of Mercedes contained the following:

"That for and in consideration of the love and affection which the Donor inspires in the Donee and as an act of
liberality and generosity, the Donor hereby gives, donates, transfer and conveys by way of donation unto the herein
Donee, her heirs, assigns and successors, the above-described parcels of land;

That it is the condition of this donation that the Donor shall continue to enjoy all the fruits of the land during his
lifetime and that of his spouse and that the donee cannot sell or otherwise, dispose of the lands without the prior
consent and approval by the Donor and her spouse during their lifetime.

xxx

That for the same purpose as hereinbefore stated, the Donor further states that he has reserved for himself
sufficient properties in full ownership or in usufruct enough for his maintenance of a decent livelihood in consonance
with his standing in society.

That the Donee hereby accepts the donation and expresses her thanks and gratitude for the kindness and
generosity of the Donor." 13

Note first that the granting clause shows that Diego donated the properties out of love and affection for the donee.
This is a mark of a donation inter vivos. Second, the reservation of lifetime usufruct indicates that the donor
14

intended to transfer the naked ownership over the properties. As correctly posed by the Court of Appeals, what was
the need for such reservation if the donor and his spouse remained the owners of the properties? Third, the donor
reserved sufficient properties for his maintenance in accordance with his standing in society, indicating that the
donor intended to part with the six parcels of land. Lastly, the donee accepted the donation. In the case
15

of Alejandro vs. Geraldez, 78 SCRA 245 (1977), we said that an acceptance clause is a mark that the donation
is inter vivos. Acceptance is a requirement for donations inter vivos. Donations mortis causa, being in the form of a
will, are not required to be accepted by the donees during the donors' lifetime.

Consequently, the Court of Appeals did not err in concluding that the right to dispose of the properties belonged to
the donee. The donor's right to give consent was merely intended to protect his usufructuary interests. In Alejandro,
we ruled that a limitation on the right to sell during the donors' lifetime implied that ownership had passed to the
donees and donation was already effective during the donors' lifetime.
The attending circumstances in the execution of the subject donation also demonstrated the real intent of the donor
to transfer the ownership over the subject properties upon its execution. Prior to the execution of donation inter
16

vivos, the Danlag spouses already executed three donations mortis causa. As correctly observed by the Court of
Appeals, the Danlag spouses were aware of the difference between the two donations. If they did not intend to
donate inter vivos, they would not again donate the four lots already donated mortis causa. Petitioners' counter
argument that this proposition was erroneous because six years after, the spouses changed their intention with the
deed of revocation, is not only disingenious but also fallacious. Petitioners cannot use the deed of revocation to
show the spouses' intent because its validity is one of the issues in this case.

Petitioners aver that Mercedes' tax declarations in her name can not be a basis in determining the donor's intent.
They claim that it is easy to get tax declarations from the government offices such that tax declarations are not
considered proofs of ownership. However, unless proven otherwise, there is a presumption of regularity in the
performance of official duties. We find that petitioners did not overcome this presumption of regularity in the
17

issuance of the tax declarations. We also note that the Court of Appeals did not refer to the tax declarations as
proofs of ownership but only as evidence of the intent by the donor to transfer ownership.

Petitioners assert that since private respondent purchased two of the six parcels of land from the donor, she herself
did not believe the donation was inter vivos. As aptly noted by the Court of Appeals, however, it was private
respondent's husband who purchased the two parcels of land.

As a rule, a finding of fact by the appellate court, especially when it is supported by evidence on record, is binding
on us. On the alleged purchase by her husband of two parcels, it is reasonable to infer that the purchase was
18

without private respondent's consent. Purchase by her husband would make the properties conjugal to her own
disadvantage. That the purchase is against her self-interest, weighs strongly in her favor and gives credence to her
claim that her husband was manipulated and unduly influenced to make the purchase, in the first place. 1âwphi1

Was the revocation valid? A valid donation, once accepted, becomes irrevocable, except on account of
officiousness, failure by the donee to comply with the charges imposed in the donation, or ingratitude. The donor-
19

spouses did not invoke any of these reasons in the deed of revocation. The deed merely stated:

"WHEREAS, while the said donation was a donation Inter Vivos, our intention thereof is that of Mortis Causa so as
we could be sure that in case of our death, the above-described properties will be inherited and/or succeeded by
Mercedes Danlag de Pilapil; and that said intention is clearly shown in paragraph 3 of said donation to the effect that
the Donee cannot dispose and/or sell the properties donated during our life-time, and that we are the one enjoying
all the fruits thereof."
20

Petitioners cited Mercedes' vehemence in prohibiting the donor to gather coconut trees and her filing of instant
petition for quieting of title. There is nothing on record, however, showing that private respondent prohibited the
donors from gathering coconuts. Even assuming that Mercedes prevented the donor from gathering coconuts, this
could hardly be considered an act covered by Article 765 of the Civil Code. Nor does this Article cover respondent's
21

filing of the petition for quieting of title, where she merely asserted what she believed was her right under the law.

Finally, the records do not show that the donor-spouses instituted any action to revoke the donation in accordance
with Article 769 of the Civil Code. Consequently, the supposed revocation on September 29, 1979, had no legal
22

effect.

WHEREFORE, the instant petition for review is DENIED. The assailed decision of the Court of Appeals dated
August 31, 1993, is AFFIRMED.
G.R. No. 106755 February 1, 2002

APOLINARIA AUSTRIA-MAGAT, petitioner,

vs.
HON. COURT OF APPEALS and FLORENTINO LUMUBOS, DOMINGO COMIA, TEODORA CARAMPOT,
ERNESTO APOLO, SEGUNDA SUMPELO, MAMERTO SUMPELO and RICARDO SUMPELO, respondents.

DECISION

DE LEON, JR., J.:

Before us is a petition for review of the Decision of the Court of Appeals, dated June 30, 1989 reversing the
1 2

Decision, dated August 15, 1986 of the Regional Trial Court (RTC) of Cavite, Branch 17. The Decision of the RTC
3

dismissed Civil Case No. 4426 which is an action for annulment of title, reconveyance and damages.

The facts of the case are as follows:

Basilisa Comerciante is a mother of five (5) children, namely, Rosario Austria, Consolacion Austria, herein petitioner
Apolinaria Austria-Magat, Leonardo, and one of herein respondents, Florentino Lumubos. Leonardo died in a
Japanese concentration camp at Tarlac during World War II.

In 1953, Basilisa bought a parcel of residential land together with the improvement thereon covered and described
in Transfer Certificate of Title No. RT-4036 (T-3268) and known as Lot 1, Block 1, Cavite Beach Subdivision, with an
area of 150 square meters, located in Bagong Pook, San Antonio, Cavite City.

On December 17, 1975, Basilisa executed a document designated as "Kasulatan sa Kaloobpala (Donation)". The
said document which was notarized by Atty. Carlos Viniegra, reads as follows:

KASULATANG SA KALOOBPALA
(DONATION)

TALASTASIN NG LAHAT AT SINUMAN:

Na ako, si BASELISA COMERCIANTE, may sapat na gulang, Filipina, balo, at naninirahan sa blg. 809 L. Javier
Bagong Pook, San Antonio, Lungsod ng Kabite, Filipinas, sa pamamagitan ng kasulatang ito’y

NAGSASALAYSAY

Na alang-alang sa mabuting paglilingkod at pagtingin na iniukol sa akin ng apat kong mga tunay na anak na sila:

ROSARIO AUSTRIA, Filipina, may sapat na gulang, balo, naninirahan sa 809 L. Javier, Bagong Pook, San Antonio,
Lungsod ng Kabite;

CONSOLACION AUSTRIA, Filipina, may sapat na gulang, balo naninirahan sa 809 L. Javier, Bagong Pook, San
Antonio, Lungsod ng Kabite;

APOLINARIA AUSTRIA, Filipina, may sapat na gulang, may asawa, naninirahan sa Pasong Kawayan, Hen. Trias,
Kabite;

FLORENTINO LUMUBOS, Filipino, may sapat na gulang, asawa ni Encarnacion Magsino, at naninirahan din sa 809
L. Javier, Bagong Pook, San Antonio, Lungsod ng Kabite; ay

Kusang loob na ibinibigay ko at ipinagkakaloob ng ganap at hindi na mababawi sa naulit ng apat na anak ko at sa
kanilang mga tagamagmana (sic), ang aking isang lupang residential o tirahan sampu ng aking bahay nahan ng
nakatirik doon na nasa Bagong Pook din, San Antonio, Lungsod ng Kabite, at nakikilala bilang Lote no. 7, Block
no.1, of Subdivision Plan Psd-12247; known as Cavite Beach Subdivision, being a portion of Lot No. 1055, of the
Cadastral survey of Cavite, GLRO Cadastral Rec. no. 9539; may sukat na 150 metros cuadrados, at nakatala sa
pangalan ko sa Titulo Torrens bilang TCT-T-3268 (RT-4036) ng Lungsod ng Kabite;

Na ang Kaloob palang ito ay magkakabisa lamang simula sa araw na ako’y pumanaw sa mundo, at sa ilalim ng
kondision na:

Magbubuhat o babawasin sa halaga ng nasabing lupa at bahay ang anumang magugul o gastos sa aking libing at
nicho at ang anumang matitira ay hahatiin ng APAT na parte, parepareho isang parte sa bawat anak kong nasasabi
sa itaas nito upang maliwanang (sic) at walang makakalamang sinoman sa kanila;
At kaming apat na anak na nakalagda o nakadiit sa kasulatang ito ay TINATANGGAP NAMIN ang kaloob-palang ito
ng aming magulang na si Basilisa Comerciante, at tuloy pinasasalamatan namin siya ng taos sa (sic) puso dahil sa
kagandahan look (sic) niyang ito sa amin.

