Ganuelas vs. Cawed, 401 SCRA 447, G.R. No.
123968 April 24, 2003 properties will pass to the donee only because of the donor’s death, then it is
FACTS:
On April 11, 1958, Celestina Ganuelas Vda. de Valin
(Celestina) executed a Deed of Donation of Real
Property2 covering seven parcels of land in favor of her niece
Ursulina Ganuelas (Ursulina), one of herein petitioners.
On June 10, 1967, Celestina executed a document
denominated as Revocation of Donation4 purporting to set
aside the deed of donation. More than a month later or on
August 18, 1967, Celestina died without issue and any
surviving ascendants and siblings.
After Celestinas death, Ursulina had been sharing the produce
of the donated properties with private respondents Leocadia G.
Flores, et al., nieces of Celestina.
In 1982, or twenty-four years after the execution of the Deed
of Donation, Ursulina secured the corresponding tax
declarations, in her name, over the donated properties, and
since then, she refused to give private respondents any share
in the produce of the properties despite repeated demands.
Private respondents were thus prompted to file with the RTC a
complaint against Ursulina, et. al. alleging that the Deed of
Donation executed by Celestina in favor of Ursulina was void
for lack of acknowledgment by the attesting witnesses thereto
before notary public Atty. Henry Valmonte, and the donation
was a disposition mortis causa which failed to comply with the
provisions of the Civil Code regarding formalities of wills and
testaments, hence, it was void.
the trial court, holding that the provision in the Deed of
Donation that in the event that the DONEE should predecease
the DONOR, the donation shall be deemed rescinded and of no
further force and effect is an explicit indication that the deed is
a donation mortis causa,8 found for the plaintiffs-herein private
respondents.
Hence, this petition for review.
ISSUES:
Whether the donation is inter vivos or mortis causa.
RULING:
Donations; Wills and Succession; Donations Mortis Causa and
Donations Inter Vivos; Words and Phrases; Donation inter vivos differs from
donation mortis causa in that in the former, the act is immediately operative
even if the actual execution may be deferred until the death of the donor,
while in the latter, nothing is conveyed to or acquired by the donee until the
death of the donor-testator.—The issue is thus whether the donation is inter
vivos or mortis causa. Crucial in the resolution of the issue is the
determination of whether the donor intended to transfer the ownership over
the properties upon the execution of the deed. Donation inter vivos differs
from donation mortis causa in that in the former, the act is immediately
operative even if the actual execution may be deferred until the death of the
donor, while in the latter, nothing is conveyed to or acquired by the donee
until the death of the donor-testator. The following ruling of this Court in
Alejandro v. Geraldez is illuminating: If the donation is made in contemplation
of the donor’s death, meaning that the full or naked ownership of the donated
at that time that the donation takes effect, and it is a donation mortis causa
which should be embodied in a last will and testament. But if the donation
takes effect during the donor’s lifetime or independently of the donor’s death,
meaning that the full or naked ownership (nuda proprietas) of the donated
properties passes to the donee during the donor’s lifetime, not by reason of
his death but because of the deed of donation, then the donation is inter
vivos.
Same; Same; Same; The distinction between a transfer inter vivos
and mortis causa is important as the validity or revocation of the donation
depends upon its nature.—The distinction between a transfer inter vivos and
mortis causa is important as the validity or revocation of the donation
depends upon its nature. If the donation is inter vivos, it must be executed and
accepted with the formalities prescribed by Articles 748 and 749 of the Civil
Code, except when it is onerous in which case the rules on contracts will apply.
If it is mortis causa, the donation must be in the form of a will, with all the
formalities for the validity of wills, otherwise it is void and cannot transfer
ownership.
Same; Same; Same; Distinguishing Characteristics of a Donation
Mortis Causa.—The distinguishing characteristics of a donation mortis causa
are the following: 1. It conveys no title or ownership to the transferee before
the death of the transferor; or, what amounts to the same thing, that the
transferor should retain the ownership (full or naked) and control of the
property while alive; 2. That before his death, the transfer should be revocable
by the transferor at will, ad nutum; but revocability may be provided for
indirectly by means of a reserved power in the donor to dispose of the
properties conveyed; 3. That the transfer should be void if the transferor
should survive the transferee.
Same; Same; Same; Same; The phrase “to become effective upon
the death of the DONOR” admits of no other interpretation but that the donor
intended to transfer the ownership of the properties to the donee on the
former’s death, not during her lifetime.—In the donation subject of the
present case, there is nothing therein which indicates that any right, title or
interest in the donated properties was to be transferred to Ursulina prior to
the death of Celestina. The phrase “to become effective upon the death of the
DONOR” admits of no other interpretation but that Celestina intended to
transfer the ownership of the properties to Ursulina on her death, not during
her lifetime.
Same; Same; Same; Same; One of the decisive characteristics of a
donation mortis causa is that the transfer should be considered void if the
donor should survive the donee.—More importantly, the provision in the deed
stating that if the donee should die before the donor, the donation shall be
deemed rescinded and of no further force and effect shows that the donation
is a postmortem disposition. As stated in a long line of cases, one of the
decisive characteristics of a donation mortis causa is that the transfer should
be considered void if the donor should survive the donee.
Same; Same; Same; To classify the donation as inter vivos simply
because it is founded on considerations of love and affection is erroneous—
love and affection may also underlie transfers mortis causa.—To classify the
donation as inter vivos simply because it is founded on considerations of love
and affection is erroneous. That the donation was prompted by the affection
of the donor for the donee and the services rendered by the latter is of no
particular significance in determining whether the deed constitutes a transfer
inter vivos or not, because a legacy may have an identical motivation. In other
words, love and affection may also underlie transfers mortis causa.
Same; Same; Same; Donations mortis causa must comply with the
formalities of a will under Article 728 of the Civil Code, failing which the
donation is void and produces no effect.—As the subject deed then is in the
nature of a mortis causa disposition, the formalities of a will under Article 728
of the Civil Code should have been complied with, failing which the donation is
void and produces no effect. As noted by the trial court, the attesting
witnesses failed to acknowledge the deed before the notary public, thus
violating Article 806 of the Civil Code which provides: Art. 806. Every will must
be acknowledged before a notary public by the testator and the witnesses.
The notary public shall not be required to retain a copy of the will, or file
another with the office of the Clerk of Court.
OTHER CASES:
Alejandro vs. Geraldez, 78 SCRA 245, No. L-33849, No. L-33968 August 18,
1977
FACTS:
The spouses Gabino (Gavino) Diaz and Severa Mendoza,
their daughter-in-law Regina Fernando and their three children, Olimpia
Diaz, Angel Diaz and Andrea Diaz, executed a deed of donation
covering eight lots of the Lolomboy Friar Lands Estate, owned by the
Diaz spouses.
Gabino Diaz died. Severa Mendoza and her two children,
Andrea Diaz and Angel Diaz, executed a deed of donation denominated
as "Kasulatan ng Pagbibigay na Magkakabisa Pagkamatay
(Donation Mortis causa )" over one-half of Lot No. 2377-A, which is a
portion of Lot No. 2377 of the Lolomboy Friar Lands Estate (which in
turn is item 3 or [c] in the 1949 deed of donation already mentioned).
In that deed of donation, Severa Mendoza donated to Andrea
Diaz her one-half share in Lot 2377-A, which one-half share is Identified
as Lot 2377-A-1, on condition that Andrea Diaz would bear the funeral
expenses to be incurred after the donor's death. She died in 1964.
It should be noted that the other one-half share in Lot 2377-A
or Lot No. 2377-A-2 was previously adjudicated to Angel Diaz because
he defrayed the funeral expenses on the occasion of the death of
Gabino Diaz.
On May 12, 1970 Andrea Diaz sued her brother, Angel Diaz, in
the CFI for the partition of Lots Nos. 2377-A and 2502. Teodorico
Alejandro, the surviving spouse of Olimpia Diaz, and their children
intervened in the said case. They claimed one-third of Lot No. 2502.
Angel Diaz alleged in his answer that he had. been occupying his share
of Lot No. 2502 "for more than twenty years". The intervenors claimed
that the 1949 donation was a void mortis causa disposition.
The trial court held that the said deed of donation was a
donation mortis causa because the ownership of the properties donated
did not pass to the donees during the donors' lifetime but was
transmitted to the donees only "upon the death of the donors".
However, it sustained the division of Lot No. 2502 into two
equal parts between Angel Diaz and Andrea Diaz on the theory that the
said deed of donation was effective "as an extra-judicial partition among
the parents and their children.
An MR was filed but was denied. Hence, this petition.
ISSUES:
Whether the deed of donation is inter vivos or mortis causa.
RULING:
Donation; Distinction between donation inter vivos and donation
mortis causa.—An inter vivos donation of real property must be evidenced by
a public document and should be accepted by the donee in the same deed of
donation or in a separate instrument. In the latter case, the donor should be
notified of the acceptance in an authentic form and that step should be noted
in both instruments. x x x On the other hand, a transfer mortis causa should be
embodied in a last will and testament. It should not be called mortis causa. It is
in reality a legacy. If not embodied in a valid will, the donation is void.
Same; Same.—This Court advised notaries to apprise donors of the
necessity of clearly specifying whether, notwithstanding the donation, they
wish to retain the right to control and dispose at will of the property before
their death, without the consent or intervention of the beneficiary, since the
reservation of such right would be a conclusive indication that the transfer
would be effective only at the donor’s death, and, therefore, the formalities of
testaments should be observed; while, a converso, the express waiver of the
right of free disposition would place the inter vivos character of the donation
beyond dispute. x x x It is the time of effectivity (aside from the form) which
distinguishes a donation inter vivos from a donation mortis causa.
Same; Features which show that a deed of donation is inter vivos
and not mortis causa.—The donation in the instant case is inter vivos because
it took effect during the lifetime of the donors. x x x In that clause it is stated
that, in consideration of the affection and esteem of the donors for the donees
and the valuable services rendered by the donees to the donors, the latter, by
means of the deed of donation, wholeheartedly transfer and unconditionally
give to the donees the lots mentioned and described in the early part of the
deed, free from any kind of liens and debts. x x x The acceptance clause is
another indication that the donation is inter vivos. Donations mortis causa,
being in the form of a will, are never accepted by the donees during the
donors’ lifetime. Acceptance is a requirement for donations inter vivos.
Same; Condition that donees cannot sell during donors’ lifetime to a
third person the donated property implies immediate passage of ownership
and, therefore donation is inter vivos.—It is stipulated x x x that the donees
cannot sell to a third person the donated properties during the donors’
lifetime but if the sale is necessary to defray the expenses and support of the
donors, then the sale is valid. The limited right to dispose of the donated lots,
which the deed gives to the donees, implies that ownership had passed to
them by means of the donation and that, therefore, the donation was already
effective during the donors’ lifetime. That is a characteristic of a donation inter
vivos.
