estate taxes cases

8/9/2019 Estate Taxes Cases

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ESTATE TAXES

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-43082 June 18, 1937

PABLO LOREN O, !" #$u"#ee o% #&e e"#!#e o% T&o'!" (!n)e*, +e e!"e+, plaintiff-appellant,vs.JUAN POSA AS, JR., Co))e #o$ o% n#e$n!) Re/enue, defendant-appellant.

Pablo Lorenzo and Delfin Joven for plaintiff-appellant.Office of the Solicitor-General Hilado for defendant-appellant.

LAUREL, J.:

On October 4, !"#, the plaintiff Pablo $oren%o, in his capacit& as trustee of the estate of 'ho(as )anle&, deceased, brou*ht this action inthe Court of +irst nstance of a(boan*a a*ainst the defendant, uan Posadas, r., then the Collector of nternal Revenue, for the refundof the a(ount of P#,/0#.14, paid b& the plaintiff as inheritance ta2 on the estate of the deceased, and for the collection of interst thereon atthe rate of 3 per cent per annu(, co(puted fro( epte(ber 0, !"#, the date 5hen the aforesaid ta2 5as 6paid under protest. 'hedefendant set up a counterclai( for P , ! .#1 alle*ed to be interest due on the ta2 in 7uestion and 5hich 5as not included in the ori*inalassess(ent. +ro( the decision of the Court of +irst nstance of a(boan*a dis(issin* both the plaintiff8s co(plaint and the defendant8scounterclai(, both parties appealed to this court.

t appears that on Ma& #1, !##, one 'ho(as )anle& died in a(boan*a, a(boan*a, leavin* a 5ill 9E2hibit 0: and considerable a(ountof real and personal properties. On ;une 4, !##, proceedin*s for the probate of his 5ill and the settle(ent and distribution of his estate5ere be*un in the Court of +irst nstance of a(boan*a. 'he 5ill 5as ad(itted to probate. aid 5ill provides, a(on* other thin*s, asfollo5s. state at this ti(e have one brother livin*, na(ed Malachi )anle&, and that (& nephe5, Matthe5 )anle&, is a son of (& saidbrother, Malachi )anle&.

'he Court of +irst nstance of a(boan*a considered it proper for the best interests of ther estate to appoint a trustee to ad(inister thereal properties 5hich, under the 5ill, 5ere to pass to Matthe5 )anle& ten &ears after the t5o e2ecutors na(ed in the 5ill, 5as, on March >,

!#4, appointed trustee. Moore too= his oath of office and *ave bond on March /, !#4. )e acted as trustee until +ebruar& #!, !"#,5hen he resi*ned and the plaintiff herein 5as appointed in his stead.

?urin* the incu(benc& of the plaintiff as trustee, the defendant Collector of nternal Revenue, alle*in* that the estate left b& the deceasedat the ti(e of his death consisted of realt& valued at P#1,!#/ and personalt& valued at P ,430, and allo5in* a deduction of P4>/.> ,assessed a*ainst the estate an inheritance ta2 in the a(ount of P ,4"4.#4 5hich, to*ether 5ith the penalties for deli7uenc& in pa&(entconsistin* of a per cent (onthl& interest fro( ul& , !" to the date of pa&(ent and a surchar*e of #0 per cent on the ta2, a(ounted toP#,/0#.14. On March 0, !"#, the defendant filed a (otion in the testa(entar& proceedin*s pendin* before the Court of +irst nstance of

a(boan*a 9 pecial proceedin*s No. "/#: pra&in* that the trustee, plaintiff herein, be ordered to pa& to the @overn(ent the said su( of


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P#,/0#.14. 'he (otion 5as *ranted. On epte(ber 0, !"#, the plaintiff paid said a(ount under protest, notif&in* the defendant at thesa(e ti(e that unless the a(ount 5as pro(ptl& refunded suit 5ould be brou*ht for its recover&. 'he defendant overruled the plaintiff8sprotest and refused to refund the said a(ount hausted, plaintiff 5ent to court 5ith the result herein above indicated.

n his appeal, plaintiff contends that the lo5er court erred Estate of Post, >0 App. ?iv., 3 ># N. G. upp., /1!. )ide also ,

altoun vs. $ord Advocate, Peter. c. App., !1/ " Mac7. ). $., 30! #" En*. Rul. Cas., >>>.: California adheres to this ne5 rule 9 tats.!/0, sec. 0, p. "4":.

But 5hatever (a& be the rule in other ;urisdictions, 5e hold that a trans(ission b& inheritance is ta2able at the ti(e of the predecessor8sdeath, not5ithstandin* the postpone(ent of the actual possession or en;o&(ent of the estate b& the beneficiar&, and the ta2 (easured b&the value of the propert& trans(itted at that ti(e re*ardless of its appreciation or depreciation.

9c : Certain ite(s are re7uired b& la5 to be deducted fro( the appraised *ross in arrivin* at the net value of the estate on 5hich theinheritance ta2 is to be co(puted 9sec. 0"!, Revised Ad(inistrative Code:. n the case at bar, the defendant and the trial court allo5ed adeduction of onl& P4>/.> . 'his su( represents the e2penses and disburse(ents of the e2ecutors until March /, !#4, a(on* 5hich5ere their fees and the proven debts of the deceased. 'he plaintiff contends that the co(pensation and fees of the trustees, 5hicha**re*ate P , >1.#> 9E2hibits C, AA, EE, PP, )), , $$, NN, OO:, should also be deducted under section 0"! of the RevisedAd(inistrative Code 5hich provides, in part, as follo5s< n order to deter(ine the net su( 5hich (ust bear the ta2, 5hen an inheritance isconcerned, there shall be deducted, in case of a resident, . . . the ;udicial e2penses of the testa(entar& or intestate proceedin*s, . . . .

