G.R. No.

123206 March 22, 2000

COMMISSIONER OF INTERNAL REVENUE, petitioner,

vs.
COURT OF APPEALS, COURT OF TAX APPEALS and JOSEFINA P. PAJONAR, as
Administratrix of the Estate of Pedro P. Pajonar, respondents.

RESOLUTION

GONZAGA-REYES, J.:

Assailed in this petition for review on certiorari is the December 21, 1995 Decision1 of the Court of
Appeals2 in CA-G.R. Sp. No. 34399 affirming the June 7, 1994 Resolution of the Court of Tax
Appeals in CTA Case No. 4381 granting private respondent Josefina P. Pajonar, as administratrix of
the estate of Pedro P. Pajonar, a tax refund in the amount of P76,502.42, representing erroneously
paid estate taxes for the year 1988.

Pedro Pajonar, a member of the Philippine Scout, Bataan Contingent, during the second World War,
was a part of the infamous Death March by reason of which he suffered shock and became insane.
His sister Josefina Pajonar became the guardian over his person, while his property was placed
under the guardianship of the Philippine National Bank (PNB) by the Regional Trial Court of
Dumaguete City, Branch 31, in Special Proceedings No. 1254. He died on January 10, 1988. He
was survived by his two brothers Isidro P. Pajonar and Gregorio Pajonar, his sister Josefina Pajonar,
nephews Concordio Jandog and Mario Jandog and niece Conchita Jandog.

On May 11, 1988, the PNB filed an accounting of the decedent's property under guardianship valued
at P3,037,672.09 in Special Proceedings No. 1254. However, the PNB did not file an estate tax
return, instead it advised Pedro Pajonar's heirs to execute an extrajudicial settlement and to pay the
taxes on his estate. On April 5, 1988, pursuant to the assessment by the Bureau of Internal Revenue
(BIR), the estate of Pedro Pajonar paid taxes in the amount of P2,557.

On May 19, 1988, Josefina Pajonar filed a petition with the Regional Trial Court of Dumaguete City
for the issuance in her favor of letters of administration of the estate of her brother. The case was
docketed as Special Proceedings No. 2399. On July 18, 1988, the trial court appointed Josefina
Pajonar as the regular administratrix of Pedro Pajonar's estate.

On December 19, 1988, pursuant to a second assessment by the BIR for deficiency estate tax, the
estate of Pedro Pajonar paid estate tax in the amount of P1,527,790.98. Josefina Pajonar, in her
capacity as administratrix and heir of Pedro Pajonar's estate, filed a protest on January 11, 1989 with
the BIR praying that the estate tax payment in the amount of P1,527,790.98, or at least some portion
of it, be returned to the heirs. 3

However, on August 15, 1989, without waiting for her protest to be resolved by the BIR, Josefina
Pajonar filed a petition for review with the Court of Tax Appeals (CTA), praying for the refund of
P1,527,790.98, or in the alternative, P840,202.06, as erroneously paid estate tax. 4 The case was
docketed as CTA Case No. 4381.
On May 6, 1993, the CTA ordered the Commissioner of Internal Revenue to refund Josefina Pajonar
the amount of P252,585.59, representing erroneously paid estate tax for the year 1988. 5 Among the
deductions from the gross estate allowed by the CTA were the amounts of P60,753 representing the
notarial fee for the Extrajudicial Settlement and the amount of P50,000 as the attorney's fees in
Special Proceedings No. 1254 for guardianship. 6

On June 15, 1993, the Commissioner of Internal Revenue filed a motion for reconsideration 7 of the
CTA's May 6, 1993 decision asserting, among others, that the notarial fee for the Extrajudicial
Settlement and the attorney's fees in the guardianship proceedings are not deductible expenses.

On June 7, 1994, the CTA issued the assailed Resolution8 ordering the Commissioner of Internal
Revenue to refund Josefina Pajonar, as administratrix of the estate of Pedro Pajonar, the amount of
P76,502.42 representing erroneously paid estate tax for the year 1988. Also, the CTA upheld the
validity of the deduction of the notarial fee for the Extrajudicial Settlement and the attorney's fees in
the guardianship proceedings.

On July 5, 1994, the Commissioner of Internal Revenue filed with the Court of Appeals a petition for
review of the CTA's May 6, 1993 Decision and its June 7, 1994 Resolution, questioning the validity of
the abovementioned deductions. On December 21, 1995, the Court of Appeals denied the
Commissioner's petition.9

Hence, the present appeal by the Commissioner of Internal Revenue.

The sole issue in this case involves the construction of section 79 10 of the National Internal
Revenue Code 11(Tax Code) which provides for the allowable deductions from the gross estate of the
decedent. More particularly, the question is whether the notarial fee paid for the extrajudicial
settlement in the amount of P60,753 and the attorney's fees in the guardianship proceedings in the
amount of P50,000 may be allowed as deductions from the gross estate of decedent in order to
arrive at the value of the net estate.

We answer this question in the affirmative, thereby upholding the decisions of the appellate courts.

In its May 6, 1993 Decision, the Court of Tax Appeals ruled thus:

Respondent maintains that only judicial expenses of the testamentary or intestate

proceedings are allowed as a deduction to the gross estate. The amount of P60,753.00 is
quite extraordinary for a mere notarial fee.

This Court adopts the view under American jurisprudence that expenses incurred in the
extrajudicial settlement of the estate should be allowed as a deduction from the gross estate.
"There is no requirement of formal administration. It is sufficient that the expense be a
necessary contribution toward the settlement of the case." [ 34 Am. Jur. 2d, p. 765; Nolledo,
Bar Reviewer in Taxation, 10th Ed. (1990), p. 481]

xxx xxx xxx

 The attorney's fees of P50,000.00, which were already incurred but not yet paid, refers to the
guardianship proceeding filed by PNB, as guardian over the ward of Pedro Pajonar,
docketed as Special Proceeding No. 1254 in the RTC (Branch XXXI) of Dumaguete City. . . .

xxx xxx xxx

The guardianship proceeding had been terminated upon delivery of the residuary estate to
the heirs entitled thereto. Thereafter, PNB was discharged of any further responsibility.

Attorney's fees in order to be deductible from the gross estate must be essential to the
collection of assets, payment of debts or the distribution of the property to the persons
entitled to it. The services for which the fees are charged must relate to the proper settlement
of the estate. [34 Am. Jur. 2d 767.] In this case, the guardianship proceeding was necessary
for the distribution of the property of the late Pedro Pajonar to his rightful heirs.

xxx xxx xxx

PNB was appointed as guardian over the assets of the late Pedro Pajonar, who, even at the
time of his death, was incompetent by reason of insanity. The expenses incurred in the
guardianship proceeding was but a necessary expense in the settlement of the decedent's
estate. Therefore, the attorney's fee incurred in the guardianship proceedings amounting to
P50,000.00 is a reasonable and necessary business expense deductible from the gross
estate of the decedent. 12

Upon a motion for reconsideration filed by the Commissioner of Internal Revenue, the Court of Tax
Appeals modified its previous ruling by reducing the refundable amount to P76,502.43 since it found
that a deficiency interest should be imposed and the compromise penalty excluded. 13 However, the
tax court upheld its previous ruling regarding the legality of the deductions

It is significant to note that the inclusion of the estate tax law in the codification of all our national
internal revenue laws with the enactment of the National Internal Revenue Code in 1939 were
copied from the Federal Law of the United States. [ UMALI, Reviewer in Taxation (1985), p. 285 ]
The 1977 Tax Code, promulgated by Presidential Decree No. 1158, effective June 3, 1977,
reenacted substantially all the provisions of the old law on estate and gift taxes, except the sections
relating to the meaning of gross estate and gift. [ Ibid, p. 286. ]

In the United States, [a]dministrative expenses, executor's commissions and attorney's fees are
considered allowable deductions from the Gross Estate. Administrative expenses are limited to such
expenses as are actually and necessarily incurred in the administration of a decedent's estate.
[PRENTICE-HALL, Federal Taxes Estate and Gift Taxes (1936), p. 120, 533.] Necessary expenses
of administration are such expenses as are entailed for the preservation and productivity of the
estate and for its management for purposes of liquidation, payment of debts and distribution of the
residue among the persons entitled thereto. [Lizarraga Hermanos vs. Abada, 40 Phil. 124.] They
must be incurred for the settlement of the estate as a whole. [34 Am. Jur. 2d, p. 765.] Thus, where
there were no substantial community debts and it was unnecessary to convert community property
to cash, the only practical purpose of administration being the payment of estate taxes, full deduction
was allowed for attorney's fees and miscellaneous expenses charged wholly to decedent's estate.
[Ibid., citing Estate of Helis, 26 T.C. 143 (A).]

Petitioner stated in her protest filed with the BIR that "upon the death of the ward, the PNB, which
was still the guardian of the estate, (Annex "Z"), did not file an estate tax return; however, it advised
the heirs to execute an extrajudicial settlement, to pay taxes and to post a bond equal to the value of
the estate, for which the state paid P59,341.40 for the premiums. (See Annex "K")." [p. 17, CTA
record.] Therefore, it would appear from the records of the case that the only practical purpose of
settling the estate by means of an extrajudicial settlement pursuant to Section 1 of Rule 74 of the
Rules of Court was for the payment of taxes and the distribution of the estate to the heirs. A fortiori,
since our estate tax laws are of American origin, the interpretation adopted by American Courts has
some persuasive effect on the interpretation of our own estate tax laws on the subject.

Anent the contention of respondent that the attorney's fees of P50,000.00 incurred in the
guardianship proceeding should not be deducted from the Gross Estate, We consider the same
unmeritorious. Attorneys' and guardians' fees incurred in a trustee's accounting of a taxable inter
vivos trust attributable to the usual issues involved in such an accounting was held to be proper
deductions because these are expenses incurred in terminating an inter vivos trust that was
includible in the decedent's estate. [Prentice Hall, Federal Taxes on Estate and Gift, p. 120, 861]
Attorney's fees are allowable deductions if incurred for the settlement of the estate. It is noteworthy
to point that PNB was appointed the guardian over the assets of the deceased. Necessarily the
assets of the deceased formed part of his gross estate. Accordingly, all expenses incurred in relation
to the estate of the deceased will be deductible for estate tax purposes provided these are
necessary and ordinary expenses for administration of the settlement of the estate. 14

In upholding the June 7, 1994 Resolution of the Court of Tax Appeals, the Court of Appeals held that:

2. Although the Tax Code specifies "judicial expenses of the testamentary or intestate proceedings,"
there is no reason why expenses incurred in the administration and settlement of an estate in
extrajudicial proceedings should not be allowed. However, deduction is limited to such administration
expenses as are actually and necessarily incurred in the collection of the assets of the estate,
payment of the debts, and distribution of the remainder among those entitled thereto. Such
expenses may include executor's or administrator's fees, attorney's fees, court fees and charges,
appraiser's fees, clerk hire, costs of preserving and distributing the estate and storing or maintaining
it, brokerage fees or commissions for selling or disposing of the estate, and the like. Deductible
attorney's fees are those incurred by the executor or administrator in the settlement of the estate or
in defending or prosecuting claims against or due the estate. (Estate and Gift Taxation in the
Philippines, T. P. Matic, Jr., 1981 Edition, p. 176).

xxx xxx xxx

It is clear then that the extrajudicial settlement was for the purpose of payment of taxes and the
distribution of the estate to the heirs. The execution of the extrajudicial settlement necessitated the
notarization of the same. Hence the Contract of Legal Services of March 28, 1988 entered into
between respondent Josefina Pajonar and counsel was presented in evidence for the purpose of
showing that the amount of P60,753.00 was for the notarization of the Extrajudicial Settlement. It
follows then that the notarial fee of P60,753.00 was incurred primarily to settle the estate of the
deceased Pedro Pajonar. Said amount should then be considered an administration expenses
actually and necessarily incurred in the collection of the assets of the estate, payment of debts and
distribution of the remainder among those entitled thereto. Thus, the notarial fee of P60,753 incurred
for the Extrajudicial Settlement should be allowed as a deduction from the gross estate.

3. Attorney's fees, on the other hand, in order to be deductible from the gross estate must be
essential to the settlement of the estate.

The amount of P50,000.00 was incurred as attorney's fees in the guardianship proceedings in Spec.
Proc. No. 1254. Petitioner contends that said amount are not expenses of the testamentary or
intestate proceedings as the guardianship proceeding was instituted during the lifetime of the
decedent when there was yet no estate to be settled.

Again, this contention must fail.

The guardianship proceeding in this case was necessary for the distribution of the property of the
deceased Pedro Pajonar. As correctly pointed out by respondent CTA, the PNB was appointed
guardian over the assets of the deceased, and that necessarily the assets of the deceased formed
part of his gross estate. . . .

xxx xxx xxx

It is clear therefore that the attorney's fees incurred in the guardianship proceeding in Spec. Proc.
No. 1254 were essential to the distribution of the property to the persons entitled thereto. Hence, the
attorney's fees incurred in the guardianship proceedings in the amount of P50,000.00 should be
allowed as a deduction from the gross estate of the decedent. 15

The deductions from the gross estate permitted under section 79 of the Tax Code basically
reproduced the deductions allowed under Commonwealth Act No. 466 (CA 466), otherwise known
as the National Internal Revenue Code of 1939, 16 and which was the first codification of Philippine
tax laws. Section 89 (a) (1) (B) of CA 466 also provided for the deduction of the "judicial expenses of
the testamentary or intestate proceedings" for purposes of determining the value of the net estate.
Philippine tax laws were, in turn, based on the federal tax laws of the United States. 17 In accord with
established rules of statutory construction, the decisions of American courts construing the federal
tax code are entitled to great weight in the interpretation of our own tax laws. 18

Judicial expenses are expenses of administration. 19 Administration expenses, as an allowable

deduction from the gross estate of the decedent for purposes of arriving at the value of the net
estate, have been construed by the federal and state courts of the United States to include all
expenses "essential to the collection of the assets, payment of debts or the distribution of the
property to the persons entitled to it." 20 In other words, the expenses must be essential to the proper
settlement of the estate. Expenditures incurred for the individual benefit of the heirs, devisees or
legatees are not deductible. 21 This distinction has been carried over to our jurisdiction. Thus,
in Lorenzo v. Posadas 22 the Court construed the phrase "judicial expenses of the testamentary or
intestate proceedings" as not including the compensation paid to a trustee of the decedent's estate
when it appeared that such trustee was appointed for the purpose of managing the decedent's real
estate for the benefit of the testamentary heir. In another case, the Court disallowed the premiums
paid on the bond filed by the administrator as an expense of administration since the giving of a
bond is in the nature of a qualification for the office, and not necessary in the settlement of the
estate. 23 Neither may attorney's fees incident to litigation incurred by the heirs in asserting their
respective rights be claimed as a deduction from the gross estate. 24 1wphi1

Coming to the case at bar, the notarial fee paid for the extrajudicial settlement is clearly a deductible
expense since such settlement effected a distribution of Pedro Pajonar's estate to his lawful heirs.
Similarly, the attorney's fees paid to PNB for acting as the guardian of Pedro Pajonar's property
during his lifetime should also be considered as a deductible administration expense. PNB provided
a detailed accounting of decedent's property and gave advice as to the proper settlement of the
latter's estate, acts which contributed towards the collection of decedent's assets and the
subsequent settlement of the estate.

We find that the Court of Appeals did not commit reversible error in affirming the questioned
resolution of the Court of Tax Appeals.

WHEREFORE, the December 21, 1995 Decision of the Court of Appeals is AFFIRMED. The notarial
fee for the extrajudicial settlement and the attorney's fees in the guardianship proceedings are
allowable deductions from the gross estate of Pedro Pajonar. 1wphi1.nt

SO ORDERED.

Melo, Vitug, Panganiban and Purisima, JJ., concur.

G.R. No. 140944 April 30, 2008

RAFAEL ARSENIO S. DIZON, in his capacity as the Judicial Administrator of the Estate of the
deceased JOSE P. FERNANDEZ, petitioner,
vs.
COURT OF TAX APPEALS and COMMISSIONER OF INTERNAL REVENUE, respondents.

DECISION

NACHURA, J.:

Before this Court is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Civil Procedure
seeking the reversal of the Court of Appeals (CA) Decision 2 dated April 30, 1999 which affirmed the
Decision3 of the Court of Tax Appeals (CTA) dated June 17, 1997.4

The Facts

On November 7, 1987, Jose P. Fernandez (Jose) died. Thereafter, a petition for the probate of his
will5 was filed with Branch 51 of the Regional Trial Court (RTC) of Manila (probate court). [6] The
probate court then appointed retired Supreme Court Justice Arsenio P. Dizon (Justice Dizon) and
petitioner, Atty. Rafael Arsenio P. Dizon (petitioner) as Special and Assistant Special Administrator,
respectively, of the Estate of Jose (Estate). In a letter 7dated October 13, 1988, Justice Dizon
informed respondent Commissioner of the Bureau of Internal Revenue (BIR) of the special
proceedings for the Estate.

Petitioner alleged that several requests for extension of the period to file the required estate tax
return were granted by the BIR since the assets of the estate, as well as the claims against it, had
yet to be collated, determined and identified. Thus, in a letter8 dated March 14, 1990, Justice Dizon
authorized Atty. Jesus M. Gonzales (Atty. Gonzales) to sign and file on behalf of the Estate the
required estate tax return and to represent the same in securing a Certificate of Tax Clearance.
Eventually, on April 17, 1990, Atty. Gonzales wrote a letter 9addressed to the BIR Regional Director
for San Pablo City and filed the estate tax return10 with the same BIR Regional Office, showing
therein a NIL estate tax liability, computed as follows:

COMPUTATION OF TAX

Conjugal Real Property (Sch. 1) P10,855,020.00

Conjugal Personal Property (Sch.2) 3,460,591.34

Taxable Transfer (Sch. 3)

Gross Conjugal Estate 14,315,611.34

Less: Deductions (Sch. 4) 187,822,576.06

Net Conjugal Estate NIL

Less: Share of Surviving Spouse NIL.

Net Share in Conjugal Estate NIL

xxx

Net Taxable Estate NIL.

 Estate Tax Due NIL.11

On April 27, 1990, BIR Regional Director for San Pablo City, Osmundo G. Umali issued Certification
Nos. 2052[12]and 2053[13] stating that the taxes due on the transfer of real and personal properties [14] of
Jose had been fully paid and said properties may be transferred to his heirs. Sometime in August
1990, Justice Dizon passed away. Thus, on October 22, 1990, the probate court appointed petitioner
as the administrator of the Estate.15

Petitioner requested the probate court's authority to sell several properties forming part of the Estate,
for the purpose of paying its creditors, namely: Equitable Banking Corporation (P19,756,428.31),
Banque de L'Indochine et. de Suez (US$4,828,905.90 as of January 31, 1988), Manila Banking
Corporation (P84,199,160.46 as of February 28, 1989) and State Investment House, Inc.
(P6,280,006.21). Petitioner manifested that Manila Bank, a major creditor of the Estate was not
included, as it did not file a claim with the probate court since it had security over several real estate
properties forming part of the Estate.16

However, on November 26, 1991, the Assistant Commissioner for Collection of the BIR,
Themistocles Montalban, issued Estate Tax Assessment Notice No. FAS-E-87-91-
003269,17 demanding the payment of P66,973,985.40 as deficiency estate tax, itemized as follows:

Deficiency Estate Tax- 1987

Estate tax P31,868,414.48

25% surcharge- late filing 7,967,103.62

late payment 7,967,103.62

Interest 19,121,048.68

Compromise-non filing 25,000.00

non payment 25,000.00

no notice of death 15.00

 no CPA Certificate 300.00

Total amount due & collectible P66,973,985.4018

In his letter19 dated December 12, 1991, Atty. Gonzales moved for the reconsideration of the said
estate tax assessment. However, in her letter20 dated April 12, 1994, the BIR Commissioner denied
the request and reiterated that the estate is liable for the payment of P66,973,985.40 as deficiency
estate tax. On May 3, 1994, petitioner received the letter of denial. On June 2, 1994, petitioner filed a
petition for review21 before respondent CTA. Trial on the merits ensued.