SA KATUNAYAN, ay nilagdaan o diniitan namin ito sa Nobeleta, Kabite, ngayong ika-17 ng Disyembre taong 1975.

HER MARK HER MARK

BASELISA COMERCIANTE ROSARIO AUSTRIA
Tagakaloobpala

(Sgd.) APOLINARIA AUSTRIA HER MARK

Tagatanggap-pala CONSOLACION AUSTRIA

(Sgd.)FLORENTINO LUMUBOS
Tagatanggap-pala

(Acknowledgment signed by Notary Public C.T. Viniegra is omitted). 4

Basilisa and her said children likewise executed another notarized document denominated as "Kasulatan" which is
attached to the deed of donation. The said document states that:

KASULATAN

TALASTASIN NG MADLA:

Na kaming mga nakalagda o nakadiit sa labak nito – sila Basilisa Comerciante at ang kanyang mga anak na sila:

Rosario Austria, Consolacion Austria, Apolonio Austria, at Florentino Lumubos, pawang may mga sapat na gulang,
na lumagda o dumiit sa kasulatang kaloob pala, na sinangayunan namin sa harap ng Notario Publico, Carlos T.
Viniegra, ay nagpapahayag ng sumusunod:

Na ang titulo numero TCT-T-2260 (RT-4036) ng Lungsod ng Kabite, bahay sa loteng tirahan ng Bagong Pook na
nababanggit sa nasabing kasulatan, ay mananatili sa poder o possession ng Ina, na si Basilisa Comerciante
habang siya ay nabubuhay at

Gayon din ang nasabing Titulo ay hindi mapapasangla o maipagbibili ang lupa habang maybuhay ang nasabing
Basilisa Comerciante.

Sa katunayan ang nagsilagda kaming lahat sa labak nito sa harap ng abogado Carlos T. Viniegra at dalawang
saksi.

Nobeleta, Kabite. Ika-17 ng Disyembre, 1975. 5

On February 6, 1979, Basilisa executed a Deed of Absolute Sale of the subject house and lot in favor of herein
petitioner Apolinaria Austria-Magat for Five Thousand Pesos (₱5,000.00). As the result of the registration of that
sale, Transfer Certificate of Title (TCT for brevity) No. RT-4036 in the name of the donor was cancelled and in lieu
thereof TCT No. T-10434 was issued by the Register of Deeds of Cavite City in favor of petitioner Apolinaria Austria-
Magat on February 8, 1979.

On September 21, 1983, herein respondents Teodora Carampot, Domingo Comia, and Ernesto Apolo (representing
their deceased mother Consolacion Austria), Ricardo, Mamerto and Segunda, all surnamed Sumpelo (representing
their deceased mother Rosario Austria) and Florentino Lumubos filed before the Regional Trial Court of Cavite an
action, docketed as Civil Case No. 4426 against the petitioner for annulment of TCT No. T-10434 and other relevant
documents, and for reconveyance and damages.

On August 15,1986, the trial court dismissed Civil Case No. 4426 per its Decision, the dispositive portion of which
reads:

WHEREFORE, in view of the foregoing, this Court hereby renders judgment for defendant dismissing this case and
ordering plaintiffs to pay the amount of ₱3,000.00 as attorney’s fees and the costs of suit.

SO ORDERED. 6

According to the trial court, the donation is a donation mortis causa pursuant to Article 728 of the New Civil Code
inasmuch as the same expressly provides that it would take effect upon the death of the donor; that the provision
stating that the donor reserved the right to revoke the donation is a feature of a donation mortis causa which must
comply with the formalities of a will; and that inasmuch as the donation did not follow the formalities pertaining to
wills, the same is void and produced no effect whatsoever. Hence, the sale by the donor of the said property was
valid since she remained to be the absolute owner thereof during the time of the said transaction.

On appeal, the decision of the trial court was reversed by the Court of Appeals in its subject decision, the dispositive
portion of which reads, to wit:

WHEREFORE, in view of the foregoing, the appealed decision is hereby SET ASIDE and a new one rendered:

1. declaring null and void the Deed of Sale of Registered Land (Annex B) and Transfer Certificate of Title
No. T-10434 of the Registry of Deeds of Cavite City (Annex E) and ordering the cancellation thereof; and

2. declaring appellants and appellee co-owners of the house and lot in question in accordance with the deed
of donation executed by Basilisa Comerciante on December 17, 1975.

No pronouncement as to costs.

SO ORDERED. 7

The appellate court declared in its decision that:

In the case at bar, the decisive proof that the deed is a donation inter vivos is in the provision that :

Ibinibigay ko at ipinagkakaloob ng ganap at hindi mababawi sa naulit na apat na anak ko at sa kanilang mga
tagapagmana, ang aking lupang residential o tirahan sampu ng aking bahay nakatirik doon xxx. (emphasis
supplied)

This is a clear expression of the irrevocability of the conveyance. The irrevocability of the donation is a characteristic
of a donation inter vivos. By the words "hindi mababawi", the donor expressly renounced the right to freely dispose
of the house and lot in question. The right to dispose of a property is a right essential to full ownership. Hence,
ownership of the house and lot was already with the donees even during the donor’s lifetime. xxx

xxx xxx xxx

In the attached document to the deed of donation, the donor and her children stipulated that:

Gayon din ang nasabing titulo ay hindi mapapasangla o maipagbibili ang lupa habang may buhay ang nasabing
Basilisa Comerciante."

The stipulation is a reiteration of the irrevocability of the dispossession on the part of the donor. On the other hand,
the prohibition to encumber, alienate or sell the property during the lifetime of the donor is a recognition of the
ownership over the house and lot in issue of the donees for only in the concept of an owner can one encumber or
dispose a property. 8

Hence this appeal grounded on the following assignment of errors:

THE RESPONDENT COURT OF APPEALS, WITH DUE RESPECT, IGNORED THE RULES OF
INTERPRETATION OF CONTRACTS WHEN IT CONSIDERED THE DONATION IN QUESTION AS INTER
VIVOS.

II

THE RESPONDENT COURT OF APPEALS, AGAIN WITH DUE RESPECT, ERRED IN NOT HOLDING THAT THE
PRESENT ACTION HAS PRESCRIBED UNDER THE STATUTE OF LIMITATIONS. 9

Anent the first assignment of error, the petitioner argues that the Court of Appeals erred in ruling that the donation
was a donation inter vivos. She claims that in interpreting a document, the other relevant provisions therein must be
read in conjunction with the rest. While the document indeed stated that the donation was irrevocable, that must be
interpreted in the light of the provisions providing that the donation cannot be encumbered, alienated or sold by
anyone, that the property donated shall remain in the possession of the donor while she is alive, and that the
donation shall take effect only when she dies. Also, the petitioner claims that the donation is mortis causa for the
reason that the contemporaneous and subsequent acts of the donor, Basilisa Comerciante, showed such intention.
Petitioner cites the testimony of Atty. Viniegra, who notarized the deed of donation, that it was the intent of the donor
to maintain control over the property while she was alive; that such intent was shown when she actually sold the lot
to herein petitioner.
We affirm the appellate court’s decision.

The provisions in the subject deed of donation that are crucial for the determination of the class to which the
donation belongs are, as follows:

xxx xxx xxx

xxx(I)binibigay ko at ipinagkakaloob ng ganap at hindi mababawi sa naulit na apat na anak ko at sa kanilang mga
tagapagmana, ang aking lupang residential o tirahan sampu ng aking bahay nakatirik doon na nasa Bagong Pook
din, San Antonio, Lungsod ng Kabite

xxx xxx xxx

Na ang Kaloob palang ito ay magkakabisa lamang simula sa araw na ako’y pumanaw sa mundo, xxx.

xxx xxx xxx

Na ang titulo numero TCT-T-2260 (RT-4036) ng Lungsod ng Kabite, bahay sa loteng tirahan ng Bagong Pook na
nababanggit sa nasabing kasulatan, ay mananatili sa poder o possesion ng Ina, na si Basilisa Comerciante habang
siya ay nabubuhay at

Gayon din ang nasabing Titulo ay hindi mapapasangla o maipagbibili ang lupa habang maybuhay ang nasabing
Basilisa Comerciante xxx.

It has been held that whether the donation is inter vivos or mortis causa depends on whether the donor intended to
transfer ownership over the properties upon the execution of the deed. In Bonsato v. Court of Appeals, this Court
10 11

enumerated the characteristics of a donation mortis causa, to wit:

(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;

(3) That the transfer should be void if the transferor should survive the transferee.