A trustee, no doubt, is entitled to receive a fair co(pensation for his services 9Barne& vs. aunders, 3 )o5., 0"0 4 $a5. ed., /41:. Butfro( this it does not follo5 that the co(pensation due hi( (a& la5full& be deducted in arrivin* at the net value of the estate sub;ect to ta2.'here is no statute in the Philippines 5hich re7uires trustees8 co((issions to be deducted in deter(inin* the net value of the estatesub;ect to inheritance ta2 93 C. ., p. 1/0:. +urther(ore, thou*h a testa(entar& trust has been created, it does not appear that thetestator intended that the duties of his e2ecutors and trustees should be separated. 9 (bid . (n re annec=8s Estate, 3 N. G. upp., >!"

10 App. ?iv., "3" (n re Collard8s Estate, 3 N. G. upp., 400.: On the contrar&, in para*raph 0 of his 5ill, the testator e2pressed thedesire that his real estate be handled and (ana*ed b& his e2ecutors until the e2piration of the period of ten &ears therein provided. udiciale2penses are e2penses of ad(inistration 93 C. ., p. 1/0: but, in tate vs. )ennepin Count& Probate Court 9 # N. ., >1> / Minn.,4>0:, it 5as said< . . . 'he co(pensation of a trustee, earned, not in the ad(inistration of the estate, but in the (ana*e(ent thereof for thebenefit of the le*atees or devises, does not co(e properl& 5ithin the class or reason for e2e(ptin* ad(inistration e2penses. . . . ervicerendered in that behalf have no reference to closin* the estate for the purpose of a distribution thereof to those entitled to it, and are notre7uired or essential to the perfection of the ri*hts of the heirs or le*atees. . . . 'rusts . . . of the character of that here before the court, are

created for the the benefit of those to 5ho( the propert& ulti(atel& passes, are of voluntar& creation, and intended for the preservation ofthe estate. No sound reason is *iven to support the contention that such e2penses should be ta=en into consideration in fi2in* the value ofthe estate for the purpose of this ta2.

9d : 'he defendant levied and assessed the inheritance ta2 due fro( the estate of 'ho(as )anle& under the provisions of section 044 ofthe Revised Ad(inistrative Code, as a(ended b& section " of Act No. "3/3. But Act No. "3/3 5ent into effect on anuar& , !"/. t,therefore, 5as not the la5 in force 5hen the testator died on Ma& #1, !##. 'he la5 at the ti(e 5as section 044 above-(entioned, asa(ended b& Act No. "/" , 5hich too= effect on March !, !##.

t is 5ell-settled that inheritance ta2ation is *overned b& the statute in force at the ti(e of the death of the decedent 9#3 R. C. $., p. #/3 4Coole& on 'a2ation, 4th ed., p. "43 :. 'he ta2pa&er can not foresee and ou*ht not to be re7uired to *uess the outco(e of pendin*(easures. Of course, a ta2 statute (a& be (ade retroactive in its operation. $iabilit& for ta2es under retroactive le*islation has been one

of the incidents of social life. 9 eattle vs. Jelleher, !0 I. ., "3/ 4! $a5. ed., #"# up. Ct. Rep., 44.: But le*islative intent that a ta2statute should operate retroactivel& should be perfectl& clear. 9 c5ab vs. ?o&le, 4# up. Ct. Rep., 4! (ietan=a vs. +irst 'rust F avin*sBan=, #01 I. ., 3/# toc=dale vs. nsurance Co., #/ all., "#" $unch vs. 'urrish, #41 I. ., ## .: A statute should be considered asprospective in its operation, 5hether it enacts, a(ends, or repeals an inheritance ta2, unless the lan*ua*e of the statute clearl& de(andsor e2presses that it shall have a retroactive effect, . . . . 93 C. ., P. 3/#.: 'hou*h the last para*raph of section 0 of Re*ulations No. 30of the ?epart(ent of +inance (a=es section " of Act No. "3/3, a(endin* section 044 of the Revised Ad(inistrative Code, applicable toall estates the inheritance ta2es due fro( 5hich have not been paid, Act No. "3/3 itself contains no provisions indicatin* le*islative intentto *ive it retroactive effect. No such effect can be*iven the statute b& this court.

'he defendant Collector of nternal Revenue (aintains, ho5ever, that certain provisions of Act No. "3/3 are (ore favorable to theta2pa&er than those of Act No. "/" , that said provisions are penal in nature and, therefore, should operate retroactivel& in confor(it& 5iththe provisions of article ## of the Revised Penal Code. 'his is the reason 5h& he applied Act No. "3/3 instead of Act No. "/" . ndeed,


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under Act No. "3/3, 9 : the surchar*e of #0 per cent is based on the ta2 onl&, instead of on both the ta2 and the interest, as provided for inAct No. "/" , and 9#: the ta2pa&er is allo5ed t5ent& da&s fro( notice and de(and b& rthe Collector of nternal Revenue 5ithin 5hich topa& the ta2, instead of ten da&s onl& as re7uired b& the old la5.

Properl& spea=in*, a statute is penal 5hen it i(poses punish(ent for an offense co((itted a*ainst the state 5hich, under the Constitution,the E2ecutive has the po5er to pardon. n co((on use, ho5ever, this sense has been enlar*ed to include 5ithin the ter( penal statutesall status 5hich co((and or prohibit certain acts, and establish penalties for their violation, and even those 5hich, 5ithout e2pressl&prohibitin* certain acts, i(pose a penalt& upon their co((ission 90! C. ., p. /:. Revenue la5s, *enerall&, 5hich i(pose ta2es collectedb& the (eans ordinaril& resorted to for the collection of ta2es are not classed as penal la5s, althou*h there are authorities to the contrar&.9See utherland, tatutor& Construction, "3 '5ine Co. vs. orthin*ton, 4 I. ., 43> # up. Ct., 00 Rice vs. I. ., 4 C. C. A., /40" +ed., ! / Co(. vs. tandard Oil Co., / Pa. t., 0/ tate vs. heeler, 44 P., 4"/ #0 Nev. 4".: Article ## of the Revised PenalCode is not applicable to the case at bar, and in the absence of clear le*islative intent, 5e cannot *ive Act No. "3/3 a retroactive effect.