As found by the CTA, the respective parties presented the following pieces of evidence, to wit:

In the hearings conducted, petitioner did not present testimonial evidence but merely
documentary evidence consisting of the following:

Nature of Document (sic) Exhibits

1. Letter dated October 13, 1988 from Arsenio P. Dizon "A"

addressed to the Commissioner of Internal Revenue
informing the latter of the special proceedings for the
settlement of the estate (p. 126, BIR records);

2. Petition for the probate of the will and issuance of letter of "B" & "B-1"
administration filed with the Regional Trial Court (RTC) of
Manila, docketed as Sp. Proc. No. 87-42980 (pp. 107-
108, BIR records);

3. Pleading entitled "Compliance" filed with the probate "C"

Court submitting the final inventory of all the properties of
the deceased (p. 106, BIR records);

4. Attachment to Exh. "C" which is the detailed and "C-1" to "C-17"

complete listing of the properties of the deceased (pp. 89-
105, BIR rec.);

5. Claims against the estate filed by Equitable Banking "D" to "D-24"

Corp. with the probate Court in the amount
ofP19,756,428.31 as of March 31, 1988, together with the
 Annexes to the claim (pp. 64-88, BIR records);

6. Claim filed by Banque de L' Indochine et de Suez with the "E" to "E-3"
probate Court in the amount of US $4,828,905.90 as of
January 31, 1988 (pp. 262-265, BIR records);

7. Claim of the Manila Banking Corporation (MBC) which as "F" to "F-3"

of November 7, 1987 amounts to P65,158,023.54, but
recomputed as of February 28, 1989 at a total amount
ofP84,199,160.46; together with the demand letter from
MBC's lawyer (pp. 194-197, BIR records);

8. Demand letter of Manila Banking Corporation prepared by "G" & "G-1"

Asedillo, Ramos and Associates Law Offices addressed
to Fernandez Hermanos, Inc., represented by Jose P.
Fernandez, as mortgagors, in the total amount
ofP240,479,693.17 as of February 28, 1989 (pp. 186-187,
BIR records);

9. Claim of State Investment House, Inc. filed with the RTC, "H" to "H-16"
Branch VII of Manila, docketed as Civil Case No. 86-
38599 entitled "State Investment House, Inc., Plaintiff,
versus Maritime Company Overseas, Inc. and/or Jose P.
Fernandez, Defendants," (pp. 200-215, BIR records);

10. Letter dated March 14, 1990 of Arsenio P. Dizon "I"

addressed to Atty. Jesus M. Gonzales, (p. 184, BIR
records);

11. Letter dated April 17, 1990 from J.M. Gonzales addressed "J"
to the Regional Director of BIR in San Pablo City (p. 183,
BIR records);

12. Estate Tax Return filed by the estate of the late Jose P. "K" to "K-5"
Fernandez through its authorized representative, Atty.
Jesus M. Gonzales, for Arsenio P. Dizon, with
attachments (pp. 177-182, BIR records);
 13. Certified true copy of the Letter of Administration issued "L"
by RTC Manila, Branch 51, in Sp. Proc. No. 87-42980
appointing Atty. Rafael S. Dizon as Judicial Administrator
of the estate of Jose P. Fernandez; (p. 102, CTA records)
and

14. Certification of Payment of estate taxes Nos. 2052 and "M" to "M-5"
2053, both dated April 27, 1990, issued by the Office of
the Regional Director, Revenue Region No. 4-C, San
Pablo City, with attachments (pp. 103-104, CTA records.).

Respondent's [BIR] counsel presented on June 26, 1995 one witness in the person of
Alberto Enriquez, who was one of the revenue examiners who conducted the
investigation on the estate tax case of the late Jose P. Fernandez. In the course of the
direct examination of the witness, he identified the following:

Documents/Signatures BIR Record

1. Estate Tax Return prepared by the BIR; p. 138

2. Signatures of Ma. Anabella Abuloc and Alberto Enriquez, -do-

Jr. appearing at the lower Portion of Exh. "1";

3. Memorandum for the Commissioner, dated July 19, 1991, pp. 143-144
prepared by revenue examiners, Ma. Anabella A. Abuloc,
Alberto S. Enriquez and Raymund S. Gallardo; Reviewed
by Maximino V. Tagle

4. Signature of Alberto S. Enriquez appearing at the lower -do-

portion on p. 2 of Exh. "2";

5. Signature of Ma. Anabella A. Abuloc appearing at the -do-

lower portion on p. 2 of Exh. "2";

6. Signature of Raymund S. Gallardo appearing at the -do-

Lower portion on p. 2 of Exh. "2";
 7. Signature of Maximino V. Tagle also appearing on p. 2 of -do-
Exh. "2";

8. Summary of revenue Enforcement Officers Audit Report, p. 139

dated July 19, 1991;

9. Signature of Alberto Enriquez at the lower portion of Exh. -do-

"3";

10. Signature of Ma. Anabella A. Abuloc at the lower portion -do-

of Exh. "3";

11. Signature of Raymond S. Gallardo at the lower portion of -do-

Exh. "3";

12. Signature of Maximino V. Tagle at the lower portion of -do-

Exh. "3";

13. Demand letter (FAS-E-87-91-00), signed by the Asst. p. 169

Commissioner for Collection for the Commissioner of
Internal Revenue, demanding payment of the amount
ofP66,973,985.40; and

14. Assessment Notice FAS-E-87-91-00 pp. 169-17022

The CTA's Ruling

On June 17, 1997, the CTA denied the said petition for review. Citing this Court's ruling in Vda. de
Oate v. Court of Appeals,23 the CTA opined that the aforementioned pieces of evidence introduced
by the BIR were admissible in evidence. The CTA ratiocinated:

Although the above-mentioned documents were not formally offered as evidence for respondent,
considering that respondent has been declared to have waived the presentation thereof during the
hearing on March 20, 1996, still they could be considered as evidence for respondent since they
were properly identified during the presentation of respondent's witness, whose testimony was duly
recorded as part of the records of this case. Besides, the documents marked as respondent's
exhibits formed part of the BIR records of the case.24
Nevertheless, the CTA did not fully adopt the assessment made by the BIR and it came up with its
own computation of the deficiency estate tax, to wit:

Conjugal Real Property P 5,062,016.00

Conjugal Personal Prop. 33,021,999.93

Gross Conjugal Estate 38,084,015.93

Less: Deductions 26,250,000.00

Net Conjugal Estate P 11,834,015.93

Less: Share of Surviving Spouse 5,917,007.96

Net Share in Conjugal Estate P 5,917,007.96

Add: Capital/Paraphernal

Properties P44,652,813.66

Less: Capital/Paraphernal 44,652,813.66

Deductions

Net Taxable Estate P 50,569,821.62

============

Estate Tax Due P 29,935,342.97

Add: 25% Surcharge for Late Filing 7,483,835.74

 Add: Penalties for-No notice of death 15.00

No CPA certificate 300.00

Total deficiency estate tax P 37,419,493.71

============

exclusive of 20% interest from due date of its payment until full payment thereof

[Sec. 283 (b), Tax Code of 1987].25

Thus, the CTA disposed of the case in this wise:

WHEREFORE, viewed from all the foregoing, the Court finds the petition unmeritorious and
denies the same. Petitioner and/or the heirs of Jose P. Fernandez are hereby ordered to pay
to respondent the amount of P37,419,493.71 plus 20% interest from the due date of its
payment until full payment thereof as estate tax liability of the estate of Jose P. Fernandez
who died on November 7, 1987.

SO ORDERED.26

Aggrieved, petitioner, on March 2, 1998, went to the CA via a petition for review.27

The CA's Ruling

On April 30, 1999, the CA affirmed the CTA's ruling. Adopting in full the CTA's findings, the CA ruled
that the petitioner's act of filing an estate tax return with the BIR and the issuance of BIR Certification
Nos. 2052 and 2053 did not deprive the BIR Commissioner of her authority to re-examine or re-
assess the said return filed on behalf of the Estate. 28

On May 31, 1999, petitioner filed a Motion for Reconsideration29 which the CA denied in its
Resolution30 dated November 3, 1999.

Hence, the instant Petition raising the following issues:

1. Whether or not the admission of evidence which were not formally offered by the
respondent BIR by the Court of Tax Appeals which was subsequently upheld by the Court of
Appeals is contrary to the Rules of Court and rulings of this Honorable Court;

2. Whether or not the Court of Tax Appeals and the Court of Appeals erred in
recognizing/considering the estate tax return prepared and filed by respondent BIR knowing
 that the probate court appointed administrator of the estate of Jose P. Fernandez had
previously filed one as in fact, BIR Certification Clearance Nos. 2052 and 2053 had been
issued in the estate's favor;

3. Whether or not the Court of Tax Appeals and the Court of Appeals erred in disallowing the
valid and enforceable claims of creditors against the estate, as lawful deductions despite
clear and convincing evidence thereof; and

4. Whether or not the Court of Tax Appeals and the Court of Appeals erred in validating
erroneous double imputation of values on the very same estate properties in the estate tax
return it prepared and filed which effectively bloated the estate's assets. 31

The petitioner claims that in as much as the valid claims of creditors against the Estate are in excess
of the gross estate, no estate tax was due; that the lack of a formal offer of evidence is fatal to BIR's
cause; that the doctrine laid down in Vda. de Oate has already been abandoned in a long line of
cases in which the Court held that evidence not formally offered is without any weight or value; that
Section 34 of Rule 132 of the Rules on Evidence requiring a formal offer of evidence is mandatory in
character; that, while BIR's witness Alberto Enriquez (Alberto) in his testimony before the CTA
identified the pieces of evidence aforementioned such that the same were marked, BIR's failure to
formally offer said pieces of evidence and depriving petitioner the opportunity to cross-examine
Alberto, render the same inadmissible in evidence; that assuming arguendo that the ruling in Vda.
de Oate is still applicable, BIR failed to comply with the doctrine's requisites because the
documents herein remained simply part of the BIR records and were not duly incorporated in the
court records; that the BIR failed to consider that although the actual payments made to the Estate
creditors were lower than their respective claims, such were compromise agreements reached long
after the Estate's liability had been settled by the filing of its estate tax return and the issuance of BIR
Certification Nos. 2052 and 2053; and that the reckoning date of the claims against the Estate and
the settlement of the estate tax due should be at the time the estate tax return was filed by the
judicial administrator and the issuance of said BIR Certifications and not at the time the
aforementioned Compromise Agreements were entered into with the Estate's creditors. 32

On the other hand, respondent counters that the documents, being part of the records of the case
and duly identified in a duly recorded testimony are considered evidence even if the same were not
formally offered; that the filing of the estate tax return by the Estate and the issuance of BIR
Certification Nos. 2052 and 2053 did not deprive the BIR of its authority to examine the return and
assess the estate tax; and that the factual findings of the CTA as affirmed by the CA may no longer
be reviewed by this Court via a petition for review.33

The Issues

There are two ultimate issues which require resolution in this case:

First. Whether or not the CTA and the CA gravely erred in allowing the admission of the pieces of
evidence which were not formally offered by the BIR; and

Second. Whether or not the CA erred in affirming the CTA in the latter's determination of the
deficiency estate tax imposed against the Estate.

The Courts Ruling

The Petition is impressed with merit.

Under Section 8 of RA 1125, the CTA is categorically described as a court of record. As cases filed
before it are litigated de novo, party-litigants shall prove every minute aspect of their cases.
Indubitably, no evidentiary value can be given the pieces of evidence submitted by the BIR, as the
rules on documentary evidence require that these documents must be formally offered before the
CTA.34 Pertinent is Section 34, Rule 132 of the Revised Rules on Evidence which reads:

SEC. 34. Offer of evidence. The court shall consider no evidence which has not been
formally offered. The purpose for which the evidence is offered must be specified.

The CTA and the CA rely solely on the case of Vda. de Oate, which reiterated this Court's previous
rulings inPeople v. Napat-a35 and People v. Mate36 on the admission and consideration of exhibits
which were not formally offered during the trial. Although in a long line of cases many of which were
decided after Vda. de Oate, we held that courts cannot consider evidence which has not been
formally offered,37 nevertheless, petitioner cannot validly assume that the doctrine laid down in Vda.
de Oate has already been abandoned. Recently, in Ramos v. Dizon,38 this Court, applying the said
doctrine, ruled that the trial court judge therein committed no error when he admitted and considered
the respondents' exhibits in the resolution of the case, notwithstanding the fact that the same were
not formally offered. Likewise, in Far East Bank & Trust Company v. Commissioner of Internal
Revenue,39 the Court made reference to said doctrine in resolving the issues therein. Indubitably, the
doctrine laid down in Vda. De Oate still subsists in this jurisdiction. In Vda. de Oate, we held that:

From the foregoing provision, it is clear that for evidence to be considered, the same must be
formally offered. Corollarily, the mere fact that a particular document is identified and marked
as an exhibit does not mean that it has already been offered as part of the evidence of a
party. In Interpacific Transit, Inc. v. Aviles[186 SCRA 385], we had the occasion to make a
distinction between identification of documentary evidence and its formal offer as an exhibit.
We said that the first is done in the course of the trial and is accompanied by the marking of
the evidence as an exhibit while the second is done only when the party rests its case and
not before. A party, therefore, may opt to formally offer his evidence if he believes that it will
advance his cause or not to do so at all. In the event he chooses to do the latter, the trial
court is not authorized by the Rules to consider the same.

However, in People v. Napat-a [179 SCRA 403] citing People v. Mate [103 SCRA 484], we
relaxed the foregoing rule and allowed evidence not formally offered to be admitted
and considered by the trial court provided the following requirements are present,
viz.: first, the same must have been duly identified by testimony duly recorded and,
second, the same must have been incorporated in the records of the case.40

From the foregoing declaration, however, it is clear that Vda. de Oate is merely an exception to the
general rule. Being an exception, it may be applied only when there is strict compliance with the
requisites mentioned therein; otherwise, the general rule in Section 34 of Rule 132 of the Rules of
Court should prevail.

In this case, we find that these requirements have not been satisfied. The assailed pieces of
evidence were presented and marked during the trial particularly when Alberto took the witness
stand. Alberto identified these pieces of evidence in his direct testimony.41 He was also subjected to
cross-examination and re-cross examination by petitioner.42 But Albertos account and the exchanges
between Alberto and petitioner did not sufficiently describe the contents of the said pieces of
evidence presented by the BIR. In fact, petitioner sought that the lead examiner, one Ma. Anabella A.
Abuloc, be summoned to testify, inasmuch as Alberto was incompetent to answer questions relative
to the working papers.43 The lead examiner never testified. Moreover, while Alberto's testimony
identifying the BIR's evidence was duly recorded, the BIR documents themselves were not
incorporated in the records of the case.

A common fact threads through Vda. de Oate and Ramos that does not exist at all in the instant
case. In the aforementioned cases, the exhibits were marked at the pre-trial proceedings to warrant
the pronouncement that the same were duly incorporated in the records of the case. Thus, we held
in Ramos:

In this case, we find and so rule that these requirements have been satisfied. The exhibits
in question were presented and marked during the pre-trial of the case thus, they have
been incorporated into the records. Further, Elpidio himself explained the contents of
these exhibits when he was interrogated by respondents' counsel...

xxxx

But what further defeats petitioner's cause on this issue is that respondents' exhibits were
marked and admitted during the pre-trial stage as shown by the Pre-Trial Order quoted
earlier.44

While the CTA is not governed strictly by technical rules of evidence, 45 as rules of procedure are not
ends in themselves and are primarily intended as tools in the administration of justice, the
presentation of the BIR's evidence is not a mere procedural technicality which may be disregarded
considering that it is the only means by which the CTA may ascertain and verify the truth of BIR's
claims against the Estate.46 The BIR's failure to formally offer these pieces of evidence, despite
CTA's directives, is fatal to its cause.47 Such failure is aggravated by the fact that not even a single
reason was advanced by the BIR to justify such fatal omission. This, we take against the BIR.

Per the records of this case, the BIR was directed to present its evidence48 in the hearing of February
21, 1996, but BIR's counsel failed to appear.49 The CTA denied petitioner's motion to consider BIR's
presentation of evidence as waived, with a warning to BIR that such presentation would be
considered waived if BIR's evidence would not be presented at the next hearing. Again, in the
hearing of March 20, 1996, BIR's counsel failed to appear.50 Thus, in its Resolution51 dated March 21,
1996, the CTA considered the BIR to have waived presentation of its evidence. In the same
Resolution, the parties were directed to file their respective memorandum. Petitioner complied but
BIR failed to do so.52 In all of these proceedings, BIR was duly notified. Hence, in this case, we are
constrained to apply our ruling in Heirs of Pedro Pasag v. Parocha:53

A formal offer is necessary because judges are mandated to rest their findings of facts and
their judgment only and strictly upon the evidence offered by the parties at the trial. Its
function is to enable the trial judge to know the purpose or purposes for which the proponent
is presenting the evidence. On the other hand, this allows opposing parties to examine the
evidence and object to its admissibility. Moreover, it facilitates review as the appellate court
will not be required to review documents not previously scrutinized by the trial court.

Strict adherence to the said rule is not a trivial matter. The Court in Constantino v. Court of
Appeals ruled that the formal offer of one's evidence is deemed waived after failing to
submit it within a considerable period of time. It explained that the court cannot admit
an offer of evidence made after a lapse of three (3) months because to do so would
"condone an inexcusable laxity if not non-compliance with a court order which, in
effect, would encourage needless delays and derail the speedy administration of
justice."
 Applying the aforementioned principle in this case, we find that the trial court had reasonable
ground to consider that petitioners had waived their right to make a formal offer of
documentary or object evidence. Despite several extensions of time to make their formal
offer, petitioners failed to comply with their commitment and allowed almost five months to
lapse before finally submitting it. Petitioners' failure to comply with the rule on
admissibility of evidence is anathema to the efficient, effective, and expeditious
dispensation of justice.

Having disposed of the foregoing procedural issue, we proceed to discuss the merits of the case.

Ordinarily, the CTA's findings, as affirmed by the CA, are entitled to the highest respect and will not
be disturbed on appeal unless it is shown that the lower courts committed gross error in the
appreciation of facts.54 In this case, however, we find the decision of the CA affirming that of the CTA
tainted with palpable error.

It is admitted that the claims of the Estate's aforementioned creditors have been condoned. As a
mode of extinguishing an obligation,55 condonation or remission of debt56 is defined as:

an act of liberality, by virtue of which, without receiving any equivalent, the creditor
renounces the enforcement of the obligation, which is extinguished in its entirety or in that
part or aspect of the same to which the remission refers. It is an essential characteristic of
remission that it be gratuitous, that there is no equivalent received for the benefit given; once
such equivalent exists, the nature of the act changes. It may become dation in payment
when the creditor receives a thing different from that stipulated; or novation, when the object
or principal conditions of the obligation should be changed; or compromise, when the matter
renounced is in litigation or dispute and in exchange of some concession which the creditor
receives.57

Verily, the second issue in this case involves the construction of Section 79 58 of the National Internal
Revenue Code59 (Tax Code) which provides for the allowable deductions from the gross estate of the
decedent. The specific question is whether the actual claims of the aforementioned creditors may be
fully allowed as deductions from the gross estate of Jose despite the fact that the said claims were
reduced or condoned through compromise agreements entered into by the Estate with its creditors.

"Claims against the estate," as allowable deductions from the gross estate under Section 79 of the
Tax Code, are basically a reproduction of the deductions allowed under Section 89 (a) (1) (C) and
(E) of Commonwealth Act No. 466 (CA 466), otherwise known as the National Internal Revenue
Code of 1939, and which was the first codification of Philippine tax laws. Philippine tax laws were, in
turn, based on the federal tax laws of the United States. Thus, pursuant to established rules of
statutory construction, the decisions of American courts construing the federal tax code are entitled
to great weight in the interpretation of our own tax laws. 60

It is noteworthy that even in the United States, there is some dispute as to whether the deductible
amount for a claim against the estate is fixed as of the decedent's death which is the general rule, or
the same should be adjusted to reflect post-death developments, such as where a settlement
between the parties results in the reduction of the amount actually paid. 61 On one hand, the U.S.
court ruled that the appropriate deduction is the "value" that the claim had at the date of the
decedent's death.62 Also, as held in Propstra v. U.S., 63 where a lien claimed against the estate was
certain and enforceable on the date of the decedent's death, the fact that the claimant subsequently
settled for lesser amount did not preclude the estate from deducting the entire amount of the claim
for estate tax purposes. These pronouncements essentially confirm the general principle that post-
death developments are not material in determining the amount of the deduction.
On the other hand, the Internal Revenue Service (Service) opines that post-death settlement should
be taken into consideration and the claim should be allowed as a deduction only to the extent of the
amount actually paid.64Recognizing the dispute, the Service released Proposed Regulations in 2007
mandating that the deduction would be limited to the actual amount paid. 65

In announcing its agreement with Propstra,66 the U.S. 5th Circuit Court of Appeals held:

We are persuaded that the Ninth Circuit's decision...in Propstra correctly apply the Ithaca
Trust date-of-death valuation principle to enforceable claims against the estate. As we
interpret Ithaca Trust, when the Supreme Court announced the date-of-death valuation
principle, it was making a judgment about the nature of the federal estate tax specifically, that
it is a tax imposed on the act of transferring property by will or intestacy and, because the act
on which the tax is levied occurs at a discrete time, i.e., the instance of death, the net value
of the property transferred should be ascertained, as nearly as possible, as of that time. This
analysis supports broad application of the date-of-death valuation rule. 67

We express our agreement with the date-of-death valuation rule, made pursuant to the ruling of the
U.S. Supreme Court in Ithaca Trust Co. v. United States.68 First. There is no law, nor do we discern
any legislative intent in our tax laws, which disregards the date-of-death valuation principle and
particularly provides that post-death developments must be considered in determining the net value
of the estate. It bears emphasis that tax burdens are not to be imposed, nor presumed to be
imposed, beyond what the statute expressly and clearly imports, tax statutes being
construed strictissimi juris against the government.69 Any doubt on whether a person, article or
activity is taxable is generally resolved against taxation. 70 Second. Such construction finds relevance
and consistency in our Rules on Special Proceedings wherein the term "claims" required to be
presented against a decedent's estate is generally construed to mean debts or demands of a
pecuniary nature which could have been enforced against the deceased in his lifetime, or liability
contracted by the deceased before his death.71Therefore, the claims existing at the time of death are
significant to, and should be made the basis of, the determination of allowable deductions.

WHEREFORE, the instant Petition is GRANTED. Accordingly, the assailed Decision dated April 30,
1999 and the Resolution dated November 3, 1999 of the Court of Appeals in CA-G.R. S.P. No.
46947 are REVERSED and SET ASIDE. The Bureau of Internal Revenue's deficiency estate tax
assessment against the Estate of Jose P. Fernandez is hereby NULLIFIED. No costs.

SO ORDERED.

G.R. No. L-56340 June 24, 1983

SPOUSES ALVARO PASTOR, JR. and MA. ELENA ACHAVAL DE PASTOR, petitioners,
vs.
THE COURT OF APPEALS, JUAN Y. REYES, JUDGE OF BRANCH I, COURT OF FIRST
INSTANCE OF CEBU and LEWELLYN BARLITO QUEMADA, respondents.