Same; All provisions of a deed of donation should be construed
together in case of conflicting statements therein. Case at bar.—The
habendum clause indicates the transfer of the ownership over the donated
properties to the donees upon the execution of the deed. But the reddendum
clause seems to imply that the ownership was retained by the donors and
would be transferred to the donees only after their death. We have reflected
on the meaning of the said contradictory clauses. All the provisions of the
deed, like those of a statute and testament, should be construed together in
order to ascertain the intention of the parties. That task would have been
rendered easier if the record shows the conduct of the donors and the donees
after the execution of the deed of donation. x x x Our conclusion is that the
aforequoted paragraph 3 of the reddendum or reservation clause refers to the
beneficial ownership (dominium utile) and not to the naked title and that what
the donors reserved to themselves, by means of that clause, was the
management of the donated lots and the fruits thereof. But, notwithstanding
that reservation, the donation, as shown in the habendum clause, was already
effective during their lifetime and was not made in contemplation of their
death because the deed transferred to the donees the naked ownership of the
donated properties. That conclusion is further supported by the fact that in
the deed of donation, out of the 8 lots owned by the donors, only 5 were
donated. Alejandro vs. Geraldez, 78 SCRA 245, No. L-33849, No. L-33968
August 18, 1977
Castro vs. Court of Appeals, 27 SCRA 1076, No. L-20122 April 28, 1969
FACTS:
The original application for registration and confirmation of title
was filed by Alejandra Austria on June 6, 1948, covering 10 parcels of
land situated in the barrios of Punglo Grande and Caviernesan, as well
as in the poblacion of Mangatarem, Pangasinan.
Socorro A. Castro submitted an opposition, alleging that the
lands applied for had been donated to her by the applicant in 1939. On
March 2, 1950 the Court rendered judgment finding that Alejandra
Austria had been in possession of the lands in concept of owner since
1894, and consequently, by virtue of the donation, ordered the
registration thereof in the name of the donee, Socorro A. Castro, subject
only to the usufruct reserved by the donor in herself for the rest of her
lifetime.
Alejandra Austria was the widow of the deceased Antonio
Ventenilla. On March 31, 1950 a number of persons, claiming to be his
heirs 2 (nephews and nieces) appeared and filed a petition to set aside
the decision and the order of general default previously entered, and to
have their opposition to the application admitted. Their petition was
granted and the case was set for trial anew. Meanwhile, Alejandra
Austria died and Socorro A. Castro was substituted in her place.
The averment of the oppositors was that the lands applied for
were owned by Antonio Ventenilla; that when he died he left a will
bequeathing them in usufruct to his wife Alejandra; and that upon her
death they passed to the said oppositors as his heirs.
The trial court, in its decision rendered on April 4, 1959,
rejected both the claims of Socorro A. Castro and of the oppositors
without deciding the question of title for purposes of registration. From
that decision only Socorro A. Castro appealed to the Court of Appeals.
The appellees did not even file a brief. On July 19, 1962 the appellate
court rendered its decision dismissing the appeal, and the case was
thereafter elevated to us on petition for review.
ISSUES:
Whether or not a donation is inter vivos or mortis causa 
RULING:
Settlement of decedent’s estate; Possession of property by widow
of deceased she being the residuary legatee is in concept of ownership.—In
Austria vs. Heirs of Antonio Ventenilla, L-10018, Sept. 19, 1956, it is there
stated that the will of this deceased was admitted to probate in 1909, in
Special Proc. No. 237 of the Court of First Instance of Pangasinan. The widow
of the deceased was appointed administratrix of the estate. In 1910 the
collateral heirs, now oppositors, filed a petition for the annulment of the will,
which petition was denied by the court below. In the order of denial, dated
Oct. 5, 1910, it was declared: “que la heredera Alejandra Austria tiene derecho
al remanente de todos los bienes dejados por el finado, despues so deducir de
ellos la pension que corresponde a cado uno de sus coherederos x x x.” That
order was affirmed by the Supreme Court on appeal on Jan. 11, 1912, L-6620,
21 Phil. 180.
The next incident took place thirty-eight years later when, on April
22, 1950 herein oppositors filed a motion in the same testate proceeding
claiming, among other things, that the widow of the deceased was merely the
life usufructuary of the estate of the deceased, the naked ownership belonging
to the movants; that she was no longer able to administer the properties; and
that she had been disposing of them in violation of her trust; and praying that
said widow be removed as administratrix and another appointed in her place.
The trial court denied the motion and rule that the estate case had long since
been closed. On appeal to the Supreme Court the order was affirmed, and
held that appellee widow was the residuary legatee of the estate of the
deceased is, therefore, res adjudicata and can no longer be relitigated by
appellants after thirty-eight years. And as appellee had been in the possession
and enjoyment of said properties all these years in the concept of owner,
being the residuary legatee thereof, there is no reason nor justification for the
reopening of these proceedings, the appointment of a new administrator, and
the reconstitution of the last will and testament of the deceased Antonio
Ventenilla.
The contention of the oppositors below is that the parcels also
belonged to the deceased Antonio Ventenilla. Even assuming this to be so,
they would have passed to his widow as the residuary heir under his will; and
as stated by the Supreme Court in case L-1008, supra, “she had been in
possession and enjoyment of said properties all these years in concept of
owner, being the residuary legatee thereof.” In any event, whether as
purchaser or as residuary legatee, such possession in concept of owner
constituted sufficient registrable title.
Donation; Determination whether inter vivos or mortis causa
depends upon nature of disposition.—Whether a donation is inter vivos or
mortis causa depends upon the nature of the disposition made. “Did the donor
intend to transfer the ownership of the property donated upon the execution
of the donation? If this is so, as reflected from the provisions contained in the
donation, then it is inter vivos; otherwise, it is merely mortis causa, or made to
take effect after death.” (Howard vs. Padilla, L-7064 and L-7098, April 22,
1955) Sometimes the nature of the donation becomes controversial when the
donee’s enjoyment of the property donated is postponed until after the
donor’s death.
Same; Same; Body of document and statements contained therein
determine intention of donor.—It is the body of the document of donation
and the statements contained therein and not the title that should be
considered in ascertaining the intention of the donor. Castro vs. Court of
Appeals, 27 SCRA 1076, No. L-20122 April 28, 1969
Gestopa vs. Court of Appeals, 342 SCRA 105, G.R. No. 111904 October 5,
2000
FACTS:
Spouses Diego and Catalina Danlag were the owners of six
parcels of unregistered lands. They executed three deeds of
donation mortis causa, in favor of private respondent Mercedes Danlag-
Pilapil.4  All deeds contained the reservation of the rights of the donors
(1) to amend, cancel or revoke the donation during their lifetime, and (2)
to sell, mortgage, or encumber the properties donated during the
donors' lifetime, if deemed necessary.
On January 16, 1973, Diego Danlag, with the consent of his
wife, Catalina Danlag, executed a deed of donation inter vivos5 covering
the aforementioned parcels of land plus two other parcels, 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.
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 their opposition, the Gestopas and the Danlags averred that
the deed of donation was null and void because it was obtained by
Mercedes through machinations and undue influence. Further, the
donation was void for it left the donor, Diego Danlag, without any
property at all.
The trial court declared the Donations Mortis Causa and Inter
Vivos as revoked, and, therefore, has (sic) no legal effect and force of
law; and that Diego Danlag the absolute and exclusive owner of the six
(6) parcels of land mentioned in the Deed of revocation; and that the
Deeds of Sale executed by Diego Danlag in favor of spouses Agripino
Gestopa and Isabel Gestopa as valid and enforceable duly executed in
accordance with the formalities required by law; Ordering all tax
declaration issued in the name of Mercedes Danlag Y Pilapil covering
the parcel of land donated cancelled and further restoring all the tax
declarations previously cancelled, except parcels nos. 1 and 5.
On appeal, the CA reversed the ruling of the RTC. Hence, this
petition.
ISSUES:
Whether or not the donation was inter vivos or mortis causa
RULING:
Civil Law; Property; Donations; 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.—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. In
ascertaining the intention of the donor, all of the deed’s provisions must be
read together.
Same; Same; Same; Acceptance clause is a mark that the donation is
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.—In the
case of Alejandro vs. Geraldez, 78 SCRA 245 (1977), we said that an
acceptance clause is a mark that the donation is inter vivos. Acceptance is a
requirement for donations inter vivos. Donations mortis causa, being in the
form of a will, are not required to be accepted by the donees during the
donors’ lifetime.
Same; Same; Same; 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 Court of
Appeals did not err in concluding that the right to dispose of the properties
belonged to the donee. The donor’s right to give consent was merely intended
to protect his usufructuary interests. In Alejandro, we ruled that a limitation
on the right to sell during the donors’ lifetime implied that ownership had
passed to the donees and donation was already effective during the donors’
lifetime.
Same; Same; Same; 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.—A valid donation,
once accepted, becomes irrevocable, except on account of officiousness,
failure by the donee to comply with the charges imposed in the donation, or
ingratitude. The donor-spouses did not invoke any of these reasons in the
deed of revocation. Gestopa vs. Court of Appeals, 342 SCRA 105, G.R. No.
111904 October 5, 2000
PDIC vs. Bureau of Internal Revenue, 511 SCRA 123, G.R. No. 158261
December 18, 2006
FACTS:
In 1986, a special examination of RBBI was conducted by the
Supervision and Examination Sector (SES) Department III of what is
now the Bangko Sentral ng Pilipinas (BSP),4 wherein various loan
irregularities were uncovered. In a letter, dated 20 May 1986, the SES
Department III required the RBBI management to infuse fresh capital
into the bank, within 30 days from date of the advice, and to correct all
the exceptions noted. However, up to the termination of the subsequent
general examination conducted by the SES Department III, no concrete
action was taken by the RBBI management. In view of the irregularities
noted and the insolvent condition of RBBI, the members of the RBBI
Board of Directors were called for a conference at the BSP on 4 August
1986. Only one RBBI Director, a certain Mr. Wakit, attended the
conference, and the examination findings and related recommendations
were discussed with him. In a letter, dated 4 August 1986, receipt of
which was acknowledged by Mr. Wakit, the SES Department III warned
the RBBI Board of Directors that, unless substantial remedial measures
are taken to rehabilitate the bank, it will recommend that the bank be
placed under receivership. In a subsequent letter, dated 17 November
1986, a copy of which was sent to every member of the RBBI Board of
Directors via registered mail, the SES Department III reiterated its
warning that it would recommend the closure of the bank, unless the
needed fresh capital was immediately infused. Despite these notices,
the SES Department III received no word from RBBI or from any of its
Directors as of 28 November 1986.5
A memorandum and report, dated 28 August 1990, were
submitted by the Director of the SES Department III concluding that the
RBBI remained in insolvent financial condition and it can no longer
safely resume business with the depositors, creditors, and the general
public. On 7 September 1990, the Monetary Board, after determining
and confirming the said memorandum and report, ordered the liquidation
of the bank and designated the Director of the SES Department III as
liquidator.7
On 10 April 1991, the designated BSP liquidator of RBBI
caused the filing with the RTC of a Petition for Assistance in the
Liquidation of RBBI, docketed as Spec. Proc. No. 91-SP-
0060.8 Subsequently, on 2 June 1992, the Monetary Board transferred
to herein petitioner Philippine Deposit Insurance Corporation (PDIC) the
receivership/liquidation of RBBI.9
 PDIC then filed, on 11 September 2002, a Motion for Approval
of Project of Distribution 10 of the assets of RBBI, in accordance with
Section 31, in relation to Section 30, of Republic Act No. 7653,
otherwise known as the New Central Bank Act. During the hearing held
on 17 January 2003, the respondent Bureau of Internal Revenue (BIR),
through Atty. Justo Reginaldo, manifested that PDIC should secure a
tax clearance certificate from the appropriate BIR Regional Office,
pursuant to Section 52(C) of Republic Act No. 8424, or the Tax Code of
1997, before it could proceed with the dissolution of RBBI. On even
date, the RTC issued one of the assailed Orders, 11 directing PDIC to
comply with Section 52(C) of the Tax Code of 1997 within 30 days from
receipt of a copy of the said order. Pending compliance therewith, the
RTC held in abeyance the Motion for Approval of Project of Distribution.
