estate - full case

7/24/2019 ESTATE - Full Case

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CARPIO, JDP TAXNo. L-11622. January 28, 1961.

TH COLLCTOR O! INTRNAL R"N#,$e%&%&oner, '(. DO#)LA* !+*HR anTTINA !+*HR, an %e CO#RT O! TAXAPPAL*, re($onen%(.

No. L-11668. January 28, 1961.

DO#)LA* !I*HR an TTINA !I*HR,$e%&%&oner(, '(. TH COLLCTOR O!

INTRNAL R"N#, an %e CO#RT O! TAXAPPAL*. re($onen%(.

Husband and wife; Conjugal partnership.In theabsence of any ante-nuptial agreement, the husbandand wife are presumed to have adopted the systemof conjugal partnership.

Civil Code of the hilippines; Husband and wife;!arriage."he property relations of husband andwife who were married in #$%$ are governed byarticle #&'( of the )panish Civil Code and not byarticle #'* of the +ew Civil Code.

)ame; rivate International aw Conict of laws/.

0rtide #&'( of the 1ld Civil Code and article #'* ofthe +ew Civil Code both adhere to the so-callednationality theory of determining the propertyrelations of spouses where one of them is a foreignerand they have made no prior agreement as to theadministration, disposition and ownership of theirconjugal properties. In such a case, the national lawof the husband becomes the dominant law indetermining the property relations of the spouses.However, there is a di2erence between two articles.0rticle #'* e3pressly provides that it appliesregardless of where the marriage was celebrated,while article #&'( is limited to marriages contracted

abroad. 4oth articles apply only to mi3ed marriagesbetween a 5ilipino and a foreigner.

)ame; 1ld law; roperty relations of 4ritish citi6enswho were, married in !anila in #$%$.7nglish lawgoverns the property relations of a man and woman,both 4ritish citi6ens, who were married in !anila#$%$.

7vidence; 5oreign laws; rocessual presumption.Inthe absence of proof of a foreign law, the processualpresumption is that it is the same as the law of theforum.

rivate International aw; 0rticle #% of the old Civil

Code; Husband and wife.0rticle #% of the old CivilCode does not govern the property relations ofhusband and wife. It refers to successional rights,which are distinct from the property relations of thespouses.

"a3ation; 7state and inheritance ta3es; )hare ofsurviving spouse is deductible.In determining- thenet ta3able estate of a deceased 4ritish subject, forpurposes of the estate and inheritance ta3es, wheresaid deceased was married to another 4ritish citi6enin !anila in #$%$, the one-half conjugal share of thesurviving wife should be deducted inasmuch as they

are presumed to have adopted the system ofconjugal partnership in the absence of an ante-nuptial agreement.

7vidence; roof of foreign laws.5oreign laws do noprove themselves in our courts. "hey are not amatter of judicial notice. i8e any other fact, theymust be alleged and proven.

)ame."he provisions of the 9ules of Court on prooof foreign laws do not e3clude the presentation ofother competent evidence to prove the e3istence ofa foreign law. "he testimony of a lawyer, practising California, together with a :uotation from apublication of 4ancroft-hitney, is su(# of the California Inheritance "a3 aw,the reciprocity must be total, that is, with respect totransfer or death ta3es of any and every character, the case of the hilippine law, and to legacy,

succession, or death ta3es of any and everycharacter, in the case of the California law. "hereforif any of the two states collects or imposes and doenot e3empt any transfer, death, legacy, orsuccession ta3 of any character, the reciprocity doenot wor8. "he shares of stoc8 in the hilippines, leftby a deceased resident of California, are subject tothe hilippine inheritance ta3. "he reciprocityprovisions of section #'' of the "a3 Code are notapplicable because there is no total reciprocity undethe two laws.

)ame; ?eduction under 5ederal 7state "a3 aw."hamount allowed under the 5ederal 7state "a3 aw is

in the nature of a deduction and not of an e3emptioregarding which reciprocity cannot be claimed undesection #'' of the hilippine "a3 Code. +or isreciprocity allowed under the 5ederal aw.

"a3ation; 7state and inheritance ta3es; 0ssessedvalue is not the controlling mar8et value.5orpurposes of the estate and inheritance ta3es, theassessed value of real estate is considered as the famar8et value only when evidence to the contrary hanot been submitted. If there is such contraryevidence, the assessed value will not be consideredthe fair mar8et value.

)ame; !ar8et value of shares of stoc8.)hares ofstoc8 of a hilippine domestic/ corporation have asitus here for purposes of ta3ation. "heir situs is notCalifornia where the certi@cates were located and inwhose stoc8 e3change the shares were registered.

"heir fair mar8et value should be based on the priceprevailing in this country where they are sought to bta3ed.

)ame; ?eductibility of e3penses allowed by theprobate court."he )upreme Court will not disturbthe ruling of the "a3 Court, allowing theadministratorAs fee, lawyerAs fee and judicial and


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CARPIO, JDP TAXadministration e3penses as liabilities of theestate, it appearing the said items were li8ewiseallowed by the probate court. "he ruling of the

"a3 Court, disallowing an additional amount forfuneral e3penses, for lac8 of evidence, shouldbe upheld. "he )upreme Court will set aside thefactual @ndings of the "a3 Court only in casethey are not supported by any evidence.

73ecutors and administrators; )ettlement of

decedentAs estates; 0ncillary and domiciliaryadminintration."he distinction between adomiciliary and an ancillary administration servesonly to distinguish one administration from the other,for the two proceedings are separate andindependent. "he reason for the ancillaryadministration is that a grant of administration doesnot, e3 proprio vigore, have any e2ect beyond thelimits of the country in which it was granted. In otherwords, there is a regular administration under thecontrol of the court, where claims must be presentedand approved and e3penses of administrationallowed before the deductions from the estate can be

authori6ed.)ame; California debt of decedent should bepresented to hilippine court for allo-icance.--0 debtof the decedent, which was incurred in California andwhich was allowed by the California court, having

jurisdiction over the domiciliary administration,should, nevertheless, be presented to the hilippineprobate court for allowance in order that it mayconstitute a valid claim against the hilippine estateunder ancillary administration.

)ame; ?eductions allowed the estate of nonresidentaliens.+o deduction from the estate of anonresident alien is allowed unless the value of hisgross estate not situated in the hilippines is statedin the return. "his re:uirement is intended to enablethe revenue o$b/l/ ofthe "a3 Code. "he deduction is allowed only to thee3tent of that portion of the debt, which is e:uivalentto the proportion that the hilippine estate bears tothe total estate wherever situated. If the hilippineestate constitutes but #B( of the entire estate,wherever situated, then only #B( of the debt may bededucted. If no statement of the estate situatedoutside the hilippines is attached to the return, thenno part of the debt may be deducted from thedecedentsA estate.

"a3ation; Interest on amount overpaid.In theabsence of any statutory provision clearly ore3pressly directing or authori6ing the payment ofinterest on ta3es overpaid, the +ational overnmentcannot be re:uired to pay interest.

7"I"I1+ for review by certiorari of a decision of theCourt of "a3 0ppeals.

ARRRA, J./

"his case relates to the determination andsettlement of the hereditary estate left by thedeceased alter . )tevenson, and the lawsapplicable thereto. alter . )tevenson born in thehilippines on 0ugust $, #>D* of 4ritish parents andmarried in the City of !anila on Eanuary '&, #$%$ to4eatrice !auricia )tevenson another 4ritish subjectdied on 5ebruary '', #$(# in )an 5rancisco,California, =.).0. whereto he and his wife moved anestablished their permanent residence since !ay #%#$*(. In his will e3ecuted in )an 5rancisco on !ay'', #$*D, and which was duly probated in the)uperior Court of California on 0pril ##, #$(#,)tevenson instituted his wife 4eatrice as his soleheiress to the following real and personal propertiesac:uired by the spouses while residing in thehilippines, described and preliminary assessed asfollowsF

ross 7state

9eal roperty ' parcelsof land in 4aguio,covered by ".C.". +os.&D> and &D$ *&,(%%.%%

ersonal roperty

#/ #DD shares of stoc8 ofCanacao 7state at #%.%%each #,DD%.%%

'/ '#%,%%% shares ofstoc8 of !indanao !otherode !ines, Inc. at %.&>per share D$,>%%.%%

&/ Cash credit withCanacao 7state Inc. *,>D%.>>

*/ Cash, with theChartered 4an8 of India,

0ustralia G China

>(#.$D

"otal ross 0ssets#&%,D$'.>

(

1n !ay '', #$(#, ancillary administrationproceedings were instituted in the Court of 5irstInstance of !anila for the settlement of the estate ithe hilippines. In due time )tevensonAs will was duadmitted to probate by our court and Ian !urray)tatt was appointed ancillary administrator of the


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CARPIO, JDP TAXestate, who on Euly ##, #$(#, @led a preliminaryestate and inheritance ta3 return with thereservation of having the properties declaredtherein @nally appraised at their values si3months after the death of )tevenson.reliminary return was made by the ancillaryadministrator in order to secure the waiver ofthe Collector of Internal 9evenue on theinheritance ta3 due on the '#%,%%% shares ofstoc8 in the !indanao !other ode !ines Inc.

which the estate then desired to dispose in the=nited )tates. 0cting upon said return, the Collectorof Internal 9evenue accepted the valuation of thepersonal properties declared therein, but increasedthe appraisal of the two parcels of land located in4aguio City by @3ing their fair mar8et value in theamount of ('.'%%.%%, instead of *&,(%%.%%. 0fterallowing the deductions claimed by the ancillaryadministrator for funeral e3penses in the amount of',%%%.%% and for judicial and administratione3penses in the sum of (,(%%.%%, the Collectorassessed the state the amount of (,#*D.$> forestate ta3 and #%,>D(,' or inheritance ta3, or atotal of #,%'&.'&. 4oth of these assessments werepaid by the estate on Eune , #$('.