9e : 'he plaintiff correctl& states that the liabilit& to pa& a ta2 (a& arise at a certain ti(e and the ta2 (a& be paid 5ithin another *iven ti(e.As stated b& this court, the (ere failure to pa& one8s ta2 does not render one delin7ent until and unless the entire period has eplased5ithin 5hich the ta2pa&er is authori%ed b& la5 to (a=e such pa&(ent 5ithout bein* sub;ected to the pa&(ent of penalties for fasilure topa& his ta2es 5ithin the prescribed period. 9I. . vs. $abadan, #3 Phil., #"!.:

'he defendant (aintains that it 5as the dut& of the e2ecutor to pa& the inheritance ta2 before the deliver& of the decedent8s propert& to thetrustee. tated other5ise, the defendant contends that deliver& to the trustee 5as deliver& to the cestui que trust , the beneficier& in thiscase, 5ithin the (eanin* of the first para*raph of subsection 9 b: of section 044 of the Revised Ad(inistrative Code. 'his contention is 5ellta=en and is sustained. 'he appoint(ent of P. . M. Moore as trustee 5as (ade b& the trial court in confor(it& 5ith the 5ishes of the

testator as e2pressed in his 5ill. t is true that the 5ord trust is not (entioned or used in the 5ill but the intention to create one is clear. Noparticular or technical 5ords are re7uired to create a testa(entar& trust 93! C. ., p. 1 :. 'he 5ords trust and trustee , thou*h apt forthe purpose, are not necessar&. n fact, the use of these t5o 5ords is not conclusive on the 7uestion that a trust is created 93! C. ., p.1 4:. 'o create a trust b& 5ill the testator (ust indicate in the 5ill his intention so to do b& usin* lan*ua*e sufficient to separate the le*alfro( the e7uitable estate, and 5ith sufficient certaint& desi*nate the beneficiaries, their interest in the ttrust, the purpose or ob;ect of thetrust, and the propert& or sub;ect (atter thereof. tated other5ise, to constitute a valid testa(entar& trust there (ust be a concurrence ofthree circu(stances< 9 : ufficient 5ords to raise a trust 9#: a definite sub;ect 9": a certain or ascertain ob;ect statutes in so(e;urisdictions e2pressl& or in effect so providin*. 93! C. ., pp. 1/0,1/3.: 'here is no doubt that the testator intended to create a trust. )eordered in his 5ill that certain of his properties be =ept to*ether undisposed durin* a fi2ed period, for a stated purpose. 'he probate courtcertainl& e2ercised sound ;ud*(ent in appoint(ent a trustee to carr& into effect the provisions of the 5ill 9 see sec. 0>#, Code of CivilProcedure:.

P. . M. Moore beca(e trustee on March /, !#4. On that date trust estate vested in hi( 9sec. 0># in relation to sec. 0!/, Code of CivilProcedure:. 'he (ere fact that the estate of the deceased 5as placed in trust did not re(ove it fro( the operation of our inheritance ta2la5s or e2e(pt it fro( the pa&(ent of the inheritance ta2. 'he correspondin* inheritance ta2 should have been paid on or before March

/, !#4, to escape the penalties of the la5s. 'his is so for the reason alread& stated that the deliver& of the estate to the trustee 5as inesse deliver& of the sa(e estate to the cestui que trust , the beneficiar& in this case. A trustee is but an instru(ent or a*ent for the cestuique trust 9 helton vs. Jin*, #!! I. ., !/ "" up. Ct. Rep., 3>! 01 $a5. ed., />3:. hen Moore accepted the trust and too= possessonof the trust estate he thereb& ad(itted that the estate belon*ed not to hi( but to his cestui que trust 9'olentino vs. itu*, "! Phil., #3, citedin 30 C. ., p. 3!#, n. 3":. )e did not ac7uire an& beneficial interest in the estate. )e too= such le*al estate onl& as the proper e2ecution ofthe trust re7uired 930 C. ., p. 0#>: and, his estate ceased upon the fulfill(ent of the testator8s 5ishes. 'he estate then vested absolutel& inthe beneficiar& 930 C. ., p. 04#:.

'he hi*hest considerations of public polic& also ;ustif& the conclusion 5e have reached. ere 5e to hold that the pa&(ent of the ta2 couldbe postponed or dela&ed b& the creation of a trust of the t&pe at hand, the result 5ould be plainl& disastrous. 'estators (a& provide, as

'ho(as )anle& has provided, that their estates be not delivered to their beneficiaries until after the lapse of a certain period of ti(e. n thecase at bar, the period is ten &ears. n other cases, the trust (a& last for fift& &ears, or for a lon*er period 5hich does not offend the rulea*ainst petuities. 'he collection of the ta2 5ould then be left to the 5ill of a private individual. 'he (ere su**estion of this result is asufficient 5arnin* a*ainst the accpetance of the essential to the ver& e2eistence of *overn(ent. 9?obbins vs. Erie Countr&, 3 Pet., 4"0 /$a5. ed., /## Jir=land vs. )otch=iss, // I. ., 4! #0 $a5. ed., 00> $ane Count& vs. Ore*on, 1 all., 1 ! $a5. ed., / InionRefri*erator 'ransit Co. vs. Jentuc=&, !! I. ., !4 #3 up. Ct. Rep., "3 0/ $a5. ed., 0/ Charles River Brid*e vs. arren Brid*e, Pet., 4#/ ! $a5. ed., 11".: 'he obli*ation to pa& ta2es rests not upon the privile*es en;o&ed b&, or the protection afforded to, a citi%en b&the *overn(ent but upon the necessit& of (one& for the support of the state 9?obbins vs. Erie Countr&, supra :. +or this reason, no one isallo5ed to ob;ect to or resist the pa&(ent of ta2es solel& because no personal benefit to hi( can be pointed out. 9'ho(as vs. @a&, 3! I.