Pelaez, Pelaez, & Pelaez Law Office for petitioners.

Ceniza, Rama & Associates for private respondents.

PLANA, J.:

I. FACTS:

This is a case of hereditary succession.

Alvaro Pastor, Sr. (PASTOR, SR.), a Spanish subject, died in Cebu City on June 5, 1966, survived
by his Spanish wife Sofia Bossio (who also died on October 21, 1966), their two legitimate children
Alvaro Pastor, Jr. (PASTOR, JR.) and Sofia Pastor de Midgely (SOFIA), and an illegitimate child, not
natural, by the name of Lewellyn Barlito Quemada QUEMADA PASTOR, JR. is a Philippine citizen,
having been naturalized in 1936. SOFIA is a Spanish subject. QUEMADA is a Filipino by his
mother's citizenship.

On November 13, 1970, QUEMADA filed a petition for the probate and allowance of an alleged
holographic will of PASTOR, SR. with the Court of First Instance of Cebu, Branch I (PROBATE
COURT), docketed as SP No. 3128-R. The will contained only one testamentary disposition: a
legacy in favor of QUEMADA consisting of 30% of PASTOR, SR.'s 42% share in the operation by
Atlas Consolidated Mining and Development Corporation (ATLAS) of some mining claims in Pina-
Barot, Cebu.

On November 21, 1970, the PROBATE COURT, upon motion of QUEMADA and after an ex parte
hearing, appointed him special administrator of the entire estate of PASTOR, SR., whether or not
covered or affected by the holographic will. He assumed office as such on December 4, 1970 after
filing a bond of P 5,000.00.

On December 7, 1970, QUEMADA as special administrator, instituted against PASTOR, JR. and his
wife an action for reconveyance of alleged properties of the estate, which included the properties
subject of the legacy and which were in the names of the spouses PASTOR, JR. and his wife, Maria
Elena Achaval de Pastor, who claimed to be the owners thereof in their own rights, and not by
inheritance. The action, docketed as Civil Case No. 274-R, was filed with the Court of First Instance
of Cebu, Branch IX.

On February 2, 1971, PASTOR, JR. and his sister SOFIA filed their opposition to the petition for
probate and the order appointing QUEMADA as special administrator.

On December 5, 1972, the PROBATE COURT issued an order allowing the will to probate. Appealed
to the Court of Appeals in CA-G.R. No. 52961- R, the order was affirmed in a decision dated May 9,
1977. On petition for review, the Supreme Court in G.R. No. L-46645 dismissed the petition in a
minute resolution dated November 1, 1977 and remanded the same to the PROBATE COURT after
denying reconsideration on January 11, 1978.

For two years after remand of the case to the PROBATE COURT, QUEMADA filed pleading after
pleading asking for payment of his legacy and seizure of the properties subject of said legacy.
PASTOR, JR. and SOFIA opposed these pleadings on the ground of pendency of the reconveyance
suit with another branch of the Cebu Court of First Instance. All pleadings remained unacted upon by
the PROBATE COURT.
On March 5, 1980, the PROBATE COURT set the hearing on the intrinsic validity of the will for
March 25, 1980, but upon objection of PASTOR, JR. and SOFIA on the e ground of pendency of the
reconveyance suit, no hearing was held on March 25. Instead, the PROBATE COURT required the
parties to submit their respective position papers as to how much inheritance QUEMADA was
entitled to receive under the wig. Pursuant thereto, PASTOR. JR. and SOFIA submitted their
Memorandum of authorities dated April 10, which in effect showed that determination of how much
QUEMADA should receive was still premature. QUEMADA submitted his Position paper dated April
20, 1980. ATLAS, upon order of the Court, submitted a sworn statement of royalties paid to the
Pastor Group of tsn from June 1966 (when Pastor, Sr. died) to February 1980. The statement
revealed that of the mining claims being operated by ATLAS, 60% pertained to the Pastor Group
distributed as follows:

1. A. Pastor, Jr. ...................................40.5%

2. E. Pelaez, Sr. ...................................15.0%

3. B. Quemada .......................................4.5%

On August 20, 1980, while the reconveyance suit was still being litigated in Branch IX of the Court of
First Instance of Cebu, the PROBATE COURT issued the now assailed Order of Execution and
Garnishment, resolving the question of ownership of the royalties payable by ATLAS and ruling in
effect that the legacy to QUEMADA was not inofficious. [There was absolutely no statement or claim
in the Order that the Probate Order of December 5, 1972 had previously resolved the issue of
ownership of the mining rights of royalties thereon, nor the intrinsic validity of the holographic will.]

The order of August 20, 1980 found that as per the holographic will and a written acknowledgment of
PASTOR, JR. dated June 17, 1962, of the above 60% interest in the mining claims belonging to the
Pastor Group, 42% belonged to PASTOR, SR. and only 33% belonged to PASTOR, JR. The
remaining 25% belonged to E. Pelaez, also of the Pastor Group. The PROBATE COURT thus
directed ATLAS to remit directly to QUEMADA the 42% royalties due decedent's estate, of which
QUEMADA was authorized to retain 75% for himself as legatee and to deposit 25% with a reputable
banking institution for payment of the estate taxes and other obligations of the estate. The 33%
share of PASTOR, JR. and/or his assignees was ordered garnished to answer for the accumulated
legacy of QUEMADA from the time of PASTOR, SR.'s death, which amounted to over two million
pesos.

The order being "immediately executory", QUEMADA succeeded in obtaining a Writ of Execution
and Garnishment on September 4, 1980, and in serving the same on ATLAS on the same day.
Notified of the Order on September 6, 1980, the oppositors sought reconsideration thereof on the
same date primarily on the ground that the PROBATE COURT gravely abused its discretion when it
resolved the question of ownership of the royalties and ordered the payment of QUEMADA's legacy
after prematurely passing upon the intrinsic validity of the will. In the meantime, the PROBATE
COURT ordered suspension of payment of all royalties due PASTOR, JR. and/or his assignees until
after resolution of oppositors' motion for reconsideration.
Before the Motion for Reconsideration could be resolved, however, PASTOR, JR., this time joined by
his wife Ma. ELENA ACHAVAL DE PASTOR, filed with the Court of Appeals a Petition for certiorari
and Prohibition with a prayer for writ of preliminary injunction (CA-G.R. No. SP- 11373-R). They
assailed the Order dated August 20, 1980 and the writ of execution and garnishment issued
pursuant thereto. The petition was denied on November 18, 1980 on the grounds (1) that its filing
was premature because the Motion for Reconsideration of the questioned Order was still pending
determination by the PROBATE COURT; and (2) that although "the rule that a motion for
reconsideration is prerequisite for an action for certiorari is never an absolute rule," the Order
assailed is "legally valid. "

On December 9, 1980, PASTOR, JR. and his wife moved for reconsideration of the Court of Appeal's
decision of November 18, 1980, calling the attention of the appellate court to another order of the
Probate Court dated November 11, 1980 (i.e., while their petition for certiorari was pending decision
in the appellate court), by which the oppositors' motion for reconsideration of the Probate Court's
Order of August 20, 1980 was denied. [The November 11 Order declared that the questions of
intrinsic validity of the will and of ownership over the mining claims (not the royalties alone) had been
finally adjudicated by the final and executory Order of December 5, 1972, as affirmed by the Court of
Appeals and the Supreme Court, thereby rendering moot and academic the suit for reconveyance
then pending in the Court of First Instance of Cebu, Branch IX. It clarified that only the 33% share of
PASTOR, JR. in the royalties (less than 7.5% share which he had assigned to QUEMADA before
PASTOR, SR. died) was to be garnished and that as regards PASTOR, SR.'s 42% share, what was
ordered was just the transfer of its possession to the custody of the PROBATE COURT through the
special administrator. Further, the Order granted QUEMADA 6% interest on his unpaid legacy from
August 1980 until fully paid.] Nonetheless, the Court of Appeals denied reconsideration.

Hence, this Petition for Review by certiorari with prayer for a writ of pre y injunction, assailing the
decision of the Court of Appeals dated November 18, 1980 as well as the orders of the Probate
Court dated August 20, 1980, November 11, 1980 and December 17, 1980, Med by petitioners on
March 26, 1981, followed by a Supplemental Petition with Urgent Prayer for Restraining Order.

In April 1981, the Court (First Division) issued a writ of preliminary injunction, the lifting of which was
denied in the Resolution of the same Division dated October 18, 1982, although the bond of
petitioners was increased from P50,000.00 to P100,000.00.

Between December 21, 1981 and October 12, 1982, private respondent filed seven successive
motions for early resolution. Five of these motions expressly prayed for the resolution of the question
as to whether or not the petition should be given due course.

On October 18, 1982, the Court (First Division) adopted a resolution stating that "the petition in fact
and in effect was given due course when this case was heard on the merits on September 7, (should
be October 21, 1981) and concise memoranda in amplification of their oral arguments on the merits
of the case were filed by the parties pursuant to the resolution of October 21, 1981 . . . " and denied
in a resolution dated December 13, 1982, private respondent's "Omnibus motion to set aside
resolution dated October 18, 1982 and to submit the matter of due course to the present
membership of the Division; and to reassign the case to another ponente."
Upon Motion for Reconsideration of the October 18, 1982 and December 13, 1982 Resolutions, the
Court en banc resolved to CONFIRM the questioned resolutions insofar as hey resolved that the
petition in fact and in effect had been given due course.

II. ISSUES:

Assailed by the petitioners in these proceedings is the validity of the Order of execution and
garnishment dated August 20, 1980 as well as the Orders subsequently issued allegedly to
implement the Probate Order of December 5, 1972, to wit: the Order of November 11, 1980
declaring that the Probate Order of 1972 indeed resolved the issues of ownership and intrinsic
validity of the will, and reiterating the Order of Execution dated August 20, 1980; and the Order of
December 17, 1980 reducing to P2,251,516.74 the amount payable to QUEMADA representing the
royalties he should have received from the death of PASTOR, SR. in 1966 up to February 1980.

The Probate Order itself, insofar as it merely allowed the holographic will in probate, is not
questioned. But petitioners denounce the Probate Court for having acted beyond its jurisdiction or
with grave abuse of discretion when it issued the assailed Orders. Their argument runs this way:
Before the provisions of the holographic win can be implemented, the questions of ownership of the
mining properties and the intrinsic validity of the holographic will must first be resolved with finality.
Now, contrary to the position taken by the Probate Court in 1980 i.e., almost eight years after the
probate of the will in 1972 the Probate Order did not resolve the two said issues. Therefore, the
Probate Order could not have resolved and actually did not decide QUEMADA's entitlement to the
legacy. This being so, the Orders for the payment of the legacy in alleged implementation of the
Probate Order of 1972 are unwarranted for lack of basis.

Closely related to the foregoing is the issue raised by QUEMADA The Probate Order of 1972 having
become final and executory, how can its implementation (payment of legacy) be restrained? Of
course, the question assumes that QUEMADA's entitlement to the legacy was finally adjudged in the
Probate Order.

On the merits, therefore, the basic issue is whether the Probate Order of December 5, 1972 resolved
with finality the questions of ownership and intrinsic validity. A negative finding will necessarily render
moot and academic the other issues raised by the parties, such as the jurisdiction of the Probate
Court to conclusively resolve title to property, and the constitutionality and repercussions of a ruling
that the mining properties in dispute, although in the name of PASTOR, JR. and his wife, really
belonged to the decedent despite the latter's constitutional disqualification as an alien.

On the procedural aspect, placed in issue is the propriety of certiorari as a means to assail the
validity of the order of execution and the implementing writ.

III. DISCUSSION:

1. Issue of Ownership

(a) In a special proceeding for the probate of a will, the issue by and large is restricted to the
extrinsic validity of the will, i.e., whether the testator, being of sound mind, freely executed the will in
accordance with the formalities prescribed by law. (Rules of Court, Rule 75, Section 1; Rule 76,
Section 9.) As a rule, the question of ownership is an extraneous matter which the Probate Court
cannot resolve with finality. Thus, for the purpose of determining whether a certain property should or
should not be included in the inventory of estate properties, the Probate Court may pass upon the
title thereto, but such determination is provisional, not conclusive, and is subject to the final decision
in a separate action to resolve title. [3 Moran, Comments on the Rules of Court (1980 ed.), p. 458;
Valero Vda. de Rodriguez vs. Court of Appeals, 91 SCRA 540.]

(b) The rule is that execution of a judgment must conform to that decreed in the dispositive part of
the decision. (Philippine-American Insurance Co. vs. Honorable Flores, 97 SCRA 811.) However, in
case of ambiguity or uncertainty, the body of the decision may be scanned for guidance in construing
the judgment. (Heirs of Presto vs. Galang, 78 SCRA 534; Fabular vs. Court of Appeals, 119 SCRA
329; Robles vs. Timario. 107 Phil. 809.)

The Order sought to be executed by the assailed Order of execution is the Probate Order of
December 5, 1972 which allegedly resolved the question of ownership of the disputed mining
properties. The said Probate Order enumerated the issues before the Probate Court, thus:

Unmistakably, there are three aspects in these proceedings: (1) the probate of the
holographic will (2) the intestate estate aspect; and (3) the administration
proceedings for the purported estate of the decedent in the Philippines.

In its broad and total perspective the whole proceedings are being impugned by the
oppositors on jurisdictional grounds, i.e., that the fact of the decedent's residence
and existence of properties in the Philippines have not been established.

Specifically placed in issue with respect to the probate proceedings are: (a) whether
or not the holographic will (Exhibit "J") has lost its efficacy as the last will and
testament upon the death of Alvaro Pastor, Sr. on June 5, 1966, in Cebu City,
Philippines; (b) Whether or not the said will has been executed with all the formalities
required by law; and (c) Did the late presentation of the holographic will affect the
validity of the same?

Issues In the Administration Proceedings are as follows: (1) Was the ex- parte
appointment of the petitioner as special administrator valid and proper? (2) Is there
any indispensable necessity for the estate of the decedent to be placed under
administration? (3) Whether or not petition is qualified to be a special administrator of
the estate; and (4) Whether or not the properties listed in the inventory (submitted by
the special administrator but not approved by the Probate Court) are to be excluded.

Then came what purports to be the dispositive portion:

Upon the foregoing premises, this Court rules on and resolves some of the problems
and issues presented in these proceedings, as follows:
(a) The Court has acquired jurisdiction over the probate proceedings as it hereby
allows and approves the so-called holographic will of testator Alvaro Pastor, Sr.,
executed on July 31, 1961 with respect to its extrinsic validity, the same having been
duly authenticated pursuant to the requisites or solemnities prescribed by law. Let,
therefore, a certificate of its allowance be prepared by the Branch Clerk of this Court
to be signed by this Presiding Judge, and attested by the seal of the Court, and
thereafter attached to the will, and the will and certificate filed and recorded by the
clerk. Let attested copies of the will and of the certificate of allowance thereof be sent
to Atlas Consolidated Mining & Development Corporation, Goodrich Bldg., Cebu City,
and the Register of Deeds of Cebu or of Toledo City, as the case may be, for
recording.

(b) There was a delay in the granting of the letters testamentary or of administration
for as a matter of fact, no regular executor and/or administrator has been appointed
up to this time and - the appointment of a special administrator was, and still is,
justified under the circumstances to take possession and charge of the estate of the
deceased in the Philippines (particularly in Cebu) until the problems causing the
delay are decided and the regular executor and/or administrator appointed.

(c) There is a necessity and propriety of a special administrator and later on an

executor and/or administrator in these proceedings, in spite of this Court's
declaration that the oppositors are the forced heirs and the petitioner is merely
vested with the character of a voluntary heir to the extent of the bounty given to him
(under) the will insofar as the same will not prejudice the legitimes of the
oppositor for the following reasons:

1. To submit a complete inventory of the estate of the

decedent-testator Alvaro Pastor, Sr.

2. To administer and to continue to put to prolific

utilization of the properties of the decedent;

3. To keep and maintain the houses and other

structures and belonging to the estate, since the
forced heirs are residing in Spain, and prepare them
for delivery to the heirs in good order after partition
and when directed by the Court, but only after the
payment of estate and inheritance taxes;

(d) Subject to the outcome of the suit for reconveyance of ownership and possession
of real and personal properties in Civil Case No. 274-T before Branch IX of the Court
of First Instance of Cebu,the intestate estate administration aspect must proceed,
unless, however, it is duly proven by the oppositors that debts of the decedent have
already been paid, that there had been an extrajudicial partition or summary one
between the forced heirs, that the legacy to be given and delivered to the petitioner
does not exceed the free portion of the estate of the testator, that the respective
 shares of the forced heirs have been fairly apportioned, distributed and delivered to
the two forced heirs of Alvaro Pastor, Sr., after deducting the property willed to the
petitioner, and the estate and inheritance taxes have already been paid to the
Government thru the Bureau of Internal Revenue.

The suitability and propriety of allowing petitioner to remain as special administrator

or administrator of the other properties of the estate of the decedent, which
properties are not directly or indirectly affected by the provisions of the holographic
will (such as bank deposits, land in Mactan etc.), will be resolved in another order as
separate incident, considering that this order should have been properly issued
solely as a resolution on the issue of whether or not to allow and approve the
aforestated will. (Emphasis supplied.)

Nowhere in the dispositive portion is there a declaration of ownership of specific properties. On the
contrary, it is manifest therein that ownership was not resolved. For it confined itself to the question
of extrinsic validity of the win, and the need for and propriety of appointing a special administrator.
Thus it allowed and approved the holographic win "with respect to its extrinsic validity, the same
having been duly authenticated pursuant to the requisites or solemnities prescribed by law." It
declared that the intestate estate administration aspect must proceed " subject to the outcome of the
suit for reconveyance of ownership and possession of real and personal properties in Civil Case
274-T before Branch IX of the CFI of Cebu." [Parenthetically, although the statement refers only to
the "intestate" aspect, it defies understanding how ownership by the estate of some properties could
be deemed finally resolved for purposes of testate administration, but not so for intestate purposes.
Can the estate be the owner of a property for testate but not for intestate purposes?] Then again, the
Probate Order (while indeed it does not direct the implementation of the legacy) conditionally stated
that the intestate administration aspect must proceed "unless . . . it is proven . . . that the legacy to
be given and delivered to the petitioner does not exceed the free portion of the estate of the
testator," which clearly implies that the issue of impairment of legitime (an aspect of intrinsic validity)
was in fact not resolved. Finally, the Probate Order did not rule on the propriety of allowing
QUEMADA to remain as special administrator of estate properties not covered by the holographic
will, "considering that this (Probate) Order should have been properly issued solely as a resolution
on the issue of whether or not to allow and approve the aforestated will. "

(c) That the Probate Order did not resolve the question of ownership of the properties listed in the
estate inventory was appropriate, considering that the issue of ownership was the very subject of
controversy in the reconveyance suit that was still pending in Branch IX of the Court of First Instance
of Cebu.

(d) What, therefore, the Court of Appeals and, in effect, the Supreme Court affirmed en toto when
they reviewed the Probable Order were only the matters properly adjudged in the said Order.

(e) In an attempt to justify the issuance of the Order of execution dated August 20, 1980, the Probate
Court in its Order of November 11, 1980 explained that the basis for its conclusion that the question
of ownership had been formally resolved by the Probate Order of 1972 are the findings in the latter
Order that (1) during the lifetime of the decedent, he was receiving royalties from ATLAS; (2) he had
resided in the Philippines since pre-war days and was engaged in the mine prospecting business
since 1937 particularly in the City of Toledo; and (3) PASTOR, JR. was only acting as dummy for his
father because the latter was a Spaniard.

Based on the premises laid, the conclusion is obviously far-fetched.

(f) It was, therefore, error for the assailed implementing Orders to conclude that the Probate Order
adjudged with finality the question of ownership of the mining properties and royalties, and that,
premised on this conclusion, the dispositive portion of the said Probate Order directed the special
administrator to pay the legacy in dispute.

2. Issue of Intrinsic Validity of the Holographic Will -

(a) When PASTOR, SR. died in 1966, he was survived by his wife, aside from his two legitimate
children and one illegitimate son. There is therefore a need to liquidate the conjugal partnership and
set apart the share of PASTOR, SR.'s wife in the conjugal partnership preparatory to the
administration and liquidation of the estate of PASTOR, SR. which will include, among others, the
determination of the extent of the statutory usufructuary right of his wife until her death. * When the
disputed Probate order was issued on December 5, 1972, there had been no liquidation of the community properties of PASTOR, SR. and
his wife.

(b) So, also, as of the same date, there had been no prior definitive determination of the assets of
the estate of PASTOR, SR. There was an inventory of his properties presumably prepared by the
special administrator, but it does not appear that it was ever the subject of a hearing or that it was
judicially approved. The reconveyance or recovery of properties allegedly owned but not in the name
of PASTOR, SR. was still being litigated in another court.

(c) There was no appropriate determination, much less payment, of the debts of the decedent and
his estate. Indeed, it was only in the Probate Order of December 5, 1972 where the Probate Court
ordered that-

... a notice be issued and published pursuant to the provisions of Rule 86 of the
Rules of Court, requiring all persons having money claims against the decedent to
file them in the office of the Branch Clerk of this Court."

(d) Nor had the estate tax been determined and paid, or at least provided for, as of December 5,
1972.

(e) The net assets of the estate not having been determined, the legitime of the forced heirs in
concrete figures could not be ascertained.

(f) All the foregoing deficiencies considered, it was not possible to determine whether the legacy of
QUEMADA - a fixed share in a specific property rather than an aliquot part of the entire net estate of
the deceased - would produce an impairment of the legitime of the compulsory heirs.