1n )eptember 'D, #$(', the ancillary administrator@led in amended estate and inheritance ta3 return inpursuance f his reservation made at the time of @lingof the preliminary return and for the purpose ofavailing of the right granted by section $# of the+ational Internal 9evenue Code.

In this amended return the valuation of the '#%,%%%shares of stoc8 in the !indanao !other ode !ines,

Inc. was reduced from %.&> per share, as originallydeclared, to %.'% per share, or from a total valuationof D$,>%%.%% to *',%%%.%%. "his change in price pershare of stoc8 was based by the ancillaryadministrator on the mar8et notation of the stoc8obtaining at the )an 5rancisco California/ )toc873change si3 months from the death of )tevenson,that is, 0s of 0ugust '', #$. In addition, theancillary administrator made claim for the followingdeductionsF

5uneral e3penses #,%*&'/ ',%>.('

Eudicial 73pensesF

a/ 0dministratorAs5ee

#,'%*.&*

b/ 0ttorneyAs 5ee .%%%.%%

c/ Eudicial and #,*%%.%(

0dministratione3penses as of0ugust $, #$('

>,%*.&$

9eal 7state "a3 for#$(# on 4aguioreal properties1.9. +o. 4-#>>&/ ('.(%

Claims against theestateF(,%%%.%%/#%,%%%.%%

#%,%%%.%%

lusF *J int. p.a.from 5eb. ' to '',#$(# ''.*D

#%,%''.*D

)ub-"otal'#,&(.>

>

In the meantime, on ?ecember #, #$(', 4eatrice!auricia )tevenson assigned all her rights andinterests in the estate to the spouses, ?ouglas and4ettina 5isher, respondents herein.

1n )eptember D, #$(&, the ancillary administrator@led a second amended estate and inheritance ta3return 73h. K!-+K/. "his return declared the sameassets of the estate stated in the amended return o)eptember '', #$(', e3cept that it contained newclaims for additional e3emption and deduction to w#/ deduction in the amount of *,%%%.%% from thegross estate of the decedent as provided for in)ection ># */ of the =.). 5ederal Internal 9evenueCode which the ancillary administrator averred wasallowable by way of the reciprocity granted by)ection #'' of the +ational Internal 9evenue Code,

as then held by the 4oard of "a3 0ppeals in case +oD# entitled KHousman vs. Collector,K 0ugust #*,#$('; and '/ e3emption from the imposition ofestate and inheritance ta3es on the '#%,%%% sharesof stoc8 in the !indanao !other ode !ines, Inc. alpursuant to the reciprocity proviso of )ection #'' ofthe +ational Internal 9evenue Code. In this lastreturn, the estate claimed that it was liable only forthe amount of ('(.&* for estate ta3 and '&>.% finheritance ta3 and that, as a conse:uence, it hadoverpaid the government. "he refund of the amounof #(,'($.>&, allegedly overpaid, was accordinglyre:uested by the estate. "he Collector denied the


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CARPIO, JDP TAXclaim. 5or this reason, action was commencedin the Court of 5irst Instance of !anila byrespondents, as assignees of 4eatrice !auricia)tevenson, for the recovery of said amount.ursuant to 9epublic 0ct +o. ##'(, the case wasforwarded to the Court of "a3 0ppeals whichcourt, after hearing, rendered decision thedispositive portion of which reads as followsF

In @ne, we are of the opinion and so hold thatFa/ the one-half L/ share of the survivingspouse in the conjugal partnership propertyas diminished by the obligations properlychargeable to such property should bededucted from the net estate of the deceasedalter . )tevenson, pursuant to )ection >$-Cof the +ational Internal 9evenue Code; b/ theintangible personal property belonging to theestate of said )tevenson is e3empt frominheritance ta3, pursuant to the provision ofsection #'' of the +ational Internal 9evenueCode in relation to the California Inheritance

"a3 aw but decedentAs estate is not entitledto an e3emption of *,%%%.%% in thecomputation of the estate ta3; c/ forpurposes of estate and inheritance ta3ationthe 4aguio real estate of the spouses shouldbe valued at (','%%.%%, and '#%,%%% sharesof stoc8 in the !indanao !other ode !ines,Inc. should be appraised at %.&> per share;and d/ the estate shall be entitled to adeduction of ',%%%.%% for funeral e3pensesand judicial e3penses of >,%*.&$.

5rom this decision, both parties appealed.

"he Collector of Internal 9evenue, hereinafter calledpetitioner assigned four errors allegedly committedby the trial court, while the assignees, ?ouglas and4ettina 5isher hereinafter called respondents, madesi3 assignments of error. "ogether, the assignederrors raise the following main issues for resolutionby this CourtF

#/ hether or not, in determining the ta3able netestate of the decedent, one-half L/ of the net estateshould be deducted therefrom as the share of tilesurviving spouse in accordance with our law on

conjugal partnership and in relation to section >$ c/of the +ational Internal revenue Code;

'/ hether or not the estate can avail itself of thereciprocity proviso embodied in )ection #'' of the+ational Internal 9evenue Code granting e3emptionfrom the payment of estate and inheritance ta3es onthe '#%,%%% shares of stoc8 in the !indanao !otherode !ines Inc.;

&/ hether or not the estate is entitled to thededuction of *,%%%.%% allowed by )ection >#, =.).

Internal 9evenue Code in relation to section #'' ofthe +ational Internal 9evenue Code;

*/ hether or not the real estate properties of thedecedent located in 4aguio City and the '#%,%%%shares of stoc8 in the !indanao !other ode !inesInc., were correctly appraised by the lower court;

(/ hether or not the estate is entitled to the

following deductionsF >,%*.&$ for judicial andadministration e3penses; ',%>.(' for funerale3penses; ('.(% for real estate ta3es; and#%,%,''.*D representing the amount ofindebtedness allegedly incurred by the decedentduring his lifetime; and

/ hether or not the estate is entitled to thepayment of interest on the amount it claims to haveoverpaid the government and to be refundable to it

In deciding the @rst issue, the lower court applied awell-8nown doctrine in our civil law that in the

absence of any ante-nuptial agreement, thecontracting parties are presumed to have adoptedthe system of conjugal partnership as to theproperties ac:uired during their marriage. "heapplication of this doctrine to the instant case isbeing disputed, however, by petitioner Collector ofInternal 9evenue, who contends that pursuant to0rticle #'* of the +ew Civil Code, the propertyrelation of the spouses )tevensons ought not to bedetermined by the hilippine law, but by the nationlaw of the decedent husband, in this case, the law o7ngland. It is alleged by petitioner that 7nglish lawsdo not recogni6e legal partnership between spouses

and that what obtains in that jurisdiction is anotherregime of property relation, wherein all propertiesac:uired during the marriage pertain and belong73clusively to the husband. In further support of hisstand, petitioner cites 0rticle # of the +ew CivilCode 0rt. #% of the old/ to the e2ect that in testateand intestate proceedings, the amount ofsuccessional rights, among others, is to bedetermined by the national law of the decedent.

In this connection, let it be noted that since themariage of the )tevensons in the hilippines too8place in #$%$, the applicable law is 0rticle #&'( of

the old Civil Code and not 0rticle #'* of the +ew CivCode which became e2ective only in #$(%. It is truethat both articles adhere to the so-called nationalitytheory of determining the property relation ofspouses where one of them is a foreigner and theyhave made no prior agreement as to theadministration disposition, and ownership of theirconjugal properties. In such a case, the national lawof the husband becomes the dominant law indetermining the property relation of the spouses.

"here is, however, a di2erence between the twoarticles in that 0rticle #'*#of the new Civil Code


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CARPIO, JDP TAXe3pressly provides that it shall be applicableregardless of whether the marriage wascelebrated in the hilippines or abroad while0rticle #&'('of the old Civil Code is limited tomarriages contracted in a foreign land.

It must be noted, however, that what has justbeen said refers to mi3ed marriages between a5ilipino citi6en and a foreigner. In the instant

case, both spouses are foreigners who married in thehilippines. !anresa,&in his Commentaries, has thisto say on this pointF

a regla establecida en el art. #.(, sere@ere a las capitulaciones otorgadas en7spana y entre espanoles. 7l #.&'(, a lascelebradas en el e3tranjero cuando alguno delos conyuges es espanol. 7n cuanto a la reglaprocedente cuando dos e3tranjeros se casanen 7spana, o dos espanoles en el e3tranjerohay :ue atender en el primer caso a lalegislacion de pais a :ue a:uellos

pertene6ean, y en el segundo, a las reglasgenerales consignadas en los articulos $ y #%de nuestro Codigo. 7mphasis supplied./

If we adopt the view of !anresa, the lawdeterminative of the property relation of the)tevensons, married in #$%$, would be the 7nglishlaw even if the marriage was celebrated in thehilippines, both of them being foreigners. 4ut, ascorrectly observed by the "a3 Court, the pertinent7nglish law that allegedly vests in the decedenthusband full ownership of the properties ac:uiredduring the marriage has not been proven by

petitioner. 73cept for a mere allegation in his answer,which is not su(# a/ and bof the California Internal and 9evenue Code aspublished in ?erringAs California Code, a publicationof the 4ancroft-hitney Company inc. 0nd as part o

his testimony, a full :uotation of the cited sectionwas o2ered in evidence as 73hibits KM-'K by therespondents.

It is well-settled that foreign laws do not provethemselves in our jurisdiction and our courts are noauthori6ed to ta8e judicial notice of them.(i8e another fact, they must be alleged and proved.