On 13 May 2003, the second assailed Order 12 was issued, in which the
RTC denied for lack of merit.
Hence, PDIC filed the present Petition for Review
on Certiorari.
ISSUES:
Whether or not a bank ordered closed and placed under
receivership by the Monetary Board of the BSP still needs to secure a
tax clearance certificate from the BIR before the liquidation court
approves the project of distribution of the assets of the bank.
RULING:
Judgments; Appeals; Pleadings and Practice; Words and Phrases;
“Appeal by Certiorari” and “Original Action for Certiorari,” Distinguished.—The
differences between an appeal by certiorari under Rule 45 of the revised Rules
of Court and an original action for certiorari under Rule 65 of the same Rules
have been laid down by this Court in the case of Atty. Paa v. Court of Appeals,
282 SCRA 448 (1997), to wit—a. In appeal by certiorari, the petition is based
on questions of law which the appellant desires the appellate court to resolve.
In certiorari as an original action, the petition raises the issue as to whether
the lower court acted without or in excess of jurisdiction or with grave abuse
of discretion; b. Certiorari, as a mode of appeal, involves the review of the
judgment, award or final order on the merits. The original action for certiorari
may be directed against an interlocutory order of the court prior to appeal
from the judgment or where there is no appeal or any other plain, speedy or
adequate remedy; c. Appeal by certiorari must be made within the
reglementary period for appeal. An original action for certiorari may be filed
not later than sixty (60) days from notice of the judgment, order or resolution
sought to be assailed; d. Appeal by certiorari stays the judgment, award or
order appealed from. An original action for certiorari, unless a writ of
preliminary injunction or a temporary restraining order shall have been issued,
does not stay the challenged proceeding; e. In appeal by certiorari, the
petitioner and respondent are the original parties to the action, and the lower
court or quasi-judicial agency is not to be impleaded. In certiorari as an original
action, the parties are the aggrieved party against the lower court or quasi-
judicial agency and the prevailing parties, who thereby respectively become
the petitioner and respondents; f. In certiorari for purposes of appeal, the
prior filing of a motion for reconsideration is not required (Sec. 1, Rule 45);
while in certiorari as an original action, a motion for reconsideration is a
condition precedent (Villa-Rey Transit vs. Bello, L-18957, April 23, 1963),
subject to certain exceptions; g. In appeal by certiorari, the appellate court is
in the exercise of its appellate jurisdiction and power of review, while in
certiorari as an original action, the higher court exercises original jurisdiction
under its power of control and supervision over the proceedings of lower
courts.
Same; Same; Same; Same; “Final Order” and “Interlocutory Order,”
Distinguished; A judgment or order may be appealed only when it is final,
meaning that it completely disposes of the case and definitively adjudicates
the respective rights of the parties, leaving thereafter no substantial
proceedings to be had in connection with the case except the proper
execution of the judgment or order.—This Court has repeatedly and uniformly
held that a judgment or order may be appealed only when it is final, meaning
that it completely disposes of the case and definitively adjudicates the
respective rights of the parties, leaving thereafter no substantial proceeding to
be had in connection with the case except the proper execution of the
judgment or order. Conversely, an interlocutory order or judgment is not
appealable for it does not decide the action with finality and leaves substantial
proceedings still to be had.
Same; Same; Same; An interlocutory order is not appealable until
after the rendition of the judgment on the merits, given that a contrary rule
would delay the administration of justice and unduly burden the courts; An
original action for certiorari under Rule 65 is an appropriate remedy to assail
an interlocutory order when (1) the tribunal issued such order without or in
excess of jurisdiction or with grave abuse of discretion, and (2) the assailed
interlocutory order is patently erroneous and the remedy of appeal would not
afford adequate and expeditious relief.—As a general rule, an interlocutory
order is not appealable until after the rendition of the judgment on the merits,
given that a contrary rule would delay the administration of justice and unduly
burden the courts. This Court, however, has also held that an original action
for certiorari under Rule 65 of the revised Rules of Court is an appropriate
remedy to assail an interlocutory order when (1) the tribunal issued such order
without or in excess of jurisdiction or with grave abuse of discretion, and (2)
the assailed interlocutory order is patently erroneous and the remedy of
appeal would not afford adequate and expeditious relief. Thus, In Re: Petition
for Assistance in the Liquidation of the Rural Bank of Bokod (Benguet), Inc.,
PDIC vs. Bureau of Internal Revenue despite this Court’s finding that PDIC, as
the liquidator of RBBI, availed itself of the wrong remedy by filing an appeal by
certiorari under Rule 45 of the revised Rules of Court, We shall adopt a
positive and pragmatic approach, and, instead of dismissing the instant
Petition outright, it shall treat the same as an original action for certiorari
under Rule 65 of the same Rules, in consideration of the crucial issues and
substantial arguments already presented by the concerned parties before this
Court.
Banks and Banking; Liquidation; Taxation; Section 52 (C) of the Tax
Code of 1997 and BIR-SEC Regulations No. 1 refer to a voluntary dissolution
and/or liquidation of a corporation through its adoption of a resolution or plan
to that effect, or an involuntary dissolution of a corporation by order of the
Securities and Exchange Commission.—The afore-quoted Tax Code provision
and regulations refer to a voluntary dissolution and/or liquidation of a
corporation through its adoption of a resolution or plan to that effect, or an
involuntary dissolution of a corporation by order of the SEC. They make no
reference at all to a situation similar to the one at bar in which a banking
corporation is ordered closed and placed under receivership by the BSP and its
assets judicially liquidated. Now, the determining question is, whether Section
52(C) of the Tax Code of 1997 and BIR-SEC Regulations No. 1 could be made to
apply to the present case. This Court rules in the negative. First, Section 52(C)
of the Tax Code of 1997 and the BIR-SEC Regulations No. 1 regulate the
relations only as between the SEC and the BIR, making a certificate of tax
clearance a prior requirement before the SEC could approve the dissolution of
a corporation. In Spec. Proc. No. 91-SP-0060 pending before the RTC, RBBI was
placed under receivership and ordered liquidated by the BSP, not the SEC; and
the SEC is not even a party in the said case, although the BIR is. This Court
cannot find any basis to extend the SEC requirements for dissolution of a
corporation to the liquidation proceedings of RBBI before the RTC when the
SEC is not even involved therein.
Same; Same; Same; New Central Bank Act (R.A. No. 7653); Section
30 of the New Central Bank Act lays down the proceedings for receivership
and liquidation of a bank; There are substantial differences in the procedure
for involuntary dissolution and liquidation of a corporation under the
Corporation Code, and that of a banking corporation under the New Central
Bank Act, so that the requirements in one cannot simply be imposed in the
other.—Section 30 of the New Central Bank Act lays down the proceedings for
receivership and liquidation of a bank. The said provision is silent as regards
the securing of a tax clearance from the BIR. The omission, nonetheless,
cannot compel this Court to apply by analogy the tax clearance requirement of
the SEC, as stated in Section 52(C) of the Tax Code of 1997 and BIR-SEC
Regulations No. 1, since, again, the dissolution of a corporation by the SEC is a
totally different proceeding from the receivership and liquidation of a bank by
the BSP. This Court cannot simply replace any reference by Section 52(C) of
the Tax Code of 1997 and the provisions of the BIR-SEC Regulations No. 1 to
the “SEC” with the “BSP.” To do so would be to read into the law and the
regulations something that is simply not there, and would be tantamount to
judicial legislation. It should be noted that there are substantial differences in
the procedure for involuntary dissolution and liquidation of a corporation
under the Corporation Code, and that of a banking corporation under the New
Central Bank Act, so that the requirements in one cannot simply be imposed in
the other.
Same; Same; Same; Same; The filing by the Philippine Deposit
Insurance Corporation of a final tax return on behalf of a bank subject of
liquidation proceedings should already address the supposed concern of the
Bureau of Internal Revenue and would already enable the latter to determine
if the bank still had outstanding liabilities.— Section 54 of the Tax Code of
1997 imposes a general duty on all receivers, trustees in bankruptcy, and
assignees, who operate and preserve the assets of a corporation, regardless of
the circumstances or the law by which they came to hold their positions, to file
the necessary returns on behalf of the corporation under their care. The filing
by PDIC of a final tax return, on behalf of RBBI, should already address the
supposed concern of the BIR and would already enable the latter to determine
if RBBI still had outstanding tax liabilities.
Same; Same; Same; Preference of Credits; Duties, taxes, and fees
due the Government enjoy priority only when they are with reference to a
specific movable property, under Article 2241 (1) of the Civil Code, or
immovable property, under Article 2242 (1) of the same Code—with reference
to the other real and personal property of the debtor, sometimes referred to
as “free property,” the taxes and assessments due the National Government,
other than those in Articles 2241(1) and 2242(2) of the Civil Code, will come
only in ninth place in the order of preference.—The Government, in this case,
cannot generally claim preference of credit, and receive payment ahead of the
other creditors of RBBI. Duties, taxes, and fees due the Government enjoy
priority only when they are with reference to a specific movable property,
under Article 2241(1) of the Civil Code, or immovable property, under Article
2242(1) of the same Code. However, with reference to the other real and
personal property of the debtor, sometimes referred to as “free property,” the
taxes and assessments due the National Government, other than those in
Articles 2241(1) and 2242(1) of the Civil Code, will come only in ninth place in
the order of preference.