., #34 > up. Ct. Rep., "4/ 4" $a5. ed., 14/.: hile courts 5ill not enlar*e, b& construction, the *overn(ent8s po5er of ta2ation9Bro(le& vs. McCau*hn, #>/ I. ., #4 14 $a5. ed., ##3 0/ up. Ct. Rep., 43: the& also 5ill not place upon ta2 la5s so loose aconstruction as to per(it evasions on (erel& fanciful and insubstantial distictions. 9I. . vs. atts, Bond., 0>/ +ed. Cas. No. 3,30" I.


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. vs. i**lesirth, # tor&, "3! +ed. Cas. No. 3,3!/, follo5ed in +roelich F Juttner vs. Collector of Custo(s, > Phil., 43 , 4> CastleBros., olf F ons vs. McCo&, # Phil., "// MuKo% F Co. vs. )ord, # Phil., 3#4 )on*=on* F han*hai Ban=in* Corporation vs. Raffert&,"! Phil., 40 $u%on tevedorin* Co. vs. 'rinidad, 4" Phil., >/".: hen proper, a ta2 statute should be construed to avoid the possibilitiesof ta2 evasion. Construed this 5a&, the statute, 5ithout resultin* in in;ustice to the ta2pa&er, beco(es fair to the *overn(ent.

'hat ta2es (ust be collected pro(ptl& is a polic& deepl& intrenched in our ta2 s&ste(. 'hus, no court is allo5ed to *rant in;unction torestrain the collection of an& internal revenue ta2 9 sec. 01>, Revised Ad(inistrative Code arasola vs. 'rinidad, 4/ Phil., #0#:. n thecase of $i( Co Chui vs. Posadas 941 Phil., 43 :, this court had occassion to de(onstrate trench(ent adherence to this polic& of the la5. theld that the fact that on account of riots directed a*ainst the Chinese on October >, !, and #/, !#4, the& 5ere prevented fro( pra&in*their internal revenue ta2es on ti(e and b& (utual a*ree(ent closed their ho(es and stores and re(ained therein, does not authori%e theCollector of nternal Revenue to e2tend the ti(e prescribed for the pa&(ent of the ta2es or to accept the( 5ithout the additional penalt& oft5ent& five per cent. 9 &llabus, No. ".:

. . . t is of the ut(ost i(portance, said the upre(e Court of the Inited tates, . . . that the (odes adopted to enforce the ta2es leviedshould be interfered 5ith as little as possible. An& dela& in the proceedin*s of the officers, upon 5ho( the dut& is developed of collectin*the ta2es, (a& deran*e the operations of *overn(ent, and thereb&, cause serious detri(ent to the public. 9?o5s vs. Chica*o, all.,

/> #/ $a5. ed., 30, 33 Churchill and 'ait vs. Raffert&, "# Phil., 0>/.:

t results that the estate 5hich plaintiff represents has been delin7uent in the pa&(ent of inheritance ta2 and, therefore, liable for thepa&(ent of interest and surchar*e provided b& la5 in such cases.

'he delin7uenc& in pa&(ent occurred on March /, !#4, the date 5hen Moore beca(e trustee. 'he interest due should be co(puted

fro( that date and it is error on the part of the defendant to co(pute it one (onth later. 'he provisions cases is (andator& 9 see and cf. $i(Co Chui vs. Posadas, supra :, and neither the Collector of nternal Revenuen or this court (a& re(it or decrease such interest, no (atterho5 heavil& it (a& burden the ta2pa&er.

'o the ta2 and interest due and unpaid 5ithin ten da&s after the date of notice and de(and thereof b& the Collector of nternal Revenue, asurchar*e of t5ent&-five per centu( should be added 9sec. 044, subsec. 9 b:, par. #, Revised Ad(inistrative Code:. ?e(and 5as (ade b&the ?eput& Collector of nternal Revenue upon Moore in a co((uniction dated October 3, !" 9E2hibit #!:. 'he date fi2ed for thepa&(ent of the ta2 and interest 5as Nove(ber "/, !" . Nove(ber "/ bein* an official holida&, the tenth da& fell on ?ece(ber , !" . Asthe ta2 and interest due 5ere not paid on that date, the estate beca(e liable for the pa&(ent of the surchar*e.

n vie5 of the fore*oin*, it beco(es unnecessar& for us to discuss the fifth error assi*ned b& the plaintiff in his brief.

e shall no5 co(pute the ta2, to*ether 5ith the interest and surchar*e due fro( the estate of 'ho(as )anle& inaccordance 5ith theconclusions 5e have reached.

At the ti(e of his death, the deceased left real properties valued at P#1,!#/ and personal properties 5orth P ,430, or a total of P#!,">0.?eductin* fro( this a(ount the su( of P4>/.> , representin* allo5able deductions under secftion 0"! of the Revised Ad(inistrativeCode, 5e have P#>,!/4. ! as the net value of the estate sub;ect to inheritance ta2.