)ection *#, 9ule #'& of our 9ules of Court prescribethe manner of proving foreign laws before ourtribunals. However, although we believe it desirablethat these laws be proved in accordance with said

rule, we held in the case of Willamette Iron and SteWorks v. Muzzal,# hil. *D#, that Ka reading ofsections &%% and &%# of our Code of Civil rocedurenow section *#, 9ule #'&/ will convince one thatthese sections do not e3clude the presentation ofother competent evidence to prove the e3istence ofa foreign law.K In that case, we considered thetestimony of an attorney-at-law of )an 5rancisco,California who :uoted verbatim a section of CalifornCivil Code and who stated that the same was in forcat the time the obligations were contracted, assu


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CARPIO, JDP TAXlaw. In line with this view, we @nd no error,therefore, on the part of the "a3 Court inconsidering the pertinent California law asproved by respondentsA witness.

e now ta8e up the :uestion of reciprocity ine3emption from transfer or death ta3es,between the )tate of California and thehilippines.5

)ection #'' of our +ational Internal 9evenue Code, inpertinent part, providesF

... 0nd, provided, further, "hat no ta3 shall becollected under this "itle in respect ofintangible personal property a/ if thedecedent at the time of his death was aresident of a foreign country which at the timeof his death did not impose a transfer of ta3or death ta3 of any character in respect ofintangible personal property of citi6ens of thehilippines not residing in that foreign

country, or b/ if the laws of the foreigncountry of which the decedent was a residentat the time of his death allow a similare3emption from transfer ta3es or death ta3esof every character in respect of intangiblepersonal property owned by citi6ens of thehilippines not residing in that foreigncountry.K 7mphasis supplied/.

1n the other hand, )ection #&>(# of the CaliforniaInheritance "a3 aw, insofar as pertinent, readsF.

K)7C. #&>(#, Intangibles of nonresident:

Conditions. Intangible personal property ise3empt from the ta3 imposed by this part ifthe decedent at the time of his death was aresident of a territory or another )tate of the=nited )tates or of a foreign state or countrywhich then imposed a legacy, succession, ordeath ta3 in respect to intangible personalproperty of its own residents, but eitherF.

a/ ?id not impose a legacy, succession, ordeath ta3 of any character in respect tointangible personal property of residents ofthis )tate, or

b/ Had in its laws a reciprocal provision underwhich intangible personal property of a non-resident was e3empt from legacy, succession,or death ta3es of every character if the

"erritory or other )tate of the =nited )tates orforeign state or country in which thenonresident resided allowed a similare3emption in respect to intangible personalproperty of residents of the "erritory or )tateof the =nited )tates or foreign state orcountry of residence of the decedent.K Id./

It is clear from both these :uoted provisions that threciprocity must be total, that is, with respect totransfer or death ta3es of any and every character, the case of the hilippine law, and to legacy,succession, or death ta3es of any and everycharacter, in the case of the California law. "hereforif any of the two states collects or imposes and doenot e3empt any transfer, death, legacy, orsuccession ta3 of any character, the reciprocity doenot wor8. "his is the underlying principle of thereciprocity clauses in both laws.

In the hilippines, upon the death of any citi6en orresident, or non-resident with properties therein,there are imposed upon his estate and its settlemenboth an estate and an inheritance ta3. =nder thelaws of California, only inheritance ta3 is imposed. 1the other hand, the 5ederal Internal 9evenue Codeimposes an estate ta3 on non-residents not citi6ensof the =nited )tates,Dbut does not provide for anye3emption on the basis of reciprocity. 0pplying theslaws in the manner the Court of "a3 0ppeals did in

the instant case, we will have a situation where aCalifornian, who is non-resident in the hilippines buhas intangible personal properties here, will thesubject to the payment of an estate ta3, althoughe3empt from the payment of the inheritance ta3. "hbeing the case, will a 5ilipino, non-resident ofCalifornia, but with intangible personal propertiesthere, be entitled to the e3emption clause of theCalifornia law, since the Californian has not beene3empted from every character of legacy,succession, or death ta3 because he is, under ourlaw, under obligation to pay an estate ta3N =pon thother hand, if we e3empt the Californian from payinthe estate ta3, we do not thereby entitle a 5ilipino tobe e3empt from a similar estate ta3 in Californiabecause under the 5ederal aw, which is e:uallyenforceable in California he is bound to pay thesame, there being no reciprocity recogni6ed inrespect thereto. In both instances, the 5ilipino citi6eis always at a disadvantage. e do not believe thatour legislature has intended such an unfair situationto the detriment of our own government and peoplee, therefore, @nd and declare that the lower courterred in e3empting the estate in :uestion frompayment of the inheritance ta3.

e are not unaware of our ruling in the caseofCollector of Internal evenue vs. !ara .9. +os. $*( G -$*>#, prom. Eanuary , #$(>, (* 1.. '>>e3empting the estate of the deceased Hugo H. !illefrom payment of the inheritance ta3 imposed by theCollector of Internal 9evenue. It will be noted,however, that the issue of reciprocity between thepertinent provisions of our ta3 law and that of the)tate of California was not there s:uarely raised, anthe ruling therein cannot control the determination the case at bar. 4e that as it may, we now declarethat in view of the e3press provisions of both thehilippine and California laws that the e3emption


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CARPIO, JDP TAXwould apply only if the law of the other grantsan e3emption from legacy, succession, or deathta3es of every character, there could not bepartial reciprocity. It would have to be total ornone at all.

ith respect to the :uestion of deduction orreduction in the amount of *,%%%.%% based onthe =.). 5ederal 7state "a3 aw which is also

being claimed by respondents, we uphold and adhereto our ruling in the !aracase supra/ that the amountof ',%%%.%% allowed under the 5ederal 7state "a3aw is in the nature of a deduction and not of ane3emption regarding which reciprocity cannot beclaimed under the provision of )ection #'' of our+ational Internal 9evenue Code. +or is reciprocityauthori6ed under the 5ederal aw. .

1n the issue of the correctness of the appraisal ofthe two parcels of land situated in 4aguio City, it iscontended that their assessed values, as appearingin the ta3 rolls months after the death of

)tevenson, ought to have been considered bypetitioner as their fair mar8et value, pursuant tosection $# of the +ational Internal 9evenue Code. Itshould be pointed out, however, that in accordancewith said proviso the properties are re:uired to beappraised at their fair mar8et value and the assessedvalue thereof shall be considered as the fair mar8etvalue only when evidence to the contrary has notbeen shown. 0fter all review of the record, we aresatis@ed that such evidence e3ists to justify thevaluation made by petitioner which was sustained bythe ta3 court, for as the ta3 court aptly observedF

K"he two parcels of land containing &,'*s:uare meters were valued by theadministrator of the estate in the 7state andInheritance ta3 returns @led by him at*&,(%%.%% which is the assessed value ofsaid properties. 1n the other hand, defendantappraised the same at (','%%.%%. It is ofcommon 8nowledge, and this Court can ta8e

judicial notice of it, that assessments for realestate ta3ation purposes are very much lowerthan the true and fair mar8et value of theproperties at a given time and place. In factone year after decedentAs death or in #$('

the said properties were sold for a price ofD',%%%.%% and there is no showing thatspecial or e3traordinary circumstances causedthe sudden increase from the price of*&,(%%.%%, if we were to accept this value asa fair and reasonable one as of #$(#. 7venmore, the counsel for plainti2s himselfadmitted in open court that he was willing topurchase the said properties at '.%% pers:uare meter. In the light of these facts webelieve and therefore hold that the valuationof (','%%.%% of the real estate in 4aguio

made by defendant is fair, reasonable andjusti@ed in the premises.K ?ecision, p. #$/.

In respect to the valuation of the '#%,%%% shares ofstoc8 in the !indanao !other ode !ines, Inc., adomestic corporation/, respondents contend thattheir value should be @3ed on the basis of the mar8:uotation obtaining at the )an 5rancisco California)toc8 73change, on the theory that the certi@cates

stoc8s were then held in that place and registeredwith the said stoc8 e3change. e cannot agree withrespondentsA argument. "he situs of the shares ofstoc8, for purposes of ta3ation, being located here ithe hilippines, as respondents themselves concedeand considering that they are sought to be ta3ed inthis jurisdiction, consistent with the e3ercise of ourgovernmentAs ta3ing authority, their fair mar8etvalue should be ta3ed on the basis of the priceprevailing in our country.

=pon the other hand, we @nd merit in respondentsAother contention that the said shares of stoc8

commanded a lesser value at the !anila )toc873change si3 months after the death of )tevenson."hrough 0tty. 0llison ibbs, respondents have show

that at that time a share of said stoc8 was bid for atonly .&'( p. #%&, t.s.n./. )igni@cantly, the testimonof 0tty. ibbs in this respect has never been:uestioned nor refuted by petitioner either beforethis court or in the court below. In the absence ofevidence to the contrary, we are, therefore,constrained to reverse the "a3 Court on this pointand to hold that the value of a share in the saidmining company on 0ugust '', #$(# in the hilippinmar8et was .&'( as claimed by respondents..

It should be noted that the petitioner and the "a3Court valued each share of stoc8 of .&> on the basof the declaration made by the estate in itspreliminary return. atently, this should not havebeen the case, in view of the fact that the ancillaryadministrator had reserved and availed of his legalright to have the properties of the estate declared atheir fair mar8et value as of si3 months from the timthe decedent died..

1n the @fth issue, we shall consider the variousdeductions, from the allowance or disallowance of

which by the "a3 Court, both petitioner andrespondents have appealed..

etitioner, in this regard, contends that no evidenceof record e3ists to support the allowance of the sumof >,%*.&$ for the following e3pensesF.

#/ 0dministratorAs fee #,'%*.&*

'/ 0ttorneyAs fee ,%%%.%%


8/23

Page| 8

CARPIO, JDP TAX

&/ Eudicial and 0dministrativee3penses

',%('.((

"otal ?eductions >,%*.&$

0n e3amination of the record discloses,

however, that the foregoing items were considereddeductible by the "a3 Court on the basis of theirapproval by the probate court to which saide3penses, we may presume, had also beenpresented for consideration. It is to be supposed thatthe probate court would not have approved saiditems were they not supported by evidencepresented by the estate. In allowing the items in:uestion, the "a3 Court had before it the pertinentorder of the probate court which was submitted inevidence by respondents. 73h. K00-'K, p. #%%,record/. 0s the "a3 Court said, it found no basis fordeparting from the @ndings of the probate court, as it

must have been satis@ed that those e3penses wereactually incurred. =nder the circumstances, we seeno ground to reverse this @nding of fact which, under9epublic 0ct of California +ational 0ssociation, whichit would appear, that while still living, alter .)tevenson obtained we are not inclined to pass uponthe claim of respondents in respect to the additionalamount of >.(' for funeral e3penses which wasdisapproved by the court a :uo for lac8 of evidence.