Same; Same; Liquidation proceedings cannot be summary in nature
—it requires the holding of hearings and presentation of evidence of the
parties concerned.—Irrefragably, liquidation proceedings cannot be summary
in nature. It requires the holding of hearings and presentation of evidence of
the parties concerned, i.e., creditors who must prove and substantiate their
claims, and the liquidator disputing the same. It also allows for multiple
appeals, so that each creditor may appeal a final order rendered against its
claim. Hence, liquidation proceedings may very well be highly-contested and
drawn-out, because, at the end of it all, all claims against the corporation
undergoing litigation must be settled definitively and its assets properly
disposed off. In Re: Petition for Assistance in the Liquidation of the Rural Bank
of Bokod (Benguet), Inc., PDIC vs. Bureau of Internal Revenue, 511 SCRA 123,
G.R. No. 158261 December 18, 2006
Collector of Internal Revenue vs. Fisher, 1 SCRA 93, No. L-11622, No. L-11668
January 28, 1961
FACTS:
Walter G. Stevenson was born in the Philippines of British parents,
married in Manila to another British subject, Beatrice. He died in 1951 in
California where he and his wife moved to.
In his will, he instituted Beatrice as his sole heiress to certain real
and personal properties, among which are 210,000 shares of stocks in
Mindanao Mother Lode Mines (Mines).
Ian Murray Statt (Statt), the appointed ancillary administrator of his
estate filed an estate and inheritance tax return. He made a preliminary return
to secure the waiver of the CIR on the inheritance of the Mines shares of
stock. In 1952, Beatrice assigned all her rights and interests in the estate to
the spouses Fisher.
Statt filed an amended estate and inheritance tax return claiming
ADDITIONAL EXEMPTIONS, one of which is the estate and inheritance tax on
the Mines’ shares of stock pursuant to a reciprocity proviso in the NIRC, hence,
warranting a refund from what he initially paid. The collector denied the claim.
He then filed in the CFI of Manila for the said amount.
CFI ruled that (a) the ½ share of Beatrice should be deducted from
the net estate of Walter, (b) the intangible personal property belonging to the
estate of Walter is exempt from inheritance tax pursuant to the reciprocity
proviso in NIRC. Hence, this petition.
ISSUES:
Whether or not the estate can avail itself of the reciprocity
proviso embodied in Section 122 of the National Internal Revenue Code
granting exemption from the payment of estate and inheritance taxes on
the 210,000 shares of stock in the Mindanao Mother Lode Mines Inc.
RULING:
Husband and wife; Conjugal partnership.—In the absence of any
ante-nuptial agreement, the husband and wife are presumed to have adopted
the system of conjugal partnership.
Civil Code of the Philippines; Husband and wife; Marriage.—The
property relations of husband and wife who were married in 1909 are
governed by article 1325 of the Spanish Civil Code and not by article 124 of the
New Civil Code.
Same; Private International Law (Conflict of laws).—Artide 1325 of
the Old Civil Code and article 124 of the New Civil Code both adhere to the so-
called nationality theory of determining the property relations of spouses
where one of them is a foreigner and they have made no prior agreement as
to the administration, disposition and ownership of their conjugal properties.
In such a case, the national law of the husband becomes the dominant law in
determining the property relations of the spouses. However, there is a
difference between two articles. Article 124 expressly provides that it applies
regardless of where the marriage was celebrated, while article 1325 is limited
to marriages contracted abroad. Both articles apply only to mixed marriages
between a Filipino and a foreigner.
Same; Old law; Property relations of British citizens who were,
married in Manila in 1909.—English law governs the property relations of a
man and woman, both British citizens, who were married in Manila 1909.
Evidence; Foreign laws; Processual presumption.—In the absence of
proof of a foreign law, the processual presumption is that it is the same as the
law of the forum.
 Private International Law; Article 10 of the old Civil Code; Husband
and wife.—Article 10 of the old Civil Code does not govern the property
relations of husband and wife. It refers to successional rights, which are
distinct from the property relations of the spouses.
Taxation; Estate and inheritance taxes; Share of surviving spouse is
deductible.—In determining- the net taxable estate of a deceased British
subject, for purposes of the estate and inheritance taxes, where said deceased
was married to another British citizen in Manila in 1909, the one-half conjugal
share of the surviving wife should be deducted inasmuch as they are
presumed to have adopted the system of conjugal partnership in the absence
of an ante-nuptial agreement.
Evidence; Proof of foreign laws.—Foreign laws do not prove
themselves in our courts. They are not a matter of judicial notice. Like any
other fact, they must be alleged and proven.
Same.—The provisions of the Rules of Court on proof of foreign
laws do not exclude the presentation of other competent evidence to prove
the existence of a foreign law. The testimony of a lawyer, practising in
California, together with a quotation from a publication of Bancroft-Whitney,
is sufficient to prove the certain provisions of the California Internal Revenue
Code.
Taxation; Estate and inheritance taxes; Reciprocity in exemption.—
Under section 122 of the Tax Code and section 13851 of the California
Inheritance Tax Law, the reciprocity must be total, that is, with respect to
transfer or death taxes of any and every character, in the case of the
Philippine law, and to legacy, succession, or death taxes of any and every
character, in the case of the California law. Therefore, if any of the two states
collects or imposes and does not exempt any transfer, death, legacy, or
succession tax of any character, the reciprocity does not work. The shares of
stock in the Philippines, left by a deceased resident of California, are subject to
the Philippine inheritance tax. The reciprocity provisions of section 122 of the
Tax Code are not applicable because there is no total reciprocity under the
two laws.
Same; Deduction under Federal Estate Tax Law.—The amount
allowed under the Federal Estate Tax Law is in the nature of a deduction and
not of an exemption, regarding which reciprocity cannot be claimed under
section 122 of the Philippine Tax Code. Nor is reciprocity allowed under the
Federal Law.
Taxation; Estate and inheritance taxes; Assessed value is not the
controlling market value.—For purposes of the estate and inheritance taxes,
the assessed value of real estate is considered as the fair market value only
when evidence to the contrary has not been submitted. If there is such
contrary evidence, the assessed value will not be considered the fair market
value.
Same; Market value of shares of stock.—Shares of stock of a
Philippine (domestic) corporation have a situs here for purposes of taxation.
Their situs is not California where the certificates were located and in whose
stock exchange the shares were registered. Their fair market value should be
based on the price prevailing in this country where they are sought to be
taxed.
Same; Deductibility of expenses allowed by the probate court.—The Supreme
Court will not disturb the ruling of the Tax Court, allowing the administrator's
fee, lawyer's fee and judicial and administration expenses as liabilities of the
estate, it appearing the said items were likewise allowed by the probate court.
The ruling of the Tax Court, disallowing an additional amount for funeral
expenses, for lack of evidence, should be upheld. The Supreme Court will set
aside the factual findings of the Tax Court only in case they are not supported
by any evidence.
Executors and administrators; Settlement of decedent's estates;
Ancillary and domiciliary adminintration.—The distinction between a
domiciliary and an ancillary administration serves only to distinguish one
administration from the other, for the two proceedings are separate and
independent. The reason for the ancillary administration is that a grant of
administration does not, ex proprio vigore, have any effect beyond the limits
of the country in which it was granted. In other words, there is a regular
administration under the control of the court, where claims must be
presented and approved and expenses of administration allowed before the
deductions from the estate can be authorized.
Same; California debt of decedent should be presented to Philippine
court for allo-icance.--A debt of the decedent, which was incurred in California
and which was allowed by the California court, having jurisdiction over the
domiciliary administration, should, nevertheless, be presented to the
Philippine probate court for allowance in order that it may constitute a valid
claim against the Philippine estate under ancillary administration.
Same; Deductions allowed the estate of nonresident aliens.—No
deduction from the estate of a nonresident alien is allowed unless the value of
his gross estate not situated in the Philippines is stated in the return. This
requirement is intended to enable the revenue officer to determine how much
of the debt may be deducted pursuant to section 89(b)(l) of the Tax Code. The
deduction is allowed only to the extent of that portion of the debt, which is
equivalent to the proportion that the Philippine estate bears to the total
estate wherever situated. If the Philippine estate constitutes but 1/5 of the
entire estate, wherever situated, then only 1/5 of the debt may be deducted.
If no statement of the estate situated outside the Philippines is attached to the
return, then no part of the debt may be deducted from the decedents' estate.
Taxation; Interest on amount overpaid.—In the absence of any
statutory provision clearly or expressly directing or authorizing the payment of
interest on taxes overpaid, the National Government cannot be required to
pay interest. Collector of Internal Revenue vs. Fisher, 1 SCRA 93, No. L-11622,
No. L-11668 January 28, 1961
Lorenzo vs. Posadas, 64 Phil. 353, No. 43082 June 18, 1937
FACTS:
On October 4, 1932, the plaintiff Pablo Lorenzo, in his capacity
as trustee of the estate of Thomas Hanley, deceased, brought this
action in the Court of First Instance of Zamboanga against the
defendant, Juan Posadas, Jr., then the Collector of Internal Revenue,
for the refund of the amount of P2,052.74, paid by the plaintiff as
inheritance tax on the estate of the deceased, and for the collection of
interest thereon at the rate of 6 per cent per annum, computed from
September 15, 1932, the date when the aforesaid tax was [paid under
protest.
The defendant set up a counterclaim for P1,191.27 alleged to
be interest due on the tax in question and which was not included in the
original assessment. From the decision of the Court of First Instance of
Zamboanga dismissing both the plaintiff's complaint and the defendant's
counterclaim, both parties appealed to this court.
ISSUES:
(a) When does the inheritance tax accrue and when must it be
satisfied?
(b) Should the inheritance tax be computed on the basis of the
value of the estate at the time of the testator's death, or on its value ten
years later?
 (c) In determining the net value of the estate subject to tax, is it
proper to deduct the compensation due to trustees?
(d) What law governs the case at bar? Should the provisions of
Act No. 3606 favorable to the tax-payer be given retroactive effect?
(e) Has there been deliquency in the payment of the
inheritance tax? If so, should the additional interest claimed by the
defendant in his appeal be paid by the estate?
RULING:
INHERITANCE TAX; ACCRUAL OF, DISTINCT FROM THE OBLIGATION
TO PAY IT.—The accrual of the inheritance tax is distinct from the obligation to
pay the same. Section 1536 as amended, of the Administrative Code, imposes
the tax upon "every transmission by virtue of inheritance, devise, bequest, gift
mortis causa, or advance in anticipation of inheritance, devise, or bequest."
The tax therefore is upon transmission or the transfer or devolution of
property of a decedent, made effective by his death, (61 C. J., p. 1592.)