'he pri(ar& ta2, accordin* to section 0"3, subsection 9 c :, of the Revised Ad(inistrative Code, should be i(posed at the rate of one percentu( upon the first ten thousand pesos and t5o per centu( upon the a(ount b& 5hich the share e2ceed thirt& thousand pesos, plus anadditional t5o hundred per centu(. One per centu( of ten thousand pesos is P //. '5o per centu( of P >,!/4. ! is P"1>./>. Addin* tothese t5o su(s an additional t5o hundred per centu(, or P!30. 3, 5e have as pri(ar& ta2, correctl& co(puted b& the defendant, the su(of P ,4"4.#4.

'o the pri(ar& ta2 thus co(puted should be added the su(s collectible under section 044 of the Revised Ad(inistrative Code. +irstshould be added P ,430." 5hich stands for interest at the rate of t5elve per centu( per annu( fro( March /, !#4, the date ofdelin7uenc&, to epte(ber 0, !"#, the date of pa&(ent under protest, a period coverin* > &ears, 3 (onths and 0 da&s. 'o the ta2 andinterest thus co(puted should be added the su( of P1#4.>>, representin* a surhcar*e of #0 per cent on both the ta2 and interest, andalso P /, the co(pro(ise su( fi2ed b& the defendant 9E2h. #!:, *ivin* a *rand total of P",3"4.4".

As the plaintiff has alread& paid the su( of P#,/0#.14, onl& the su(s of P ,0> .3! is le*all& due fro( the estate. 'his last su( is P"!/.4#(ore than the a(ount de(anded b& the defendant in his counterclai(. But, as 5e cannot *ive the defendant (ore than 5hat he clai(s,5e (ust hold that the plaintiff is liable onl& in the su( of P , ! .#1 the a(ount stated in the counterclai(.

'he ;ud*(ent of the lo5er court is accordin*l& (odified, 5ith costs a*ainst the plaintiff in both instances. o ordered.


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Manila

EN BANC

G.R. No. L-34937 M!$ & 13, 1933

CONCEPC ON AL E ROCES !n+ &e$ &u" !n+,

MARCOS ROCES, !n+ EL RA AL E R C(AR S, plaintiff-appellants,vs.JUAN POSA AS, JR., Co))e #o$ o% n#e$n!) Re/enue, defendant-appellee.

*eria and La O for appellants.+ttorne"-General Jaranilla for appellee.

MPER AL, J.:

'he plaintiffs herein brou*ht this action to recover fro( the defendant, Collector of nternal Revenue, certain su(s of (one& paid b& the(under protest as inheritance ta2. 'he& appealed fro( the ;ud*(ent rendered b& the Court of +irst nstance of Manila dis(issin* the action,5ithout costs.

On March / and #, !#0, Esperan%a 'ua%on, b& (eans of public docu(ents, donated certain parcels of land situated in Manila to theplaintiffs herein, 5ho, 5ith their respective husbands, accepted the( in the sa(e public docu(ents, 5hich 5ere dul& recorded in there*istr& of deeds. B& virtue of said donations, the plaintiffs too= possession of the said lands, received the fruits thereof and obtained thecorrespondin* transfer certificates of title.

On anuar& 0, !#3, the donor died in the Cit& of Manila 5ithout leavin* an& forced heir and her 5ill 5hich 5as ad(itted to probate, shebe7ueathed to each of the donees the su( of P0,///. After the estate had been distributed a(on* the instituted le*atees and beforedeliver& of their respective shares, the appellee herein, as Collector of nternal Revenue, ruled that the appellants, as donees andle*atees, should pa& as inheritance ta2 the su(s of P 3,31" and P ",!0 .40, respectivel&. Of these su(s P 0, ! .4> 5as levied as ta2on the donation to Concepcion idal de Roces and P ,4> .0# on her le*ac&, and, li=e5ise, P #,">>.!0 5as i(posed upon the donation(ade to Elvira idal de Richards and P ,43#.0/ on her le*ac&. At first the appellants refused to pa& the afore(entioned ta2es but, at theinsistence of the appellee and in order not to dela& the ad;udication of the le*acies, the& a*reed at last, to pa& the( under protest.

'he appellee filed a de(urrer to the co(plaint on the *round that the facts alle*ed therein 5ere not sufficient to constitute a cause ofaction. After the le*al 7uestions raised therein had been discussed, the court sustained the de(urrer and ordered the a(end(ent of theco(plaint 5hich the appellants failed to do, 5hereupon the trial court dis(issed the action on the *round that the afore- (entionedappellants did not reall& have a ri*ht of action.

n their brief, the appellants assi*n onl& one alle*ed error, to 5it< that the de(urrer interposed b& the appellee 5as sustained 5ithoutsufficient *round.

'he ;ud*(ent appealed fro( 5as based on the provisions of section 04/ Ad(inistrative Code 5hich reads as follo5s!:. After a careful stud& of the la5 and theauthorities applicable thereto, 5e are the opinion that neither theor& reflects the true spirit of the afore(entioned provision. 'he *iftsreferred to in section 04/ of the Revised Ad(inistration Code are, obviousl&, those donations inter vivos that ta=e effect i((ediatel& ordurin* the lifeti(e of the donor but are (ade in consideration or in conte(plation of death. @ifts inter vivos , the trans(ission of 5hich is not


8/34

(ade in conte(plation of the donor8s death should not be understood as included 5ithin the said le*al provision for the reason that it 5oulda(ount to i(posin* a direct ta2 on propert& and not on the trans(ission thereof, 5hich act does not co(e 5ithin the scope of theprovisions contained in Article L of Chapter 4/ of the Ad(inistrative Code 5hich deals e2pressl& 5ith the ta2 on inheritances, le*acies andother ac7uisitions mortis causa .