In connection with the deduction of ('.(%representing the amount of realty ta3es paid in #$(#on the decedentAs two parcels of land in 4aguio City,

which respondents claim was disallowed by the "a3Court, we @nd that this claim has in fact beenallowed. hat happened here, which a careful reviewof the record will reveal, was that the "a3 Court, initemi6ing the liabilities of the estate, vi6F

#/ 0dministratorAs fee

'/ 0ttorneyAs fee

&/ Eudicial and 0dministration e3penses as of0ugust $, #$('

"otal

added the ('.(% for realty ta3es as a liability of theestate, to the #,*%%.%( for judicial andadministration e3penses approved by the court,ma8ing a total of ',%('.((, e3actly the same @gure

which was arrived at by the "a3 Court for judicial anadministration e3penses. Hence, the di2erencebetween the total of $,'(.$> allowed by the "a3Court as deductions, and the >,%*.&$ as found bythe probate court, which is ('.(%, the sameamount allowed for realty ta3es. 0n evident oversighas involuntarily been made in omitting the',%%%.%% for funeral e3penses in the @nalcomputation. "his amount has been e3presslyallowed by the lower court and there is no reasonwhy it should not be. .

e come now to the other claim of respondents thapursuant to section >$b/ #/ in relation to section>$a/ #/ 7/ and section >$d/, +ational Internal9evenue Code, the amount of #%,%''.*D shouldhave been allowed the estate as a deduction,because it represented an indebtedness of thedecedent incurred during his lifetime. In supportthereof, they o2ered in evidence a duly certi@edclaim, presented to the probate court in California bthe 4an8 of California +ational 0ssociation, which it

would appear, that while still living, alter .)tevenson obtained a loan of (,%%%.%% secured bypledge on #*%,%%% of his shares of stoc8 in the!indanao !other ode !ines, Inc. 73hs. KO-O*K, pp(&-($, record/. "he "a3 Court disallowed this item othe ground that the local probate court had notapproved the same as a valid claim against theestate and because it constituted an indebtedness respect to intangible personal property which the "aCourt held to be e3empt from inheritance ta3.

5or two reasons, we uphold the action of the lowercourt in disallowing the deduction.

5irstly, we believe that the approval of the hilippinprobate court of this particular indebtedness of thedecedent is necessary. "his is so although the sameit is averred has been already admitted and approveby the corresponding probate court in California,situs of the principal or domiciliary administration. Iis true that we have here in the hilippines only anancillary administration in this case, but, it has beenheld, the distinction between domiciliary or principaadministration and ancillaryadministration servesonly to distinguish oneadministration from the other, for the two

proceedings are separate and independent.>

"hereason for the ancillary administration is that, a graof administration does not e" proprio vigore, haveany e2ect beyond the limits of the country in whichwas granted. Hence, we have the re:uirement thatbefore a will duly probated outside of the hilippinecan have e2ect here, it must @rst be proved andallowed before our courts, in much the same manneas wills originally presented for allowancetherein.$0nd the estate shall be administered undletters testamentary, or letters of administrationgranted by the court, and disposed of according tothe will as probated, after payment of just debts an


9/23

Page| 9

CARPIO, JDP TAXe3penses of administration.#%In other words,there is a regular administration under thecontrol of the court, where claims must bepresented and approved, and e3penses ofadministration allowed before deductions fromthe estate can be authori6ed. 1therwise, wewould have the actuations of our own probatecourt, in the settlement and distribution of theestate situated here, subject to the proceedingsbefore the foreign court over which our courts

have no control. e do not believe such a procedureis countenanced or contemplated in the 9ules ofCourt.

0nother reason for the disallowance of thisindebtedness as a deduction, springs from theprovisions of )ection >$, letter d/, number #/, of the+ational Internal 9evenue Code which readsF

d/ Miscellaneousprovisions #/ +odeductions shall be allowed in the case of anon-resident not a citi6en of the hilippines

unless the e3ecutor, administrator or anyoneof the heirs, as the case may be, includes inthe return re:uired to be @led under sectionninety-three the value at the time of his deathof that part of the gross estate of the non-resident not situated in the hilippines.K

In the case at bar, no such statement of the grossestate of the non-resident )tevenson not situated inthe hilippines appears in the three returnssubmitted to the court or to the o$, letter d/, number #/ of theInternal 9evenue Code.

5or the reasons thus stated, we a


10/23

Page|15

CARPIO, JDP TAXIn%erna+ Re'enue, eenan% ana$$e++an%.

#.I+H79I"0+C7 "0P; 0CC9=0 15, ?I)"I+C"591! "H7 14I0"I1+ "1 0Q I"."he accrualof the inheritance ta3 is distinct from theobligation to pay the same. )ection #(& asamended, of the 0dministrative Code, imposesthe ta3 upon Kevery transmission by virtue ofinheritance, devise, be:uest, gift mortis causa,

or advance in anticipation of inheritance, devise, orbe:uest.K "he ta3 therefore is upon transmission orthe transfer or devolution of property of a decedent,made e2ective by his death, # C. E., p. #($'./

'.I?.; !70)=97 15, 4Q M0=7 15 7)"0"7.If death isthe generating source from which the power of thestate to impose inheritance ta3es ta8es its being andif, upon the death of the decedent, succession ta8esplace and the right of the state to ta3 vests instantly,the ta3 should be measured by the value of theestate as it stood at the time of the decedentAsdeath, regardless of any subse:uent contingencya2ecting value or any subse:uent increase or

decrease in value. # C. E., pp.A #$', #$&; ' 9. C.., p. '&'; 4la8emore and 4ancroft, Inheritance

"a3es, p. #&D. )ee also Rnowlton vs. !oore, #D> =.)., *#; '% )up. Ct. 9ep., D*D; ** aw. ed., $>./

&.I?.; I?.K"he right of the state to an inheritanceta3 accrues at the moment of death, and hence isordinarily measured as to any bene@ciary by thevalue at that time of such property as passes to him.)ubse:uent appreciation or depreciation isimmaterial.K 9oss, Inheritance "a3ation, p. D'./

*.I?.; I?.hatever may be the rule in otherjurisdictions, we hold that a transmission by

inheritance is ta3able at the time of thepredecessorAs death, notwithstanding thepostponement of the actual possession or enjoymentof the estate by the bene@ciary, and the ta3measured by the value of the property transmitted atthat time regardless of its appreciation ordepreciation.

(.I?.; "9=)") 0+? "9=)"77).0 trustee, no doubt,is entitled to receive a fair compensation for hisservices. 4arney vs. )aunders, # How., (&(; #*aw. ed., #%*D./ 4ut from this it does not follow thatthe compensation due him may lawfully be deductedin arriving at the net value of the estate subject to

ta3. "here is no statute in the hilippines whichre:uires trusteesA commissions to be deducted indetermining the net value of the estate subject toinheritance ta3. # C. E., p. #D%(./ 5urthermore,though a testamentary trust has been created, itdoes not appear that the testator intended that theduties of his e3ecutors and trustees should beseparated. Ibid.; In re Mannec8As 7state, ## +. Q.)upp., >$&; #D( 0pp. ?iv., &&; In re CollardAs 7state,## +. Q. )upp., *((./

.I?.; I?.; 0?!I+I)"90"I1+ 7P7+)7).Eudiciale3penses are e3penses of administration # C. E., p.

#D%(/ but, in )tate vs. Hennepin County robateCourt ##' +. ., >D>; #%# !inn., *>(/, it was saidF S S the compensation of a trustee, earned, not in thadministration of the estate, but in the managementhereof for the bene@t of the legatees or devisees,does not come properly within the class or reason foe3empting administration e3penses. S S S )ervicesrendered in that behalf have no reference to closingthe estate for the purpose of a distribution thereof tthose entitled to it, and are not re:uired or essentiato the perfection of the rights of the heirs orlegatees. S S S "rusts S S S of the character of thathere before the court, are created for the bene@t ofthose to whom the property ultimately passes, are ovoluntary creation, and intended for the preservatioof the estate. +o sound reason is given to supportthe contention that such e3penses should be ta8eninto consideration in @3ing the value of the estate fothe purposes of .this ta3.

D.I?.; 97"910C"IM7 7I)0"I1+.It is well-settledthat inheritance ta3ation is governed by the statutein force at the time of the death of the decedent '

9. C. ., p. '%; * Cooley on "a3ation, *th ed., p.&*#/. "he ta3payer cannot foresee and ought not tbe re:uired to guess the outcome of pendingmeasures. 1f course, a ta3 statute may be maderetroactive in its operation. iability for ta3es underretroactive legislation has been Kone of the incidentof social life.K )eattle vs. Relleher, #$( =. )., &(#,&%; *$ aw. ed., '&'; '( )up. Ct. 9ep., **./

>.I?.; I?.4ut legislative intent that a ta3 statuteshould operate retroactively should be perfectlyclear. )cwab vs. ?oyle, *' )up. Ct. 9ep., *$#;)mietan8a vs. 5irst "rust G )avings 4an8, '(D =. ).,%'; )toc8dale vs. Insurance Co., '% all., &'&;

unch vs. "urrish, '*D =. )., ''#./ K0 statute shouldbe considered as prospective in its operation,whether it enacts, amends, or repeals an inheritancta3, unless the language of the statute clearlydemands or e3presses that it shall have a retroactive2ect, S S S K # C. E., #%'./

$.I?.; I?."hough the last paragraph of section ( o9egulations +o. ( of the ?epartment of 5inancema8es section & of 0ct +o. &%, amending section#(** of the 9evised 0dministrative Code, applicableto all estates the inheritance ta3es due from whichhave not been paid, 0ct +o. &% itself contains noprovisions indicating legislative intent to give itretroactive e2ect. +o such e2ect can be given thestatute by this court.