(g) Finally, there actually was no determination of the intrinsic validity of the will in other respects. It
was obviously for this reason that as late as March 5, 1980 - more than 7 years after the Probate
Order was issued the Probate Court scheduled on March 25, 1980 a hearing on the intrinsic validity
of the will.

3. Propriety of certiorari

Private respondent challenges the propriety of certiorari as a means to assail the validity of the
disputed Order of execution. He contends that the error, if any, is one of judgment, not jurisdiction,
and properly correctible only by appeal, not certiorari.

Under the circumstances of the case at bar, the challenge must be rejected. Grave abuse of
discretion amounting to lack of jurisdiction is much too evident in the actuations of the probate court
to be overlooked or condoned.

(a) Without a final, authoritative adjudication of the issue as to what properties compose the estate of
PASTOR, SR. in the face of conflicting claims made by heirs and a non-heir (MA. ELENA ACHAVAL
DE PASTOR) involving properties not in the name of the decedent, and in the absence of a
resolution on the intrinsic validity of the will here in question, there was no basis for the Probate
Court to hold in its Probate Order of 1972, which it did not, that private respondent is entitled to the
payment of the questioned legacy. Therefore, the Order of Execution of August 20, 1980 and the
subsequent implementing orders for the payment of QUEMADA's legacy, in alleged implementation
of the dispositive part of the Probate Order of December 5, 1972, must fall for lack of basis.

(b) The ordered payment of legacy would be violative of the rule requiring prior liquidation of the
estate of the deceased, i.e., the determination of the assets of the estate and payment of all debts
and expenses, before apportionment and distribution of the residue among the heirs and legatees.
(Bernardo vs. Court of Appeals, 7 SCRA 367.)

(c) Neither has the estate tax been paid on the estate of PASTOR, SR. Payment therefore of the
legacy to QUEMADA would collide with the provision of the National Internal Revenue Code
requiring payment of estate tax before delivery to any beneficiary of his distributive share of the
estate (Section 107 [c])

(d) The assailed order of execution was unauthorized, having been issued purportedly under Rule
88, Section 6 of the Rules of Court which reads:

Sec. 6. Court to fix contributive shares where devisees, legatees, or heirs have been
in possession. Where devisees, legatees, or heirs have entered into possession of
portions of the estate before the debts and expenses have been settled and paid and
have become liable to contribute for the payment of such debts and expenses, the
court having jurisdiction of the estate may, by order for that purpose, after hearing,
settle the amount of their several liabilities, and order how much and in what manner
each person shall contribute, and may issue execution as circumstances require.

The above provision clearly authorizes execution to enforce payment of debts of estate. A legacy is
not a debt of the estate; indeed, legatees are among those against whom execution is authorized to
be issued.
 ... there is merit in the petitioners' contention that the probate court generally cannot
issue a writ of execution. It is not supposed to issue a writ of execution because its
orders usually refer to the adjudication of claims against the estate which the
executor or administrator may satisfy without the necessity of resorting to a writ of
execution. The probate court, as such, does not render any judgment enforceable by
execution.

The circumstances that the Rules of Court expressly specifies that the probate court
may issue execution (a) to satisfy (debts of the estate out of) the contributive shares
of devisees, legatees and heirs in possession of the decedent's assets (Sec. 6. Rule
88), (b) to enforce payment of the expenses of partition (Sec. 3, Rule 90), and (c) to
satisfy the costs when a person is cited for examination in probate proceedings (Sec.
13, Rule 142) may mean, under the rule of inclusion unius est exclusion alterius, that
those are the only instances when it can issue a writ of execution. (Vda. de Valera
vs. Ofilada, 59 SCRA 96, 108.)

(d) It is within a court's competence to order the execution of a final judgment; but to order the
execution of a final order (which is not even meant to be executed) by reading into it terms that are
not there and in utter disregard of existing rules and law, is manifest grave abuse of discretion
tantamount to lack of jurisdiction. Consequently, the rule that certiorari may not be invoked to defeat
the right of a prevailing party to the execution of a valid and final judgment, is inapplicable. For when
an order of execution is issued with grave abuse of discretion or is at variance with the judgment
sought to be enforced (PVTA vs. Honorable Gonzales, 92 SCRA 172), certiorari will lie to abate the
order of execution.

(e) Aside from the propriety of resorting to certiorari to assail an order of execution which varies the
terms of the judgment sought to be executed or does not find support in the dispositive part of the
latter, there are circumstances in the instant case which justify the remedy applied for.

Petitioner MA. ELENA ACHAVAL DE PASTOR, wife of PASTOR, JR., is the holder in her own right of
three mining claims which are one of the objects of conflicting claims of ownership. She is not an
heir of PASTOR, SR. and was not a party to the probate proceedings. Therefore, she could not
appeal from the Order of execution issued by the Probate Court. On the other hand, after the
issuance of the execution order, the urgency of the relief she and her co-petitioner husband seek in
the petition for certiorari states against requiring her to go through the cumbersome procedure of
asking for leave to intervene in the probate proceedings to enable her, if leave is granted, to appeal
from the challenged order of execution which has ordered the immediate transfer and/or
garnishment of the royalties derived from mineral properties of which she is the duly registered
owner and/or grantee together with her husband. She could not have intervened before the issuance
of the assailed orders because she had no valid ground to intervene. The matter of ownership over
the properties subject of the execution was then still being litigated in another court in a
reconveyance suit filed by the special administrator of the estate of PASTOR, SR.

Likewise, at the time petitioner PASTOR, JR. Med the petition for certiorari with the Court of Appeals,
appeal was not available to him since his motion for reconsideration of the execution order was still
pending resolution by the Probate Court. But in the face of actual garnishment of their major source
of income, petitioners could no longer wait for the resolution of their motion for reconsideration. They
needed prompt relief from the injurious effects of the execution order. Under the circumstances,
recourse to certiorari was the feasible remedy.

WHEREFORE, the decision of the Court of Appeals in CA G.R. No. SP-11373-R is reversed. The
Order of execution issued by the probate Court dated August 20, 1980, as well as all the Orders
issued subsequent thereto in alleged implementation of the Probate Order dated December 5, 1972,
particularly the Orders dated November 11, 1980 and December 17, 1980, are hereby set aside; and
this case is remanded to the appropriate Regional Trial Court for proper proceedings, subject to the
judgment to be rendered in Civil Case No. 274-R.

SO ORDERED.

G.R. No. 120880 June 5, 1997

FERDINAND R. MARCOS II, petitioner,

vs.
COURT OF APPEALS, THE COMMISSIONER OF THE BUREAU OF INTERNAL REVENUE and
HERMINIA D. DE GUZMAN, respondents.

TORRES, JR., J.:

In this Petition for Review on Certiorari, Government action is once again assailed as precipitate and
unfair, suffering the basic and oftly implored requisites of due process of law. Specifically, the petition
assails the Decision1 of the Court of Appeals dated November 29, 1994 in CA-G.R. SP No. 31363, where
the said court held:

In view of all the foregoing, we rule that the deficiency income tax assessments and
estate tax assessment, are already final and (u)nappealable-and-the subsequent
levy of real properties is a tax remedy resorted to by the government, sanctioned by
Section 213 and 218 of the National Internal Revenue Code. This summary tax
remedy is distinct and separate from the other tax remedies (such as Judicial Civil
actions and Criminal actions), and is not affected or precluded by the pendency of
any other tax remedies instituted by the government.

WHEREFORE, premises considered, judgment is hereby rendered DISMISSING the

petition forcertiorari with prayer for Restraining Order and Injunction.

No pronouncements as to costs.

SO ORDERED.

More than seven years since the demise of the late Ferdinand E. Marcos, the former President of
the Republic of the Philippines, the matter of the settlement of his estate, and its dues to the
government in estate taxes, are still unresolved, the latter issue being now before this Court for
resolution. Specifically, petitioner Ferdinand R. Marcos II, the eldest son of the decedent, questions
the actuations of the respondent Commissioner of Internal Revenue in assessing, and collecting
through the summary remedy of Levy on Real Properties, estate and income tax delinquencies upon
the estate and properties of his father, despite the pendency of the proceedings on probate of the
will of the late president, which is docketed as Sp. Proc. No. 10279 in the Regional Trial Court of
Pasig, Branch 156.

Petitioner had filed with the respondent Court of Appeals a Petition for Certiorari and Prohibition with
an application for writ of preliminary injunction and/or temporary restraining order on June 28, 1993,
seeking to

I. Annul and set aside the Notices of Levy on real property dated February 22, 1993
and May 20, 1993, issued by respondent Commissioner of Internal Revenue;

II. Annul and set aside the Notices of Sale dated May 26, 1993;

III. Enjoin the Head Revenue Executive Assistant Director II (Collection Service),
from proceeding with the Auction of the real properties covered by Notices of Sale.

After the parties had pleaded their case, the Court of Appeals rendered its Decision 2 on November
29, 1994, ruling that the deficiency assessments for estate and income tax made upon the petitioner and
the estate of the deceased President Marcos have already become final and unappealable, and may thus
be enforced by the summary remedy of levying upon the properties of the late President, as was done by
the respondent Commissioner of Internal Revenue.

WHEREFORE, premises considered judgment is hereby rendered DISMISSING the

petition forCertiorari with prayer for Restraining Order and Injunction.

No pronouncements as to cost.

SO ORDERED.

Unperturbed, petitioner is now before us assailing the validity of the appellate court's decision,
assigning the following as errors:

A. RESPONDENT COURT MANIFESTLY ERRED IN RULING THAT THE

SUMMARY TAX REMEDIES RESORTED TO BY THE GOVERNMENT ARE NOT
AFFECTED AND PRECLUDED BY THE PENDENCY OF THE SPECIAL
PROCEEDING FOR THE ALLOWANCE OF THE LATE PRESIDENT'S ALLEGED
WILL. TO THE CONTRARY, THIS PROBATE PROCEEDING PRECISELY PLACED
ALL PROPERTIES WHICH FORM PART OF THE LATE PRESIDENT'S ESTATE IN
CUSTODIA LEGIS OF THE PROBATE COURT TO THE EXCLUSION OF ALL
OTHER COURTS AND ADMINISTRATIVE AGENCIES.
 B. RESPONDENT COURT ARBITRARILY ERRED IN SWEEPINGLY DECIDING
THAT SINCE THE TAX ASSESSMENTS OF PETITIONER AND HIS PARENTS HAD
ALREADY BECOME FINAL AND UNAPPEALABLE, THERE WAS NO NEED TO GO
INTO THE MERITS OF THE GROUNDS CITED IN THE PETITION. INDEPENDENT
OF WHETHER THE TAX ASSESSMENTS HAD ALREADY BECOME FINAL,
HOWEVER, PETITIONER HAS THE RIGHT TO QUESTION THE UNLAWFUL
MANNER AND METHOD IN WHICH TAX COLLECTION IS SOUGHT TO BE
ENFORCED BY RESPONDENTS COMMISSIONER AND DE GUZMAN. THUS,
RESPONDENT COURT SHOULD HAVE FAVORABLY CONSIDERED THE MERITS
OF THE FOLLOWING GROUNDS IN THE PETITION:

(1) The Notices of Levy on Real Property were issued beyond the
period provided in the Revenue Memorandum Circular No. 38-68.

(2) [a] The numerous pending court cases questioning the late
President's ownership or interests in several properties (both
personal and real) make the total value of his estate, and the
consequent estate tax due, incapable of exact pecuniary
determination at this time. Thus, respondents' assessment of the
estate tax and their issuance of the Notices of Levy and Sale are
premature, confiscatory and oppressive.

[b] Petitioner, as one of the late President's compulsory heirs, was

never notified, much less served with copies of the Notices of Levy,
contrary to the mandate of Section 213 of the NIRC. As such,
petitioner was never given an opportunity to contest the Notices in
violation of his right to due process of law.

C. ON ACCOUNT OF THE CLEAR MERIT OF THE PETITION, RESPONDENT

COURT MANIFESTLY ERRED IN RULING THAT IT HAD NO POWER TO GRANT
INJUNCTIVE RELIEF TO PETITIONER. SECTION 219 OF THE NIRC
NOTWITHSTANDING, COURTS POSSESS THE POWER TO ISSUE A WRIT OF
PRELIMINARY INJUNCTION TO RESTRAIN RESPONDENTS COMMISSIONER'S
AND DE GUZMAN'S ARBITRARY METHOD OF COLLECTING THE ALLEGED
DEFICIENCY ESTATE AND INCOME TAXES BY MEANS OF LEVY.

The facts as found by the appellate court are undisputed, and are hereby adopted:

On September 29, 1989, former President Ferdinand Marcos died in Honolulu,

Hawaii, USA.

On June 27, 1990, a Special Tax Audit Team was created to conduct investigations
and examinations of the tax liabilities and obligations of the late president, as well as
that of his family, associates and "cronies". Said audit team concluded its
investigation with a Memorandum dated July 26, 1991. The investigation disclosed
that the Marcoses failed to file a written notice of the death of the decedent, an estate
tax returns [sic], as well as several income tax returns covering the years 1982 to
1986, all in violation of the National Internal Revenue Code (NIRC).

Subsequently, criminal charges were filed against Mrs. Imelda R. Marcos before the
Regional Trial of Quezon City for violations of Sections 82, 83 and 84 (has penalized
under Sections 253 and 254 in relation to Section 252 a & b) of the National
Internal Revenue Code (NIRC).

The Commissioner of Internal Revenue thereby caused the preparation and filing of
the Estate Tax Return for the estate of the late president, the Income Tax Returns of
the Spouses Marcos for the years 1985 to 1986, and the Income Tax Returns of
petitioner Ferdinand "Bongbong" Marcos II for the years 1982 to 1985.

On July 26, 1991, the BIR issued the following: (1) Deficiency estate tax assessment
no. FAC-2-89-91-002464 (against the estate of the late president Ferdinand Marcos
in the amount of P23,293,607,638.00 Pesos); (2) Deficiency income tax assessment
no. FAC-1-85-91-002452 and Deficiency income tax assessment no. FAC-1-86-91-
002451 (against the Spouses Ferdinand and Imelda Marcos in the amounts of
P149,551.70 and P184,009,737.40 representing deficiency income tax for the years
1985 and 1986); (3) Deficiency income tax assessment nos. FAC-1-82-91-002460 to
FAC-1-85-91-002463 (against petitioner Ferdinand "Bongbong" Marcos II in the
amounts of P258.70 pesos; P9,386.40 Pesos; P4,388.30 Pesos; and P6,376.60
Pesos representing his deficiency income taxes for the years 1982 to 1985).

The Commissioner of Internal Revenue avers that copies of the deficiency estate and
income tax assessments were all personally and constructively served on August 26,
1991 and September 12, 1991 upon Mrs. Imelda Marcos (through her caretaker Mr.
Martinez) at her last known address at No. 204 Ortega St., San Juan, M.M. (Annexes
"D" and "E" of the Petition). Likewise, copies of the deficiency tax assessments
issued against petitioner Ferdinand "Bongbong" Marcos II were also personally and
constructively served upon him (through his caretaker) on September 12, 1991, at
his last known address at Don Mariano Marcos St. corner P. Guevarra St., San Juan,
M.M. (Annexes "J" and "J-1" of the Petition). Thereafter, Formal Assessment notices
were served on October 20, 1992, upon Mrs. Marcos c/o petitioner, at his office,
House of Representatives, Batasan Pambansa, Quezon City. Moreover, a notice to
Taxpayer inviting Mrs. Marcos (or her duly authorized representative or counsel), to a
conference, was furnished the counsel of Mrs. Marcos, Dean Antonio Coronel but
to no avail.

The deficiency tax assessments were not protested administratively, by Mrs. Marcos
and the other heirs of the late president, within 30 days from service of said
assessments.

On February 22, 1993, the BIR Commissioner issued twenty-two notices of levy on
real property against certain parcels of land owned by the Marcoses to satisfy the
alleged estate tax and deficiency income taxes of Spouses Marcos.
 On May 20, 1993, four more Notices of Levy on real property were issued for the
purpose of satisfying the deficiency income taxes.

On May 26, 1993, additional four (4) notices of Levy on real property were again
issued. The foregoing tax remedies were resorted to pursuant to Sections 205 and
213 of the National Internal Revenue Code (NIRC).

In response to a letter dated March 12, 1993 sent by Atty. Loreto Ata (counsel of
herein petitioner) calling the attention of the BIR and requesting that they be duly
notified of any action taken by the BIR affecting the interest of their client Ferdinand
"Bongbong" Marcos II, as well as the interest of the late president copies of the
aforesaid notices were, served on April 7, 1993 and on June 10, 1993, upon Mrs.
Imelda Marcos, the petitioner, and their counsel of record, "De Borja, Medialdea, Ata,
Bello, Guevarra and Serapio Law Office".

Notices of sale at public auction were posted on May 26, 1993, at the lobby of the
City Hall of Tacloban City. The public auction for the sale of the eleven (11) parcels of
land took place on July 5, 1993. There being no bidder, the lots were declared
forfeited in favor of the government.

On June 25, 1993, petitioner Ferdinand "Bongbong" Marcos II filed the instant
petition for certiorariand prohibition under Rule 65 of the Rules of Court, with prayer
for temporary restraining order and/or writ of preliminary injunction.

It has been repeatedly observed, and not without merit, that the enforcement of tax laws and the
collection of taxes, is of paramount importance for the sustenance of government. Taxes are the
lifeblood of the government and should be collected without unnecessary hindrance. However, such
collection should be made in accordance with law as any arbitrariness will negate the very reason for
government itself. It is therefore necessary to reconcile the apparently conflicting interests of the
authorities and the taxpayers so that the real purpose of taxation, which is the promotion of the
common good, may be achieved. 3

Whether or not the proper avenues of assessment and collection of the said tax obligations were
taken by the respondent Bureau is now the subject of the Court's inquiry.

Petitioner posits that notices of levy, notices of sale, and subsequent sale of properties of the late
President Marcos effected by the BIR are null and void for disregarding the established procedure
for the enforcement of taxes due upon the estate of the deceased. The case of Domingo
vs. Garlitos 4 is specifically cited to bolster the argument that "the ordinary procedure by which to settle
claims of indebtedness against the estate of a deceased, person, as in an inheritance (estate) tax, is for
the claimant to present a claim before the probate court so that said court may order the administrator to
pay the amount therefor." This remedy is allegedly, exclusive, and cannot be effected through any other
means.

Petitioner goes further, submitting that the probate court is not precluded from denying a request by
the government for the immediate payment of taxes, and should order the payment of the same only
within the period fixed by the probate court for the payment of all the debts of the decedent. In this
regard, petitioner cites the case of Collector of Internal Revenue vs. The Administratrix of the Estate
of Echarri (67 Phil 502), where it was held that:

The case of Pineda vs. Court of First Instance of Tayabas and Collector of Internal
Revenue (52 Phil 803), relied upon by the petitioner-appellant is good authority on
the proposition that the court having control over the administration proceedings has
jurisdiction to entertain the claim presented by the government for taxes due and to
order the administrator to pay the tax should it find that the assessment was proper,
and that the tax was legal, due and collectible. And the rule laid down in that case
must be understood in relation to the case of Collector of Customs
vs. Haygood, supra., as to the procedure to be followed in a given case by the
government to effectuate the collection of the tax. Categorically stated, where during
the pendency of judicial administration over the estate of a deceased person a claim
for taxes is presented by the government, the court has the authority to order
payment by the administrator; but, in the same way that it has authority to order
payment or satisfaction, it also has the negative authority to deny the same. While
there are cases where courts are required to perform certain duties mandatory and
ministerial in character, the function of the court in a case of the present character is
not one of them; and here, the court cannot be an organism endowed with latitude of
judgment in one direction, and converted into a mere mechanical contrivance in
another direction.

On the other hand, it is argued by the BIR, that the state's authority to collect internal revenue taxes
is paramount. Thus, the pendency of probate proceedings over the estate of the deceased does not
preclude the assessment and collection, through summary remedies, of estate taxes over the same.
According to the respondent, claims for payment of estate and income taxes due and assessed after
the death of the decedent need not be presented in the form of a claim against the estate. These
can and should be paid immediately. The probate court is not the government agency to decide
whether an estate is liable for payment of estate of income taxes. Well-settled is the rule that the
probate court is a court with special and limited jurisdiction.

Concededly, the authority of the Regional Trial Court, sitting, albeit with limited jurisdiction, as a
probate court over estate of deceased individual, is not a trifling thing. The court's jurisdiction, once
invoked, and made effective, cannot be treated with indifference nor should it be ignored with
impunity by the very parties invoking its authority.

In testament to this, it has been held that it is within the jurisdiction of the probate court to approve
the sale of properties of a deceased person by his prospective heirs before final adjudication; 5 to
determine who are the heirs of the decedent; 6 the recognition of a natural child; 7 the status of a woman
claiming to be the legal wife of the decedent; 8the legality of disinheritance of an heir by the testator; 9 and
to pass upon the validity of a waiver of hereditary rights. 10

The pivotal question the court is tasked to resolve refers to the authority of the Bureau of Internal
Revenue to collect by the summary remedy of levying upon, and sale of real properties of the
decedent, estate tax deficiencies, without the cognition and authority of the court sitting in probate
over the supposed will of the deceased.