Significant to the resolution of this issue is the irrevocable character of the donation in the case at bar. In Cuevas v.
Cuevas, we ruled that when the deed of donation provides that the donor will not dispose or take away the property
12

donated (thus making the donation irrevocable), he in effect is making a donation inter vivos. He parts away with his
naked title but maintains beneficial ownership while he lives. It remains to be a donation inter vivos despite an
express provision that the donor continues to be in possession and enjoyment of the donated property while he is
alive. In the Bonsato case, we held that:

(W)hat is most significant [in determining the type of donation] is the absence of stipulation that the donor could
revoke the donations; on the contrary, the deeds expressly declare them to be "irrevocable", a quality absolutely
incompatible with the idea of conveyances mortis causa where revocability is of the essence of the act, to the extent
that a testator can not lawfully waive or restrict his right of revocation (Old Civil Code, Art.737; New Civil Code, Art.
828).13

Construing together the provisions of the deed of donation, we find and so hold that in the case at bar the donation
is inter vivos. The express irrevocability of the same ("hindi na mababawi") is the distinctive standard that identifies
that document as a donation inter vivos. The other provisions therein which seemingly make the donation mortis
causa do not go against the irrevocable character of the subject donation. According to the petitioner, the provisions
which state that the same will only take effect upon the death of the donor and that there is a prohibition to alienate,
encumber, dispose, or sell the same, are proofs that the donation is mortis causa. We disagree. The said provisions
should be harmonized with its express irrevocability. In Bonsato where the donation per the deed of donation would
also take effect upon the death of the donor with reservation for the donor to enjoy the fruits of the land, the Court
held that the said statements only mean that "after the donor’s death, the donation will take effect so as to make the
donees the absolute owners of the donated property, free from all liens and encumbrances; for it must be
remembered that the donor reserved for himself a share of the fruits of the land donated." 14

In Gestopa v. Court of Appeals, this Court held that the prohibition to alienate does not necessarily defeat the inter
15

vivos character of the donation. It even highlights the fact that what remains with the donor is the right of usufruct
and not anymore the naked title of ownership over the property donated. In the case at bar, the provision in the
deed of donation that the donated property will remain in the possession of the donor just goes to show that the
donor has given up his naked title of ownership thereto and has maintained only the right to use (jus utendi) and
possess (jus possidendi) the subject donated property.

Thus, we arrive at no other conclusion in that the petitioner’s cited provisions are only necessary assurances that
during the donor’s lifetime, the latter would still enjoy the right of possession over the property; but, his naked title of
ownership has been passed on to the donees; and that upon the donor’s death, the donees would get all the rights
of ownership over the same including the right to use and possess the same.

Furthermore, it also appeared that the provision in the deed of donation regarding the prohibition to alienate the
subject property is couched in general terms such that even the donor is deemed included in the said prohibition
("Gayon din ang nasabing Titulo ay hindi mapapasangla o maipagbibili ang lupa habang maybuhay ang nasabing
Basilisa Comerciante"). Both the donor and the donees were prohibited from alienating and encumbering the
property during the lifetime of the donor. If the donor intended to maintain full ownership over the said property until
her death, she could have expressly stated therein a reservation of her right to dispose of the same. The prohibition
on the donor to alienate the said property during her lifetime is proof that naked ownership over the property has
been transferred to the donees. It also supports the irrevocable nature of the donation considering that the donor
has already divested herself of the right to dispose of the donated property. On the other hand, the prohibition on
the donees only meant that they may not mortgage or dispose the donated property while the donor enjoys and
possesses the property during her lifetime. However, it is clear that the donees were already the owners of the
subject property due to the irrevocable character of the donation.

The petitioner argues that the subsequent and contemporaneous acts of the donor would show that her intention
was to maintain control over her properties while she was still living. We disagree. Respondent Domingo Comia
testified that sometime in 1977 or prior to the sale of the subject house and lot, his grandmother, the donor in the
case at bar, delivered the title of the said property to him; and that the act of the donor was a manifestation that she
was acknowledging the ownership of the donees over the property donated. Moreover, Atty. Viniegra testified that
16

when the donor sold the lot to the petitioner herein, she was not doing so in accordance with the agreement and
intent of the parties in the deed of donation; that she was disregarding the provision in the deed of donation
prohibiting the alienation of the subject property; and that she knew that the prohibition covers her as well as the
donees. 17

Another indication in the deed of donation that the donation is inter vivos is the acceptance clause therein of the
donees. We have ruled that an acceptance clause is a mark that the donation is inter vivos. Acceptance is a
requirement for donations inter vivos. On the other hand, donations mortis causa, being in the form of a will, are not
required to be accepted by the donees during the donor’s lifetime. 18

We now rule on whether the donor validly revoked the donation when one of her daughters and donees,
Consolacion Austria, violated the prohibition to encumber the property. When Consolacion Austria mortgaged the
subject property to a certain Baby Santos, the donor, Basilisa Comerciante, asked one of the respondents herein,
Domingo Comia, to redeem the property, which the latter did. After the petitioner in turn redeemed the property from
respondent Domingo, the donor, Basilisa, sold the property to the petitioner who is one of the donees.

The act of selling the subject property to the petitioner herein cannot be considered as a valid act of revocation of
the deed of donation for the reason that a formal case to revoke the donation must be filed pursuant to Article 764 of
the Civil Code which speaks of an action that has a prescriptive period of four (4) years from non-compliance with
19

the condition stated in the deed of donation. The rule that there can be automatic revocation without benefit of a
court action does not apply to the case at bar for the reason that the subject deed of donation is devoid of any
provision providing for automatic revocation in event of non-compliance with the any of the conditions set forth
therein. Thus, a court action is necessary to be filed within four (4) years from the non-compliance of the condition
violated. As regards the ground of estoppel, the donor, Basilisa, cannot invoke the violation of the provision on the
prohibition to encumber the subject property as a basis to revoke the donation thereof inasmuch as she
acknowledged the validity of the mortgage executed by the donee, Consolacion Austria, when the said donor asked
respondent Domingo Comia to redeem the same. Thereafter, the donor, Basilisa likewise asked respondent
Florentino Lumubos and the petitioner herein to redeem the same. Those acts implied that the donees have the
20

right of control and naked title of ownership over the property considering that the donor, Basilisa condoned and
acknowledged the validity of the mortgage executed by one of the donees, Consolacion Austria.

Anent the second issue, the petitioner asserts that the action, against the petitioner, for annulment of TCT No. T-
10434 and other relevant documents, for reconveyance and damages, filed by the respondents on September 21,
1983 on the ground of fraud and/or implied trust has already prescribed. The sale happened on February 6, 1979
and its registration was made on February 8, 1979 when TCT No. RT-4036 in the name of the donor was cancelled
and in lieu thereof TCT No. T-10434 in the name of the petitioner was issued. Thus, more than four (4) years have
1âwphi1

passed since the sale of the subject real estate property was registered and the said new title thereto was issued to
the petitioner. The petitioner contends that an action for reconveyance of property on the ground of alleged fraud
must be filed within four (4) years from the discovery of fraud which is from the date of registration of the deed of
sale on February 8, 1979; and that the same prescriptive period also applies to a suit predicated on a trust
relationship that is rooted on fraud of breach of trust.

When one’s property is registered in another’s name without the former’s consent, an implied trust is created by law
in favor of the true owner. Article 1144 of the New Civil Code provides:
Art. 1144. The following actions must be brought within ten years from the time the right of action accrues:

(1) Upon a written contract;

(2) Upon an obligation created by law;

(3) Upon a judgment. (n)

Thus, an action for reconveyance of the title to the rightful owner prescribes in ten (10) years from the issuance of
the title. It is only when fraud has been committed that the action will be barred after four (4) years.
21 22

However, the four-year prescriptive period is not applicable to the case at bar for the reason that there is no fraud in
this case. The findings of fact of the appellate court which are entitled to great respect, are devoid of any finding of
fraud. The records do not show that the donor, Basilisa, and the petitioner ever intended to defraud the respondents
herein with respect to the sale and ownership of the said property. On the other hand, the sale was grounded upon
their honest but erroneous interpretation of the deed of donation that it is mortis causa, not inter vivos; and that the
donor still had the rights to sell or dispose of the donated property and to revoke the donation.

There being no fraud in the trust relationship between the donor and the donees including the herein petitioner, the
action for reconveyance prescribes in ten (10) years. Considering that TCT No. T-10434 in the name of the
petitioner and covering the subject property was issued only on February 8, 1979, the filing of the complaint in the
case at bar in 1983 was well within the ten-year prescriptive period.

The Court of Appeals, therefore, committed no reversible error in its appealed Decision. 1âwphi1

WHEREFORE, the appealed Decision dated June 30, 1989 of the Court of Appeals is hereby AFFIRMED. No
pronouncement as to costs.

SO ORDERED.

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

MARIA CARLA PIROVANO, etc., et al., petitioners-appellants,

vs.
THE COMMISSIONER OF INTERNAL REVENUE, respondent-appellee.