#%.I?.; I?.; 7+0 )"0"="7).roperly spea8ing, astatute is penal when it imposes punishment for ano2ense committed against the state which, under tConstitution, the 73ecutive has the power to pardonIn common use, however, this sense has beenenlarged to include within the term Kpenal statutesKall statutes which command or prohibit certain actsand establish penalties for their violation, and eventhose which, without e3pressly prohibiting certain


11/23

Page|11

CARPIO, JDP TAXacts, impose a penalty upon their commission.($ C. E., p. ###%./

##.I?.; I?.; I?.; 97M7+=7 0.9evenue laws,generally, which impose ta3es collected by themeans ordinarily resorted to for the collection ofta3es are not classed as penal laws, althoughthere are authorities to the contrary. )ee)utherland, )tatutory Construction, "wineCo. vs. orthington, #*# =. )., *>; #' )up. Ct.,

((; 9ice vs. =. )., * C. C. 0., #%*; (& 5ed., $#%; Com.vs. )tandard 1il Co., #%# a. )t., #(%; )tate vs.heeler, ** ., *&%; '( +ev., #*&./ 0rticle '' of the9evised enal Code is not applicable to the case atbar, and in the absence of clear legislative intent, wecannot give 0ct +o. &% a retroactive e2ect.

#'.I?.; "9=)") 0+? "9=)"77)."he word KtrustK isnot mentioned or used in the will but the intention tocreate one is clear. +o particular or technical wordsare re:uired to create a testamentary trust. S $ C.

E., p. D##./ "he words KtrustK and KtrusteeK, thoughapt for the purpose, are not necessary. In fact, theuse of these two words is not conclusive on the

:uestion that a trust is created. $ C. E., p. D#*./

#&.I?.; I?."here is no doubt that the testatorintended to create a trust. He ordered in his will thatcertain of his properties be 8ept together undisposedduring a @3ed period, for a stated purpose. "heprobate court certainly e3ercised sound judgment inappointing a trustee to carry into e2ect theprovisions of the will. )ee sec. (>', Code of Civilrocedure./

#*.I?.; I?.; 79919 I+ 7+I)H M79)I1+ 15)=4)7C"I1+ 4/, )7C"I1+ #(*&, 97MI)7?0?!I+I)"90"IM7 C1?7."he word KtrusteeK,

appearing in subsection b/ of section #(*&, shouldread K@deicommissaryK or Kcestui :ue trustK. "herewas an obvious mista8e in translation from the)panish to the 7nglish version.

070 from a judgment of the Court of 5irstInstance of Tamboanga. ?e la Costa, E.

"he facts are stated in the opinion of the court.

ablo oren6o and ?el@n Eoven for plainti2-appellant.

)olicitor-eneral Hilado for defendant-appellant.Uoren6o vs. osadas, * hil. &($&D/V

LA#RL, J.:

1n 1ctober *, #$&', the plainti2 ablo oren6o, in his

capacity as trustee of the estate of "homas Hanley,

deceased, brought this action in the Court of 5irst

Instance of Tamboanga against the defendant, Euan

osadas, Er., then the Collector of Internal 9evenue,

for the refund of the amount of ',%('.D*, paid by

the plainti2 as inheritance ta3 on the estate of the

deceased, and for the collection of interst thereon at

the rate of per cent per annum, computed from

)eptember #(, #$&', the date when the aforesaid ta3

was Upaid under protest. "he defendant set up a

counterclaim for #,#$#.'D alleged to be interest du

on the ta3 in :uestion and which was not included i

the original assessment. 5rom the decision of the

Court of 5irst Instance of Tamboanga dismissing bo

the plainti2As complaint and the defendantAs

counterclaim, both parties appealed to this court.

It appears that on !ay 'D, #$'', one "homas Hanle

died in Tamboanga, Tamboanga, leaving a will

73hibit (/ and considerable amount of real andpersonal properties. 1n june #*, #$'', proceedings

for the probate of his will and the settlement and

distribution of his estate were begun in the Court of

5irst Instance of Tamboanga. "he will was admitted

to probate. )aid will provides, among other things, a

followsF

*. I direct that any money left by me be give

to my nephew !atthew Hanley.

(. I direct that all real estate owned by me a

the time of my death be not sold or otherwisdisposed of for a period of ten #%/ years aft

my death, and that the same be handled and

managed by the e3ecutors, and proceeds

thereof to be given to my nephew, !atthew

Hanley, at Castlemore, 4allaghaderine,

County of 9osecommon, Ireland, and that he

be directed that the same be used only for t

education of my brotherAs children and their

descendants.

. I direct that ten #%/ years after my death

my property be given to the above mentione!atthew Hanley to be disposed of in the way

he thin8s most advantageous.

3 3 3 3 3 3 3 3 3

>. I state at this time I have one brother livin

named !alachi Hanley, and that my nephew

!atthew Hanley, is a son of my said brother,

!alachi Hanley.

"he Court of 5irst Instance of Tamboanga considere

it proper for the best interests of ther estate to

appoint a trustee to administer the real properties

which, under the will, were to pass to !atthew

Hanley ten years after the two e3ecutors named in

the will, was, on !arch >, #$'*, appointed trustee.

!oore too8 his oath of o


12/23

Page|12

CARPIO, JDP TAX?uring the incumbency of the plainti2 as

trustee, the defendant Collector of Internal

9evenue, alleging that the estate left by the

deceased at the time of his death consisted of

realty valued at 'D,$'% and personalty valued

at #,*(, and allowing a deduction of *>%.>#,

assessed against the estate an inheritance ta3

in the amount of #,*&*.'* which, together with

the penalties for deli:uency in payment

consisting of a # per cent monthly interest from Euly#, #$ to the date of payment and a surcharge of

'( per cent on the ta3, amounted to ',%('.D*. 1n

!arch #(, #$&', the defendant @led a motion in the

testamentary proceedings pending before the Court

of 5irst Instance of Tamboanga )pecial proceedings

+o. &%'/ praying that the trustee, plainti2 herein, be

ordered to pay to the overnment the said sum of

',%('.D*. "he motion was granted. 1n )eptember

#(, #$&', the plainti2 paid said amount under

protest, notifying the defendant at the same time

that unless the amount was promptly refunded suit

would be brought for its recovery. "he defendantoverruled the plainti2As protest and refused to refund

the said amount hausted, plainti2 went to court with

the result herein above indicated.

In his appeal, plainti2 contends that the lower court

erredF

I. In holding that the real property of "homas

Hanley, deceased, passed to his instituted

heir, !atthew Hanley, from the moment of the

death of the former, and that from the time,

the latter became the owner thereof.

II. In holding, in e2ect, that there was

deli:uency in the payment of inheritance ta3

due on the estate of said deceased.

III. In holding that the inheritance ta3 in

:uestion be based upon the value of the

estate upon the death of the testator, and

not, as it should have been held, upon the

value thereof at the e3piration of the period of

ten years after which, according to the

testatorAs will, the property could be and wasto be delivered to the instituted heir.

IM. In not allowing as lawful deductions, in the

determination of the net amount of the estate

subject to said ta3, the amounts allowed by

the court as compensation to the KtrusteesK

and paid to them from the decedentAs estate.

M. In not rendering judgment in favor of the

plainti2 and in denying his motion for new

trial.

"he defendant-appellant contradicts the theories of

the plainti2 and assigns the following error besidesF

"he lower court erred in not ordering the

plainti2 to pay to the defendant the sum of

#,#$#.'D, representing part of the interest a

the rate of # per cent per month from 0pril

#%, #$'*, to Eune &%, #$, which the plainti

had failed to pay on the inheritance ta3

assessed by the defendant against the estat

of "homas Hanley.

"he following are the principal :uestions to be

decided by this court in this appealF a/ hen does

the inheritance ta3 accrue and when must it be

satis@edN b/ )hould the inheritance ta3 be comput

on the basis of the value of the estate at the time o

the testatorAs death, or on its value ten years laterNc/ In determining the net value of the estate subjec

to ta3, is it proper to deduct the compensation due

trusteesN d/ hat law governs the case at barN

)hould the provisions of 0ct +o. &% favorable to

the ta3-payer be given retroactive e2ectN e/ Has

there been deli:uency in the payment of the

inheritance ta3N If so, should the additional interest

claimed by the defendant in his appeal be paid by

the estateN 1ther points of incidental importance,

raised by the parties in their briefs, will be touched

upon in the course of this opinion.

a/ "he accrual of the inheritance ta3 is distinct from

the obligation to pay the same. )ection #(& as

amended, of the 0dministrative Code, imposes the

ta3 upon Kevery transmission by virtue of

inheritance, devise, be:uest, giftmortis causa, or

advance in anticipation of inheritance,devise, or

be:uest.K "he ta3 therefore is upon transmission or

the transfer or devolution of property of a decedent

made e2ective by his death. # C. E., p. #($'./ It is

in reality an e3cise or privilege ta3 imposed on the

right to succeed to, receive, or ta8e property by or

under a will or the intestacy law, or deed, grant, orgift to become operative at or after death. 0cording

to article (D of the Civil Code, Kthe rights to the

succession of a person are transmitted from the

moment of his death.K KIn other wordsK, said

0rellano, C. E., K. . . the heirs succeed immediately t

all of the property of the deceased ancestor. "he

property belongs to the heirs at the moment of the

death of the ancestor as completely as if the

ancestor had e3ecuted and delivered to them a dee

for the same before his death.K 4ondad vs. 4ondad


13/23

Page|10

CARPIO, JDP TAX&* hil., '&'. See also, !ijares vs. +ery, & hil.,

#$(; )uilong G Co., vs. Chio-"aysan, #' hil., #&;

ubrico vs. 0rbado, #' hil., &$#; Innocencio vs.