The nature of the process of estate tax collection has been described as follows:

Strictly speaking, the assessment of an inheritance tax does not directly involve the
administration of a decedent's estate, although it may be viewed as an incident to the
complete settlement of an estate, and, under some statutes, it is made the duty of
the probate court to make the amount of the inheritance tax a part of the final decree
of distribution of the estate. It is not against the property of decedent, nor is it a claim
against the estate as such, but it is against the interest or property right which the
heir, legatee, devisee, etc., has in the property formerly held by decedent. Further,
under some statutes, it has been held that it is not a suit or controversy between the
parties, nor is it an adversary proceeding between the state and the person who
owes the tax on the inheritance. However, under other statutes it has been held that
the hearing and determination of the cash value of the assets and the determination
of the tax are adversary proceedings. The proceeding has been held to be
necessarily a proceeding in rem. 11

In the Philippine experience, the enforcement and collection of estate tax, is executive in character,
as the legislature has seen it fit to ascribe this task to the Bureau of Internal Revenue. Section 3 of
the National Internal Revenue Code attests to this:

Sec. 3. Powers and duties of the Bureau. The powers and duties of the Bureau of
Internal Revenue shall comprehend the assessment and collection of all national
internal revenue taxes, fees, and charges, and the enforcement of all forfeitures,
penalties, and fines connected therewith, including the execution of judgments in all
cases decided in its favor by the Court of Tax Appeals and the ordinary courts. Said
Bureau shall also give effect to and administer the supervisory and police power
conferred to it by this Code or other laws.

Thus, it was in Vera vs. Fernandez 12 that the court recognized the liberal treatment of claims for taxes
charged against the estate of the decedent. Such taxes, we said, were exempted from the application of
the statute of non-claims, and this is justified by the necessity of government funding, immortalized in the
maxim that taxes are the lifeblood of the government.Vectigalia nervi sunt rei publicae taxes are the
sinews of the state.

Taxes assessed against the estate of a deceased person, after administration is

opened, need not be submitted to the committee on claims in the ordinary course of
administration. In the exercise of its control over the administrator, the court may
direct the payment of such taxes upon motion showing that the taxes have been
assessed against the estate.

Such liberal treatment of internal revenue taxes in the probate proceedings extends so far, even to
allowing the enforcement of tax obligations against the heirs of the decedent, even after distribution
of the estate's properties.
 Claims for taxes, whether assessed before or after the death of the deceased, can
be collected from the heirs even after the distribution of the properties of the
decedent. They are exempted from the application of the statute of non-claims. The
heirs shall be liable therefor, in proportion to their share in the inheritance. 13

Thus, the Government has two ways of collecting the taxes in question. One, by going
after all the heirs and collecting from each one of them the amount of the tax
proportionate to the inheritance received. Another remedy, pursuant to the lien created by
Section 315 of the Tax Code upon all property and rights to property belong to the
taxpayer for unpaid income tax, is by subjecting said property of the estate which is in the
hands of an heir or transferee to the payment of the tax due the estate. (Commissioner of
Internal Revenue vs. Pineda, 21 SCRA 105, September 15, 1967.)

From the foregoing, it is discernible that the approval of the court, sitting in probate, or as a
settlement tribunal over the deceased is not a mandatory requirement in the collection of estate
taxes. It cannot therefore be argued that the Tax Bureau erred in proceeding with the levying and
sale of the properties allegedly owned by the late President, on the ground that it was required to
seek first the probate court's sanction. There is nothing in the Tax Code, and in the pertinent
remedial laws that implies the necessity of the probate or estate settlement court's approval of the
state's claim for estate taxes, before the same can be enforced and collected.

On the contrary, under Section 87 of the NIRC, it is the probate or settlement court which is bidden
not to authorize the executor or judicial administrator of the decedent's estate to deliver any
distributive share to any party interested in the estate, unless it is shown a Certification by the
Commissioner of Internal Revenue that the estate taxes have been paid. This provision disproves
the petitioner's contention that it is the probate court which approves the assessment and collection
of the estate tax.

If there is any issue as to the validity of the BIR's decision to assess the estate taxes, this should
have been pursued through the proper administrative and judicial avenues provided for by law.

Section 229 of the NIRC tells us how:

Sec. 229. Protesting of assessment. When the Commissioner of Internal Revenue

or his duly authorized representative finds that proper taxes should be assessed, he
shall first notify the taxpayer of his findings. Within a period to be prescribed by
implementing regulations, the taxpayer shall be required to respond to said notice. If
the taxpayer fails to respond, the Commissioner shall issue an assessment based on
his findings.

Such assessment may be protested administratively by filing a request for

reconsideration or reinvestigation in such form and manner as may be prescribed by
implementing regulations within (30) days from receipt of the assessment; otherwise,
the assessment shall become final and unappealable.

If the protest is denied in whole or in part, the individual, association or corporation

adversely affected by the decision on the protest may appeal to the Court of Tax
 Appeals within thirty (30) days from receipt of said decision; otherwise, the decision
shall become final, executory and demandable. (As inserted by P.D. 1773)

Apart from failing to file the required estate tax return within the time required for the filing of the
same, petitioner, and the other heirs never questioned the assessments served upon them, allowing
the same to lapse into finality, and prompting the BIR to collect the said taxes by levying upon the
properties left by President Marcos.

Petitioner submits, however, that "while the assessment of taxes may have been validly undertaken
by the Government, collection thereof may have been done in violation of the law. Thus, the manner
and method in which the latter is enforced may be questioned separately, and irrespective of the
finality of the former, because the Government does not have the unbridled discretion to enforce
collection without regard to the clear provision of law." 14

Petitioner specifically points out that applying Memorandum Circular No. 38-68, implementing
Sections 318 and 324 of the old tax code (Republic Act 5203), the BIR's Notices of Levy on the
Marcos properties, were issued beyond the allowed period, and are therefore null and void:

. . . the Notices of Levy on Real Property (Annexes O to NN of Annex C of this

Petition) in satisfaction of said assessments were still issued by respondents well
beyond the period mandated in Revenue Memorandum Circular No. 38-68. These
Notices of Levy were issued only on 22 February 1993 and 20 May 1993 when at
least seventeen (17) months had already lapsed from the last service of tax
assessment on 12 September 1991. As no notices of distraint of personal property
were first issued by respondents, the latter should have complied with Revenue
Memorandum Circular No. 38-68 and issued these Notices of Levy not earlier than
three (3) months nor later than six (6) months from 12 September 1991. In
accordance with the Circular, respondents only had until 12 March 1992 (the last day
of the sixth month) within which to issue these Notices of Levy. The Notices of Levy,
having been issued beyond the period allowed by law, are thus void and of no
effect. 15

We hold otherwise. The Notices of Levy upon real property were issued within the prescriptive period
and in accordance with the provisions of the present Tax Code. The deficiency tax assessment,
having already become final, executory, and demandable, the same can now be collected through
the summary remedy of distraint or levy pursuant to Section 205 of the NIRC.

The applicable provision in regard to the prescriptive period for the assessment and collection of tax
deficiency in this instance is Article 223 of the NIRC, which pertinently provides:

Sec. 223. Exceptions as to a period of limitation of assessment and collection of

taxes. (a) In the case of a false or fraudulent return with intent to evade tax or of a
failure to file a return, the tax may be assessed, or a proceeding in court for the
collection of such tax may be begun without assessment, at any time within ten (10)
years after the discovery of the falsity, fraud, or omission:Provided, That, in a fraud
 assessment which has become final and executory, the fact of fraud shall be
judicially taken cognizance of in the civil or criminal action for the collection thereof.

xxx xxx xxx

(c) Any internal revenue tax which has been assessed within the period of limitation
above prescribed, may be collected by distraint or levy or by a proceeding in court
within three years following the assessment of the tax.

xxx xxx xxx

The omission to file an estate tax return, and the subsequent failure to contest or appeal the
assessment made by the BIR is fatal to the petitioner's cause, as under the above-cited provision, in
case of failure to file a return, the tax may be assessed at any time within ten years after the
omission, and any tax so assessed may be collected by levy upon real property within three years
following the assessment of the tax. Since the estate tax assessment had become final and
unappealable by the petitioner's default as regards protesting the validity of the said assessment,
there is now no reason why the BIR cannot continue with the collection of the said tax. Any objection
against the assessment should have been pursued following the avenue paved in Section 229 of the
NIRC on protests on assessments of internal revenue taxes.

Petitioner further argues that "the numerous pending court cases questioning the late president's
ownership or interests in several properties (both real and personal) make the total value of his
estate, and the consequent estate tax due, incapable of exact pecuniary determination at this time.
Thus, respondents' assessment of the estate tax and their issuance of the Notices of Levy and sale
are premature and oppressive." He points out the pendency of Sandiganbayan Civil Case Nos.
0001-0034 and 0141, which were filed by the government to question the ownership and interests of
the late President in real and personal properties located within and outside the Philippines.
Petitioner, however, omits to allege whether the properties levied upon by the BIR in the collection of
estate taxes upon the decedent's estate were among those involved in the said cases pending in the
Sandiganbayan. Indeed, the court is at a loss as to how these cases are relevant to the matter at
issue. The mere fact that the decedent has pending cases involving ill-gotten wealth does not affect
the enforcement of tax assessments over the properties indubitably included in his estate.

Petitioner also expresses his reservation as to the propriety of the BIR's total assessment of
P23,292,607,638.00, stating that this amount deviates from the findings of the Department of
Justice's Panel of Prosecutors as per its resolution of 20 September 1991. Allegedly, this is clear
evidence of the uncertainty on the part of the Government as to the total value of the estate of the
late President.

This is, to our mind, the petitioner's last ditch effort to assail the assessment of estate tax which had
already become final and unappealable.

It is not the Department of Justice which is the government agency tasked to determine the amount
of taxes due upon the subject estate, but the Bureau of Internal Revenue, 16 whose determinations
and assessments are presumed correct and made in good faith. 17 The taxpayer has the duty of proving
otherwise. In the absence of proof of any irregularities in the performance of official duties, an
assessment will not be disturbed. Even an assessment based on estimates is prima facie valid and lawful
where it does not appear to have been arrived at arbitrarily or capriciously. The burden of proof is upon
the complaining party to show clearly that the assessment is erroneous. Failure to present proof of error
in the assessment will justify the judicial affirmance of said assessment. 18 In this instance, petitioner has
not pointed out one single provision in the Memorandum of the Special Audit Team which gave rise to the
questioned assessment, which bears a trace of falsity. Indeed, the petitioner's attack on the assessment
bears mainly on the alleged improbable and unconscionable amount of the taxes charged. But mere
rhetoric cannot supply the basis for the charge of impropriety of the assessments made.

Moreover, these objections to the assessments should have been raised, considering the ample
remedies afforded the taxpayer by the Tax Code, with the Bureau of Internal Revenue and the Court
of Tax Appeals, as described earlier, and cannot be raised now via Petition for Certiorari, under the
pretext of grave abuse of discretion. The course of action taken by the petitioner reflects his
disregard or even repugnance of the established institutions for governance in the scheme of a well-
ordered society. The subject tax assessments having become final, executory and enforceable, the
same can no longer be contested by means of a disguised protest. In the main, Certiorari may not
be used as a substitute for a lost appeal or remedy. 19 This judicial policy becomes more pronounced in
view of the absence of sufficient attack against the actuations of government.

On the matter of sufficiency of service of Notices of Assessment to the petitioner, we find the
respondent appellate court's pronouncements sound and resilient to petitioner's attacks.

Anent grounds 3(b) and (B) both alleging/claiming lack of notice We find, after
considering the facts and circumstances, as well as evidences, that there was
sufficient, constructive and/or actual notice of assessments, levy and sale, sent to
herein petitioner Ferdinand "Bongbong" Marcos as well as to his mother Mrs. Imelda
Marcos.

Even if we are to rule out the notices of assessments personally given to the
caretaker of Mrs. Marcos at the latter's last known address, on August 26, 1991 and
September 12, 1991, as well as the notices of assessment personally given to the
caretaker of petitioner also at his last known address on September 12, 1991 the
subsequent notices given thereafter could no longer be ignored as they were sent at
a time when petitioner was already here in the Philippines, and at a place where said
notices would surely be called to petitioner's attention, and received by responsible
persons of sufficient age and discretion.

Thus, on October 20, 1992, formal assessment notices were served upon Mrs.
Marcos c/o the petitioner, at his office, House of Representatives, Batasan
Pambansa, Q.C. (Annexes "A", "A-1", "A-2", "A-3"; pp. 207-210,
Comment/Memorandum of OSG). Moreover, a notice to taxpayer dated October 8,
1992 inviting Mrs. Marcos to a conference relative to her tax liabilities, was furnished
the counsel of Mrs. Marcos Dean Antonio Coronel (Annex "B", p. 211, ibid).
Thereafter, copies of Notices were also served upon Mrs. Imelda Marcos, the
petitioner and their counsel "De Borja, Medialdea, Ata, Bello, Guevarra and Serapio
Law Office", on April 7, 1993 and June 10, 1993. Despite all of these Notices,
 petitioner never lifted a finger to protest the assessments, (upon which the Levy and
sale of properties were based), nor appealed the same to the Court of Tax Appeals.

There being sufficient service of Notices to herein petitioner (and his mother) and it
appearing that petitioner continuously ignored said Notices despite several
opportunities given him to file a protest and to thereafter appeal to the Court of Tax
Appeals, the tax assessments subject of this case, upon which the levy and sale
of properties were based, could no longer be contested (directly or indirectly) via this
instant petition for certiorari. 20

Petitioner argues that all the questioned Notices of Levy, however, must be nullified for having been
issued without validly serving copies thereof to the petitioner. As a mandatory heir of the decedent,
petitioner avers that he has an interest in the subject estate, and notices of levy upon its properties
should have been served upon him.

We do not agree. In the case of notices of levy issued to satisfy the delinquent estate tax, the
delinquent taxpayer is the Estate of the decedent, and not necessarily, and exclusively, the petitioner
as heir of the deceased. In the same vein, in the matter of income tax delinquency of the late
president and his spouse, petitioner is not the taxpayer liable. Thus, it follows that service of notices
of levy in satisfaction of these tax delinquencies upon the petitioner is not required by law, as under
Section 213 of the NIRC, which pertinently states:

xxx xxx xxx

. . . Levy shall be effected by writing upon said certificate a description of the property
upon which levy is made. At the same time, written notice of the levy shall be mailed
to or served upon the Register of Deeds of the province or city where the property is
located and upon the delinquent taxpayer, or if he be absent from the Philippines, to
his agent or the manager of the business in respect to which the liability arose, or if
there be none, to the occupant of the property in question.

xxx xxx xxx

The foregoing notwithstanding, the record shows that notices of warrants of distraint and levy of sale
were furnished the counsel of petitioner on April 7, 1993, and June 10, 1993, and the petitioner
himself on April 12, 1993 at his office at the Batasang Pambansa. 21 We cannot therefore,
countenance petitioner's insistence that he was denied due process. Where there was an opportunity to
raise objections to government action, and such opportunity was disregarded, for no justifiable reason,
the party claiming oppression then becomes the oppressor of the orderly functions of government. He
who comes to court must come with clean hands. Otherwise, he not only taints his name, but ridicules the
very structure of established authority.

IN VIEW WHEREOF, the Court RESOLVED to DENY the present petition. The Decision of the Court
of Appeals dated November 29, 1994 is hereby AFFIRMED in all respects.

SO ORDERED.
Regalado, Romero, Puno and Mendoza, JJ., concur.

G.R. No. 155541 January 27, 2004

ESTATE OF THE LATE JULIANA DIEZ VDA. DE GABRIEL, petitioner,

vs.
COMMISSIONER OF INTERNAL REVENUE, respondent.

DECISION

YNARES-SANTIAGO, J.:

This petition for review on certiorari assails the decision of the Court of Appeals in CA-G.R. CV No.
09107, dated September 30, 2002,1 which reversed the November 19, 1995 Order of Regional Trial
Court of Manila, Branch XXXVIII, in Sp. Proc. No. R-82-6994, entitled "Testate Estate of Juliana Diez
Vda. De Gabriel". The petition was filed by the Estate of the Late Juliana Diez Vda. De Gabriel,
represented by Prudential Bank as its duly appointed and qualified Administrator.

As correctly summarized by the Court of Appeals, the relevant facts are as follows:

During the lifetime of the decedent, Juliana Vda. De Gabriel, her business affairs were
managed by the Philippine Trust Company (Philtrust). The decedent died on April 3, 1979.
Two days after her death, Philtrust, through its Trust Officer, Atty. Antonio M. Nuyles, filed her
Income Tax Return for 1978. The return did not indicate that the decedent had died.

On May 22, 1979, Philtrust also filed a verified petition for appointment as Special Administrator with
the Regional Trial Court of Manila, Branch XXXVIII, docketed as Sp. Proc. No. R-82-6994. The court
a quo appointed one of the heirs as Special Administrator. Philtrusts motion for reconsideration was
denied by the probate court.

On January 26, 1981, the court a quo issued an Order relieving Mr. Diez of his appointment, and
appointed Antonio Lantin to take over as Special Administrator. Subsequently, on July 30, 1981, Mr.
Lantin was also relieved of his appointment, and Atty. Vicente Onosa was appointed in his stead.

In the meantime, the Bureau of Internal Revenue conducted an administrative investigation on the
decedents tax liability and found a deficiency income tax for the year 1977 in the amount of
P318,233.93. Thus, on November 18, 1982, the BIR sent by registered mail a demand letter and
Assessment Notice No. NARD-78-82-00501 addressed to the decedent "c/o Philippine Trust
Company, Sta. Cruz, Manila" which was the address stated in her 1978 Income Tax Return. No
response was made by Philtrust. The BIR was not informed that the decedent had actually passed
away.

In an Order dated September 5, 1983, the court a quo appointed Antonio Ambrosio as the
Commissioner and Auditor Tax Consultant of the Estate of the decedent.
On June 18, 1984, respondent Commissioner of Internal Revenue issued warrants of distraint and
levy to enforce collection of the decedents deficiency income tax liability, which were served upon
her heir, Francisco Gabriel. On November 22, 1984, respondent filed a "Motion for Allowance of
Claim and for an Order of Payment of Taxes" with the court a quo. On January 7, 1985, Mr.
Ambrosio filed a letter of protest with the Litigation Division of the BIR, which was not acted upon
because the assessment notice had allegedly become final, executory and incontestable.

On May 16, 1985, petitioner, the Estate of the decedent, through Mr. Ambrosio, filed a formal
opposition to the BIRs Motion for Allowance of Claim based on the ground that there was no proper
service of the assessment and that the filing of the aforesaid claim had already prescribed. The BIR
filed its Reply, contending that service to Philippine Trust Company was sufficient service, and that
the filing of the claim against the Estate on November 22, 1984 was within the five-year prescriptive
period for assessment and collection of taxes under Section 318 of the 1977 National Internal
Revenue Code (NIRC).

On November 19, 1985, the court a quo issued an Order denying respondents claim against the
Estate,2 after finding that there was no notice of its tax assessment on the proper party.3

On July 2, 1986, respondent filed an appeal with the Court of Appeals, docketed as CA-G.R. CV No.
09107,4assailing the Order of the probate court dated November 19, 1985. It was claimed that
Philtrust, in filing the decedents 1978 income tax return on April 5, 1979, two days after the
taxpayers death, had "constituted itself as the administrator of the estate of the deceased at least
insofar as said return is concerned."5 Citing Basilan Estate Inc. v. Commissioner of Internal
Revenue,6 respondent argued that the legal requirement of notice with respect to tax
assessments7 requires merely that the Commissioner of Internal Revenue release, mail and send
the notice of the assessment to the taxpayer at the address stated in the return filed, but not that the
taxpayer actually receive said assessment within the five-year prescriptive period. 8 Claiming that
Philtrust had been remiss in not notifying respondent of the decedents death, respondent therefore
argued that the deficiency tax assessment had already become final, executory and incontestable,
and that petitioner Estate was liable therefor.

On September 30, 2002, the Court of Appeals rendered a decision in favor of the respondent.
Although acknowledging that the bond of agency between Philtrust and the decedent was severed
upon the latters death, it was ruled that the administrator of the Estate had failed in its legal duty to
inform respondent of the decedents death, pursuant to Section 104 of the National Internal Revenue
Code of 1977. Consequently, the BIRs service to Philtrust of the demand letter and Notice of
Assessment was binding upon the Estate, and, upon the lapse of the statutory thirty-day period to
question this claim, the assessment became final, executory and incontestable. The dispositive
portion of said decision reads:

WHEREFORE, finding merit in the appeal, the appealed decision is REVERSED AND SET
ASIDE. Another one is entered ordering the Administrator of the Estate to pay the
Commissioner of Internal Revenue the following:

a. The amount of P318,223.93, representing the deficiency income tax liability for the
year 1978, plus 20% interest per annum from November 2, 1982 up to November 2,
 1985 and in addition thereto 10% surcharge on the basic tax of P169,155.34
pursuant to Section 51(e)(2) and (3) of the Tax Code as amended by PD 69 and
1705; and

b. The costs of the suit.

SO ORDERED.9

Hence, the instant petition, raising the following issues:

1. Whether or not the Court of Appeals erred in holding that the service of deficiency tax
assessment against Juliana Diez Vda. de Gabriel through the Philippine Trust Company was
a valid service in order to bind the Estate;

2. Whether or not the Court of Appeals erred in holding that the deficiency tax assessment
and final demand was already final, executory and incontestable.