Angel S. Gamboa for petitioners-appellants.

Office of the Solicitor General for respondent-appellee.

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

This case is a sequel to the case of Pirovano vs. De la Rama Steamship Co., 96 Phil. 335.

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

Enrico Pirovano was the father of the herein petitioners-appellants. Sometime in the early part of 1941, De la Rama
Steamship Co. insured the life of said Enrico Pirovano, who was then its President and General Manager until the
time of his death, with various Philippine and American insurance companies for a total sum of one million pesos,
designating itself as the beneficiary of the policies, obtained by it. Due to the Japanese occupation of the Philippines
during the second World War, the Company was unable to pay the premiums on the policies issued by its Philippine
insurers and these policies lapsed, while the policies issued by its American insurers were kept effective and
subsisting, the New York office of the Company having continued paying its premiums from year to year.

During the Japanese occupation , or more particularly in the latter part of 1944, said Enrico Pirovano died.

After the liberation of the Philippines from the Japanese forces, the Board of Directors of De la Rama Steamship Co.
adopted a resolution dated July 10, 1946 granting and setting aside, out of the proceeds expected to be collected on
the insurance policies taken on the life of said Enrico Pirovano, the sum of P400,000.00 for equal division among
the four (4) minor children of the deceased, said sum of money to be convertible into 4,000 shares of stock of the
Company, at par, or 1,000 shares for each child. Shortly thereafter, the Company received the total sum of
P643,000.00 as proceeds of the said life insurance policies obtained from American insurers.

Upon receipt of the last stated sum of money, the Board of Directors of the Company modified, on January 6, 1947,
the above-mentioned resolution by renouncing all its rights title, and interest to the said amount of P643,000.00 in
favor of the minor children of the deceased, subject to the express condition that said amount should be retained by
the Company in the nature of a loan to it, drawing interest at the rate of five per centum (5%) per annum, and
payable to the Pirovano children after the Company shall have first settled in full the balance of its present
remaining bonded indebtedness in the sum of approximately P5,000,000.00. This latter resolution was carried out in
a Memorandum Agreement on January 10, 1947 and June 17, 1947., respectively, executed by the Company and
Mrs. Estefania R. Pirovano, the latter acting in her capacity as guardian of her children (petitioners-appellants
herein) find pursuant to an express authority granted her by the court.

On June 24, 1947, the Board of Directors of the Company further modified the last mentioned resolution providing
therein that the Company shall pay the proceeds of said life insurance policies to the heirs of the said Enrico
Pirovano after the Company shall have settled in full the balance of its present remaining bonded indebtedness, but
the annual interests accruing on the principal shall be paid to the heirs of the said Enrico Pirovano, or their duly
appointed representative, whenever the Company is in a position to meet said obligation.

On February 26, 1948, Mrs. Estefania R. Pirovano, in behalf of her children, executed a public document formally
accepting the donation; and, on the same date, the Company through its Board of Directors, took official notice of
this formal acceptance.

On September 13, 1949, the stockholders of the Company formally ratified the various resolutions hereinabove
mentioned with certain clarifying modifications that the payment of the donation shall not be effected until such time
as the Company shall have first duly liquidated its present bonded indebtedness in the amount of P3,260,855.77
with the National Development Company, or fully redeemed the preferred shares of stock in the amount which shall
be issued to the National Development Company in lieu thereof; and that any and all taxes, legal fees, and
expenses in any way connected with the above transaction shall be chargeable and deducted from the proceeds of
the life insurance policies mentioned in the resolutions of the Board of Directors.

On March 8, 1951, however, the majority stockholders of the Company voted to revoke the resolution approving the
donation in favor of the Pirovano children.

As a consequence of this revocation and refusal of the Company to pay the balance of the donation amounting to
P564,980.90 despite demands therefor, the herein petitioners-appellants represented by their natural guardian, Mrs.
Estefania R. Pirovano, brought an action for the recovery of said amount, plus interest and damages against De la
Rama Steamship Co., in the Court of First Instance of Rizal, which case ultimately culminated to an appeal to this
Court. On December 29, 1954, this court rendered its decision in the appealed case (96 Phil. 335) holding that the
donation was valid and remunerative in nature, the dispositive part of which reads:

Wherefore, the decision appealed from should be modified as follows: (a) that the donation in favor of the
children of the late Enrico Pirovano of the proceeds of the insurance policies taken on his life is valid and
binding on the defendant corporation; (b) that said donation, which amounts to a total of P583,813.59,
including interest, as it appears in the books of the corporation as of August 31, 1951, plus interest thereon
at the rate of 5 per cent per annum from the filing of the complaint, should be paid to the plaintiffs after the
defendant corporation shall have fully redeemed the preferred shares issued to the National Development
Company under the terms and conditions stared in the resolutions of the Board of Directors of January 6,
1947 and June 24, 1947, as amended by the resolution of the stockholders adopted on September 13,
1949; and (c) defendant shall pay to plaintiffs an additional amount equivalent to 10 per cent of said amount
of P583,813.59 as damages by way of attorney's fees, and to pay the costs of action. (Pirovano et al. vs. De
la Rama Steamship Co., 96 Phil. 367-368)

The above decision became final and executory. In compliance therewith, De la Rama Steamship Co. made, on
April 6, 1955, a partial payment on the amount of the judgment and paid the balance thereof on May 12, 1955.

On March 6, 1955, respondent Commissioner of Internal Revenue assessed the amount of P60,869.67 as donees'
gift tax, inclusive of surcharges, interests and other penalties, against each of the petitioners-appellants, or for the
total sum of P243,478.68; and, on April 23, 1955, a donor's gift tax in the total amount of P34,371.76 was also
assessed against De la Rama Steamship Co., which the latter paid.

Petitioners-appellants herein contested respondent Commissioner's assessment and imposition of the donees' gift
taxes and donor's gift tax and also made a claim for refund of the donor's gift tax so collected. Respondent
Commissioner overruled petitioners' claims; hence, the latter presented two (2) petitions for review against
respondent's rulings before the Court of Tax Appeals, said petitions having been docketed as CTA Cases Nos. 347
and 375. CTA Case No. 347 relates to the petition disputing the legality of the assessment of donees' gift taxes and
donor's gift tax while CTA Case No. 375 refers to the claim for refund of the donor's gift tax already paid.

After the filing of respondent's usual answers to the petitions, the two cases, being interrelated to each other, were
tried jointly and terminated.

On January 31, 1962, the Court of Tax Appeals rendered its decision in the two cases, the dispositive part of which
reads:
 In resume, we are of the opinion, that (1) the donor's gift tax in the sum of P34,371.76 was erroneously
assessed and collected, hence, petitioners are entitled to the refund thereof; (2) the donees' gift taxes were
correctly assessed; (3) the imposition of the surcharge of 25% is not proper; (4) the surcharge of 5% is
legally due; and (5) the interest of 1% per month on the deficiency donees' gift taxes is due from petitioners
from March 8, 1955 until the taxes are paid.

IN LINE WITH THE FOREGOING OPINION, petitioners are hereby ordered to pay the donees' gift taxes as
assessed by respondent, plus 5% surcharge and interest at the rate of 1% per month from March 8, 1955 to
the date of payment of said donees' gift taxes. Respondent is ordered to apply the sum of P34,371.76 which
is refundable to petitioners, against the amount due from petitioners. With costs against petitioners in Case
No. 347.

Petitioners-appellants herein filed a motion to reconsider the above decision, which the lower court denied. Hence,
this appeal before us.

In the instant appeal, petitioners-appellants herein question only that portion of the decision of the lower court
ordering the payment of donees' gift taxes as assessed by respondent as well as the imposition of surcharge and
interest on the amount of donees' gift taxes.

In their brief and memorandum, they dispute the factual finding of the lower court that De la Rama Steamship
Company's renunciation of its rights, title, and interest over the proceeds of said life insurance policies in favor of the
Pirovano children "was motivated solely and exclusively by its sense of gratitude, an act of pure liberality, and not to
pay additional compensation for services inadequately paid for." Petitioners now contend that the lower court's
finding was erroneous in seemingly considering the disputed grant as a simple donation, since our previous decision
(96 Phil. 335) had already declared that the transfer to the Pirovano children was a remuneratory donation.
Petitioners further contend that the same was made not for an insufficient or inadequate consideration but rather it a
was made for a full and adequate compensation for the valuable services rendered by the late Enrico Pirovano to
the De la Rama Steamship Co.; hence, the donation does not constitute a taxable gift under the provisions of
Section 108 of the National Internal Revenue Code.

The argument for petitioners-appellants fails to take into account the fact that neither in Spanish nor in Anglo-
American law was it considered that past services, rendered without relying on a coetaneous promise, express or
implied, that such services would be paid for in the future, constituted cause or consideration that would make a
conveyance of property anything else but a gift or donation. This conclusion flows from the text of Article 619 of the
Code of 1889 (identical with Article 726 of the present Civil Code of the Philippines):

When a person gives to another a thing ... on account of the latter's merits or of the services rendered by
him to the donor, provided they do not constitute a demandable debt, ..., there is also a donation. ... .