2. ID.; MEASURE OF, BY VALUE OF ESTATE.—If death is the generating
source from which the power of the state to impose inheritance taxes takes its
being and if, upon the death of the decedent, succession takes place and the
right of the state to tax vests instantly, the tax should be measured by the
value of the estate as it stood at the time of the decedent's death, regardless
of any subsequent contingency affecting value or any subsequent increase or
decrease in value. (61 C. J., pp.' 1692, 1693; 26 R. C. L., p. 232; Blakemore and
Bancroft, Inheritance Taxes, p. 137. See also Knowlton vs. Moore, 178 U. S.,
41; 20 Sup. Ct. Rep., 747; 44 Law. ed., 968.)
3. ID.; ID.—"The right of the state to an inheritance tax accrues at the
moment of death, and hence is ordinarily measured as to any beneficiary by
the value at that time of such property as passes to him. Subsequent
appreciation or depreciation is immaterial." (Ross, Inheritance Taxation, p. 72.)
4. ID.; ID.—Whatever may be the rule in other jurisdictions, we hold that a
transmission by inheritance is taxable at the time of the predecessor's death,
notwithstanding the postponement of the actual possession or enjoyment of
the estate by the beneficiary, and the tax measured by the value of the
property transmitted at that time regardless of its appreciation or
depreciation.
5. ID.; TRUSTS AND TRUSTEES.—A trustee, no doubt, is entitled to receive a
fair compensation for his services. (Barney vs. Saunders, 16 How., 535; 14 Law.
ed., 1047.) But from this it does not follow that the compensation due him
may lawfully be deducted in arriving at the net value of the estate subject to
tax. There is no statute in the Philippines which requires trustees' commissions
to be deducted in determining the net value of the estate subject to
inheritance tax. (61 C. J., p. 1705.) Furthermore, though a testamentary trust
has been created, it does not appear that the testator intended that the duties
of his executors and trustees should be separated. (Ibid.; In re Vanneck's
Estate, 161 N. Y. Supp., 893; 175 App. Div., 363; In re Collard's Estate, 161 N. Y.
Supp., 455.)
6. ID.; ID.; ADMINISTRATION EXPENSES.—Judicial expenses are expenses of
administration (61 C. J., p. 1705) but, in State vs. Hennepin County Probate
Court (112 N. W., 878; 101 Minn., 485), it was said: "* * * the compensation of
a trustee, earned, not in the administration of the estate, but in the
management thereof for the benefit of the legatees or devisees, does not
come properly within the class or reason for exempting administration
expenses. * * * Services rendered in that behalf have no reference to closing
the estate for the purpose of a distribution thereof to those entitled to it, and
are not required or essential to the perfection of the rights of the heirs or
legatees. * * * Trusts * * * of the character of that here before the court, are
created for the benefit of those to whom the property ultimately passes, are
of voluntary creation, and intended for the preservation of the estate. No
sound reason is given to support the contention that such expenses should be
taken into consideration in fixing the value of the estate for the purposes of
.this tax.
7. ID.; RETROACTIVE LEGISLATION.—It is well-settled that inheritance
taxation is governed by the statute in force at the time of the death of the
decedent (26 R. C. L., p. 206; 4 Cooley on Taxation, 4th ed., p. 3461). The
taxpayer cannot foresee and ought not to be required to guess the outcome of
pending measures. Of course, a tax statute may be made retroactive in its
operation. Liability for taxes under retroactive legislation has been "one of the
incidents of social life." (Seattle vs. Kelleher, 195 U. S., 351, 360; 49 Law. ed.,
232; 25 Sup. Ct. Rep., 44.)
8. ID.; ID.—But legislative intent that a tax statute should operate
retroactively should be perfectly clear. (Scwab vs. Doyle, 42 Sup. Ct. Rep., 491;
Smietanka vs. First Trust & Savings Bank, 257 U. S., 602; Stockdale vs.
Insurance Co., 20 Wall., 323; Lunch vs. Turrish, 247 U. S., 221.) "A statute
should be considered as prospective in its operation, whether it enacts,
amends, or repeals an inheritance tax, unless the language of the statute
clearly demands or expresses that it shall have a retroactive effect, * * * " (61
C. J., 1602.)
9. ID.; ID.—Though the last paragraph of section 5 of Regulations No. 65 of
the Department of Finance makes section 3 of Act No. 3606, amending section
1544 of the Revised Administrative Code, applicable to all estates the
inheritance taxes due from which have not been paid, Act No. 3606 itself
contains no provisions indicating legislative intent to give it retroactive effect.
No such effect can be given the statute by this court.
10. ID.; ID.; PENAL STATUTES.—Properly speaking, a statute is penal when it
imposes punishment for an offense committed against the state which, under
the Constitution, the Executive has the power to pardon. In common use,
however, this sense has been enlarged to include within the term "penal
statutes" all statutes which command or prohibit certain acts, and establish
penalties for their violation, and even those which, without expressly
prohibiting certain acts, impose a penalty upon their commission. (59 C. J., p.
1110.)
11. ID.; ID.; ID.; REVENUE LAW.—Revenue laws, generally, which impose
taxes collected by the means ordinarily resorted to for the collection of taxes
are not classed as penal laws, although there are authorities to the contrary.
(See Sutherland, Statutory Construction, 361; Twine Co. vs. Worthington, 141
U. S., 468; 12 Sup. Ct., 55; Rice vs. U. S., 4 C. C. A., 104; 53 Fed., 910; Com. vs.
Standard Oil Co., 101 Pa. St., 150; State vs. Wheeler, 44 P., 430; 25 Nev., 143.)
Article 22 of the Revised Penal Code is not applicable to the case at bar, and in
the absence of clear legislative intent, we cannot give Act No. 3606 a
retroactive effect.
12. ID.; TRUSTS AND TRUSTEES.—The word "trust" is not mentioned or used
in the will but the intention to create one is clear. No particular or technical
words are required to create a testamentary trust. * (69 C. J., p. 711.) The
words "trust" and "trustee", though apt for the purpose, are not necessary. In
fact, the use of these two words is not conclusive on the question that a trust
is created. (69 C. J., p. 714.)
13. ID.; ID.—There is no doubt that the testator intended to create a trust.
He ordered in his will that certain of his properties be kept together
undisposed during a fixed period, for a stated purpose. The probate court
certainly exercised sound judgment in appointing a trustee to carry into effect
the provisions of the will. (See sec. 582, Code of Civil Procedure.)
14. ID.; ID.; ERROR IN ENGLISH VERSION OF SUBSECTION (B), SECTION 1543,
REVISED ADMINISTRATIVE CODE.—The word "trustee", appearing in
subsection (b) of section 1543, should read "fideicommissary" or "cestui que
trust". There was an obvious mistake in translation from the Spanish to the
English version.
Gabin vs. Melliza, 84 Phil. 794, No. L-1849 October 25, 1949
FACTS:
On January 19, 1944, Raymundo Melliza and Laureana Gabin
entered into a written agreement whereby the former contracted the
personal services of the latter to administer certain haciendas owned by
Raymundo Melliza for a period of thirty years from said date, at the
option of Laureana Gabin. As compensation for said personal services
Melliza agreed to pay Gabin 350 cavans of palay every agricultural year.
It was further stipulated that Laureana Gabin cannot be dismissed from
the service without just and legal cause during the time she cared to
serve within the said period of thirty years, and in case of dismissal she
shall have the right to be indemnified for the rest of the period at the rate
of 150 cavans of palay for each agricultural year.
Raymundo Melliza died on December 11, 1945, and
testamentary proceedings were thereafter instituted in the Court of First
Instance of Iloilo for the administration and distribution of his estate.
Having been deprived by the executrix Remedios S. de
Villanueva of the administration of the haciendas in question, Laureana
Gabin presented to the probate court a claim against the estate of the
deceased Raymundo Melliza for the payment to her by the executrix of
150 cavans of palay beginning the agricultural year 1945-1946 until the
termination of the testamentary proceedings, and that thereafter the heir
or heirs to whom the haciendas may be adjudicated be ordered to pay
the claimant the same amount of palay every year until the expiration of
thirty years from the agricultural year 1945-1946.
The heirs of the deceased opposed said claim on the following
grounds: (1) That, not being a claim for money, it is not a proper claim
under section 5 of Rule 87; (2) that the agreement or contract on which
it is based is one of agency which was terminated by the death of the
principal; (3) that Raymundo Melliza could not, except by will, dispose of
the administration of his properties after his death; and (4) that there
was no consideration for the granting of such administration for 30 years
with remuneration.lawphi1.nêt
The probate court sustained the first ground of the opposition
and denied the claim. Hence this appeal.
ISSUES:
whether appellant's claim for 150 cavans of palay a year for
the remainder of the thirty-year period mentioned in the agreement
Exhibit A is a proper claim which may be allowed in the testamentary
proceedings under Rule 87.
RULING:
EXECUTORS AND ADMINISTRATORS ; CLAIMS AGAINST ESTATEJ
CASE AT BAR.—In his lifetime M contracted the services of G to administer
certain haciendas belonging to M for a period of thirty years at a
compensation of 350 cavans of palay per agricultural year, with the stipulation
that G cannot be dismissed from the service without just and legal cause
during the time she cared to serve within the said period of thirty years, and in
case of dismissal she shall have the right to be indemnified for the rest of the
period at the rate of 150 cavans of palay for each agricultural year. After M's
death his executrix took from G the administration of said haciendas, and G
filed a claim against the estate for the payment of 150 cavans of palay per
agricultural year for twenty-nine years. Held: That the claim is not allowable,
first, because it arose after the death of the decedent and, second, because it
is not a claim for money falling under Rule 87 of the Rules of Court.
Vera vs. Fernandez, 89 SCRA 199, No. L-31364 March 30, 1979
FACTS:
The Motion for allowance of claim and for payment of taxes dated May
28, 1969 was filed on June 3, 1969 in the abovementioned special
proceedings, (par. 3, Annex A, Petition, pp. 1920, Rollo). The claim
represents the indebtedness to the Government of the late Luis D.
Tongoy for deficiency income taxes in the total sum of P3,254.80 as
above stated, covered by Assessment Notices Nos. 11-50-29-1-11061-
21-63 and 11-50-291-1 10875-64, to which motion was attached Proof
of Claim (Annex B, Petition, pp. 21-22, Rollo). The Administrator
opposed the motion solely on the ground that the claim was barred
under Section 5, Rule 86 of the Rules of Court (par. 4, Opposition to
Motion for Allowance of Claim, pp. 23-24, Rollo). Finding the opposition
well-founded, the respondent Judge, Jose F. Fernandez, dismissed the
motion for allowance of claim filed by herein petitioner, Regional Director
of the Bureau of Internal Revenue, in an order dated July 29, 1969
(Annex D, Petition, p. 26, Rollo). On September 18, 1969, a motion for
reconsideration was filed, of the order of July 29, 1969, but was denied
in an Order dated October 7, 1969.