Petitioner Estate denies that Philtrust had any legal personality to represent the decedent after her
death. As such, petitioner argues that there was no proper notice of the assessment which,
therefore, never became final, executory and incontestable.10 Petitioner further contends that
respondents failure to file its claim against the Estate within the proper period prescribed by the
Rules of Court is a fatal error, which forever bars its claim against the Estate. 11

Respondent, on the other hand, claims that because Philtrust filed the decedents income tax return
subsequent to her death, Philtrust was the de facto administrator of her Estate. 12 Consequently,
when the Assessment Notice and demand letter dated November 18, 1982 were sent to Philtrust,
there was proper service on the Estate.13Respondent further asserts that Philtrust had the legal
obligation to inform petitioner of the decedents death, which requirement is found in Section 104 of
the NIRC of 1977.14 Since Philtrust did not, respondent contends that petitioner Estate should not be
allowed to profit from this omission.15 Respondent further argues that Philtrusts failure to protest the
aforementioned assessment within the 30-day period provided in Section 319-A of the NIRC of 1977
meant that the assessment had already become final, executory and incontestable. 16

The resolution of this case hinges on the legal relationship between Philtrust and the decedent, and,
by extension, between Philtrust and petitioner Estate. Subsumed under this primary issue is the sub-
issue of whether or not service on Philtrust of the demand letter and Assessment Notice No. NARD-
78-82-00501 was valid service on petitioner, and the issue of whether Philtrusts inaction thereon
could bind petitioner. If both sub-issues are answered in the affirmative, respondents contention as
to the finality of Assessment Notice No. NARD-78-82-00501 must be answered in the affirmative.
This is because Section 319-A of the NIRC of 1977 provides a clear 30-day period within which to
protest an assessment. Failure to file such a protest within said period means that the assessment
ipso jure becomes final and unappealable, as a consequence of which legal proceedings may then
be initiated for collection thereof.

We find in favor of the petitioner.

The first point to be considered is that the relationship between the decedent and Philtrust was one
of agency, which is a personal relationship between agent and principal. Under Article 1919 (3) of
the Civil Code, death of the agent or principal automatically terminates the agency. In this instance,
the death of the decedent on April 3, 1979 automatically severed the legal relationship between her
and Philtrust, and such could not be revived by the mere fact that Philtrust continued to act as her
agent when, on April 5, 1979, it filed her Income Tax Return for the year 1978.

Since the relationship between Philtrust and the decedent was automatically severed at the moment
of the Taxpayers death, none of Philtrusts acts or omissions could bind the estate of the Taxpayer.
Service on Philtrust of the demand letter and Assessment Notice No. NARD-78-82-00501 was
improperly done.

It must be noted that Philtrust was never appointed as the administrator of the Estate of the
decedent, and, indeed, that the court a quo twice rejected Philtrusts motion to be thus appointed. As
of November 18, 1982, the date of the demand letter and Assessment Notice, the legal relationship
between the decedent and Philtrust had already been non-existent for three years.

Respondent claims that Section 104 of the National Internal Revenue Code of 1977 imposed the
legal obligation on Philtrust to inform respondent of the decedents death. The said Section reads:

SEC. 104. Notice of death to be filed. In all cases of transfers subject to tax or where,
though exempt from tax, the gross value of the estate exceeds three thousand pesos, the
executor, administrator, or any of the legal heirs, as the case may be, within two months after
the decedents death, or within a like period after qualifying as such executor or
administrator, shall give written notice thereof to the Commissioner of Internal Revenue.

The foregoing provision falls in Title III, Chapter I of the National Internal Revenue Code of
1977, or the chapter on Estate Tax, and pertains to "all cases of transfers subject to tax" or
where the "gross value of the estate exceeds three thousand pesos". It has absolutely no
applicability to a case for deficiency income tax, such as the case at bar. It further lacks
applicability since Philtrust was never the executor, administrator of the decedents estate,
and, as such, never had the legal obligation, based on the above provision, to inform
respondent of her death.

Although the administrator of the estate may have been remiss in his legal obligation to
inform respondent of the decedents death, the consequences thereof, as provided in
Section 119 of the National Internal Revenue Code of 1977, merely refer to the imposition of
certain penal sanctions on the administrator. These do not include the indefinite tolling of the
prescriptive period for making deficiency tax assessments, or the waiver of the notice
requirement for such assessments.

Thus, as of November 18, 1982, the date of the demand letter and Assessment Notice No.
NARD-78-82-00501, there was absolutely no legal obligation on the part of Philtrust to either
(1) respond to the demand letter and assessment notice, (2) inform respondent of the
decedents death, or (3) inform petitioner that it had received said demand letter and
 assessment notice. This lack of legal obligation was implicitly recognized by the Court of
Appeals, which, in fact, rendered its assailed decision on grounds of "equity". 17

Since there was never any valid notice of this assessment, it could not have become final, executory
and incontestable, and, for failure to make the assessment within the five-year period provided in
Section 318 of the National Internal Revenue Code of 1977, respondents claim against the
petitioner Estate is barred. Said Section 18 reads:

SEC. 318. Period of limitation upon assessment and collection. Except as provided in the
succeeding section, internal revenue taxes shall be assessed within five years after the
return was filed, and no proceeding in court without assessment for the collection of such
taxes shall be begun after the expiration of such period. For the purpose of this section, a
return filed before the last day prescribed by law for the filing thereof shall be considered as
filed on such last day: Provided, That this limitation shall not apply to cases already
investigated prior to the approval of this Code.

Respondent argues that an assessment is deemed made for the purpose of giving effect to such
assessment when the notice is released, mailed or sent to the taxpayer to effectuate the
assessment, and there is no legal requirement that the taxpayer actually receive said notice within
the five-year period.18 It must be noted, however, that the foregoing rule requires that the notice be
sent to the taxpayer, and not merely to a disinterested party. Although there is no specific
requirement that the taxpayer should receive the notice within the said period, due process requires
at the very least that such notice actually be received. In Commissioner of Internal Revenue v.
Pascor Realty and Development Corporation,19 we had occasion to say:

An assessment contains not only a computation of tax liabilities, but also a demand for
payment within a prescribed period. It also signals the time when penalties and interests
begin to accrue against the taxpayer. To enable the taxpayer to determine his remedies
thereon, due process requires that it must be served on and received by the taxpayer.

In Republic v. De le Rama,20 we clarified that, when an estate is under administration, notice must be
sent to the administrator of the estate, since it is the said administrator, as representative of the
estate, who has the legal obligation to pay and discharge all debts of the estate and to perform all
orders of the court. In that case, legal notice of the assessment was sent to two heirs, neither one of
whom had any authority to represent the estate. We said:

The notice was not sent to the taxpayer for the purpose of giving effect to the assessment,
and said notice could not produce any effect. In the case of Bautista and Corrales Tan v.
Collector of Internal Revenue this Court had occasion to state that "the assessment is
deemed made when the notice to this effect is released, mailed or sent to the taxpayer for
the purpose of giving effect to said assessment." It appearing that the person liable for the
payment of the tax did not receive the assessment, the assessment could not become final
and executory. (Citations omitted, emphasis supplied.)

In this case, the assessment was served not even on an heir of the Estate, but on a completely
disinterested third party. This improper service was clearly not binding on the petitioner.
By arguing that (1) the demand letter and assessment notice were served on Philtrust, (2) Philtrust
was remiss in its obligation to respond to the demand letter and assessment notice, (3) Philtrust was
remiss in its obligation to inform respondent of the decedents death, and (4) the assessment notice
is therefore binding on the Estate, respondent is arguing in circles. The most crucial point to be
remembered is that Philtrust had absolutely no legal relationship to the deceased, or to her Estate.
There was therefore no assessment served on the Estate as to the alleged underpayment of tax.
Absent this assessment, no proceedings could be initiated in court for the collection of said tax, 21 and
respondents claim for collection, filed with the probate court only on November 22, 1984, was
barred for having been made beyond the five-year prescriptive period set by law.

WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals in CA-G.R. CV No.
09107, dated September 30, 2002, is REVERSED and SET ASIDE. The Order of the Regional Trial
Court of Manila, Branch XXXVIII, in Sp. Proc. No. R-82-6994, dated November 19, 1985, which
denied the claim of the Bureau of Internal Revenue against the Estate of Juliana Diez Vda. De
Gabriel for the deficiency income tax of the decedent for the year 1977 in the amount of
P318,223.93, is AFFIRMED.

No pronouncement as to costs.

SO ORDERED.

G.R. No. 159694 January 27, 2006

COMMISSIONER OF INTERNAL REVENUE, Petitioner,

vs.
AZUCENA T. REYES, Respondent.

x -- -- -- -- -- -- -- -- -- -- -- -- -- x

G.R. No. 163581 January 27, 2006

AZUCENA T. REYES, Petitioner,

vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent.

DECISION

PANGANIBAN, CJ.:

Under the present provisions of the Tax Code and pursuant to elementary due process, taxpayers
must be informed in writing of the law and the facts upon which a tax assessment is based;
otherwise, the assessment is void. Being invalid, the assessment cannot in turn be used as a basis
for the perfection of a tax compromise.

The Case
Before us are two consolidated1 Petitions for Review2 filed under Rule 45 of the Rules of Court,
assailing the August 8, 2003 Decision3 of the Court of Appeals (CA) in CA-GR SP No. 71392. The
dispositive portion of the assailed Decision reads as follows:

"WHEREFORE, the petition is GRANTED. The assailed decision of the Court of Tax Appeals is
ANNULLED and SET ASIDE without prejudice to the action of the National Evaluation Board on the
proposed compromise settlement of the Maria C. Tancinco estates tax liability." 4

The Facts

The CA narrated the facts as follows:

"On July 8, 1993, Maria C. Tancinco (or decedent) died, leaving a 1,292 square-meter residential lot
and an old house thereon (or subject property) located at 4931 Pasay Road, Dasmarias Village,
Makati City.

"On the basis of a sworn information-for-reward filed on February 17, 1997 by a certain Raymond
Abad (or Abad), Revenue District Office No. 50 (South Makati) conducted an investigation on the
decedents estate (or estate). Subsequently, it issued a Return Verification Order. But without the
required preliminary findings being submitted, it issued Letter of Authority No. 132963 for the regular
investigation of the estate tax case. Azucena T. Reyes (or [Reyes]), one of the decedents heirs,
received the Letter of Authority on March 14, 1997.

"On February 12, 1998, the Chief, Assessment Division, Bureau of Internal Revenue (or BIR),
issued a preliminary assessment notice against the estate in the amount of P14,580,618.67. On May
10, 1998, the heirs of the decedent (or heirs) received a final estate tax assessment notice and a
demand letter, both dated April 22, 1998, for the amount of P14,912,205.47, inclusive of surcharge
and interest.

"On June 1, 1998, a certain Felix M. Sumbillo (or Sumbillo) protested the assessment [o]n behalf of
the heirs on the ground that the subject property had already been sold by the decedent sometime in
1990.

"On November 12, 1998, the Commissioner of Internal Revenue (or [CIR]) issued a preliminary
collection letter to [Reyes], followed by a Final Notice Before Seizure dated December 4, 1998.

"On January 5, 1999, a Warrant of Distraint and/or Levy was served upon the estate, followed on
February 11, 1999 by Notices of Levy on Real Property and Tax Lien against it.

"On March 2, 1999, [Reyes] protested the notice of levy. However, on March 11, 1999, the heirs
proposed a compromise settlement of P1,000,000.00.

"In a letter to [the CIR] dated January 27, 2000, [Reyes] proposed to pay 50% of the basic tax due,
citing the heirs inability to pay the tax assessment. On March 20, 2000, [the CIR] rejected [Reyess]
offer, pointing out that since the estate tax is a charge on the estate and not on the heirs, the latters
financial incapacity is immaterial as, in fact, the gross value of the estate amounting
to P32,420,360.00 is more than sufficient to settle the tax liability. Thus, [the CIR] demanded
payment of the amount of P18,034,382.13 on or before April 15, 2000[;] otherwise, the notice of sale
of the subject property would be published.

"On April 11, 2000, [Reyes] again wrote to [the CIR], this time proposing to pay 100% of the basic tax
due in the amount of P5,313,891.00. She reiterated the proposal in a letter dated May 18, 2000.

"As the estate failed to pay its tax liability within the April 15, 2000 deadline, the Chief, Collection
Enforcement Division, BIR, notified [Reyes] on June 6, 2000 that the subject property would be sold
at public auction on August 8, 2000.

"On June 13, 2000, [Reyes] filed a protest with the BIR Appellate Division. Assailing the scheduled
auction sale, she asserted that x x x the assessment, letter of demand[,] and the whole tax
proceedings against the estate are void ab initio. She offered to file the corresponding estate tax
return and pay the correct amount of tax without surcharge [or] interest.

"Without acting on [Reyess] protest and offer, [the CIR] instructed the Collection Enforcement
Division to proceed with the August 8, 2000 auction sale. Consequently, on June 28, 2000, [Reyes]
filed a [P]etition for [R]eview with the Court of Tax Appeals (or CTA), docketed as CTA Case No.
6124.

"On July 17, 2000, [Reyes] filed a Motion for the Issuance of a Writ of Preliminary Injunction or
Status Quo Order, which was granted by the CTA on July 26, 2000. Upon [Reyess] filing of a surety
bond in the amount ofP27,000,000.00, the CTA issued a [R]esolution dated August 16, 2000
ordering [the CIR] to desist and refrain from proceeding with the auction sale of the subject property
or from issuing a [W]arrant of [D]istraint or [G]arnishment of [B]ank [A]ccount[,] pending
determination of the case and/or unless a contrary order is issued.

"[The CIR] filed a [M]otion to [D]ismiss the petition on the grounds (i) that the CTA no longer has
jurisdiction over the case[,] because the assessment against the estate is already final and
executory; and (ii) that the petition was filed out of time. In a [R]esolution dated November 23, 2000,
the CTA denied [the CIRs] motion.

"During the pendency of the [P]etition for [R]eview with the CTA, however, the BIR issued Revenue
Regulation (or RR) No. 6-2000 and Revenue Memorandum Order (or RMO) No. 42-2000 offering
certain taxpayers with delinquent accounts and disputed assessments an opportunity to compromise
their tax liability.

"On November 25, 2000, [Reyes] filed an application with the BIR for the compromise settlement (or
compromise) of the assessment against the estate pursuant to Sec. 204(A) of the Tax Code, as
implemented by RR No. 6-2000 and RMO No. 42-2000.

"On December 26, 2000, [Reyes] filed an Ex-Parte Motion for Postponement of the hearing before
the CTA scheduled on January 9, 2001, citing her pending application for compromise with the BIR.
The motion was granted and the hearing was reset to February 6, 2001.
"On January 29, 2001, [Reyes] moved for postponement of the hearing set on February 6, 2001, this
time on the ground that she had already paid the compromise amount of P1,062,778.20 but was still
awaiting approval of the National Evaluation Board (or NEB). The CTA granted the motion and reset
the hearing to February 27, 2001.

"On February 19, 2001, [Reyes] filed a Motion to Declare Application for the Settlement of Disputed
Assessment as a Perfected Compromise. In said motion, she alleged that [the CIR] had not yet
signed the compromise[,] because of procedural red tape requiring the initials of four Deputy
Commissioners on relevant documents before the compromise is signed by the [CIR]. [Reyes]
posited that the absence of the requisite initials and signature[s] on said documents does not vitiate
the perfected compromise.

"Commenting on the motion, [the CIR] countered that[,] without the approval of the NEB, [Reyess]
application for compromise with the BIR cannot be considered a perfected or consummated
compromise.

"On March 9, 2001, the CTA denied [Reyess] motion, prompting her to file a Motion for
Reconsideration Ad Cautelam. In a [R]esolution dated April 10, 2001, the CTA denied the [M]otion for
[R]econsideration with the suggestion that[,] for an orderly presentation of her case and to prevent
piecemeal resolutions of different issues, [Reyes] should file a [S]upplemental [P]etition for
[R]eview[,] setting forth the new issue of whether there was already a perfected compromise.

"On May 2, 2001, [Reyes] filed a Supplemental Petition for Review with the CTA, followed on June 4,
2001 by its Amplificatory Arguments (for the Supplemental Petition for Review), raising the following
issues:

1. Whether or not an offer to compromise by the [CIR], with the acquiescence by the Secretary of
Finance, of a tax liability pending in court, that was accepted and paid by the taxpayer, is a perfected
and consummated compromise.

2. Whether this compromise is covered by the provisions of Section 204 of the Tax Code (CTRP)
that requires approval by the BIR [NEB].

"Answering the Supplemental Petition, [the CIR] averred that an application for compromise of a tax
liability under RR No. 6-2000 and RMO No. 42-2000 requires the evaluation and approval of either
the NEB or the Regional Evaluation Board (or REB), as the case may be.

"On June 14, 2001, [Reyes] filed a Motion for Judgment on the Pleadings; the motion was granted
on July 11, 2001. After submission of memoranda, the case was submitted for [D]ecision.

"On June 19, 2002, the CTA rendered a [D]ecision, the decretal portion of which pertinently reads:

WHEREFORE, in view of all the foregoing, the instant [P]etition for [R]eview is hereby DENIED.
Accordingly, [Reyes] is hereby ORDERED to PAY deficiency estate tax in the amount of Nineteen
Million Five Hundred Twenty Four Thousand Nine Hundred Nine and 78/100 (P19,524,909.78),
computed as follows:
 xxxxxxxxx

[Reyes] is likewise ORDERED to PAY 20% delinquency interest on deficiency estate tax due
of P17,934,382.13 from January 11, 2001 until full payment thereof pursuant to Section 249(c) of the
Tax Code, as amended.

"In arriving at its decision, the CTA ratiocinated that there can only be a perfected and consummated
compromise of the estates tax liability[,] if the NEB has approved [Reyess] application for
compromise in accordance with RR No. 6-2000, as implemented by RMO No. 42-2000.

"Anent the validity of the assessment notice and letter of demand against the estate, the CTA stated
that at the time the questioned assessment notice and letter of demand were issued, the heirs knew
very well the law and the facts on which the same were based. It also observed that the petition was
not filed within the 30-day reglementary period provided under Sec. 11 of Rep. Act No. 1125 and
Sec. 228 of the Tax Code."5

Ruling of the Court of Appeals

In partly granting the Petition, the CA said that Section 228 of the Tax Code and RR 12-99 were
mandatory and unequivocal in their requirement. The assessment notice and the demand letter
should have stated the facts and the law on which they were based; otherwise, they were deemed
void.6 The appellate court held that while administrative agencies, like the BIR, were not bound by
procedural requirements, they were still required by law and equity to observe substantive due
process. The reason behind this requirement, said the CA, was to ensure that taxpayers would be
duly apprised of -- and could effectively protest -- the basis of tax assessments against them. 7 Since
the assessment and the demand were void, the proceedings emanating from them were likewise
void, and any order emanating from them could never attain finality.

The appellate court added, however, that it was premature to declare as perfected and
consummated the compromise of the estates tax liability. It explained that, where the basic tax
assessed exceeded P1 million, or where the settlement offer was less than the prescribed minimum
rates, the National Evaluation Boards (NEB) prior evaluation and approval were the conditio sine
qua non to the perfection and consummation of any compromise. 8 Besides, the CA pointed out,
Section 204(A) of the Tax Code applied to all compromises, whether government-initiated or
not.9 Where the law did not distinguish, courts too should not distinguish.

Hence, this Petition.10

The Issues

In GR No. 159694, petitioner raises the following issues for the Courts consideration:

"I.

Whether petitioners assessment against the estate is valid.

 "II.

Whether respondent can validly argue that she, as well as the other heirs, was not aware of the facts
and the law on which the assessment in question is based, after she had opted to propose several
compromises on the estate tax due, and even prematurely acting on such proposal by paying 20%
of the basic estate tax due."11

The foregoing issues can be simplified as follows: first, whether the assessment against the estate is
valid; and, second, whether the compromise entered into is also valid.

The Courts Ruling

The Petition is unmeritorious.

First Issue:

Validity of the Assessment Against the Estate

The second paragraph of Section 228 of the Tax Code12 is clear and mandatory. It provides as
follows:

"Sec. 228. Protesting of Assessment. --

xxxxxxxxx

"The taxpayers shall be informed in writing of the law and the facts on which the assessment is
made: otherwise, the assessment shall be void."

In the present case, Reyes was not informed in writing of the law and the facts on which the
assessment of estate taxes had been made. She was merely notified of the findings by the CIR, who
had simply relied upon the provisions of former Section 229 13 prior to its amendment by Republic Act
(RA) No. 8424, otherwise known as the Tax Reform Act of 1997.

First, RA 8424 has already amended the provision of Section 229 on protesting an assessment. The
old requirement of merely notifying the taxpayer of the CIRs findings was changed in 1998
to informing the taxpayer of not only the law, but also of the facts on which an assessment would be
made; otherwise, the assessment itself would be invalid.

It was on February 12, 1998, that a preliminary assessment notice was issued against the estate. On
April 22, 1998, the final estate tax assessment notice, as well as demand letter, was also issued.
During those dates, RA 8424 was already in effect. The notice required under the old law was no
longer sufficient under the new law.

To be simply informed in writing of the investigation being conducted and of the recommendation for
the assessment of the estate taxes due is nothing but a perfunctory discharge of the tax function of
correctly assessing a taxpayer. The act cannot be taken to mean that Reyes already knew the law
and the facts on which the assessment was based. It does not at all conform to the compulsory
requirement under Section 228. Moreover, the Letter of Authority received by respondent on March
14, 1997 was for the sheer purpose of investigation and was not even the requisite notice under the
law.

The procedure for protesting an assessment under the Tax Code is found in Chapter III of Title VIII,
which deals with remedies. Being procedural in nature, can its provision then be applied
retroactively? The answer is yes.

The general rule is that statutes are prospective. However, statutes that are remedial, or that do not
create new or take away vested rights, do not fall under the general rule against the retroactive
operation of statutes.14 Clearly, Section 228 provides for the procedure in case an assessment is
protested. The provision does not create new or take away vested rights. In both instances, it can
surely be applied retroactively. Moreover, RA 8424 does not state, either expressly or by necessary
implication, that pending actions are excepted from the operation of Section 228, or that applying it
to pending proceedings would impair vested rights.