There is nothing on record to show that when the late Enrico Pirovano rendered services as President and General
Manager of the De la Rama Steamship Co. he was not fully compensated for such services, or that, because they
were "largely responsible for the rapid and very successful development of the activities of the company" (Res. of
July 10, 1946). Pirovano expected or was promised further compensation over and in addition to his regular
emoluments as President and General Manager. The fact that his services contributed in a large measure to the
success of the company did not give rise to a recoverable debt, and the conveyances made by the company to his
heirs remain a gift or donation. This is emphasized by the directors' Resolution of January 6, 1947, that "out of
gratitude" the company decided to renounce in favor of Pirovano's heirs the proceeds of the life insurance policies in
question. The true consideration for the donation was, therefore, the company's gratitude for his services, and not
the services themselves.

That the tax court regarded the conveyance as a simple donation, instead of a remuneratory one as it was declared
to be in our previous decision, is but an innocuous error; whether remuneratory or simple, the conveyance remained
a gift, taxable under Chapter 2, Title III of the Internal Revenue Code.

But then appellants contend, the entire property or right donated should not be considered as a gift for taxation
purposes; only that portion of the value of the property or right transferred, if any, which is in excess of the value of
the services rendered should be considered as a taxable gift. They cite in support Section 111 of the Tax Code
which provides that —

Where property is transferred for less, than an adequate and full consideration in money or money's worth,
then the amount by which the value of the property exceeded the value of the consideration shall, for the
purpose of the tax imposed by this Chapter, be deemed a gift, ... .

The flaw in this argument lies in the fact that, as copied from American law, the term consideration used in this
section refers to the technical "consideration" defined by the American Law Institute (Restatement of Contracts) as
"anything that is bargained for by the promisor and given by the promisee in exchange for the promise" (Also,
Corbin on Contracts, Vol. I, p. 359). But, as we have seen, Pirovano's successful activities as officer of the De la
Rama Steamship Co. cannot be deemed such consideration for the gift to his heirs, since the services were
rendered long before the Company ceded the value of the life policies to said heirs; cession and services were not
the result of one bargain or of a mutual exchange of promises.

And the Anglo-American law treats a subsequent promise to pay for past services (like one to pay for improvements
already made without prior request from the promisor) to be a nudum pactum (Roscorla vs. Thomas, 3 Q.B. 234;
Peters vs. Poro, 25 ALR 615; Carson vs. Clark, 25 Am. Dec. 79; Boston vs. Dodge, 12 Am. Dec. 206), i.e., one that
is unenforceable in view of the common law rule that consideration must consist in a legal benefit to the promisee or
some legal detriment to the promisor.

What is more, the actual consideration for the cession of the policies, as previously shown, was the Company's
gratitude to Pirovano; so that under section 111 of the Code there is no consideration the value of which can be
deducted from that of the property transferred as a gift. Like "love and affection," gratitude has no economic value
and is not "consideration" in the sense that the word is used in this section of the Tax Code.

As stated by Chief Justice Griffith of the Supreme Court of Mississippi in his well-known book, "Outlines of the Law"
(p. 204) —

Love and affection are not considerations of value — they are not estimable in terms of value. Nor are sentiments of
gratitude for gratuitous part favors or kindnesses; nor are obligations which are merely moral. It has been well said
that if a moral obligation were alone sufficient it would remove the necessity for any consideration at all, since the
fact of making a promise impose, the moral obligation to perform it."

It is of course perfectly possible that a donation or gift should at the same time impose a burden or condition on the
donee involving some economic liability for him. A, for example, may donate a parcel of land to B on condition that
the latter assume a mortgage existing on the donated land. In this case the donee may rightfully insist that the gift
tax be computed only on the value of the land less the value of the mortgage. This, in fact, is contemplated by
Article 619 of the Civil Code of 1889 (Art. 726 of the Tax Code) when it provides that there is also a donation "when
the gift imposes upon the donee a burden which is less than the value of the thing given." Section 111 of the Tax
Code has in view situations of this kind, since it also prescribes that "the amount by which the value of the property
exceeded the value of the consideration" shall be deemed a gift for the purpose of the tax. .

Petitioners finally contend that, even assuming that the donation in question is subject to donees' gift taxes, the
imposition of the surcharge of 5% and interest of 1% per month from March 8, 1955 was not justified because the
proceeds of the life insurance policies were actually received on April 6, 1955 and May 12, 1955 only and in
accordance with Section 115(c) of the Tax Code; the filing of the returns of such tax became due on March 1, 1956
and the tax became payable on May 15, 1956, as provided for in Section 116(a) of the same Code. In other words,
petitioners maintain that the assessment and demand for donees' gift taxes was prematurely made and of no legal
effect; hence, they should not be held liable for such surcharge and interest.

It is well to note, and it is not disputed, that petitioners-donees have failed to file any gift tax return and that they also
failed to pay the amount of the assessment made against them by respondent in 1955. This situation is covered by
Section 119(b) (1) and (c) and Section 120 of the Tax Code:

(b) Deficiency.

(1) Payment not extended. — Where a deficiency, or any interest assessed in connection therewith, or any
addition to the taxes provided for in section one hundred twenty is not paid in full within thirty days from the
date of the notice and demand from the Commissioner, there shall be collected as a part of the taxes,
interest upon the unpaid amount at the rate of one per centum a month from the date of such notice and
demand until it is paid. (section 119)

(c) Surcharge. — If any amount of the taxes included in the notice and demand from the Commissioner of
Internal Revenue is not paid in full within thirty days after such notice and demand, there shall be collected
in addition to the interest prescribed above as a part of the taxes a surcharge of five per centum of the
unpaid amount. (sec. 119)

The failure to file a return was found by the lower court to be due to reasonable cause and not to willful neglect. On
this score, the elimination by the lower court of the 25% surcharge is ad valorem penalty which respondent
Commissioner had imposed pursuant to Section 120 of the Tax Code was proper, since said Section 120 vests in
the Commissioner of Internal Revenue or in the tax court power and authority to impose or not to impose such
penalty depending upon whether or not reasonable cause has been shown in the non-filing of such return.

On the other hand, unlike said Section 120, Section 119, paragraphs (b) (1) and (c) of the Tax Code, does not
confer on the Commissioner of Internal Revenue or on the courts any power and discretion not to impose such
interest and surcharge. It is likewise provided for by law that an appeal to the Court of Tax Appeals from a decision
of the Commissioner of Internal Revenue shall not suspend the payment or collection of the tax liability of the
taxpayer unless a motion to that effect shall have been presented to the court and granted by it on the ground that
such collection will jeopardize the interest of the taxpayer (Sec. 11, Republic Act No. 1125; Rule 12, Rules of the
Court of Tax Appeals). It should further be noted that —
 It has been the uniform holding of this Court that no suit for enjoining the collection of a tax, disputed or
undisputed, can be brought, the remedy being to pay the tax first, formerly under protest and now without
need of protect, file the claim with the Collector, and if he denies it, bring an action for recovery against him.
(David v. Ramos, et al., 90 Phil. 351)

Section 306 of the National Internal Revenue Code ... lays down the procedure to be followed in those cases
wherein a taxpayer entertains some doubt about the correctness of a tax sought to be collected. Said
section provides that the tax, should first be paid and the taxpayer should sue for its recovery afterwards.
The purpose of the law obviously is to prevent delay in the collection of taxes, upon which the Government
depends for its existence. To allow a taxpayer to first secure a ruling as regards the validity of the tax before
paying it would be to defeat this purpose. (National Dental Supply Co. vs. Meer, 90 Phil. 265)

Petitioners did not file in the lower court any motion for the suspension of payment or collection of the amount of
assessment made against them.

On the basis of the above-stated provisions of law and applicable authorities, it is evident that the imposition of 1%
interest monthly and 5% surcharge is justified and legal. As succinctly stated by the court below, said imposition is
"mandatory and may not be waived by the Commissioner of Internal Revenue or by the courts" (Resolution on
petitioners' motion for reconsideration, Annex XIV, petition). Hence, said imposition of interest and surcharge by the
lower court should be upheld.

WHEREFORE, the decision of the Court of Tax Appeals is affirmed. Costs against petitioners Pirovano.

G.R. No. 210987 November 24, 2014

THE PHILIPPINE AMERICAN LIFE AND GENERAL INSURANCE COMPANY, Petitioner,

vs.
THE SECRETARY OF FINANCE and THE COMMISSIONER OF INTERNAL REVENUE, Respondents.