Hence, this appeal on certiorari
ISSUES:
whether or not the statute of non-claims Section 5, Rule 86 of
the New Rule of Court, bars claim of the government for unpaid taxes,
still within the period of limitation prescribed in Section 331 and 332 of
the National Internal Revenue Code.
RULING:
Taxation; Estate Taxes; Statutory Construction; Interpretation; Rule
86, Sec 5, Rules of Court; Tax obligations of decedent which are created by law
different from money claims against decedent arising from contract provided
for in Sec. 5 of Mule 85 of the Rules of Court.—A perusal of the aforequoted
provisions, shows that it makes no mention of claims for monetary obligations
of the decedent created by law, such as taxes which is entirely of different
character from the claims expressly enumerated therein, such as: “all claims
for money against the decedent arising from contract, express or implied,
whether the same be due, not due or contingent, all claims for funeral
expenses and expenses for the last sickness of the decedent and judgment for
money against the decedent.” Under the familiar rule of statutory
construction of expressio unius est exclusio alterius, the mention of one thing
implies the exclusion of another thing not mentioned. Thus, if a statute
enumerates the things upon which it is to operate, everything else must
necessarily, and by implication be excluded from its operation and effect.
Same; Same; Prescription, not a case of; Claims for taxes collectible
even after distribution of decedent’s estate among his heirs who are liable in
proportion of their share in the inheritance to the payment of taxes; Claims for
estate taxes exempted from application of statute of non-claims.—That
abolition of the Committee on Claims does not alter the bask railing kid down
giving exception on the claim for taxes from being filed as the other claims
mentioned in the Rule should be filed before the Court. Claims for taxes may
he collected even after the distribution of the decedent’s estate among his
heirs who shall be liable therefor in proportion of their share in the
inheritance. (Government of the Philippines vs. Pamintuan, 55 Phil. 13). The
reason for the more liberal treatment of claims for taxes against a decedent’s
estate in the form of exception from the application of the statute of non-
claims, is not hard to find. Taxes are the lifeblood of the Government and their
prompt and certain availability are imperious need. (Commissioner of Internal
Revenue vs. Pineda, G.R. No. L-22734, September 15, 1967, 21 SCRA 105).
Upon taxation depends the Government ability to serve the people for whose
benefit taxes are collected, To safeguard such interest, neglect or omission of
government officials entrusted with the collection of taxes should not be
allowed to bring harm or detriment to the people, in the same manner as
private persons may foe made to suffer individually on account of his own
negligence, the presumption being that they take good care of their personal
affairs. This should not hold true to government officials with respect to
matters not of their own personal concern. This is the philosophy behind the
government’s exception, as a general rule, from the operation of the principle
of estoppel.
Same; Same; Unpaid taxes due the decedent collectible before
inheritance passed to decedent’s heirs even without presenting claim under
Sec. 2 of Rule 86 of the Rules of Court.—Furthermore, as held in Commissioner
of Internal Revenue vs. Pineda, supra, citing the last paragraph of Section 315
of the Tax Code payment of income tax shall be a lien in favor of the
Government of the Philippines from the time the assessment was made by the
Commissioner of Internal Revenue until paid with interests, penalties, etc. By
virtue of such lien, this Court held that the property of the estate already in
the hands of an heir or transferee may be subject to the payment of the tax
due the estate. A fortiori, before the inheritance has passed to the heirs, the
unpaid taxes due the decedent may be collected, even without its having been
presented under Section 2 of Rule 36 of the Rules of Court, It may truly be said
that until the property of the estate of the decedent has vested in the heirs,
the decedent, represented by his estate, continues as if he were still alive,
subject to the payment of such taxes as would be collectible from the estate
even after his death. Thus in the case abovecited, the income taxes sought to
be collected were due from the estate, for the three years 1946, 1947 and
1948 following his death in May, 1945.
Same; Same; Application for allowance of claim and order for
payment of taxes by decedent allowed even after expiration of time for filing
of claims under the Rules of Court but before order of distribution is entered.
—In the instant case, petitioners filed an application (Motion for Allowance of
Claim and for an Order of Payment of Taxes) which, though filed after the
expiration of the time previously limited but before an order of the
distribution is entered, should have been granted by the respondent court, in
the absence of any valid ground, as none was shown, justifying denial of the
motion, especially considering that it was for allowance of claim for taxes due
from the estate, which in effect represents a claim of the people at large, the
only reason given for the denial being that the claim was filed out of the
previously limited period, sustaining thereby private respondents’ contention,
erroneously as has been demonstrated. Vera vs. Fernandez, 89 SCRA 199, No.
L-31364 March 30, 1979
Dizon vs. Court of Tax Appeals, 553 SCRA 111, G.R. No. 140944 April 30, 2008
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 letter7 dated 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 letter 8 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 9 addressed
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
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
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.
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.
the CTA denied the said petition for review. Citing this Court's ruling
in Vda. de Oñate v. Court of Appeals,23 the CTA opined that the
aforementioned pieces of evidence introduced by the BIR were
admissible in evidence.
On appeal, the CA affirmed the CTA ruling and 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.
Hence, this petition.
ISSUES:
Whether or not the CA erred in affirming the CTA in the latter's
determination of the deficiency estate tax imposed against the Estate.
RULING:
 Remedial Law; Evidence; No evidentiary value can be given the
pieces of evidence submitted by the Bureau of Internal Revenue (BIR), as the
rules on documentary evidence require that these documents must be
formally offered before the Court of Tax Appeals (CTA).—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. 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.
Same; Same; Courts cannot consider evidence which has not been
formally offered; Doctrine laid down in Vda. de Oñate still subsists in this
jurisdiction; Vda. de Oñate 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.—The CTA and the CA rely solely on the case of
Vda. de Oñate, 250 SCRA 283 (1995), which reiterated this Court’s previous
rulings in People v. Napat-a, 179 SCRA 403 (1989), and People v. Mate, 103
SCRA 484 (1981), 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 Oñate, we held that courts cannot consider
evidence which has not been formally offered, nevertheless, petitioner cannot
validly assume that the doctrine laid down in Vda. de Oñate has already been
abandoned. Recently, in Ramos v. Dizon, 498 SCRA 17 (2006), 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, 502 SCRA 87 (2006), the Court made reference to said
doctrine in resolving the issues therein. Indubitably, the doctrine laid down in
Vda. De Oñate still subsists in this jurisdiction. In Vda. de Oñate, we held that:
x x x 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.” From the foregoing declaration,
however, it is clear that Vda. de Oñate 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.
Same; Same; The presentation of the Bureau of Internal Revenue’s
(BIR’s) evidence is not a mere procedural technicality which may be
disregarded considering that it is the only means by which the Court of Tax
Appeals (CTA) may ascertain and verify the truth of BIR’s claims against the
Estate.—While the CTA is not governed strictly by technical rules of evidence,
as rules of procedure are not ends in themselves and are primarily intended as
tools in the administration of justice, the presentation of the BIR’s evidence is
not a mere procedural technicality which may be disregarded considering that
it is the only means by which the CTA may ascertain and verify the truth of
BIR’s claims against the Estate. The BIR’s failure to formally offer these pieces
of evidence, despite CTA’s directives, is fatal to its cause. 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.
Civil Law; Obligations; Condonation or Remission of Debt; Words
and Phrases; Definition of condonation or remission of debt.—It is admitted
that the claims of the Estate’s aforementioned creditors have been condoned.
As a mode of extinguishing an obligation, condonation or remission of debt 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.
Taxation; Statutory Construction; Court agrees with the date-of-
death valuation rule; 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.—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, 279 U.S. 151, 49
S. Ct. 291, 73 L.Ed. 647 (1929). 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. Any doubt on whether a person,
article or activity is taxable is generally resolved against taxation. 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. Therefore,
the claims existing at the time of death are significant to, and should be made
the basis of, the determination of allowable deductions. Dizon vs. Court of Tax
Appeals, 553 SCRA 111, G.R. No. 140944 April 30, 2008
Elegado vs. Court of Tax Appeals, 173 SCRA 285, G.R. No. 68385 May 12,
1989
FACTS:
On March 14, 1976, Warren Taylor Graham, an American national
formerly resident in the Philippines, died in Oregon, U.S.A. 1 As he left
certain shares of stock in the Philippines, his son, Ward Graham, filed
an estate tax return on September 16, 1976, with the Philippine
Revenue Representative in San Francisco, U.S.A. 2
On the basis of this return, the respondent Commissioner of Internal
Revenue assessed the decedent's estate an estate tax in the amount of
P96,509.35 on February 9, 1978.3 This assessment was protested on
March 7, 1978, by the law firm of Bump, Young and Walker on behalf of
the estate . 4 The protest was denied by the Commissioner on July 7,
1978.5 No further action was taken by the estate in pursuit of that
protest.
Meanwhile, on January 18, 1977, the decedent's will had been admitted
to probate in the Circuit Court of Oregon 6 Ward Graham, the designated
executor, then appointed Ildefonso Elegado, the herein petitioner, as his
attorney-in-fact for the allowance of the will in the Philippines. 7
Pursuant to such authority, the petitioner commenced probate
proceedings in the Court of First Instance of Rizal. 8 The will was
allowed on December 18, 1978, with the petitioner as ancillary
administrator. 9 As such, he filed a second estate tax return with the
Bureau of Internal Revenue on June 4, 1980.10
On the basis of this second return, the Commissioner imposed an
assessment on the estate in the amount of P72,948.87.11 This was
protested on behalf of the estate by the Agrava, Lucero and Gineta Law
Office on August 13, 1980.12
While this protest was pending, the Commissioner filed in the probate
proceedings a motion for the allowance of the basic estate tax of
P96,509.35 as assessed on February 9, 1978.13 He said that this liability
had not yet been paid although the assessment had long become final
and executory.
The petitioner regarded this motion as an implied denial of the protest
filed on August 13, 1980, against the second assessment of
P72,948.87.14 On this understanding, he filed on September 15, 1981, a
petition for review with the Court of Tax Appeals challenging the said
assessment. 15
The Commissioner did not immediately answer (in fact, as the petitioner
stressed, no answer was filed during a delay of 195 days) and in the end
instead cancelled the protested assessment in a letter to the decedent's
estate dated March 31, 1982.16 This cancellation was notified to the
Court of Tax Appeals in a motion to dismiss on the ground that the
protest had become moot and academic.17
The motion was granted and the petition dismissed. Hence, this petition.
ISSUES:
whether the said stocks should be assessed as of the time of
the owner's death or six months thereafter
RULING:
Taxation; Assessments; Estate Tax; It is illogical to suggest that a
provisional assessment can supersede an earlier assessment which had
become final and executory. ___ It is noted that in the letter of July 3, 1980,
imposing the second assessment of P72,948.87, the Commissioner made it
clear that “the aforesaid amount is considered provisional only based on the
estate tax return filed subject to investigation by this Office for final
determination of the correct estate tax due from the estate. Any amount that
may be found due after said investigation will be assessed and collected later.”