Second, the non-retroactive application of Revenue Regulation (RR) No. 12-99 is of no moment,
considering that it merely implements the law.

A tax regulation is promulgated by the finance secretary to implement the provisions of the Tax
Code.15 While it is desirable for the government authority or administrative agency to have one
immediately issued after a law is passed, the absence of the regulation does not automatically mean
that the law itself would become inoperative.

At the time the pre-assessment notice was issued to Reyes, RA 8424 already stated that the
taxpayer must be informed of both the law and facts on which the assessment was based. Thus, the
CIR should have required the assessment officers of the Bureau of Internal Revenue (BIR) to follow
the clear mandate of the new law. The old regulation governing the issuance of estate tax
assessment notices ran afoul of the rule that tax regulations -- old as they were -- should be in
harmony with, and not supplant or modify, the law.16

It may be argued that the Tax Code provisions are not self-executory. It would be too wide a stretch
of the imagination, though, to still issue a regulation that would simply require tax officials to inform
the taxpayer, in any manner, of the law and the facts on which an assessment was based. That
requirement is neither difficult to make nor its desired results hard to achieve.

Moreover, an administrative rule interpretive of a statute, and not declarative of certain rights and
corresponding obligations, is given retroactive effect as of the date of the effectivity of the
statute.17 RR 12-99 is one such rule. Being interpretive of the provisions of the Tax Code, even if it
was issued only on September 6, 1999, this regulation was to retroact to January 1, 1998 -- a date
prior to the issuance of the preliminary assessment notice and demand letter.

Third, neither Section 229 nor RR 12-85 can prevail over Section 228 of the Tax Code.
No doubt, Section 228 has replaced Section 229. The provision on protesting an assessment has
been amended. Furthermore, in case of discrepancy between the law as amended and its
implementing but old regulation, the former necessarily prevails.18 Thus, between Section 228 of the
Tax Code and the pertinent provisions of RR 12-85, the latter cannot stand because it cannot go
beyond the provision of the law. The law must still be followed, even though the existing tax
regulation at that time provided for a different procedure. The regulation then simply provided that
notice be sent to the respondent in the form prescribed, and that no consequence would ensue for
failure to comply with that form.

Fourth, petitioner violated the cardinal rule in administrative law that the taxpayer be accorded due
process. Not only was the law here disregarded, but no valid notice was sent, either. A void
assessment bears no valid fruit.

The law imposes a substantive, not merely a formal, requirement. To proceed heedlessly with tax
collection without first establishing a valid assessment is evidently violative of the cardinal principle
in administrative investigations: that taxpayers should be able to present their case and adduce
supporting evidence.19 In the instant case, respondent has not been informed of the basis of the
estate tax liability. Without complying with the unequivocal mandate of first informing the taxpayer of
the governments claim, there can be no deprivation of property, because no effective protest can be
made.20 The haphazard shot at slapping an assessment, supposedly based on estate taxations
general provisions that are expected to be known by the taxpayer, is utter chicanery.

Even a cursory review of the preliminary assessment notice, as well as the demand letter sent,
reveals the lack of basis for -- not to mention the insufficiency of -- the gross figures and details of
the itemized deductions indicated in the notice and the letter. This Court cannot countenance an
assessment based on estimates that appear to have been arbitrarily or capriciously arrived at.
Although taxes are the lifeblood of the government, their assessment and collection "should be
made in accordance with law as any arbitrariness will negate the very reason for government itself." 21

Fifth, the rule against estoppel does not apply. Although the government cannot be estopped by the
negligence or omission of its agents, the obligatory provision on protesting a tax assessment cannot
be rendered nugatory by a mere act of the CIR .

Tax laws are civil in nature.22 Under our Civil Code, acts executed against the mandatory provisions
of law are void, except when the law itself authorizes the validity of those acts. 23 Failure to comply
with Section 228 does not only render the assessment void, but also finds no validation in any
provision in the Tax Code. We cannot condone errant or enterprising tax officials, as they are
expected to be vigilant and law-abiding.

Second Issue:

Validity of Compromise

It would be premature for this Court to declare that the compromise on the estate tax liability has
been perfected and consummated, considering the earlier determination that the assessment
against the estate was void. Nothing has been settled or finalized. Under Section 204(A) of the Tax
Code, where the basic tax involved exceeds one million pesos or the settlement offered is less than
the prescribed minimum rates, the compromise shall be subject to the approval of the NEB
composed of the petitioner and four deputy commissioners.

Finally, as correctly held by the appellate court, this provision applies to all compromises, whether
government-initiated or not. Ubi lex non distinguit, nec nos distinguere debemos. Where the law
does not distinguish, we should not distinguish.

WHEREFORE, the Petition is hereby DENIED and the assailed Decision AFFIRMED. No
pronouncement as to costs.

SO ORDERED.

G.R. No. 155810 August 13, 2004

LYDIA SUMIPAT, LAURITO SUMIPAT, ALEJANDRO SUMIPAT, ALICIA SUMIPAT, and LIRAFE
SUMIPAT,petitioners,
vs.
BRIGIDO BANGA, HERMINIGILDO TABOTABO, VIVIANO TABOTABO, BERNARDITA ANION,
and LEONIDA TABOTABO, respondents.

DECISION

TINGA, J.:

This is a Petition for Review on Certiorari1 of the Decision2 of the Court of Appeals which reversed
and set aside the decision3 of the Regional Trial Court (RTC) and partially annulled the Deed of
Absolute Transfer and/or Quitclaim (the deed) subject of this case.

We quote the appellate courts findings of fact:

The spouses Placida Tabo-tabo and Lauro Sumipat, who contracted marriage on July 20,
1939, acquired three parcels of land two of which were covered by Original Certificate of Title
No. P-17842 and Transfer Certificate of Title No. T-15826.

The couple was childless.

Lauro Sumipat, however, sired five illegitimate children out of an extra-marital affair with
Pedra Dacola, namely: herein defendants-appellees Lydia, Laurito, Alicia, Alejandro and
Lirafe, all surnamed Sumipat.

On January 5, 1983, Lauro Sumipat executed a document denominated "DEED OF

ABSOLUTE TRANSFER AND/OR QUIT-CLAIM OVER REAL PROPERTIES" (the assailed
 document) in favor of defendants-appellees covering the three parcels of land (the
properties). On the document appears the signature of his wife Placida which indicates that
she gave her marital consent thereto.

It appears that on January 5, 1983 when the assailed document was executed, Lauro
Sumipat was already very sick and bedridden; that upon defendant-appellee Lydias request,
their neighbor Benjamin Rivera lifted the body of Lauro Sumipat whereupon Lydia guided his
(Lauro Sumipats) hand in affixing his signature on the assailed document which she had
brought; that Lydia thereafter left but later returned on the same day and requested Lauros
unlettered wife Placida to sign on the assailed document, as she did in haste, even without
the latter getting a responsive answer to her query on what it was all about.

After Lauro Sumipats death on January 30, 1984, his wife Placida, hereinafter referred to as
plaintiff-appellant, and defendants-appellees jointly administered the properties 50% of the
produce of which went to plaintiff-appellant.

As plaintiff-appellants share in the produce of the properties dwindled until she no longer
received any and learning that the titles to the properties in question were already
transferred/made in favor of the defendants-appellees, she filed a complaint for declaration
of nullity of titles, contracts, partition, recovery of ownership now the subject of the present
appeal.

Defendant-appellee Lydia disclaims participation in the execution of the assailed document,

she claiming to have acquired knowledge of its existence only on January 10, 1983 or five
days after its execution when Lauro Sumipat gave the same to her.

Branch 6 of the Regional Trial Court of Dipolog City decided the case in favor of defendants-
appellees, it holding that by virtue of the assailed document the due execution of which was
not contested by plaintiff-appellant, the properties were absolutely transferred to defendants-
appellees.4

The trial court found that the subject properties are conjugal having been acquired during the
marriage of Lauro Sumipat and Placida Tabotabo (Placida). However, because Placida failed to
question the genuineness and due execution of the deed and even admitted having affixed her
signature thereon, the trial court declared that the entirety of the subject properties, and not just
Lauro Sumipats conjugal share, were validly transferred to the defendants, the petitioners herein. 5

On appeal,6 the appellate court held that since Placida was unlettered, 7 the appellees, the petitioners
herein, as the parties interested in enforcing the deed, have the burden of proving that the terms
thereof were fully explained to her.8 This they failed to do.

Under the Civil Code, a contract where consent is given through mistake, violence, intimidation,
undue influence or fraud is voidable.9 In order that mistake may invalidate consent, it should refer to
the substance of the thing which is the object of the contract, or to those conditions which have
principally moved one or both parties to enter into the contract.10

The appellate court found that Placida did not understand the full import of the deed because the
terms thereof were not explained to her either by the petitioners or by the notary public before whom
the deed was acknowledged. According to the appellate court, Judge Pacifico Garcia (Judge
Garcia), before whom the deed was acknowledged, did not identify Placida as having appeared
before him on January 5, 1983 to acknowledge the deed. The jurat indicates that it was only Lauro
Sumipat who appeared before Judge Garcia and to whom he explained the contents of the deed.
Further, the appellate court noted that Judge Garcia himself was under the impression that the deed
conveyed the exclusive properties of Lauro Sumipat. Hence, he could not have explained to Placida
that the deed actually transferred the conjugal properties of Lauro Sumipat and Placida. 11

The Court of Appeals, therefore, annulled the deed insofar as it covers Placidas conjugal share in
the subject properties because the latters consent thereto was vitiated by mistake when she affixed
her signature on the document.

The petitioners filed a Motion for Reconsideration on the grounds of estoppel, absence of fraud and
prescription. The appellate court denied the Motion for Reconsideration in its Resolution12 dated
October 16, 2002 ruling that the grounds relied upon have been addressed in its Decision dated April
11, 2002. Anent the ground of prescription, the appellate court held that since the properties were
acquired through fraud or mistake, the petitioners are considered trustees of an implied trust for the
benefit of Placida. Citing jurisprudence,13 the Court of Appeals ruled that actions based on implied or
constructive trust prescribe 10 years from the issuance of a Torrens Title over the property. Since two
(2) of the subject properties were issued Transfer Certificates of Title (TCT) Numbered T-40037 14 and
T-4003815 under the petitioners names on August 18, 1987, the Complaint for declaration of nullity of
titles, partition, recovery of ownership and possession, reconveyance, accounting and damages,
which was filed on March 3, 1993, was filed well within the prescriptive period.

The petitioners are now before this Court principally claiming that Placida freely consented to the
execution of the deed and that they did not commit fraudulent acts in connection with its execution.
They also reiterate their argument that the Court of Appeals should have dismissed the case on the
ground of prescription. It is their contention that the present action being one to annul a contract on
the ground of fraud, it should have been filed within four (4) years from the discovery of fraud or
registration of the instrument with the Registry of Deeds.

The respondents filed their Comment16 dated February 7, 2003, essentially echoing the findings of
the Court of Appeals on the matter of Placidas consent. According to them, Placida was deceived
and misled into affixing her signature on the deed. They further claim that Placida did not actually
appear before the notary public to acknowledge the instrument.

In their Reply17 dated April 29, 2003, the petitioners insist that Placida was not illiterate and that
Lauro Sumipat validly transferred the titles over the properties in question to them. They also argue
that if Placida did not understand the import of the deed, she could have questioned Lauro Sumipat
about it since the deed was executed a year before the latter died.

The trial court and the Court of Appeals are in agreement that the subject properties are conjugal,
having been acquired during the marriage of Lauro Sumipat and Placida. They came out, however,
with disparate denouements. While the trial court upheld the validity of the deed as an instrument of
transfer of all the litigated parcels of land in their entirety on the ground that Placida failed to
question its authenticity and due execution, the appellate court struck the deed down insofar as the
conjugal share of Placida is concerned based on its finding that her consent was vitiated by mistake.

At bottom, the crux of the controversy is whether the questioned deed by its terms or under the
surrounding circumstances has validly transferred title to the disputed properties to the petitioners.

A perusal of the deed reveals that it is actually a gratuitous disposition of property a donation
although Lauro Sumipat imposed upon the petitioners the condition that he and his wife, Placida,
shall be entitled to one-half (1/2) of all the fruits or produce of the parcels of land for their
subsistence and support. The preliminary clauses of the deed read:
 That conscious of my advanced age and failing health, I feel that I am not capable anymore
of attending to and maintaining and keeping in continuous cultivation my above described
properties;

That my children are all desirous of taking over the task of maintaining my properties and
have demonstrated since childhood the needed industry and hard work as they have in fact
established possession over my real properties and introduced more improvements over my
lands, the fruit of which through their concerted efforts and labors, I myself and my family
have enjoyed;

That it would be to the best interest of my above mentioned children that the ownership over
my above described properties be transferred in their names, thereby encouraging them
more in developing the lands to its fullest productivity.18

The deed covers three (3) parcels of land.19 Being a donation of immovable property, the
requirements for validity set forth in Article 749 of the Civil Code should have been followed, viz:

Art. 749. In order that the donation of the immovable may be valid, it must be made in a
public document, specifying therein the property donated and the value of the charges which
the donee must satisfy.

The acceptance may be made in the same deed of donation or in a separate public
document, but it shall not take effect unless it is done during the lifetime of the donor.

If the acceptance is made in a separate instrument, the donor shall be notified thereof in an
authentic form, and this step shall be noted in both instruments.

Title to immovable property does not pass from the donor to the donee by virtue of a deed of
donation until and unless it has been accepted in a public instrument and the donor duly notified
thereof. The acceptance may be made in the very same instrument of donation. If the acceptance
does not appear in the same document, it must be made in another. Where the deed of donation
fails to show the acceptance, or where the formal notice of the acceptance, made in a separate
instrument, is either not given to the donor or else not noted in the deed of donation and in the
separate acceptance, the donation is null and void.20

In this case, the donees acceptance of the donation is not manifested either in the deed itself or in a
separate document. Hence, the deed as an instrument of donation is patently void.

We also note the absence of any proof of filing of the necessary return, payment of donors taxes on
the transfer, or exemption from payment thereof. Under the National Internal Revenue Code of 1977,
the tax code in force at the time of the execution of the deed, an individual who makes any transfer
by gift shall make a return and file the same within 30 days after the date the gift is made with the
Revenue District Officer, Collection Agent or duly authorized Treasurer of the municipality in which
the donor was domiciled at the time of the transfer.21 The filing of the return and payment of donors
taxes are mandatory. In fact, the registrar of deeds is mandated not to register in the registry of
property any document transferring real property by way of gifts inter vivos unless a certification that
the taxes fixed and actually due on the transfer had been paid or that the transaction is tax exempt
from the Commissioner of Internal Revenue, in either case, is presented. 22

Neither can we give effect to the deed as a sale, barter or any other onerous conveyance, in the
absence of valid cause or consideration and consent competently and validly given. 23 While it is true
that the appellate court found Placidas consent to have been vitiated by mistake, her testimony on
the matter actually makes out a case of total absence of consent, not merely vitiation thereof. She
testified in this regard, thus:

Q- What have you been doing on that day on January 5, 1983?

A- I was at home boiling water.

Q- While you were boiling water in the house, at that time who arrived, if there was any?

A- Lydia Sumipat arrived.

Court:-(To the witness)

Q- Who is this Lydia Sumipat?

A- The daughter of my husband with his paramour.

Q- How old was she?

A- I did not know if she was already 30 years old at that time because he was born in 1950.

Atty. Legorio:-(To the witness)

Q- When you said Lydia Sumipat, you are referring to one of the defendants in this case?

A- Yes, sir. She is the one.

Q- This Lydia Sumipat you are referring to as one of the principal defendant and daughter of
your husband with his paramour, in January, 1983 what was her educational attainment, if
you know?

A- She has already finished schooling.

Q- Do you know what she obtained?

A- Teacher.

Q- You said she arrived in the afternoon of January 5, 1983 in your house while you were
boiling water. What did she do when she arrived there?

A- She brought with her a paper.

Q- What did she say to you?

A- She told me to sign that paper immediately because there is the witness waiting and so I
asked from her what was that paper I am going to sign. I asked her because I am unlettered
but she said never mind just sign this immediately.

Q- By the way, what is your highest educational attainment?

 A- I have never gone to school.

Q- Do you know how to read or to write?

A- I know how to write only my name.

Q- You know how to write your name only?

A- Yes, sir.

Q- You said she told you to sign that piece of paper and you asked her what was that and
she told you "you just sign that", what did you do then?

A- She was in a hurry to let me sign that document so I signed it without knowing what was
that.

Q- Did she tell you that piece of paper was a document wherein the land including your land
in Siayan were to be given to them?

A- I did not give my land.24

During cross-examination, Placida again denied any knowledge of the nature of the deed:

q You are aware that the titles over these lots had already been transferred in the name of
the defendants?

a They surreptitiously transferred the title in their names, I do not know about it.

q You mean to say you signed a document transferring them in their names?

a There was a piece of paper brought to me to be signed by Lydia; I asked whats all about
but she did not tell me; I was forced to sign considering that according to her somebody was
waiting for it.

q What do you mean that you are force to sign?

a She told me to sign that paper immediately because there is a witness waiting that paper
but she was alone when she came to me.

q So you signed that paper?

a I signed it because she was in a hurry.

q That was done during the lifetime of your husband?

a Yes, sir.

q And your husband also signed that paper?

 a I do not know because I have not seen my husband signed, Lydia only came to me to let
me sign that paper.

q Is it not a fact that you and your husband were brought before the office of Judge Pacifico
Garcia of Manukan, and in the office you signed that document?

a I have not gone to the Municipal building of Manukan and I do not know Judge Garcia.

q But what you know now that the titles are transferred in the name of the defendants?

a It was Lydia who caused the transfer of the titles in their names.

q And you know that fact when you signed that paper?

a At the time I signed the paper, I do not know yet that the title would be transferred, it was
only at the time when I requested my niece to follow it up because according to them I am no
longer entitled to the land.25

In Baranda v. Baranda,26 this Court declared that the deeds of sale questioned therein are not merely
voidable (as intimated by the plaintiffs themselves in their complaint for annulment of the deeds and
reconveyance of the lots) but null and void ab initio as the supposed seller declared under oath that
she signed the deeds without knowing what they were. The significant circumstance meant, the
Court added, that her consent was not merely marred by vices of consent so as to make the
contracts voidable, but that she had not given her consent at all.

Parenthetically, as Placidas Complaint is entitled Declaration of Nullity of Titles; Contracts; Partition,

Recovery of Ownership and Possession; Reconveyance; Accounting and Damages with Prayer for
Preliminary Injunction and Receivership, the validity of the deed was directly assailed, but its
absolute nullity was not specifically raised as an issue. Nevertheless, both the RTC and the
appellate court took the cue from Placidas theory that the deed is merely voidable as regards her
conjugal share of the properties. However, since the real issue is whether the questioned deed has
validly transferred ownership of the litigated properties, it is appropriate for the Court to inquire into
the form of the deed and the existence of valid consent thereto to ascertain the validity or nullity of
the deed.

From the substantive and procedural standpoints, the objectives to write finis to a protracted
litigation and avoid multiplicity of suits are worth pursuing at all times. Conformably, we have ruled in
a number of cases that an appellate court is accorded broad discretionary power to consider even
errors not assigned. We have applied this tenet, albeit as a matter of exception, in the following
instances: (1) grounds not assigned as errors but affecting jurisdiction over the subject matter; (2)
matters not assigned as errors on appeal but are evidently plain or clerical errors within
contemplation of law; (3) matters not assigned as errors on appeal but consideration of which is
necessary in arriving at a just decision and complete resolution of the case or to serve the interests
of justice or to avoid dispensing piecemeal justice; (4) matters not specifically assigned as errors on
appeal but raised in the trial court and are matters of record having some bearing on the issue
submitted which the parties failed to raise or which the lower court ignored; (5) matters not assigned
as errors on appeal but closely related to an error assigned; and (6) matters not assigned as errors
on appeal but upon which the determination of a question properly assigned is dependent. 27

In the instant case, the validity of the deed was directly assailed although both parties are of the view
that it is not an absolute nullity. The correct characterization of the deed is, therefore, determinative
of the present controversy. Elsewise framed, the issue of validity or nullity is interwoven with the
positions adopted by the parties and the rulings made by the courts below. Hence, we shall be
resolute in striking down the deed especially as it appears on its face to be a patent nullity.

Having said this, we shall now proceed to the issue of prescription. Being an absolute nullity, both as
a donation and as a sale, the deed is subject to attack at any time, in accordance with the rule in
Article 1410 of the Civil Code that an action to declare the inexistence of a void contract does not
prescribe.

We are thus unimpressed by the petitioners contention that the appellate court should have
dismissed Placidas appeal on the ground of prescription. Passage of time cannot cure the fatal flaw
in an inexistent and void contract.28 The defect of inexistence of a contract is permanent and
incurable; hence, it cannot be cured either by ratification or by prescription. 29

Turning now to the effects of the absolute nullity of the deed, it is well-settled that when there is a
showing of illegality, the property registered is deemed to be simply held in trust for the real owner by
the person in whose name it is registered, and the former then has the right to sue for the
reconveyance of the property. The action for the purpose is also imprescriptible. As long as the land
wrongfully registered under the Torrens system is still in the name of the person who caused such
registration, an action in personam will lie to compel him to reconvey the property to the real owner.30

One final note. After this Decision shall have become final and executory, the parties may either
extrajudicially divide the estates of Lauro Sumipat and Placida Tabotabo pursuant to Rule 74 of the
Rules of Court or judicially settle the estates pursuant to Rules 78, et seq., in accordance with
this Decision and the law.