DECISION

VELASCO, JR., J.:

Nature of the Case

Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing and seeking the
reversal of the Resolutions of the Court of Appeals (CA) in CA-G.R. SP No. 127984, dated May 23, 2013 and 1

January 21, 2014, which dismissed outright the petitioner's appeal from the Secretary of Finance's review of BIR
Ruling No. 015-12 for lack of jurisdiction.
2

The Facts

Petitioner The Philippine American Life and General Insurance Company (Philamlife) used to own 498,590 Class A
shares in Philam Care Health Systems, Inc. (PhilamCare), representing 49.89% of the latter's outstanding capital
stock. In 2009, petitioner, in a bid to divest itself of its interests in the health maintenance organization industry,
offered to sell its shareholdings in PhilamCare through competitive bidding. Thus, on September 24, 2009,
petitioner's Class A shares were sold for USD 2,190,000, or PhP 104,259,330 based on the prevailing exchange
rate at the time of the sale, to STI Investments, Inc., who emerged as the highest bidder. 3

After the sale was completed and the necessary documentary stamp and capital gains taxes were paid, Philamlife
filed an application for a certificate authorizing registration/tax clearance with the Bureau of Internal Revenue (BIR)
Large Taxpayers Service Division to facilitate the transfer of the shares. Months later, petitioner was informed that it
needed to secure a BIR ruling in connection with its application due to potential donor’s tax liability. In compliance,
petitioner, on January 4, 2012, requested a ruling to confirm that the sale was not subject to donor’s tax, pointing
4

out, in its request, the following: that the transaction cannot attract donor’s tax liability since there was no donative
intent and,ergo, no taxable donation, citing BIR Ruling [DA-(DT-065) 715-09] dated November 27, 2009; that the5

shares were sold at their actual fair market value and at arm’s length; that as long as the transaction conducted is at
arm’s length––such that a bona fide business arrangement of the dealings is done inthe ordinary course of
business––a sale for less than an adequate consideration is not subject to donor’s tax; and that donor’s tax does not
apply to saleof shares sold in an open bidding process.

On January 4, 2012, however, respondent Commissioner on Internal Revenue (Commissioner) denied Philamlife’s
request through BIR Ruling No. 015-12. As determined by the Commissioner, the selling price of the shares thus
sold was lower than their book value based on the financial statements of PhilamCare as of the end of 2008. As 6
such, the Commisioner held, donor’s tax became imposable on the price difference pursuant to Sec. 100 of the
National Internal Revenue Code (NIRC), viz:

SEC. 100. Transfer for Less Than Adequate and full Consideration.- Where property, other than real property
referred to in Section 24(D), is transferred for less than an adequate and full consideration in money or money’s
worth, then the amount by which the fair market value of the property exceeded the value of the consideration shall,
for the purpose of the tax imposed by this Chapter, be deemed a gift, and shall be included in computing the amount
of gifts made during the calendar year.

The afore-quoted provision, the Commissioner added, is implemented by Revenue Regulation 6-2008 (RR 6-2008),
which provides:

SEC. 7. SALE, BARTER OR EXCHANGE OF SHARES OF STOCK NOT TRADED THROUGH A LOCAL STOCK
EXCHANGE PURSUANT TO SECS. 24(C), 25(A)(3), 25(B), 27(D)(2), 28(A)(7)(c), 28(B)(5)(c) OF THE TAX CODE,
AS AMENDED. —

xxxx

(c) Determination of Amount and Recognition of Gain or Loss –

(c.1) In the case of cash sale, the selling price shall be the consideration per deed of sale.

xxxx

(c.1.4) In case the fair market value of the shares of stock sold, bartered, or exchanged is greater than the amount
of money and/or fair market value of the property received, the excess of the fair market value of the shares of stock
sold, bartered or exchanged overthe amount of money and the fair market value of the property, if any, received as
consideration shall be deemed a gift subject to the donor’stax under Section 100 of the Tax Code, as amended.

xxxx

(c.2) Definition of ‘fair market value’of Shares of Stock. – For purposes of this Section, ‘fair market value’ of the
share of stock sold shall be:

xxxx

(c.2.2) In the case of shares of stock not listed and traded in the local stock exchanges, the book value of the shares
of stock as shown in the financial statements duly certified by an independent certified public accountant nearest to
the date of sale shall be the fair market value.

In view of the foregoing, the Commissioner ruled that the difference between the book value and the selling price in
the sales transaction is taxable donation subject to a 30% donor’s tax under Section 99(B) of the
NIRC. Respondent Commissioner likewise held that BIR Ruling [DA-(DT-065) 715-09], on which petitioner
7

anchored its claim, has already been revoked by Revenue Memorandum Circular (RMC) No. 25-2011. 8

Aggrieved, petitioner requested respondent Secretary of Finance (Secretary) to review BIR Ruling No. 015-12, but
to no avail. For on November 26, 2012, respondent Secretary affirmed the Commissioner’s assailed ruling in its
entirety. 9

Ruling of the Court of Appeals

Not contented with the adverse results, petitioner elevated the case to the CA via a petition for review under Rule
43, assigning the following errors:10

A.

The Honorable Secretary of Finance gravely erred in not finding that the application of Section 7(c.2.2) of RR 06-08
in the Assailed Ruling and RMC 25-11 is void insofar as it altersthe meaning and scope of Section 100 of the Tax
Code.

B.

The Honorable Secretary of Finance gravely erred in finding that Section 100 of the Tax Code is applicable tothe
sale of the Sale of Shares.

1.
 The Sale of Shares were sold at their fair market value and for fair and full consideration in money or
money’s worth.

2.

The sale of the Sale Shares is a bona fide business transaction without any donative intent and is
therefore beyond the ambit of Section 100 of the Tax Code.

3.

It is superfluous for the BIR to require an express provision for the exemption of the sale of the Sale
Shares from donor’s tax since Section 100 of the Tax Code does not explicitly subject the
transaction to donor’s tax.

C.

The Honorable Secretary of Finance gravely erred in failing to find that in the absence of any of the grounds
mentioned in Section 246 of the Tax Code, rules and regulations, rulings or circulars – such as RMC 25-11 – cannot
be given retroactive application to the prejudice of Philamlife.

On May 23, 2013, the CA issued the assailed Resolution dismissing the CA Petition, thusly:

WHEREFORE, the Petition for Review dated January 9, 2013 is DISMISSED for lack of jurisdiction.

SO ORDERED.

In disposing of the CA petition, the appellate court ratiocinated that it is the Court of Tax Appeals (CTA), pursuant to
Sec. 7(a)(1) of Republic Act No. 1125 (RA 1125), as amended, which has jurisdiction over the issues raised. The
11

outright dismissal, so the CA held, is predicated on the postulate that BIR Ruling No. 015-12 was issued in the
exercise of the Commissioner’s power to interpret the NIRC and other tax laws. Consequently, requesting for its
review can be categorized as "other matters arising under the NIRC or other laws administered by the BIR," which is
under the jurisdiction of the CTA, not the CA.

Philamlife eventually sought reconsideration but the CA, in its equally assailed January 21, 2014 Resolution,
maintained its earlier position. Hence, the instant recourse.

Issues

Stripped to the essentials, the petition raises the following issues in both procedure and substance:

1. Whether or not the CA erred in dismissing the CA Petition for lack of jurisdiction; and

2. Whether or not the price difference in petitioner’s adverted sale of shares in PhilamCare attracts donor’s
tax.

Procedural Arguments

a. Petitioner’s contentions

Insisting on the propriety of the interposed CA petition, Philamlife, while conceding that respondent Commissioner
issued BIR Ruling No. 015-12 in accordance with her authority to interpret tax laws, argued nonetheless that such
ruling is subject to review by the Secretary of Finance under Sec. 4 of the NIRC, to wit:

SECTION 4. Power of the Commissioner to Interpret Tax Laws and to Decide Tax Cases. – The power to interpret
the provisions of this Code and other tax laws shall be under the exclusive and original jurisdiction of the
Commissioner, subject to review by the Secretary of Finance.

The power to decide disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties
imposed in relation thereto, or other matters arising under this Code orother laws or portions thereof administered
by the Bureau of Internal Revenue is vested in the Commissioner, subject to the exclusive appellate jurisdiction of
the Court of Tax Appeals. Petitioner postulates that there is a need to differentiate the rulings promulgated by the
respondent Commissioner relating to those rendered under the first paragraph of Sec. 4 of the NIRC, which are
appealable to the Secretary of Finance, from those rendered under the second paragraph of Sec. 4 of the NIRC,
which are subject to review on appeal with the CTA.

This distinction, petitioner argues, is readily made apparent by Department Order No. 7-02, as circularized by RMC
12

No. 40-A-02.
Philamlife further averred that Sec.7 of RA 1125, as amended, does not find application in the case at bar since it
only governs appeals from the Commissioner’s rulings under the second paragraph and does not encompass
rulings from the Secretary of Finance in the exercise of his power of review under the first, as what was elevated to
the CA. It added that under RA 1125, as amended, the only decisions of the Secretary appealable to the CTA are
those rendered in customs cases elevated to him automatically under Section 2315 of the Tariff and Customs
Code. 13

There is, thus, a gap in the law when the NIRC, as couched, and RA 1125, as amended, failed to supply where the
rulings of the Secretary in its exercise of its power of review under Sec. 4 of the NIRC are appealable to. This gap,
petitioner submits, was remedied by British American Tobacco v. Camacho wherein the Court ruled that where
14

what is assailed is the validity or constitutionality of a law, or a rule or regulation issued by the administrative
agency, the regular courts have jurisdiction to pass upon the same.