It is illogical to suggest that a provisional assessment can supersede an earlier
assessment which had clearly become final and executory.
Same; Same; Binding Effect on Foreigners; If our own lawyers and
taxpayers cannot claim a similar preference, it follows that foreigners cannot
be any less bound by our laws in our own country. ___ The second contention
is no less flimsy. The petitioner cannot be serious when he argues that the first
assessment was invalid because the foreign lawyers who filed the return on
which it was based were not familiar with our tax laws and procedure. Is the
petitioner suggesting that they are excused from compliance therewith
because of their ignorance? If our own lawyers and taxpayers cannot claim a
similar preference because they are not allowed to claim a like ignorance, it
stands to reason that foreigners cannot be any less bound by our own laws in
our own country. A more obvious and shallow discrimination than that
suggested by the petitioner is indeed difficult to find. Elegado vs. Court of Tax
Appeals, 173 SCRA 285, G.R. No. 68385 May 12, 1989
Marcos II vs. Court of Appeals, 273 SCRA 47, G.R. No. 120880 June 5, 1997
FACTS:
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 certiorari and prohibition under Rule 65 of the
Rules of Court, with prayer for temporary restraining order and/or writ of
preliminary injunction, 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.
Hence, this petition.
ISSUES:
Whether or not 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 is
valid
RULING:
Taxation; Due Process; While taxes are the lifeblood of the
government and should be collected without unnecessary hindrance, such
collection should be made in accordance with law as any arbitrariness will
negate the very reason for government itself.—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.
Same; Courts; Probate Courts; Jurisdiction; The authority of the
Regional Trial Court, sitting, albeit with limited jurisdiction, as a probate court
over the estate of a deceased individual, is not a trifling thing, but 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.—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; to determine who are the heirs of
the decedent; the recognition of a natural child; the status of a woman
claiming to be the legal wife of the decedent; the legality of disinheritance of
an heir by the testator; and to pass upon the validity of a waiver of hereditary
rights.
Same; Same; Same; Same; Separation of Powers; In the Philippine
experience, the enforcement and collection of estate tax is executive in
nature.—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.”
Same; Same; Same; Same; 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.—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.
Same; The deficiency tax assessment, if it has already become final,
executory, and demandable, may be collected through the summary remedy
of distraint or levy pursuant to Section 205 of the NIRC.—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.
Same; Estates Taxes; The omission to file an estate tax return, and
the subsequent failure to contest or appeal the assessment made by the BIR is
fatal, as under Section 223 of the NIRC, 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.—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.
Same; Same; Ill-Gotten Wealth; 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 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.
Same; Same; It is not the Department of Justice which is the
government agency tasked to determine the amount of taxes due upon the
estate but the Bureau of Internal Revenue, whose determinations and
assessments are presumed correct and made in good faith.—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, whose determinations and assessments are presumed correct and
made in good faith. 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.
Same; Same; 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.—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. 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.
Same; Same; Actions; Certiorari; Objections to assessments should
be raised by means of the ample remedies afforded the taxpayer by the Tax
Code, with the Bureau of Internal Revenue and the Court of Tax Appeals, and
not via a Petition for Certiorari, under the pretext of grave abuse of discretion.
—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. This judicial policy
becomes more pronounced in view of the absence of sufficient attack against
the actuations of government.
Same; Same; Parties; 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 heirs of the deceased.—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: “x x x . . . 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. x x x”
Due Process; Equity; 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 the 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.—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. 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. Marcos II vs. Court of
Appeals, 273 SCRA 47, G.R. No. 120880 June 5, 1997
Vda. de San Agustin vs. Commissioner of Internal Revenue, 364 SCRA 802,
G.R. No. 138485 September 10, 2001
FACTS:
"Atty. Jose San Agustin of 2904 Kakarong St., Olympia, Makati
died on June 27, 1990 leaving his wife Dra. Felisa L. San Agustin as
sole heir. He left a holographic will executed on April 21, 1980 giving all
his estate to his widow, and naming retired Justice Jose Y. Feria as
Executor thereof.
"Probate proceedings were instituted on August 22, 1990, in
the Regional Trial Court (RTC) of Makati, Branch 139, docketed as Sp.
Proc. No. M-2554. Pursuantly, notice of decedent's death was sent to
the Commissioner of Internal Revenue on August 30, 1990.1âwphi1.nêt
"On September 3, 1990, an estate tax return reporting an
estate tax due of P1,676,432.00 was filed on behalf of the estate, with a
request for an extension of two years for the payment of the tax,
inasmuch as the decedent's widow ( did) not personally have sufficient
funds, and that the payment (would) have to come from the estate.
"In his letter/answer, dated September 4, 1990, BIR Deputy
Commissioner Victor A. Deoferio, Jr., granted the heirs an extension of
only six (6) months, subject to the imposition of penalties and interests
under Sections 248 and 249 of the National Internal Revenue Code, as
amended.
 "In the probate proceedings, on October 11, 1990 the RTC
allowed the will and appointed Jose Feria as Executor of the estate. On
December 5, 1990, the executor submitted to the probate court an
inventory of the estate with a motion for authority to withdraw funds for
the payment of the estate tax.
Such authority was granted by the probate court on March 5,
1991 .Thereafter, on March 8, 1991 , the executor paid the estate tax in
the amount of P1,676,432 as reported in the Tax Return filed with the
BIR. This was well within the six (6) months extension period granted by
the BIR.
"On September 23, 1991, the widow of the deceased, Felisa L.
San Agustin, received a Pre-Assessment Notice from the BIR, dated
August 29, 1991, showing a deficiency estate tax of P538,509.50,
which, including surcharge, interest and penalties, amounted to
P976,540.00.
"On October 1, 1991, within the ten-day period given in the
pre-assessment notice, the executor filed a letter with the petitioner
Commissioner expressing readiness to pay the basic deficiency estate
tax of P538,509.50 as soon as the Regional Trial Court approves
withdrawal thereof, but, requesting that the surcharge, interest, and
other penalties, amounting to P438,040.38 be waived, considering that
the assessed deficiency arose only on account of the difference in zonal
valuation used by the Estate and the BIR, and that the estate tax due
per return of P1,676,432.00 was already paid in due time within the
extension period.
"On October 4, 1991, the Commissioner issued an
Assessment Notice reiterating the demand in the pre- assessment
notice and requesting payment on or before thirty (30) days upon receipt
thereof.
"In a letter, dated October 31, 1991, the executor requested
the Commissioner a reconsideration of the assessment of P976,549.00
and waiver of the surcharge, interest, etc.
"On December 18, 1991, the Commissioner accepted payment
of the basic deficiency tax in the amount of P538,509.50 through its
Receivable Accounts Billing Division.
"The request for reconsideration was not acted upon until
January 21, 1993, when the executor received a letter, dated September
21, 1992, signed by the Commissioner, stating that there is no legal
justification for the waiver of the interests, surcharge and compromise
penalty in this case, and requiring full payment of P438,040.38
representing such charges within ten (10) days from receipt thereof.
"In view thereof, the respondent estate paid the amount of
P438,040.38 under protest on January 25, 1993.
"On February 18, 1993, a Petition for Review was filed by the
executor with the CT A with the prayer that the Commissioner's
letter/decision, dated September 21, 1992 be reversed and that a refund
of the amount of P438,040.38 be ordered .
"The Commissioner opposed the said petition, alleging that the
CTA's jurisdiction was not properly invoked inasmuch as no claim for a
tax refund of the deficiency tax collected was filed with the Bureau of
Internal Revenue before the petition was filed, in violation of Sections
204 and 230 of the National Internal Revenue Code. Moreover, there is
no statutory basis for the refund of the deficiency surcharges, interests
and penalties charged by the Commissioner upon the estate of the
decedent.
"Upholding its jurisdiction over the dispute, the CTA rendered
its Decision, dated April 21, 1994, modifying the CIR's assessment for
surcharge, interests and other penalties from P438,040.38 to
P13,462.74, representing interest on the deficiency estate tax, for which
reason the CTA ordered the reimbursement to the respondent estate the
balance of P423,577.64
On 30 May 1994, the decision of the Court of Tax Appeals was
appealed by the Commissioner of Internal Revenue to the Court of
Appeals. the Court of Appeals granted the petition of the Commissioner
of Internal Revenue and held that the Court of Tax Appeals did not
acquire jurisdiction over the subject matter and that, accordingly, its
decision was null and void.
Hence, the instant petition.
ISSUES:
WON The imposition by the respondent of surcharge, interest
and penalties on the deficiency estate tax is not in accord with the law
and therefore illegal
RULING:
Taxation; Actions; Tax Refunds; To hold that the taxpayer has lost
the right to appeal from the ruling on the disputed assessment but must
prosecute his appeal under Section 306 of the Tax Code, which requires a
taxpayer to file a claim for refund of the taxes paid as a condition precedent to
his right to appeal, would in effect require of him to go through a useless and
needless ceremony that would only delay the disposition of the case—the law
should not be interpreted as to result in absurdities.—The case has a striking
resemblance to the controversy in Roman Catholic Archbishop of Cebu vs.
Collector of Internal Revenue. The petitioner in that case paid under protest
the sum of P5,201.52 by way of income tax, surcharge and interest and,
forthwith, filed a petition for review before the Court of Tax Appeals. Then
respondent Collector (now Commissioner) of Internal Revenue set up several
defenses, one of which was that petitioner had failed to first file a written
claim for refund, pursuant to Section 306 of the Tax Code, of the amounts
paid. Convinced that the lack of a written claim for refund was fatal to
petitioner’s recourse to it, the Court of Tax Appeals dismissed the petition for
lack of jurisdiction. On appeal to this Court, the tax court’s ruling was reversed;
the Court held: “We agree with petitioner that Section 7 of Republic Act No.
1125, creating the Court of Tax Appeals, in providing for appeals from—x x x
allows an appeal from a decision of the Collector in cases involving ‘disputed
assessments’ as distinguished from cases involving ‘refunds of internal
revenue taxes, fees or other charges, x x x’; that the present action involves a
disputed assessment’; because from the time petitioner received assessments
Nos. 17-EC-00301-55 and 17-AC-600107-56 disallowing certain deductions
claimed by him in his income tax returns for the years 1955 and 1956, he
already protested and refused to pay the same, questioning the correctness
and legality of such assessments; and that the petitioner paid the disputed
assessments under protest before filing his petition for review with the Court a
quo, only to forestall the sale of his properties that had been placed under
distraint by the respondent Collector since December 4, 1957. To hold that the
taxpayer has now lost the right to appeal from the ruling on the disputed
assessment but must prosecute his appeal under section 306 of the Tax Code,
which requires a taxpayer to file a claim for refund of the taxes paid as a
condition precedent to his right to appeal, would in effect require of him to go
through a useless and needless ceremony that would only delay the
disposition of the case, for the Collector (now Commissioner) would certainly
disallow the claim for refund in the same way as he disallowed the protest
against the assessment. The law, should not be interpreted as to result in
absurdities.” The Court sees no cogent reason to abandon the above dictum
and to require a useless formality that can serve the interest of neither the
government nor the taxpayer. The tax court has aptly acted in taking
cognizance of the taxpayer’s appeal to it.