WHEREFORE, the instant Petition for Review on Certiorari is DENIED. The Decision of the Regional
Trial Court dated September 29, 1997 and the Decision of the Court of Appeals dated April 11, 2002,
as well as its Resolutiondated October 16, 2002, are VACATED. In lieu thereof, judgment is hereby
rendered in favor of the respondents, to wit: (i) DECLARING the Deed of Absolute Transfer and/or
Quitclaim dated January 5, 1983 NULL AND VOID; and (ii) ORDERING the CANCELLATION of
Transfer Certificates of Title Numbered T-40037 and T-40038 (Zamboanga del Norte) and the tax
declaration covering the unregistered parcel of land, all issued in the names of the petitioners Lydia,
Laurito, Alicia, Alejandro and Lirafe, all surnamed Sumipat, and the REINSTATEMENT of Original
Certificate of Title No. P-17842 (Zamboanga del Norte) Transfer Certificate Title No. T-15826
(Zamboanga del Norte) and the tax declaration covering the unregistered parcel of land, all in the
name of "Lauro Sumipat . . . married to Placida Tabotabo."

Costs against the petitioners.

SO ORDERED.

G.R. No. 120721 February 23, 2005

MANUEL G. ABELLO, JOSE C. CONCEPCION, TEODORO D. REGALA, AVELINO V.

CRUZ, petitioners,
vs.
COMMISSIONER OF INTERNAL REVENUE and COURT OF APPEALS, respondents.

DECISION
AZCUNA, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Civil Procedure, assailing the
decision of the Court of Appeals in CA G.R. SP No. 27134, entitled "Comissioner of Internal
Revenue v. Manuel G. Abello, Jose C. Concepcion, Teodoro D. Regala, Avelino V. Cruz and Court of
Tax Appeals," which reversed and set aside the decision of the Court of Tax Appeals (CTA), ordering
the Commissioner of Internal Revenue (Commissioner) to withdraw his letters dated April 21, 1988
and August 4, 1988 assessing donors taxes and to desist from collecting donors taxes from
petitioners.

During the 1987 national elections, petitioners, who are partners in the Angara, Abello, Concepcion,
Regala and Cruz (ACCRA) law firm, contributed P882,661.31 each to the campaign funds of
Senator Edgardo Angara, then running for the Senate. In letters dated April 21, 1988, the Bureau of
Internal Revenue (BIR) assessed each of the petitioners P263,032.66 for their contributions. On
August 2, 1988, petitioners questioned the assessment through a letter to the BIR. They claimed that
political or electoral contributions are not considered gifts under the National Internal Revenue Code
(NIRC), and that, therefore, they are not liable for donors tax. The claim for exemption was denied
by the Commissioner.1 1vvphi1.nt

On September 12, 1988, petitioners filed a petition for review with the CTA, which was decided on
October 7, 1991 in favor of the petitioners. As aforestated, the CTA ordered the Commissioner to
desist from collecting donors taxes from the petitioners.2

On appeal, the Court of Appeals reversed and set aside the CTA decision on April 20, 1994. 3 The
appellate Court ordered the petitioners to pay donors tax amounting to P263,032.66 each,
reasoning as follows:

The National Internal Revenue Code, as amended, provides:

Sec. 91. Imposition of Tax. (a) There shall be levied, assessed, collected, and paid upon the transfer
by any person, resident, or non-resident, of the property by gift, a tax, computed as provided in
Section 92. (b) The tax shall apply whether the transfer is in trust or otherwise, whether the gift is
direct or indirect, and whether the property is real or personal, tangible or intangible.

Pursuant to the above-quoted provisions of law, the transfer of property by gift, whether the transfer
is in trust or otherwise, whether the gift is direct or indirect, and whether the property is real or
personal, tangible or intangible, is subject to donors or gift tax.

A gift is generally defined as a voluntary transfer of property by one to another without any
consideration or compensation therefor (28 C.J. 620; Santos vs. Robledo, 28 Phil. 250).

In the instant case, the contributions are voluntary transfers of property in the form of money from
private respondents to Sen. Angara, without considerations therefor. Hence, they squarely fall under
the definition of donation or gift.

As correctly pointed out by the Solicitor General:

The fact that the contributions were given to be used as campaign funds of Sen. Angara does not
affect the character of the fund transfers as donation or gift. There was thereby no retention of
control over the disposition of the contributions. There was simply an indication of the purpose for
which they were to be used. For as long as the contributions were used for the purpose for which
they were intended, Sen. Angara had complete and absolute power to dispose of the contributions.
He was fully entitled to the economic benefits of the contributions.

Section 91 of the Tax Code is very clear. A donors or gift tax is imposed on the transfer of property
by gift.
1awphi1.nt

The Bureau of Internal Revenue issued Ruling No. 344 on July 20, 1988, which reads:

Political Contributions. For internal revenue purposes, political contributions in the Philippines are
considered taxable gift rather than taxable income. This is so, because a political contribution is
indubitably not intended by the giver or contributor as a return of value or made because of any
intent to repay another what is his due, but bestowed only because of motives of philanthropy or
charity. His purpose is to give and to bolster the morals, the winning chance of the candidate and/or
his party, and not to employ or buy. On the other hand, the recipient-donee does not regard himself
as exchanging his services or his product for the money contributed. But more importantly he
receives financial advantages gratuitously.

When the U.S. gift tax law was adopted in the Philippines (before May 7, 1974), the taxability of
political contributions was, admittedly, an unsettled issue; hence, it cannot be presumed that the
Philippine Congress then had intended to consider or treat political contributions as non-taxable gifts
when it adopted the said gift tax law. Moreover, well-settled is the rule that the Philippines need not
necessarily adopt the present rule or construction in the United States on the matter. Generally,
statutes of different states relating to the same class of persons or things or having the same
purposes are not considered to be in pari materia because it cannot be justifiably presumed that the
legislature had them in mind when enacting the provision being construed. (5206, Sutherland,
Statutory Construction, p. 546.) Accordingly, in the absence of an express exempting provision of
law, political contributions in the Philippines are subject to the donors gift tax. (cited in National
Internal Revenue Code Annotated by Hector S. de Leon, 1991 ed., p. 290).

In the light of the above BIR Ruling, it is clear that the political contributions of the private
respondents to Sen. Edgardo Angara are taxable gifts. The vagueness of the law as to what
comprise the gift subject to tax was made concrete by the above-quoted BIR ruling. Hence, there is
no doubt that political contributions are taxable gifts.4

Petitioners filed a motion for reconsideration, which the Court of Appeals denied in its resolution of
June 16, 1995.5

Petitioners thereupon filed the instant petition on July 26, 1995. Raised are the following issues:

1. DID THE HONORABLE COURT OF APPEALS ERR WHEN IT FAILED TO CONSIDER IN

ITS DECISION THE PURPOSE BEHIND THE ENACTMENT OF OUR GIFT TAX LAW?
 2. DID THE HONORABLE COURT OF APPEALS ERR IN NOT CONSIDERING THE
INTENTION OF THE GIVERS IN DETERMINING WHETHER OR NOT THE PETITIONERS
POLITICAL CONTRIBUTIONS WERE GIFTS SUBJECT TO DONORS TAX?

3. DID THE HONORABLE COURT OF APPEALS ERR WHEN IT FAILED TO CONSIDER

THE DEFINITION OF AN "ELECTORAL CONTRIBUTION" UNDER THE OMNIBUS
ELECTION CODE IN DETERMINING WHETHER OR NOT POLITICAL CONTRIBUTIONS
ARE TAXABLE?

4. DID THE HONORABLE COURT OF APPEALS ERR IN NOT CONSIDERING THE

ADMINISTRATIVE PRACTICE OF CLOSE TO HALF A CENTURY OF NOT SUBJECTING
POLITICAL CONTRIBUTIONS TO DONORS TAX?

5. DID THE HONORABLE COURT OF APPEALS ERR IN NOT CONSIDERING THE

AMERICAN JURISPRUDENCE RELIED UPON BY THE COURT OF TAX APPEALS AND
BY THE PETITIONERS TO THE EFFECT THAT POLITICAL CONTRIBUTIONS ARE NOT
TAXABLE GIFTS?

6. DID THE HONORABLE COURT OF APPEALS ERR IN NOT APPLYING AMERICAN

JURISPRUDENCE ON THE GROUND THAT THIS WAS NOT KNOWN AT THE TIME THE
PHILIPPINES GIFT TAX LAW WAS ADOPTED IN 1939?

7. DID THE HONORABLE COURT OF APPEALS ERR IN RESOLVING THE CASE MAINLY
ON THE BASIS OF A RULING ISSUED BY THE RESPONDENT ONLY AFTER THE
ASSESSMENTS HAD ALREADY BEEN MADE?

8. DID THE HONORABLE COURT OF APPEALS ERR WHEN IT DID NOT CONSTRUE
THE GIFT TAX LAW LIBERALLY IN FAVOR OF THE TAXPAYER AND STRICLTY AGAINST
THE GOVERNMENT IN ACCORDANCE WITH APPLICABLE PRINCIPLES OF
STATUTORY CONSTRUCTION?6

First, Fifth and Sixth Issues

Section 91 of the National Internal Revenue Code (NIRC) reads:

(A) There shall be levied, assessed, collected and paid upon the transfer by any person,
resident or nonresident, of the property by gift, a tax, computed as provided in Section 92

(B) The tax shall apply whether the transfer is in trust or otherwise, whether the gift is direct
or indirect, and whether the property is real or personal, tangible or intangible.

The NIRC does not define transfer of property by gift. However, Article 18 of the Civil Code, states:

In matters which are governed by the Code of Commerce and special laws, their deficiency shall be
supplied by the provisions of this Code.
Thus, reference may be made to the definition of a donation in the Civil Code. Article 725 of said
Code defines donation as:

. . . an act of liberality whereby a person disposes gratuitously of a thing or right in favor of another,
who accepts it.

Donation has the following elements: (a) the reduction of the patrimony of the donor; (b) the increase
in the patrimony of the donee; and, (c) the intent to do an act of liberality or animus donandi.7

The present case falls squarely within the definition of a donation. Petitioners, the late Manuel G.
Abello8 , Jose C. Concepcion, Teodoro D. Regala and Avelino V. Cruz, each gave P882,661.31 to the
campaign funds of Senator Edgardo Angara, without any material consideration. All three elements
of a donation are present. The patrimony of the four petitioners were reduced by P882,661.31 each.
Senator Edgardo Angaras patrimony correspondingly increased by P3,530,645.249 . There was
intent to do an act of liberality or animus donandi was present since each of the petitioners gave
their contributions without any consideration.

Taken together with the Civil Code definition of donation, Section 91 of the NIRC is clear and
unambiguous, thereby leaving no room for construction. In Rizal Commercial Banking Corporation v.
Intermediate Appellate Court10 the Court enunciated:

It bears stressing that the first and fundamental duty of the Court is to apply the law. When the law is
clear and free from any doubt or ambiguity, there is no room for construction or interpretation. As has
been our consistent ruling, where the law speaks in clear and categorical language, there is no
occasion for interpretation; there is only room for application (Cebu Portland Cement Co. v.
Municipality of Naga, 24 SCRA 708 [1968])

Where the law is clear and unambiguous, it must be taken to mean exactly what it says and the
court has no choice but to see to it that its mandate is obeyed (Chartered Bank Employees
Association v. Ople, 138 SCRA 273 [1985]; Luzon Surety Co., Inc. v. De Garcia, 30 SCRA 111
[1969]; Quijano v. Development Bank of the Philippines,35 SCRA 270 [1970]).

Only when the law is ambiguous or of doubtful meaning may the court interpret or construe its true
intent. Ambiguity is a condition of admitting two or more meanings, of being understood in more
l^vvphi1.net

than one way, or of referring to two or more things at the same time. A statute is ambiguous if it is
admissible of two or more possible meanings, in which case, the Court is called upon to exercise
one of its judicial functions, which is to interpret the law according to its true intent.

Second Issue

Since animus donandi or the intention to do an act of liberality is an essential element of a donation,
petitioners argue that it is important to look into the intention of the giver to determine if a political
contribution is a gift. Petitioners argument is not tenable. First of all, donative intent is a creature of
the mind. It cannot be perceived except by the material and tangible acts which manifest its
presence. This being the case, donative intent is presumed present when one gives a part of ones
patrimony to another without consideration. Second, donative intent is not negated when the person
donating has other intentions, motives or purposes which do not contradict donative intent. This
Court is not convinced that since the purpose of the contribution was to help elect a candidate, there
was no donative intent. Petitioners contribution of money without any material consideration
evinces animus donandi. The fact that their purpose for donating was to aid in the election of the
donee does not negate the presence of donative intent.

Third Issue

Petitioners maintain that the definition of an "electoral contribution" under the Omnibus Election
Code is essential to appreciate how a political contribution differs from a taxable gift. 11 Section 94(a)
of the said Code defines electoral contribution as follows:

The term "contribution" includes a gift, donation, subscription, loan, advance or deposit of money or
anything of value, or a contract, promise or agreement to contribute, whether or not legally
enforceable, made for the purpose of influencing the results of the elections but shall not include
services rendered without compensation by individuals volunteering a portion or all of their time in
behalf of a candidate or political party. It shall also include the use of facilities voluntarily donated by
other persons, the money value of which can be assessed based on the rates prevailing in the area.

Since the purpose of an electoral contribution is to influence the results of the election, petitioners
again claim that donative intent is not present. Petitioners attempt to place the barrier of mutual
exclusivity between donative intent and the purpose of political contributions. This Court reiterates
that donative intent is not negated by the presence of other intentions, motives or purposes which do
not contradict donative intent.

Petitioners would distinguish a gift from a political donation by saying that the consideration for a gift
is the liberality of the donor, while the consideration for a political contribution is the desire of the
giver to influence the result of an election by supporting candidates who, in the perception of the
giver, would influence the shaping of government policies that would promote the general welfare
and economic well-being of the electorate, including the giver himself.

Petitioners attempt is strained. The fact that petitioners will somehow in the future benefit from the
election of the candidate to whom they contribute, in no way amounts to a valuable material
consideration so as to remove political contributions from the purview of a donation. Senator Angara
was under no obligation to benefit the petitioners. The proper performance of his duties as a
legislator is his obligation as an elected public servant of the Filipino people and not a consideration
for the political contributions he received. In fact, as a public servant, he may even be called to enact
laws that are contrary to the interests of his benefactors, for the benefit of the greater good.

In fine, the purpose for which the sums of money were given, which was to fund the campaign of
Senator Angara in his bid for a senatorial seat, cannot be considered as a material consideration so
as to negate a donation.

Fourth Issue
Petitioners raise the fact that since 1939 when the first Tax Code was enacted, up to 1988 the BIR
never attempted to subject political contributions to donors tax. They argue that:

. . . It is a familiar principle of law that prolonged practice by the government agency charged with
the execution of a statute, acquiesced in and relied upon by all concerned over an appreciable
period of time, is an authoritative interpretation thereof, entitled to great weight and the highest
respect. . . .12

This Court holds that the BIR is not precluded from making a new interpretation of the law, especially
when the old interpretation was flawed. It is a well-entrenched rule that

. . . erroneous application and enforcement of the law by public officers do not block subsequent
correct application of the statute (PLDT v. Collector of Internal Revenue, 90 Phil. 676), and that the
Government is never estopped by mistake or error on the part of its agents (Pineda v. Court of First
Instance of Tayabas, 52 Phil. 803, 807; Benguet Consolidated Mining Co. v. Pineda, 98 Phil. 711,
724).13

Seventh Issue

Petitioners question the fact that the Court of Appeals decision is based on a BIR ruling, namely BIR
Ruling No. 88-344, which was issued after the petitioners were assessed for donors tax. This Court
does not need to delve into this issue. It is immaterial whether or not the Court of Appeals based its
decision on the BIR ruling because it is not pivotal in deciding this case. As discussed above,
Section 91 (now Section 98) of the NIRC as supplemented by the definition of a donation found in
Article 725 of the Civil Code, is clear and unambiguous, and needs no further elucidation.

Eighth Issue

Petitioners next contend that tax laws are construed liberally in favor of the taxpayer and strictly
against the government. This rule of construction, however, does not benefit petitioners because, as
stated, there is here no room for construction since the law is clear and unambiguous.

Finally, this Court takes note of the fact that subsequent to the donations involved in this case,
Congress approved Republic Act No. 7166 on November 25, 1991, providing in Section 13 thereof
that political/electoral contributions, duly reported to the Commission on Elections, are not subject to
the payment of any gift tax. This all the more shows that the political contributions herein made are
subject to the payment of gift taxes, since the same were made prior to the exempting legislation,
and Republic Act No. 7166 provides no retroactive effect on this point.

WHEREFORE, the petition is DENIED and the assailed Decision and Resolution of the Court of
Appeals are AFFIRMED.

No costs.

SO ORDERED.
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,1 under Rule 45 of the Rules of Court, assails the decision2 of the Court of
Appeals dated August 31, 1993, in CA-G.R. CV No. 38266, which reversed the judgment 3 of the
Regional Trial Court of Cebu City, Branch 5.

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

Spouses Diego and Catalina Danlag were the owners of six parcels of unregistered lands. They
executed three deeds of donation mortis causa, two of which are dated March 4, 1965 and another
dated October 13, 1966, in favor of private respondent Mercedes Danlag-Pilapil. 4 The first deed
pertained to parcels 1 & 2 with Tax Declaration Nos. 11345 and 11347, respectively. The second
deed pertained to parcel 3, with TD No. 018613. The last deed pertained to parcel 4 with TD No.
016821. All deeds contained the reservation of the rights of the donors (1) to amend, cancel or
revoke the donation during their lifetime, and (2) to sell, mortgage, or encumber the properties
donated during the donors' lifetime, if deemed necessary.

On January 16, 1973, Diego Danlag, with the consent of his wife, Catalina Danlag, executed a deed
of donationinter vivos5 covering the aforementioned parcels of land plus two other parcels with TD
Nos. 11351 and 11343, respectively, again in favor of private respondent Mercedes. This contained
two conditions, that (1) the Danlag spouses shall continue to enjoy the fruits of the land during their
lifetime, and that (2) the donee can not sell or dispose of the land during the lifetime of the said
spouses, without their prior consent and approval. Mercedes caused the transfer of the parcels' tax
declaration to her name and paid the taxes on them.

On June 28, 1979 and August 21, 1979, Diego and Catalina Danlag sold parcels 3 and 4 to herein
petitioners, Mr. and Mrs. Agripino Gestopa. On September 29, 1979, the Danlags executed a deed
of revocation6 recovering the six parcels of land subject of the aforecited deed of donation inter
vivos.

On March 1, 1983, Mercedes Pilapil (herein private respondent) filed with the RTC a petition against
the Gestopas and the Danlags, for quieting of title7 over the above parcels of land. She alleged that
she was an illegitimate daughter of Diego Danlag; that she lived and rendered incalculable beneficial
services to Diego and his mother, Maura Danlag, when the latter was still alive. In recognition of the
services she rendered, Diego executed a Deed of Donation on March 20, 1973, conveying to her the
six (6) parcels of land. She accepted the donation in the same instrument, openly and publicly
exercised rights of ownership over the donated properties, and caused the transfer of the tax
declarations to her name. Through machination, intimidation and undue 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 vivosproperties 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.12 The
deed of donation dated January 16, 1973, in favor of Mercedes contained the following:

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

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

xxx

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

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

Note first that the granting clause shows that Diego donated the properties out of love and affection
for the donee. This is a mark of a donation inter vivos.14 Second, the reservation of lifetime usufruct
indicates that the donor intended to transfer the naked ownership over the properties. As correctly
posed by the Court of Appeals, what was the need for such reservation if the donor and his spouse
remained the owners of the properties? Third, the donor reserved sufficient properties for his
maintenance in accordance with his standing in society, indicating that the donor intended to part
with the six parcels of land.15 Lastly, the donee accepted the donation. In the case ofAlejandro vs.
Geraldez, 78 SCRA 245 (1977), we said that an acceptance clause is a mark that the donation
isinter 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. InAlejandro, we ruled that a limitation on the right to sell during the donors'
lifetime implied that ownership had passed to the donees and donation was already effective during
the donors' lifetime.

The attending circumstances in the execution of the subject donation also demonstrated the real
intent of the donor to transfer the ownership over the subject properties upon its execution. 16 Prior to
the execution of donationinter vivos, the Danlag spouses already executed three donations mortis
causa. As correctly observed by the Court of Appeals, the Danlag spouses were aware of the
difference between the two donations. If they did not intend to donate inter vivos, they would not
again donate the four lots already donated mortis causa. Petitioners' counter argument that this
proposition was erroneous because six years after, the spouses changed their intention with the
deed of revocation, is not only disingenious but also fallacious. Petitioners cannot use the deed of
revocation to show the spouses' intent because its validity is one of the issues in this case.

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

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

As a rule, a finding of fact by the appellate court, especially when it is supported by evidence on
record, is binding on us.18 On the alleged purchase by her husband of two parcels, it is reasonable to
infer that the purchase was without private respondent's consent. Purchase by her husband would
make the properties conjugal to her own disadvantage. That the purchase is against her self-
interest, weighs strongly in her favor and gives credence to her claim that her husband was
manipulated and unduly influenced to make the purchase, in the first place. 1wphi1

Was the revocation valid? A valid donation, once accepted, becomes irrevocable, except on account
of officiousness, failure by the donee to comply with the charges imposed in the donation, or
ingratitude.19 The donor-spouses did not invoke any of these reasons in the deed of revocation. The
deed merely stated:

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

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

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

WHEREFORE, the instant petition for review is DENIED. The assailed decision of the Court of
Appeals dated August 31, 1993, is AFFIRMED.

Costs against petitioners.

SO ORDERED.