Our interpretation of the la5 is not in conflict 5ith the rule laid do5n in the case of ,uason and ,uason vs. Posadas , supra . e said therein,as 5e sa& no5, that the e2pression all *ifts refers to *ifts inter vivos inas(uch as the la5 considers the( as advances on inheritance, inthe sense that the& are *ifts inter vivos (ade in conte(plation or in consideration of death. n that case, it 5as not held that that =ind of*ifts consisted in those (ade co(pletel& independent of death or 5ithout re*ard to it.

aid le*al provision is not null and void on the alle*ed *round that the sub;ect (atter thereof is not e(braced in the title of the sectionunder 5hich it is enu(erated. On the contrar&, its provisions are perfectl& su((ari%ed in the headin*, 'a2 on nheritance, etc. 5hich isthe title of Article L . +urther(ore, the constitutional provision cited should not be strictl& construed as to (a=e it necessar& that the titlecontain a full inde2 to all the contents of the la5. t is sufficient if the lan*ua*e used therein is e2pressed in such a 5a& that in case of doubtit 5ould afford a (eans of deter(inin* the le*islators intention. 9$e5is8 utherland tatutor& Construction, ol. , p. 30 .: $astl&, thecircu(stance that the Ad(inistrative Code 5as prepared and co(piled strictl& in accordance 5ith the provisions of the ones $a5 on that(atter should not be overloo=ed and that, in a co(pilation of la5s such as the Ad(inistrative Code, it is but natural and proper thatprovisions referrin* to diverse (atters should be found. 9A&son and *nacio vs . Provincial Board of Ri%al and Municipal Council of Navotas,"! Phil., !" .:

'he appellants 7uestion the po5er of the $e*islature to i(pose ta2es on the trans(ission of real estate that ta=es effect i((ediatel& anddurin* the lifeti(e of the donor, and alle*e as their reason that such ta2 parta=es of the nature of the land ta2 5hich the la5 has alread&

created in another part of the Ad(inistrative Code. ithout (a=in* e2press pronounce(ent on this 7uestion, for it is unnecessar&, 5e 5ishto state that such is not the case in these instance. 'he ta2 collected b& the appellee on the properties donated in !#0 reall& constitutesan inheritance ta2 i(posed on the trans(ission of said properties in conte(plation or in consideration of the donor8s death and under thecircu(stance that the donees 5ere later instituted as the for(er8s le*atees. +or this reason, the la5 considers such trans(issions in thefor( of *ifts inter vivos , as advances on inheritance and nothin* therein violates an& constitutional provision, inas(uch as said le*islationis 5ithin the po5er of the $e*islature.

Propert" Sub ect to (nheritance ,a& . H 'he inheritance ta2 ordinaril& applies to all propert& 5ithin the po5er of the state to reachpassin* b& 5ill or the la5s re*ulatin* intestate succession or b& *ift inter vivos in the (anner desi*nated b& statute, 5hether suchpropert& be real or personal, tan*ible or intan*ible, corporeal or incorporeal. 9#3 R.C.$., p. #/>, par. 11.:

n the case of ,uason and ,uason vs. Posadas , supra , it 5as also held that section 04/ of the Ad(inistrative Code did not violate theconstitutional provision re*ardin* unifor(it& of ta2ation. t cannot be null and void on this *round because it e7uall& sub;ects to the sa(eta2 all of those donees 5ho later beco(e heirs, le*atees or donees mortis causa b& the 5ill of the donor. 'here 5ould be a repu*nant andarbitrar& e2ception if the provisions of the la5 5ere not applicable to all donees of the sa(e =ind. n the case cited above, it 5as said< Atan& rate the ar*u(ent adduced a*ainst its constitutionalit&, 5hich is the lac= of Inifor(it&, does not see( to be 5ell founded. t 5as saidthat under such an interpretation, 5hile a donee inter vivos 5ho, after the predecessor8s death proved to be an heir, a le*atee, or adonee mortis causa , 5ould have to pa& the ta2, another donee inter vivos 5ho did not prove to he an heir, a le*atee, or a donee mortiscausa of the predecessor, 5ould be e2e(pt fro( such a ta2. But as these are t5o different cases, the principle of unifor(it& is inapplicableto the(.

'he last 7uestion of a procedural nature arisin* fro( the case at bar, 5hich should be passed upon, is 5hether the case, as it no5 stands,can be decided on the (erits or should be re(anded to the court a quo for further proceedin*s. Accordin* to our vie5 of the case, it follo5sthat, if the *ifts received b& the appellants 5ould have the ri*ht to recover the su(s of (one& clai(ed b& the(. )ence the necessit& ofascertainin* 5hether the co(plaint contains an alle*ation to that effect. e have e2a(ined said co(plaint and found nothin* of that

nature. On the contrar&, it be (a& be inferred fro( the alle*ations contained in para*raphs # and 1 thereof that said donations intervivos 5ere (ade in consideration of the donor8s death. e refer to the alle*ations that such trans(issions 5ere effected in the (onth ofMarch, !#0, that the donor died in anuar&, !#3, and that the donees 5ere instituted le*atees in the donor8s 5ill 5hich 5as ad(itted toprobate. t is fro( these alle*ations, especiall& the last, that 5e infer a presu(ption uris tantum that said donations 5ere (ade mortiscausa and, as such, are sub;ect to the pa&(ent of inheritance ta2.

herefore, the de(urrer interposed b& the appellee 5as 5ell-founded because it appears that the co(plaint did not alle*e fact sufficient toconstitute a cause of action. hen the appellants refused to a(end the sa(e, spite of the court8s order to that effect, the& voluntaril&5aived the opportunit& offered the( and the& are not no5 entitled to have the case re(anded for further proceedin*s, 5hich 5ould serveno purpose alto*ether in vie5 of the insufficienc& of the co(plaint.

herefore, the ;ud*(ent appealed fro( is hereb& affir(ed, 5ith costs of this instance a*ainst the appellants. o ordered.