In sum, appeals questioning the decisions of the Secretary of Finance in the exercise of its power of review under
Sec. 4 of the NIRC are not within the CTA’s limited special jurisdiction and, according to petitioner, are appealable to
the CA via a Rule 43 petition for review.

b. Respondents’ contentions

Before the CA, respondents countered petitioner’s procedural arguments by claiming that even assuming arguendo
that the CTA does not have jurisdiction over the case, Philamlife, nevertheless,committed a fatal error when it failed
to appeal the Secretary of Finance’s ruling to the Office of the President (OP). As made apparent by the rules, the
Department of Finance is not among the agencies and quasi-judicial bodies enumerated under Sec. 1, Rule 43 of
the Rules of Court whose decisions and rulings are appealable through a petition for review. This is in stark
15

contrast to the OP’s specific mention under the same provision, so respondents pointed out.

To further reinforce their argument, respondents cite the President’s power of review emanating from his power of
control as enshrined under Sec. 17 of Article VII of the Constitution, which reads:

Section 17.The President shall have control of all the executive departments, bureaus, and offices. He shall ensure
that the laws be faithfully executed.

The nature and extent of the President’s constitutionally granted power of control have beendefined in a plethora of
cases, most recently in Elma v. Jacobi, wherein it was held that:
16

x x x This power of control, which even Congress cannot limit, let alone withdraw, means the power of the Chief
Executive to review, alter, modify, nullify, or set aside what a subordinate, e.g., members of the Cabinet and heads
of line agencies, had done in the performance of their duties and to substitute the judgment of the former for that of
the latter.

In their Comment on the instant petition, however, respondents asseverate that the CA did not err in its holding
respecting the CTA’s jurisdiction over the controversy.

The Court’s Ruling

The petition is unmeritorious.

Reviews by the Secretary of Finance pursuant to Sec. 4 of the NIRC are appealable to the CTA

To recapitulate, three different, if not conflicting, positions as indicated below have been advanced by the parties
and by the CA as the proper remedy open for assailing respondents’ rulings:

1. Petitioners: The ruling of the Commissioner is subject to review by the Secretary under Sec. 4 of the
NIRC, and that of the Secretary to the CA via Rule 43;

2. Respondents: The ruling of the Commissioner is subject to review by the Secretary under Sec. 4 of the
NIRC, and that of the Secretary to the Office of the President before appealing to the CA via a Rule 43
petition; and

3. CA: The ruling of the Commissioner is subject to review by the CTA.

We now resolve.

Preliminarily, it bears stressing that there is no dispute that what is involved herein is the respondent
Commissioner’s exercise of power under the first paragraph of Sec. 4 of the NIRC––the power to interpret tax laws.
This, in fact, was recognized by the appellate court itself, but erroneously held that her action in the exercise of such
power is appealable directly to the CTA. As correctly pointed out by petitioner, Sec. 4 of the NIRC readily provides
that the Commissioner’s power to interpret the provisions of this Code and other tax laws is subject to review by the
Secretary of Finance. The issue that now arises is this––where does one seek immediate recourse from the adverse
ruling of the Secretary of Finance in its exercise of its power of review under Sec. 4?

Admittedly, there is no provision in law that expressly provides where exactly the ruling of the Secretary of Finance
under the adverted NIRC provision is appealable to. However, We find that Sec. 7(a)(1) of RA 1125, as amended,
addresses the seeming gap in the law asit vests the CTA, albeit impliedly, with jurisdiction over the CA petition as
"other matters" arising under the NIRC or other laws administered by the BIR. As stated:

Sec. 7. Jurisdiction.- The CTA shall exercise:

a. Exclusive appellate jurisdiction to review by appeal, as herein provided:

1. Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal
revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National
Internal Revenue or other laws administered by the Bureau of Internal Revenue. (emphasis supplied)

Even though the provision suggests that it only covers rulings of the Commissioner, We hold that it is, nonetheless,
sufficient enough to include appeals from the Secretary’s review under Sec. 4 of the NIRC.

It is axiomatic that laws should be given a reasonable interpretation which does not defeat the very purpose for
which they were passed. Courts should not follow the letter of a statute when to do so would depart from the true
17

intent of the legislature or would otherwise yield conclusions inconsistent with the purpose of the act. This Court
18

has, in many cases involving the construction of statutes, cautioned against narrowly interpreting a statute as to
defeat the purpose of the legislator, and rejected the literal interpretation of statutes if todo so would lead to unjust
or absurd results.19

Indeed, to leave undetermined the mode of appeal from the Secretary of Finance would be an injustice to taxpayers
prejudiced by his adverse rulings. To remedy this situation, Weimply from the purpose of RA 1125 and its
amendatory laws that the CTA is the proper forum with which to institute the appeal. This is not, and should not, in
any way, be taken as a derogation of the power of the Office of President but merely as recognition that matters
calling for technical knowledge should be handled by the agency or quasi-judicial body with specialization over the
controversy. As the specialized quasi-judicial agency mandated to adjudicate tax, customs, and assessment cases,
there can be no other court of appellate jurisdiction that can decide the issues raised inthe CA petition, which
involves the tax treatment of the shares of stocks sold. Petitioner, though, nextinvites attention to the ruling in Ursal
v. Court of Tax Appeals to argue against granting the CTA jurisdiction by implication, viz:
20

Republic Act No. 1125 creating the Court of Tax Appeals did not grant it blanket authority to decide any and all tax
disputes. Defining such special court’s jurisdiction, the Act necessarily limited its authority to those matters
enumerated therein. Inline with this idea we recently approved said court’s order rejecting an appeal to it by Lopez &
Sons from the decision of the Collector ofCustoms, because in our opinion its jurisdiction extended only to a review
of the decisions of the Commissioner of Customs, as provided bythe statute — and not to decisions of the Collector
of Customs. (Lopez & Sons vs. The Court of Tax Appeals, 100 Phil., 850, 53 Off. Gaz., [10] 3065).

xxxx

x x x Republic Act No. 1125 is a complete law by itself and expressly enumerates the matters which the Court of
Tax Appeals may consider; such enumeration excludes all others by implication. Expressio unius est exclusio
alterius.

Petitioner’s contention is untenable. Lest the ruling in Ursalbe taken out of context, but worse as a precedent, it must
be noted that the primary reason for the dismissal of the said case was that the petitioner therein lacked the
personality to file the suit with the CTA because he was not adversely affected by a decision or ruling of the
Collector of Internal Revenue, as was required under Sec. 11 of RA 1125. As held:
21

We share the view that the assessor had no personality to resort to the Court of Tax Appeals. The rulings of the
Board of Assessment Appeals did not "adversely affect" him. At most it was the City of Cebu that had been
adversely affected in the sense that it could not thereafter collect higher realty taxes from the abovementioned
property owners. His opinion, it is true had been overruled; but the overruling inflicted no material damage upon him
or his office. And the Court of Tax Appeals was not created to decide mere conflicts of opinion between
administrative officers or agencies. Imagine an income tax examiner resorting to the Court of Tax Appeals whenever
the Collector of Internal Revenue modifies, or lower his assessment on the return of a tax payer! 22

The appellate power of the CTA includes certiorari

Petitioner is quick to point out, however, that the grounds raised in its CA petition included the nullity of Section
7(c.2.2) of RR 06-08 and RMC 25-11. In an attempt to divest the CTA jurisdiction over the controversy, petitioner
then cites British American Tobacco, wherein this Court has expounded on the limited jurisdiction of the CTA in the
following wise:
While the above statute confers on the CTA jurisdiction to resolve tax disputes in general, this does not include
cases where the constitutionality of a law or rule is challenged. Where what is assailed is the validity or
constitutionality of a law, or a rule or regulation issued by the administrative agency in the performance of its quasi
legislative function, the regular courts have jurisdiction to pass upon the same. The determination of whether a
specific rule or set of rules issued by an administrative agency contravenes the law or the constitution is within the
jurisdiction of the regular courts. Indeed, the Constitution vests the power of judicial review or the power to declare a
law, treaty, international or executive agreement, presidential decree, order, instruction, ordinance, or regulation
inthe courts, including the regional trial courts. This is within the scope of judicial power, which includes the authority
of the courts to determine inan appropriate action the validity of the acts of the political departments. Judicial power
includes the duty of the courts of justice to settle actual controversies involving rights which are legally demandable
and enforceable, and to determine whether or not there has been a grave abuse of discretion amounting to lack or
excess of jurisdiction on the part of any branch or instrumentality of the Government. 23

Vis-a-vis British American Tobacco, it bears to stress what appears to be a contrasting ruling in Asia International
Auctioneers, Inc. v. Parayno, Jr., to wit:

Similarly, in CIR v. Leal, pursuant to Section 116 of Presidential Decree No. 1158 (The National Internal Revenue
Code, as amended) which states that "[d]ealers in securities shall pay a tax equivalent to six (6%) per centum of
their gross income. Lending investors shall pay a tax equivalent to five (5%) per cent, of their gross income," the
CIR issued Revenue Memorandum Order (RMO) No. 15-91 imposing 5% lending investor’s tax on pawnshops
based on their gross income and requiring all investigating units of the BIR to investigate and assess the lending
investor’s tax due from them. The issuance of RMO No. 15-91 was an offshoot of the CIR’s finding that the
pawnshop business is akin to that of "lending investors" as defined in Section 157(u) of the Tax Code.
Subsequently, the CIR issued RMC No. 43-91 subjecting pawn tickets to documentary stamp tax. Respondent
therein, Josefina Leal, owner and operator of Josefina’s Pawnshop, asked for a reconsideration of both RMO No.
15-91 and RMC No. 43-91, but the same was denied by petitioner CIR. Leal then filed a petition for prohibition with
the RTC of San Mateo, Rizal, seeking to prohibit petitioner CIR from implementing the revenue orders. The CIR,
through the OSG, filed a motion to dismiss on the ground of lack of jurisdiction. The RTC denied the motion.
Petitioner filed a petition for certiorari and prohibition with the CA which dismissed the petition "for lack of basis." In
reversing the CA, dissolving the Writ of Preliminary Injunction issued by the trial court and ordering the dismissal of
the case before the trial court, the Supreme Court held that "[t]he questioned RMO No. 15-91 and RMC No. 43-91
are actually rulings or opinions of the Commissioner implementing the Tax Code on the taxability of pawnshops."
They were issued pursuant to the CIR’s power under Section 245 of the Tax Code "to make rulings or opinions in
connection with the implementation of the provisions of internal revenue laws, including ruling on the classification of
articles of sales and similar purposes."The Court held that under R.A. No. 1125 (An Act Creating the Court of Tax
Appeals), as amended, such rulings of the CIR are appealable to the CTA.

In the case at bar, the assailed revenue regulations and revenue memorandum circulars are actually rulings or
opinions of the CIR on the tax treatment of motor vehicles sold at public auction within the SSEZ to implement
Section 12 of R.A. No. 7227 which provides that "exportation or removal of goods from the territory of the [SSEZ] to
the other parts of the Philippine territory shall be subject to customs duties and taxes under the Customs and Tariff
Codeand other relevant tax laws of the Philippines." They were issued pursuant to the power of the CIR under
Section 4 of the National Internal Revenue Code x x x. (emphasis added)
24

The respective teachings in British American Tobacco and Asia International Auctioneers, at first blush, appear to
bear no conflict––that when the validity or constitutionality of an administrative rule or regulation is assailed, the
regular courts have jurisdiction; and if what is assailed are rulings or opinions of the Commissioner on tax
treatments, jurisdiction over the controversy is lodged with the CTA. The problem with the above postulates,
however, is that they failed to take into consideration one crucial point––a taxpayer can raise both issues
simultaneously.

Petitioner avers that there is now a trend wherein both the CTA and the CA disclaim jurisdiction over tax cases: on
the one hand, mere prayer for the declaration of a tax measure’s unconstitutionality or invalidity before the CTA can
result in a petition’s outright dismissal, and on the other hand, the CA will likewise dismiss the same petition should
it find that the primary issue is not the tax measure’s validity but the assessment or taxability of the transaction or
subject involved. To illustrate this point, petitioner cites the assailed Resolution, thusly: Admittedly, in British
American Tobacco vs. Camacho, the Supreme Court has ruled that the determination of whether a specific rule or
set of rules issued by an administrative agency contravenes the law or the constitution is within the jurisdiction of the
regular courts, not the CTA.

xxxx

Petitioner essentially questions the CIR’s ruling that Petitioner’s sale of shares is a taxable donation under Sec. 100
of the NIRC. The validity of Sec. 100 of the NIRC, Sec. 7 (C.2.2) and RMC 25-11 is merely questioned incidentally
since it was used by the CIR as bases for its unfavourable opinion. Clearly, the Petition involves an issue on the
taxability of the transaction rather than a direct attack on the constitutionality of Sec. 100, Sec.7 (c.2.2.) of RR 06-08
and RMC 25-11. Thus, the instant Petition properly pertains to the CTA under Sec. 7 of RA 9282.
As a result of the seemingly conflicting pronouncements, petitioner submits that taxpayers are now at a quandary on
what mode of appeal should be taken, to which court or agency it should be filed, and which case law should be
followed.

Petitioner’s above submission is specious.

In the recent case of City of Manila v. Grecia-Cuerdo, the Court en banc has ruled that the CTA now has the power
25

of certiorari in cases within its appellate jurisdiction. To elucidate:

The prevailing doctrine is that the authority to issue writs of certiorari involves the exercise of original jurisdiction
which must be expressly conferred by the Constitution or by law and cannot be implied from the mere existence of
appellate jurisdiction. Thus, x x x this Court has ruled against the jurisdiction of courts or tribunals over petitions for
certiorari on the ground that there is no law which expressly gives these tribunals such power. Itmust be observed,
however, that x x x these rulings pertain not to regular courts but to tribunals exercising quasijudicial powers. With
respect tothe Sandiganbayan, Republic Act No. 8249 now provides that the special criminal court has exclusive
original jurisdiction over petitions for the issuance of the writs of mandamus, prohibition, certiorari, habeas corpus,
injunctions, and other ancillary writs and processes in aid of its appellate jurisdiction.

In the same manner, Section 5 (1), Article VIII of the 1987 Constitution grants power to the Supreme Court, in the
exercise of its original jurisdiction, to issue writs of certiorari, prohibition and mandamus. With respect to the Court of
Appeals, Section 9 (1) of Batas Pambansa Blg. 129 (BP 129) gives the appellate court, also in the exercise of its
original jurisdiction, the power to issue, among others, a writ of certiorari, whether or not in aid of its appellate
jurisdiction. As to Regional Trial Courts, the power to issue a writ of certiorari, in the exercise of their original
jurisdiction, is provided under Section 21 of BP 129.

The foregoing notwithstanding, while there is no express grant of such power, with respect to the CTA, Section 1,
Article VIII of the 1987 Constitution provides, nonetheless, that judicial power shall be vested in one Supreme Court
and in such lower courts as may be established by law and that judicial power includes the duty of the courts of
justice to settle actual controversies involving rights which are legally demandable and enforceable, and to
determine whether or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on
the part of any branch or instrumentality of the Government.

On the strength of the above constitutional provisions, it can be fairly interpreted that the power of the CTA includes
that of determining whether or not there has been grave abuse of discretion amounting to lack or excess of
jurisdiction on the part of the RTC in issuing an interlocutory order in cases falling within the exclusive appellate
jurisdiction of the tax court. It, thus, follows that the CTA, by constitutional mandate, is vested with jurisdiction to
issue writs of certiorari in these cases.

Indeed, in order for any appellate court to effectively exercise its appellate jurisdiction, it must have the authority to
issue, among others, a writ of certiorari. In transferring exclusive jurisdiction over appealed tax cases to the CTA, it
can reasonably be assumed that the law intended to transfer also such power as is deemed necessary, if not
indispensable, in aid of such appellate jurisdiction. There is no perceivable reason why the transfer should only be
considered as partial, not total. (emphasis added)

Evidently, City of Manilacan be considered as a departure from Ursal in that in spite of there being no express grant
in law, the CTA is deemed granted with powers of certiorari by implication. Moreover, City of Manila diametrically
opposes British American Tobacco to the effect that it is now within the power of the CTA, through its power of
certiorari, to rule on the validity of a particular administrative ruleor regulation so long as it is within its appellate
jurisdiction. Hence, it can now rule not only on the propriety of an assessment or tax treatment of a certain
transaction, but also on the validity of the revenue regulation or revenue memorandum circular on which the said
assessment is based.

Guided by the doctrinal teaching in resolving the case at bar, the fact that the CA petition not only contested the
applicability of Sec. 100 of the NIRC over the sales transaction but likewise questioned the validity of Sec. 7 (c.2.2)
of RR 06-08 and RMC 25-11 does not divest the CTA of its jurisdiction over the controversy, contrary to petitioner's
arguments.

The price difference is subject to donor's tax

Petitioner's substantive arguments are unavailing. The absence of donative intent, if that be the case, does not
exempt the sales of stock transaction from donor's tax since Sec. 100 of the NIRC categorically states that the
amount by which the fair market value of the property exceeded the value of the consideration shall be deemed a
gift. Thus, even if there is no actual donation, the difference in price is considered a donation by fiction of law.
1âwphi1

Moreover, Sec. 7(c.2.2) of RR 06-08 does not alter Sec. 100 of the NIRC but merely sets the parameters for
determining the "fair market value" of a sale of stocks. Such issuance was made pursuant to the Commissioner's
power to interpret tax laws and to promulgate rules and regulations for their implementation.
Lastly, petitioner is mistaken in stating that RMC 25-11, having been issued after the sale, was being applied
retroactively in contravention to Sec. 246 of the NIRC. Instead, it merely called for the strict application of Sec. 100,
26

which was already in force the moment the NIRC was enacted.

WHEREFORE, the petition is hereby DISMISSED. The Resolutions of the Court of Appeals in CA-G.R. SP No.
127984 dated May 23, 2013 and January 21, 2014 are hereby AFFIRMED. SO ORDERED.