at-andan, #* hil., *$#; 0liasas vs.0lcantara,

# hil., *>$; Ilustre vs. 0laras 5rondosa, #D

hil., &'#; !alahacan vs. Ignacio, #$ hil., *&*;

4owa vs. 4riones, &> hil., 'D; 1sario vs. 1sario

G Quchausti )teamship Co., *# hil., ( 5ule

vs. 5ule, * hil., D; ?ais vs. Court of 5irst

Instance of Capi6, (# hil., &$; 4aun vs. Heirs of4aun, (& hil., (*./ lainti2, however, asserts that

while article (D of the Civil Code is applicable to

testate as well as intestate succession, it operates

only in so far as forced heirs are concerned. 4ut the

language of article (D of the Civil Code is broad and

ma8es no distinction between di2erent classes of

heirs. "hat article does not spea8 of forced heirs; it

does not even use the word KheirK. It spea8s of the

rights of succession and the transmission thereof

from the moment of death. "he provision of section

'( of the Code of Civil rocedure regarding the

authentication and probate of a will as a necessarycondition to e2ect transmission of property does not

a2ect the general rule laid down in article (D of the

Civil Code. "he authentication of a will implies its due

e3ecution but once probated and allowed the

transmission is e2ective as of the death of the

testator in accordance with article (D of the Civil

Code. hatever may be the time when actual

transmission of the inheritance ta8es place,

succession ta8es place in any event at the moment

of the decedentAs death. "he time when the heirs

legally succeed to the inheritance may di2er from

the time when the heirs actually receive suchinheritance. K'oco importaK, says !anresa

commenting on article (D of the Civil Code, K*ue

desde el falleimiento del causante, hasta *ue el

heredero o legatario entre en posesion de los bienes

de la herencia o del legado, transcurra mucho o poco

tiempo, pues la ad*uisicion ha de retrotraerse al

momento de la muerte, y asi lo ordena el articulo

++, *ue debe considerarse como complemento del

presente.K ( !anresa, &%(; see also, art. **%, par. #,

Civil Code./ "homas Hanley having died on !ay 'D,

#$'', the inheritance ta3 accrued as of the date.

5rom the fact, however, that "homas Hanley died on

!ay 'D, #$'', it does not follow that the obligation to

pay the ta3 arose as of the date. "he time for the

payment on inheritance ta3 is clearly @3ed by section

#(** of the 9evised 0dministrative Code as amended

by 0ct +o. &%, in relation to section #(*& of the

same Code. "he two sections followF

)7C. #(*&. &"emption of certain ac*uisitions

and transmissions. "he following shall not

be ta3edF

a/ "he merger of the usufruct in the

owner of the na8ed title.

b/ "he transmission or delivery of th

inheritance or legacy by the @duciary

heir or legatee to the trustees.

c/ "he transmission from the @rst he

legatee, or donee in favor of another

bene@ciary, in accordance with the

desire of the predecessor.

In the last two cases, if the scale of ta3ation

appropriate to the new bene@ciary is greater

than that paid by the @rst, the former must

pay the di2erence.

)7C. #(**. When ta" to be paid. "he ta3

@3ed in this article shall be paidF

a/ In the second and third cases of thne3t preceding section, before

entrance into possession of the

property.

b/ In other cases, within the si3

months subse:uent to the death of th

predecessor; but if judicial

testamentary or intestate proceeding

shall be instituted prior to the

e3piration of said period, the paymen

shall be made by the e3ecutor or

administrator before delivering to eac

bene@ciary his share.

If the ta3 is not paid within the time

hereinbefore prescribed, interest at the rate

twelve per centum per annum shall be adde

as part of the ta3; and to the ta3 and interes

due and unpaid within ten days after the dat

of notice and demand thereof by the collecto

there shall be further added a surcharge of

twenty-@ve per centum.

0 certi@ed of all letters testamentary or of

admisitration shall be furnished the Collecto

of Internal 9evenue by the Cler8 of Court

within thirty days after their issuance.

It should be observed in passing that the word

KtrusteeK, appearing in subsection b/ of section

#(*&, should read K@deicommissaryK or Kcestui *ue

trustK. "here was an obvious mista8e in translation

from the )panish to the 7nglish version.


14/23

Page|1

CARPIO, JDP TAX"he instant case does fall under subsection a/,

but under subsection b/, of section #(**

above-:uoted, as there is here no @duciary

heirs, @rst heirs, legatee or donee. =nder the

subsection, the ta3 should have been paid

before the delivery of the properties in :uestion

to . E. !. !oore as trustee on !arch #%, #$'*.

b/ "he plainti2 contends that the estate of

"homas Hanley, in so far as the real properties areconcerned, did not and could not legally pass to the

instituted heir, !atthew Hanley, until after the

e3piration of ten years from the death of the testator

on !ay 'D, #$'' and, that the inheritance ta3 should

be based on the value of the estate in #$&', or ten

years after the testatorAs death. "he plainti2

introduced evidence tending to show that in #$&' the

real properties in :uestion had a reasonable value of

only (,D>D. "his amount added to the value of the

personal property left by the deceased, which the

plainti2 admits is #,*(, would generate an

inheritance ta3 which, e3cluding deductions, interestand surcharge, would amount only to about #$.('.

If death is the generating source from which the

power of the estate to impose inheritance ta3es

ta8es its being and if, upon the death of the

decedent, succession ta8es place and the right of the

estate to ta3 vests instantly, the ta3 should be

measured by the vlaue of the estate as it stood at

the time of the decedentAs death, regardless of any

subse:uent contingency value of any subse:uent

increase or decrease in value. # C. E., pp. #$',

#$&; ' 9. C. ., p. '&'; 4la8emore and 4ancroft,Inheritance "a3es, p. #&D. See alsoRnowlton vs.

!oore, #D> =.)., *#; '% )up. Ct. 9ep., D*D; ** aw.

ed., $$./ K"he right of the state to an inheritance ta3

accrues at the moment of death, and hence is

ordinarily measured as to any bene@ciary by the

value at that time of such property as passes to him.

)ubse:uent appreciation or depriciation is

immaterial.K 9oss, Inheritance "a3ation, p. D'./

1ur attention is directed to the statement of the rule

in Cyclopedia of aw of and rocedure vol. &D, pp.

#(D*, #(D(/ that, in the case of contingentremainders, ta3ation is postponed until the estate

vests in possession or the contingency is settled. "his

rule was formerly followed in +ew Qor8 and has been

adopted in Illinois, !innesota, !assachusetts, 1hio,

ennsylvania and isconsin. "his rule, horever, is by

no means entirely satisfactory either to the estate or

to those interested in the property ' 9. C. ., p.

'./. 9eali6ing, perhaps, the defects of its anterior

system, we @nd upon e3amination of cases and

authorities that +ew Qor8 has varied and now

re:uires the immediate appraisal of the postponed

estate at its clear mar8et value and the payment

forthwith of the ta3 on its out of the corpusof the

estate transferred. In re Manderbilt, #D' +. Q., $;

+. 7., D>'; In reHuber, > +. Q. 0pp. ?iv., *(>; >&

Q. )upp., D$; 7state of "racy, #D$ +. Q., (%#; D' +. Q

(#$; 7state of 4re6, #D' +. Q., %$; * +. 7., $(>;

7state of ost, >( 0pp. ?iv., ##; >' +. Q. )upp.,

#%D$. -ide also, )altoun vs. ord 0dvocate, # eter.

)c. 0pp., $D%; & !ac:. H. ., ($; '& 7ng. 9ul. Cas.,

>>>./ California adheres to this new rule )tats. #$%sec. (, p. &*&/.

4ut whatever may be the rule in other jurisdictions,

we hold that a transmission by inheritance is ta3abl

at the time of the predecessorAs death,

notwithstanding the postponement of the actual

possession or enjoyment of the estate by the

bene@ciary, and the ta3 measured by the value of

the property transmitted at that time regardless of

appreciation or depreciation.

c/ Certain items are re:uired by law to be deductedfrom the appraised gross in arriving at the net value

of the estate on which the inheritance ta3 is to be

computed sec. #(&$, 9evised 0dministrative Code/

In the case at bar, the defendant and the trial court

allowed a deduction of only *>%.>#. "his sum

represents the e3penses and disbursements of the

e3ecutors until !arch #%, #$'*, among which were

their fees and the proven debts of the deceased. "h

plainti2 contends that the compensation and fees o

the trustees, which aggregate #,#>D.'> 73hibits C

00, 77, , HH, EE, , ++, 11/, should also be

deducted under section #(&$ of the 9evised0dministrative Code which provides, in part, as

followsF KIn order to determine the net sum which

must bear the ta3, when an inheritance is concerne

there shall be deducted, in case of a resident, . . . th

judicial e3penses of the testamentary or intestate

proceedings, . . . .K

0 trustee, no doubt, is entitled to receive a fair

compensation for his services 4arney vs. )aunders

# How., (&(; #* aw. ed., #%*D/. 4ut from this it

does not follow that the compensation due him may

lawfully be deducted in arriving at the net value ofthe estate subject to ta3. "here is no statute in the

hilippines which re:uires trusteesA commissions to

be deducted in determining the net value of the

estate subject to inheritance ta3 # C. E., p. #D%(/.

5urthermore, though a testamentary trust has been

created, it does not appear that the testator intende

that the duties of his e3ecutors and trustees should

be separated. Ibid.; In re Mannec8As 7state, ## +.

)upp., >$&; #D( 0pp. ?iv., &&; In re CollardAs 7state

## +. Q. )upp., *((./ 1n the contrary, in paragraph

( of his will, the testator e3pressed the desire that


15/23

Page|1

CARPIO, JDP TAXhis real estate be handled and managed by his

e3ecutors until the e3piration of the period of

ten years therein provided. Eudicial e3penses

are e3penses of administration # C. E., p.