9/34

+vance a /.J. )illamor Ostrand +bad Santos Hull )ic0ers and 1uttes JJ. concur.


Manila

EN BANC

G.R. No. L-3 770 No/e' e$ 4, 1932

LU S . SON, plaintiff-appellant,vs.JUAN POSA AS, JR., Co))e #o$ o% n#e$n!) Re/enue, defendant-appellant.

2arcelino +!uas for plaintiff-appellant.+ttorne"-General Jaranilla for defendant-appellant.

BUTTE, J.:

'his is an appeal fro( the decision of the Court of +irst nstance of Pa(pan*a in favor of the defendant uan Posadas, r., Collector ofnternal Revenue, in a suit filed b& the plaintiffs, $uis . ?ison, for the recover& of an inheritance ta2 in the su( of P#,>/>.1" paid under

protest. 'he petitioner alle*ed in his co(plaint that the ta2 is ille*al because he received the propert&, 5hich is the basis of the ta2, fro( hisfather before his death b& a deed of *ift inter vivos 5hich 5as dul& accepted and re*istered before the death of his father. 'he defendantans5ered 5ith a *eneral denial and 5ith a counterde(and for the su( of P ,#40.03 5hich it 5as alle*ed is a balance still due and unpaidon account of said ta2. 'he plaintiff replied to the counterde(and 5ith a *eneral denial. 'he court a quo held that the cause of action set upin the counterde(and 5as not proven and dis(issed the sa(e. Both sides appealed to this court, but the cross-co(plaint and appeal ofthe Collector of nternal Revenue 5ere dis(issed b& this court on March 1, !"#, on (otion of the Attorne&-@eneral. 3a4phil.net

'he onl& evidence introduced at the trial of this cause 5as the proof of pa&(ent of the ta2 under protest, as stated, and the deed of *ifte2ecuted b& +eli2 ?ison on April !, !#>, in favor of his sons $uis . ?ison, the plaintiff-appellant. 'his deed of *ift transferred t5ent&-t5otracts of land to the donee, reservin* to the donor for his life the usufruct of three tracts. 'his deed 5as ac=no5led*ed b& the donor beforea notar& public on April 3, !#>. $uis . ?ison, on April 1, !#>, for(all& accepted said *ift b& an instru(ent in 5ritin* 5hich heac=no5led*ed before a notar& public on April #/, !#>.

At the trial the parties a*reed to and filed the follo5in* in*enious stipulation of fact, the Court of +irst nstance of Manila, 5hich has ;urisdiction over the estate of the late Mar*arita ?avid, issued anorder appointin* Carlos Moran ison as ;udicial ad(inistrator, 5ithout co(pensation, after filin* a bond in the a(ount of P0,///. 'he ne2tda&, Carlos Moran ison too= his oath of office and put up the re7uisite bond 5hich 5as dul& approved b& the court. On the sa(e da&,letters of ad(inistration 5ere issued to hi(.

On anuar& !, !00, the ;udicial ad(inistrator filed an accountin* of his ad(inistration 5hich contains, a(on* others, the follo5in*disburse(ent ite(s/.1/

0. Paid to isa&an uret& F nsurance Corporation on?ece(ber # , !04, for pre(iu(s due on the

Ad(inistrator8s bond of ;udicial Ad(inistrator Carlos Moranison for the period fro( ?ece(ber # , !04 to ?ece(ber

# , !00 .... .. ... ... .. ... ... .. ... ... .. ... ... ... .. ... ... .. ... ... .. ... ... 13. 4

Narcisa +. 'eodoro, one of the heirs, ob;ected to the approval of the above- 7uoted ite(s on the *rounds that the& are not necessar&e2penses of ad(inistration and should not be char*ed a*ainst the estate. On +ebruar& #0, !00, the court approved the report of thead(inistrator but disallo5ed the ite(s ob;ected to on the *round that the& cannot be considered as e2penses of ad(inistration. 'head(inistrator filed a (otion for reconsideration and 5hen the sa(e 5as denied, he too= the present appeal.

'he onl& issue to be deter(ined is 5hether a ;udicial ad(inistrator, servin* 5ithout co(pensation, is entitled to char*e as an e2pense ofad(inistration the pre(iu(s paid on his bond.

'he lo5er court did not consider the pre(iu(s paid on the bond filed b& the ad(inistrator as an e2pense of ad(inistration ta=in* intoaccount undoubtedl& the rulin* laid do5n in the case of Sulit vs. Santos , 03 Phil., 3#3. 'hat is a case 5hich also involves the pa&(ent ofcertain pre(iu( on the bond put up b& the ;udicial ad(inistrator and 5hen he as=ed the court that the sa(e be considered as an e2penseof ad(inistration, it 5as disapproved for the sa(e reasons advanced b& the trial court. n sustainin* this findin*, this Court ruled that the

e2pense incurred b& an e2ecutor or ad(inistrator to produce a bond is not a proper char*e a*ainst the estate. ection 3>/ of the Code ofCivil Procedure 9si(ilar to section 1, Rule >3: does not authori%e the e2ecutor or ad(inistrator to char*e a*ainst the estate the (one&spent for the presentation, filin*, and substitution of a bond. And elaboratin* on this (atter, the Court (ade the follo5in* co((ent/ of the Code of Civil Procedure, for these aree2penses incurred after the e2ecutor of ad(inistrator has (et the re7uire(ents of the la5 and has entered upon the perfor(anceof his duties. 9 ee n re Eb&8s Estate 6 >!4 , "/ Atl., #4.:

e feel that the orders of ud*e Mapa in this case rested on a fine sense of official dut&, so(eti(es lac=in* in cases of thischaracter, to protect the residue of the estate of a deceased person fro( un;ustifiable inroads b& an e2ecutor, and that as theseorders confor( to the facts and the la5, the& are entitled to be fortified b& an e2plicit pronounce(ent fro( this court. e rule thatthe e2pense incurred b& an e2ecution or ad(inistrator to procure a bond is not a proper char*e a*ainst the estate, and thatsection 3>/ of the Code of Civil Procedure does not authori%e the e2ecutor or ad(inistrator to char*e a*ainst the estate the(one& spent for the presentation, filin*, and substitution of a bond.