Same; The delay in the payment of the deficiency tax within the
time prescribed for its payment in the notice of assessment justifies the
imposition of a 25% surcharge in consonance with Section 248A(3) of the Tax
Code.—The delay in the payment of the deficiency tax within the time
prescribed for its payment in the notice of assessment justifies the imposition
of a 25% surcharge in consonance with Section 248A(3) of the Tax Code. The
basic deficiency tax in this case being P538,509.50, the twenty-five percent
thereof comes to P134,627.37. Section 249 of the Tax Code states that any
deficiency in the tax due would be subject to interest at the rate of twenty
percent (20%) per annum, which interest shall be assessed and collected from
the date prescribed for its payment until full payment is made.
Same; Taxes, the lifeblood of the government, are meant to be paid
without delay and often oblivious to contingencies or conditions.—Regrettably
for petitioner, the need for an authority from the probate court in the
payment of the deficiency estate tax, over which respondent Commissioner
has hardly any control, is not one that can negate the application of the Tax
Code provisions aforequoted. Taxes, the lifeblood of the government, are
meant to be paid without delay and often oblivious to contingencies or
conditions. Vda. de San Agustin vs. Commissioner of Internal Revenue, 364
SCRA 802, G.R. No. 138485 September 10, 2001
Pastor, Jr. vs. Court of Appeals, 122 SCRA 885, No. L-56340 June 24, 1983
FACTS:
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
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.
ISSUES:
RULING:
Succession; The question of ownership is as a rule, an extraneous
matter in a probate proceeding.—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.
Judgment; Execution; Writ of execution must conform with the
dispositive portion but body of decision may be consulted in case of ambiguity.
—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.)
Same; Succession; Issue of ownership was not resolved by the
probate court in this case.—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 will, and the need for and propriety of appointing a
special administrator. Thus it allowed and approved the holographic will “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.”
Same; Same; The Supreme Court affirmed in the previous case only
what was adjudged in the Probate Court’s Probate Order.—What, therefore,
the Court of Appeals and, in effect, the Supreme Court affirmed en toto when
they reviewed the Probate Order were only the matters properly adjudged in
the said Order.
Same; Same; Probate Court erred in assuming in its implementing
Order that the Probate Order adjudged the issue of ownership.—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 Court directed the special administrator to pay the
legacy in dispute.
Succession; In case of death of one of the spouses their respective
proprietary rights must be liquidated and the debts paid in the succession
proceedings for the deceased spouse.—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.
Same; Same.—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. There was no appropriate determination, much less payment,
of the debts of the decedent and his estate. x x x
Certiorari; Certiorari is proper where probate court issued
erroneous implementing orders of its Probate Order.—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. 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.
Succession; Taxation; Legacy made in a will cannot be distributed
without a prior liquidation of the decedent’s estate and payment of debts and
taxes.—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.) 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]).
Same; Judgment; A legacy is not a debt of the estate for which a
writ of execution may issue.—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.
Execution; Certiorari; An order of execution that varies the terms of
a final order can be questioned in a certiorari proceeding.—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.
Same; Same; Action; Motions; A motion for leave to intervene need
not be resorted to first and certiorari may be commenced at once in case of
urgent relief from an implementing order.—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 militates 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. Pastor, Jr. vs. Court of Appeals, 122 SCRA 885, No. L-56340 June
24, 1983
Polido vs. Court of Appeals, 527 SCRA 248, G.R. No. 170632 July 10, 2007
FACTS:
After the death of her husband Jacinto Polido (Polido), Eugenia Duque
Polido, petitioner, tried to withdraw the joint savings deposit they
maintained at the Philippine National Bank, Camiling, Tarlac Branch, but
failed because one Mariano Gasat (Gasat), herein respondent who
claimed to be the couple’s adopted child, objected thereto.
Petitioner thus filed on January 21, 2004 a complaint before the
Regional Trial Court of Tarlac, with Motion for the Issuance of a Writ of
Preliminary Injunction, against Gasat.
In her complaint, petitioner prayed for the following reliefs:
1. An Order granting the issuance of [a] writ of preliminary
injunction enjoining and restraining the defendant and all
persons acting under him from preventing the officers or
employee[s] of the Philippine National Bank, Camiling, Tarlac
Branch from releasing in favor of the plaintiff the money
deposited with the said bank upon posting of a bond by the
plaintiff in an amount to be fixed by the Court;
2. After trial, to declare the defendant not the adopted child of
the plaintiff and her husband Jacinto Polido;
3. Directing the defendant to pay plaintiff attorney’s fees and
litigation expenses in the amount of P100,000.00 and moral
damages in the amount of P50,000.00.
Other reliefs which are just and equitable under the premises are
likewise prayed for.1 (Underscoring supplied)
In his Answer with Compulsory Counterclaim,2 Gasat alleged that
petitioner and her late husband had adopted him as their child, annexing
as proof thereof a photocopy of an Order dated September 23, 1970 of
the Municipal Trial Court (MTC) of Camiling in Civil Case No. 2497, "In
the Matter of the Adoption of the Minors, Lea D. Tomas and Mariano
Gasat, JACINTO POLIDO AND EUGENIA POLIDO, Petitioners," 3 and a
copy of a Certification4 from the MTC Clerk of Court that a "[c]opy of the
decree of adoption dated September 23, 1970 was furnished to the
Office of the Local Civil Registrar" and said decree had become final
and executory; and that petitioner cannot withdraw any amount from the
bank account because she should follow legal procedures governing
settlement of the estate of a deceased, unless a competent court issues
an order allowing her to withdraw from said account.5
In his Opposition to the Issuance of Preliminary Injunction and Motion to
Set the Affirmative Defenses for Preliminary Hearing, 6 Gasat argued
that:
xxxx
 3. Even assuming but without admitting that the defendant’s fee.19 Petitioner filed a Motion for Reconsideration, which the Court of
adoption paper is ineffective, still he cannot be deprived of his Appeals denied
inheritance from the Estate of Jacinto Polido because
said deceased and the plaintiff are childless and all the Hence, the present Petition
properties subject of inheritance are exclusive properties of the
late Jacinto Polido, the same being inherited from his late
ISSUES:
father, NARCISO POLIDO[,] who died in Hawaii, USA.

WON the Court of Appeals for committing grave abuse of discretion in

4. The Estate of Narciso Polido was inherited by his two
relaxing the rule on the payment of docket fees on the ground of
children, namely, said JACINTO POLIDO and PETRA P.
GASAT, also deceased and the latter was survived by her substantial justice.
husband and SEVEN (7) children of which the defendant
(MARIANO D. POLIDO) is one . . .; RULING:

5. Thus, by virtue of the provision of Art. 1001 of the Civil Code Remedial Law; Appeals; Docket Fees; Jurisprudence allows the
of the Philippines, which reads as follows: relaxation of the Rule on non-payment of appellate docket fees.—
Jurisprudence allows the relaxation of the Rule on nonpayment of appellate
"ART. 1001. Should brothers and sisters or their children survive with docket fees. Notwithstanding the mandatory nature of the requirement of
the widow or widower, the latter shall be entitled to one-half of the payment of appellate docket fees, we also recognize that its strict application
inheritance and the brothers and sisters or their children to the other is qualified by the following: first, failure to pay those fees within the
half."
reglementary period allows only discretionary, not automatic, dismissal;
second, such power should be used by the court in conjunction with its
[T]he heirs of the late Jacinto Polido are his WIFE (plaintiff) [who is
exercise of sound discretion in accordance with the tenets of justice and fair
entitled to] one-half (1/2) and Petra P. Gasat’s SEVEN (7) CHILDREN
which would include the defendant[, who are entitled to] one-half (1/2). play, as well as with a great deal of circumspection in consideration of all
attendant circumstances.
HENCE, THERE IS NO WAY WHATSOEVER TO JUSTIFY THE
ISSUANCE OF PRELIMINARY INJUNCTION AGAINST THE Same; Same; Same; Relaxation by the appellate court of the rule
DEFENDANT EVEN IF HIS ADOPTION WOULD BE NULLIFIED OR on non-payment of the appellate docket fee appears justified.—The relaxation
OF NO EFFECT WHATSOEVER.7 (Emphasis in the original; by the appellate court of the rule on non-payment of the; appellate docket fee
underscoring supplied)
appears justified as a perusal of the records of the case shows persuasive and
weighty reasons to give due course to the appeal. Polido vs. Court of Appeals,
Gasat subsequently filed an Omnibus Motion8 withdrawing 1) the
527 SCRA 248, G.R. No. 170632 July 10, 2007
allegation he had made in various pleadings that he is an adopted son
of the couple and 2) his Motion to Set the Affirmative Defenses for
Preliminary Hearing. And he moved to convert the case to an action for
partition, at his instance, of the estate of his grandfather Narciso
Polido,9 father of petitioner’s husband and Gasat’s mother, and to
require petitioner to file income tax returns and pay the estate tax due.

To Gasat’s prayer to convert the action to one for partition and to require
her to file Estate Tax Returns, petitioner filed an Opposition. 10 And she
moved for Judgment on the Pleadings.11

To justify her motion for judgment on the pleadings, petitioner argued

that Gasat, in withdrawing his claim and allegation that he is an adopted
child, "practically admitted [her] material allegations [in the Complaint]
that [he] is not an adopted child."12

By Order13 dated December 7, 2004, the trial court denied Gasat’s

motion to convert the case to an action for partition and ruled that grant
the motion for judgment on the ground that the defense that he is an
adopted child of the plaintiff is withdrawn by the defendant himself. By
withdrawing his defense, he is deemed to have admitted the main
allegation of the plaintiff that he is not an adopted child. On the motion of
the defendant that the instant action be converted into a partition and
that the plaintiff be ordered to file her real estate tax return, the same is
denied for lack of merit.

Gasat filed a Notice of Appeal.16 On May 26, 2005, before the Court of
Appeals, he filed an Ex-Parte Motion to Admit Payment of Docket
Fee,17 explaining that being jobless, it took some time for him to raise
the docket fee. He added that he had to borrow at an exorbitant interest
rate. Finally, he explained that when he went to the trial court to pay the
docket fee, he was advised to pay the same at the Court of Appeals, the
records having already been forwarded to it.

The Court of Appeals denied his motion and dismissed his

appeal.18 On Motion for Reconsideration, however, the Court of Appeals,
by Resolution dated July 19, 2005, admitted Gasat’s docket