#D%(/ but, in )tate vs. Hennepin County robate

Court ##' +. ., >D>; #%# !inn., *>(/, it was

saidF K. . . "he compensation of a trustee,

earned, not in the administration of the estate,

but in the management thereof for the bene@t

of the legatees or devises, does not come properlywithin the class or reason for e3empting

administration e3penses. . . . )ervice rendered in that

behalf have no reference to closing the estate for the

purpose of a distribution thereof to those entitled to

it, and are not re:uired or essential to the perfection

of the rights of the heirs or legatees. . . . "rusts . . . of

the character of that here before the court, are

created for the the bene@t of those to whom the

property ultimately passes, are of voluntary creation,

and intended for the preservation of the estate. +o

sound reason is given to support the contention that

such e3penses should be ta8en into consideration in@3ing the value of the estate for the purpose of this

ta3.K

d/ "he defendant levied and assessed the

inheritance ta3 due from the estate of "homas

Hanley under the provisions of section #(** of the

9evised 0dministrative Code, as amended by section

& of 0ct +o. &%. 4ut 0ct +o. &% went into e2ect

on Eanuary #, #$&%. It, therefore, was not the law in

force when the testator died on !ay 'D, #$''. "he

law at the time was section #(** above-mentioned,

as amended by 0ct +o. &%, which too8 e2ect on!arch $, #$''.

It is well-settled that inheritance ta3ation is governed

by the statute in force at the time of the death of the

decedent ' 9. C. ., p. '%; * Cooley on "a3ation,

*th ed., p. &*#/. "he ta3payer can not foresee and

ought not to be re:uired to guess the outcome of

pending measures. 1f course, a ta3 statute may be

made retroactive in its operation. iability for ta3es

under retroactive legislation has been Kone of the

incidents of social life.K )eattle vs. Relleher, #$( =.

)., &%; *$ aw. ed., '&' )up. Ct. 9ep., **./ 4utlegislative intent that a ta3 statute should operate

retroactively should be perfectly clear. )cwab vs.

?oyle, *' )up. Ct. 9ep., *$#; )mietan8a vs. 5irst "rust

G )avings 4an8, '(D =. )., %'; )toc8dale vs.

Insurance Co., '% all., &'&; unch vs. "urrish, '*D =.

)., ''#./ K0 statute should be considered as

prospective in its operation, whether it enacts,

amends, or repeals an inheritance ta3, unless the

language of the statute clearly demands or

e3presses that it shall have a retroactive e2ect, . . . .K

# C. E., . #%'./ "hough the last paragraph of

section ( of 9egulations +o. ( of the ?epartment o

5inance ma8es section & of 0ct +o. &%, amending

section #(** of the 9evised 0dministrative Code,

applicable to all estates the inheritance ta3es due

from which have not been paid, 0ct +o. &% itself

contains no provisions indicating legislative intent t

give it retroactive e2ect. +o such e2ect can begiven

the statute by this court.

"he defendant Collector of Internal 9evenuemaintains, however, that certain provisions of 0ct +

&% are more favorable to the ta3payer than those

of 0ct +o. &%, that said provisions are penal in

nature and, therefore, should operate retroactively

conformity with the provisions of article '' of the

9evised enal Code. "his is the reason why he

applied 0ct +o. &% instead of 0ct +o. &%. Indee

under 0ct +o. &%, #/ the surcharge of '( per cen

is based on the ta3 only, instead of on both the ta3

and the interest, as provided for in 0ct +o. &%, an

'/ the ta3payer is allowed twenty days from notice

and demand by rthe Collector of Internal 9evenuewithin which to pay the ta3, instead of ten days only

as re:uired by the old law.

roperly spea8ing, a statute is penal when it impose

punishment for an o2ense committed against the

state which, under the Constitution, the 73ecutive

has the power to pardon. In common use, however,

this sense has been enlarged to include within the

term Kpenal statutesK all status which command or

prohibit certain acts, and establish penalties for the

violation, and even those which, without e3pressly

prohibiting certain acts, impose a penalty upon theicommission ($ C. E., p. ###%/. 9evenue laws,

generally, which impose ta3es collected by the

means ordinarily resorted to for the collection of

ta3es are not classed as penal laws, although there

are authorities to the contrary. See )utherland,

)tatutory Construction, "wine Co. vs.

orthington, #*# =. )., *>; #' )up. Ct., ((; 9ice vs

=. )., * C. C. 0., #%*; (& 5ed., $#%; Com. vs. )tanda

1il Co., #%# a. )t., #(%; )tate vs. heeler, ** .,

*&%; '( +ev. #*&./ 0rticle '' of the 9evised enal

Code is not applicable to the case at bar, and in the

absence of clear legislative intent, we cannot give0ct +o. &% a retroactive e2ect.

e/ "he plainti2 correctly states that the liability to

pay a ta3 may arise at a certain time and the ta3

may be paid within another given time. 0s stated by

this court, Kthe mere failure to pay oneAs ta3 does n

render one delin:ent until and unless the entire

period has eplased within which the ta3payer is

authori6ed by law to ma8e such payment without

being subjected to the payment of penalties for


16/23

Page|16

CARPIO, JDP TAXfasilure to pay his ta3es within the prescribed

period.K =. ). vs. abadan, ' hil., '&$./

"he defendant maintains that it was the duty of

the e3ecutor to pay the inheritance ta3 before

the delivery of the decedentAs property to the

trustee. )tated otherwise, the defendant

contends that delivery to the trustee was

delivery to the cestui *ue trust, the bene@ciery

in this case, within the meaning of the @rstparagraph of subsection b/ of section #(** of the

9evised 0dministrative Code. "his contention is well

ta8en and is sustained. "he appointment of . E. !.

!oore as trustee was made by the trial court in

conformity with the wishes of the testator as

e3pressed in his will. It is true that the word KtrustK is

not mentioned or used in the will but the intention to

create one is clear. +o particular or technical words

are re:uired to create a testamentary trust $ C. E.,

p. D##/. "he words KtrustK and KtrusteeK, though apt

for the purpose, are not necessary. In fact, the use of

these two words is not conclusive on the :uestionthat a trust is created $ C. E., p. D#*/. K"o create a

trust by will the testator must indicate in the will his

intention so to do by using language su$; (D aw. ed., #%>/. hen

!oore accepted the trust and too8 possesson of the

trust estate he thereby admitted that the estate

belonged not to him but to his cestui *ue

trust "olentino vs. Mitug, &$ hil.,#', cited in ( C.

E., p. $', n. &/. He did not ac:uire any bene@cial

interest in the estate. He too8 such legal estate only

as the proper e3ecution of the trust re:uired ( C.

p. ('>/ and, his estate ceased upon the ful@llment o

the testatorAs wishes. "he estate then vestedabsolutely in the bene@ciary ( C. E., p. (*'/.

"he highest considerations of public policy also

justify the conclusion we have reached. ere we to

hold that the payment of the ta3 could be postpone

or delayed by the creation of a trust of the type at

hand, the result would be plainly disastrous.

"estators may provide, as "homas Hanley has

provided, that their estates be not delivered to thei

bene@ciaries until after the lapse of a certain period

of time. In the case at bar, the period is ten years. I

other cases, the trust may last for @fty years, or for longer period which does not o2end the rule agains

petuities. "he collection of the ta3 would then be le

to the will of a private individual. "he mere

suggestion of this result is a su

)up. Ct. 9ep., &*%; *& aw. ed., D*%./ hile courts

will not enlarge, by construction, the governmentAs

power of ta3ation 4romley vs. !cCaughn, '>% =. )

#'*; D* aw. ed., ''; (% )up. Ct. 9ep., */ they alswill not place upon ta3 laws so loose a construction

as to permit evasions on merely fanciful and

insubstantial distictions. =. ). vs. atts, # 4ond.,

(>%; 5ed. Cas. +o. #,(&; =. ). vs. igglesirth, '

)tory, &$; 5ed. Cas. +o. #,$%, followed in 5roelic

G Ruttner vs. Collector of Customs, #> hil., *#, *>

Castle 4ros., olf G )ons vs. !cCoy, '# hil., &%%;

!uWo6 G Co. vs. Hord, #' hil., '*; Hong8ong G

)hanghai 4an8ing Corporation vs. 9a2erty, &$ hil.,

#*(; u6on )tevedoring Co. vs. "rinidad, *& hil.,

>%&./ hen proper, a ta3 statute should be construe


17/23

Page|13

CARPIO, JDP TAXto avoid the possibilities of ta3 evasion.

Construed this way, the statute, without

resulting in injustice to the ta3payer, becomes

fair to the government.

"hat ta3es must be collected promptly is a

policy deeply intrenched in our ta3 system.

"hus, no court is allowed to grant injunction to

restrain the collection of any internal revenue

ta3 sec. #(D>, 9evised 0dministrative Code;)arasola vs. "rinidad, *% hil., '('/. In the case of

im Co Chui vs. osadas *D hil., *#/, this court

had occassion to demonstrate trenchment adherence

to this policy of the law. It held that Kthe fact that on

account of riots directed against the Chinese on

1ctober #>, #$, and '%, #$'*, they were prevented

from praying their internal revenue ta3es on time

and by mutual agreement closed their homes and

stores and remained therein, does not authori6e the

Collector of Internal 9evenue to e3tend the time

prescribed for the payment of the ta3es or to accept

them without the additional penalty of twenty @veper cent.K )yllabus, +o. &./

K. . . It is of the utmost importance,K said the

)upreme Court of the =nited )tates, K. . . that the

modes adopted to enforce the ta3es levied should be

interfered with as little as possible. 0ny delay in the

proceedings of the o; '% aw. ed., (, ; Churchill and "ait

vs. 9a2erty, &' hil., (>%./

It results that the estate which plainti2 represents

has been delin:uent in the payment of inheritance

ta3 and, therefore, liable for the payment of interest

and surcharge provided by law in such cases.

"he delin:uency in payment occurred on !arch #%,

#$'*, the date when !oore became trustee. "he

interest due should be computed from that date and

it is error on the part of the defendant to compute it

one month later. "he provisions cases is mandatory

see and cf. im Co Chui vs. osadas, supra/, andneither the Collector of Internal 9evenuen or this

court may remit or decrease such interest, no matter

how heavily it may burden the ta3payer.

"o the ta3 and interest due and unpaid within ten

days after the date of notice and demand thereof by

the Collector of Internal 9evenue, a surcharge of

twenty-@ve per centum should be added sec. #(**,

subsec. b/, par. ', 9evised 0dministrative Code/.

?emand was made by the ?eputy Collector of

Internal 9evenue upon !oore in a communiction

dated 1ctober #, #$ 73hibit '$/. "he date @3ed

for the payment of the ta3 and interest was

+ovember &%, #$. +ovember &% being an oyears, months and ( days. "o the ta3 and interest

thus computed should be added the sum of D'*.>>

representing a surhcarge of '( per cent on both the

ta3 and interest, and also #%, the compromise sum

@3ed by the defendant 73h. '$/, giving a grand tot

of &,&*.*&.

0s the plainti2 has already paid the sum of

',%('.D*, only the sums of #,(>#.$ is legally due

from the estate. "his last sum is &$%.*' more than


18/23

Page|18

CARPIO, JDP TAXthe amount demanded by the defendant in his

counterclaim. 4ut, as we cannot give the

defendant more than what he claims, we must

hold that the plainti2 is liable only in the sum of

#,#$#.'D the amount stated in the

counterclaim.

"he judgment of the lower court is accordingly

modi@ed, with costs against the plainti2 in both

instances. )o ordered

4No. 0903.


19/23

Page|19

CARPIO, JDP TAXdonations, the plainti2s too8 possession of the

said lands, received the fruits thereof and

obtained the corresponding transfer certi@cates

of title.

1n Eanuary (, #$', the donor died in the City

of !anila without leaving any forced heir and

her will which was admitted to probate, she

be:ueathed to each of the donees the sum of

(,%%%. 0fter the estate had been distributed amongthe instituted legatees and before delivery of their

respective shares, the appellee herein, as Collector of

Internal 9evenue, ruled that the appellants, as

donees and legatees, should pay as inheritance ta3

the sums of #,D& and #&,$(#.*(, respectively. 1f

these sums #(,#$#.*> was levied as ta3 on the

donation to Concepcion Midal de 9oces and

#,*>#.(' on her legacy, and, li8ewise, #',&>>.$(

was imposed upon the donation made to 7lvira Midal

de 9ichards and #,*'.(% on her legacy. 0t @rst the

appellants refused to pay the aforementioned ta3es

but, at the insistence of the appellee and in order notto delay the adjudication of the legacies, they agreed

at last, to pay them under protest.

"he appellee @led a demurrer to the complaint on the

ground that the facts alleged therein were not

su


20/23

Page|25

CARPIO, JDP TAXstrictly in accordance with the provisions of the

Eones aw on that matter should not be

overloo8ed and that, in a compilation of laws

such as the 0dministrative Code, it is but

natural and proper that provisions referring to

diverse matters should be found. 0yson and

Ignacio vs. rovincial 4oard of 9i6al and

!unicipal Council of +avotas, &$ hil., $./

"he appellants :uestion the power of the egislatureto impose ta3es on the transmission of real estate

that ta8es e2ect immediately and during the lifetime

of the donor, and allege as their reason that such ta3

parta8es of the nature of the land ta3 which the law

has already created in another part of the

0dministrative Code. ithout ma8ing e3press

pronouncement on this :uestion, for it is

unnecessary, we wish to state that such is not the

case in these instance. "he ta3 collected by the

appellee on the properties donated in #$'( really

constitutes an inheritance ta3 imposed on the

transmission of said properties in contemplation or inconsideration of the donorAs death and under the

circumstance that the donees were later instituted as

the formerAs legatees. 5or this reason, the law

considers such transmissions in the form of gifts inter

vivos, as advances on inheritance and nothing

therein violates any constitutional provision,

inasmuch as said legislation is within the power of

the egislature.

'roperty Sub0ect to Inheritance /a". "he

inheritance ta3 ordinarily applies to all

property within the power of the state toreach passing by will or the laws regulating

intestate succession or by gift inter vivosin

the manner designated by statute, whether

such property be real or personal, tangible or

intangible, corporeal or incorporeal. '

9.C.., p. '%>, par. #DD./

In the case of /uason and /uason vs. 'osadas, supra,

it was also held that section #(*% of the

0dministrative Code did not violate the constitutional

provision regarding uniformity of ta3ation. It cannot

be null and void on this ground because it e:uallysubjects to the same ta3 all of those donees who

later become heirs, legatees or donees mortis

causaby the will of the donor. "here would be a

repugnant and arbitrary e3ception if the provisions of

the law were not applicable to all donees of the same

8ind. In the case cited above, it was saidF K0t any

rate the argument adduced against its

constitutionality, which is the lac8 of =niformity, does

not seem to be well founded. It was said that under

such an interpretation, while a donee inter vivoswho,

after the predecessorAs death proved to be an heir, a

legatee, or a donee mortis causa, would have to pa

the ta3, another donee inter vivoswho did not pro

to he an heir, a legatee, or a donee mortis causao

the predecessor, would be e3empt from such a ta3.

4ut as these are two di2erent cases, the principle o

uniformity is inapplicable to them.K

"he last :uestion of a procedural nature arising from

the case at bar, which should be passed upon, is

whether the case, as it now stands, can be decidedon the merits or should be remanded to the court a

*uofor further proceedings. 0ccording to our view

the case, it follows that, if the gifts received by the

appellants would have the right to recover the sum

of money claimed by them. Hence the necessity of

ascertaining whether the complaint contains an

allegation to that e2ect. e have e3amined said

complaint and found nothing of that nature. 1n the

contrary, it be may be inferred from the allegations

contained in paragraphs ' and D thereof that said

donations inter vivoswere made in consideration o

the donorAs death. e refer to the allegations thatsuch transmissions were e2ected in the month of

!arch, #$'(, that the donor died in Eanuary, #$',

and that the donees were instituted legatees in the

donorAs will which was admitted to probate. It is from

these allegations, especially the last, that we infer a

presumption0uris tantumthat said donations were

made mortis causaand, as such, are subject to th

payment of inheritance ta3.

herefore, the demurrer interposed by the appellee

was well-founded because it appears that the

complaint did not allege fact su


21/23

Page|21

CARPIO, JDP TAXsubjects the plainti2 and appellant to the

payment of the inheritance ta3 upon the gift

'>&*#&%

*

* HIII+7 9719") 0++1"0"7?

?ison vs. osadas

inter vivos he received from his father and which

really was an advancement upon the inheritance he

would be entitled to receive upon the death of the

donor.

'.Id.; Id.; Id.)ection #(*% of the 0dministrative

Code does not ta3 gifts per se, but only when those

gifts are made to those who shall prove to be the

heirs, devisees, legatees or donees mortis causa of

the donor.

&.Id.; Id.; Id.; KHeirsK."he e3pression in section

#(*% of the 0dministrative Code Kthose who, after his

death, shall prove to be his heirsK includes those who

are given the status and rights of heirs, regardless of

the :uantity of property they may receive as such

heirs.

070 from a judgment of the Court of 5irst

Instance of ampanga. 9eyes, E.

"he facts are stated in the opinion of the court.

!arcelino 0guas for plainti2-appellant.

0ttorney-eneral Earanilla for defendant-appellant.

U?ison vs. osadas, (D hil., *(#$&'/V

#TT, J.:

"his is an appeal from the decision of the Court of

5irst Instance of ampanga in favor of the defendant

Euan osadas, Er., Collector of Internal 9evenue, in a

suit @led by the plainti2s, uis . ?ison, for therecovery of an inheritance ta3 in the sum of

',>%>.D& paid under protest. "he petitioner alleged

in his complaint that the ta3 is illegal because he

received the property, which is the basis of the ta3,

from his father before his death by a deed of

gift inter vivos which was duly accepted and

registered before the death of his father. "he

defendant answered with a general denial and with a

counterdemand for the sum of #,'*(.( which it

was alleged is a balance still due and unpaid on

account of said ta3. "he plainti2 replied to the

counterdemand with a general denial. "he courta

*uo held that the cause of action set up in the

counterdemand was not proven and dismissed the

same. 4oth sides appealed to this court, but the

cross-complaint and appeal of the Collector of

Internal 9evenue were dismissed by this court on

!arch #D, #$&', on motion of the 0ttorney-

eneral.1a$phil.net

"he only evidence introduced at the trial of this

cause was the proof of payment of the ta3 under

protest, as stated, and the deed of gift e3ecuted by

5eli3 ?ison on 0pril $, #$'>, in favor of his sons uis

. ?ison, the plainti2-appellant. "his deed of gift

transferred twenty-two tracts of land to the donee,

reserving to the donor for his life the usufruct of

three tracts. "his deed was ac8nowledged by the

donor before a notary public on 0pril #, #$'>. uis

. ?ison, on 0pril #D, #$'>, formally accepted said

gift by an instrument in writing which he

ac8nowledged before a notary public on 0pril '%,#$'>.

0t the trial the parties agreed to and @led the

following ingenious stipulation of factF

#. "hat ?on 5eli3 ?ison died on 0pril '#, #$'

'. "hat ?on 5eli3 ?ison, before his death,

made a gift inter vivos in favor of the plainti2

uis . ?ison of all his property according to

deed of gift 73hibit ?/ which includes all the

property of ?on 5eli3 ?i6on;

&. "hat the plainti2 did not receive property

any 8ind of ?on 5eli3 ?ison upon the death o

the latter;

*. "hat ?on uis . ?ison was the legitimate

and only child of ?on 5eli3 ?ison.

It is inferred from 73hibit ? that 5eli3 ?ison was a

widower at the time of his death.

"he theory of the plainti2-appellant is that he

received and holds the property mentioned by a

consummated gift and that 0ct +o. '%# Chapter *

of the 0dministrative Code/ being the inheritance ta

statute, does not ta3 gifts. "he provision directly he

involved is section #(*% of the 0dministrative Code

which reads a

estate - full case

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