12/34

t is true that the ulit case (a& be differentiated fro( the present in the sense that, in the for(er the ad(inistrator accepted the trust 5iththe e(olu(ent that the la5 allo5s, 5hereas in the latter the ad(inistrator accepted the sa(e 5ithout co(pensation, but this difference isof no (o(ent, for there is nothin* in the decision that (a& ;ustif& the conclusion that the allo5ance or disallo5ance of pre(iu(s paid onthe bond of the ad(inistrator is (ade dependent on the receipt of co(pensation. On the contrar&, a different conclusion (a& be inferredconsiderin* the ratio decidendi on 5hich the rulin* is predicated. 'hus, it 5as there stated that the position of an e2ecutor or ad(inistratoris one of trust< that it is proper for the la5 to safe*uard the estates of deceased persons b& re7uirin* the ad(inistrator to *ive a suitablebond, and that the abilit& to *ive this bond is in the nature of a 7ualification for the office. t is also inti(ated therein that f an individualdoes not desire to assu(e the position of e2ecutor or ad(inistrator, he (a& refuse to do so, and it is far-fetched to conclude that the*ivin* of a bond b& an ad(inistrator is an necessar& e2pense in the care, (ana*e(ent and settle(ent of the estate 5ithin the (eanin* ofthe la5, because these e2penses are incurred after the e2ecutor or ad(inistrator has (et the re7uire(ent of the la5 and has enteredupon the perfor(ance of his duties. Of course, a person (a& accept the position of e2ecutor or ad(inistrator 5ith all the incident

appertainin* thereto havin* in (ind the co(pensation 5hich the la5 allo5s for the purpose, but he (a& 5aive this co(pensation in thesa(e (anner as he (a& refuse to serve 5ithout it. Appellant havin* 5aived co(pensation, he cannot no5 be heard to co(plain of thee2penses incident to his 7ualification.

'he orders appealed fro( are hereb& affir(ed, 5ithout costs.


Manila

ECON? ? ON

G.R. No. L-2927 M!* 18, 1978

Te"#!#e E"#!#e o% #&e L!#e 6e)5 J. +e Gu '!n. CTOR NO G. E GU MAN, ad(inistrator-appellee,vs.CR SP NA E GU MAN-CAR LLO, ARSEN O E GU MAN !n+ (ONORATA E GU MAN-MEN OLA, oppositors-appellants.

%miliano Samson 6 5. 1alderama-Samson for appellants.

/ezar Parale o for appellee.

A:U NO, J.:

'his case is about the propriet& of allo5in* as ad(inistration e2penses certain disburse(ents (ade b& the ad(inistrator of the testateestate of the late +eli2 . de @u%(an of @apan, Nueva Eci;a.

'he deceased testator 5as survived b& ei*ht children na(ed ictorino, $ibrada, everino, Mar*arita, osefina, )onorata, Arsenio andCrispina. )is 5ill 5as dul& probated. $etters of ad(inistration 5ere issued to his son, ?octor ictorino @. de @u%(an, pursuant to the order dated epte(ber 1, !34 of the Court of +irst nstance of Nueva Eci;a in pecial Proceedin* No. 4" .

One of the properties left b& the dent 5as a residential house located in the poblacion. n confor(it& 5ith his last 5ill, that house and the loton 5hich it stands 5ere ad;udicated to his ei*ht children, each bein* *iven a one-ei*hth proindiviso share in the pro;ect of partition datedMarch !, !33, 5hich 5as si*ned b& the ei*ht heirs and 5hich 5as approved in the lo5er court8s order of April 4, !31 but 5ithoutpre;udice to the final outco(e of the accountin*.

'he ad(inistrator sub(itted four accountin* reports for the period fro( une 3, !34 to epte(ber, !31. 'hree heirs Crispina de@u%(ans-Carillo )onorata de @u%(an-Mendiola and Arsenio de @u%(an interposed ob;ections to the ad(inistrator8s disburse(ents in thetotal su( of P ",3 /.4>, bro=en do5n as follo5s!.0#


13/34

". Repair of terrace and

interior of house H P0,!#>.// H P /,"!!.0!

. $ivin* e2penses of $ibrada de @u%(an 5hile occup&in* the fa(il& ho(e 5ithout pa&in* rent.#/

. rri*ation fee P ./4!.0>

'O'A$ P ",3 /.4>

t should be noted that the probate court in its order of Au*ust #!, !33 directed the ad(inistrator to refrain fro( spendin* the assets ofthe estate for reconstructin* and re(odelin* the house of the deceased and to stop spendin* 9sic: an& asset of the estate 5ithout firstdurin* authorit& of the court to do so 9pp. #3-#1, Record on Appeal:.

'he lo5er court in its order of April #!, !3> allo5ed the d ite(s as le*iti(ate e2penses of ad(inistration. +ro( that order, the threeoppositors appealed to this Court. 'heir contention is that the probate court erred in approvin* the utili%ation of the inco(e of the estate9fro( rice harvests: to defra& those e2penditures 5hich alle*edl& are not allo5able under the Rules of Court.

An e2ecutor or ad(inistrator is allo5ed the necessar& e2penses in the care, (ana*e(ent, and settle(ent of the estate. )e is entitled topossess and (ana*e the decedent8s real and personal estate as lon* as it is necessar& for the pa&(ent of the debts and the e2penses of


14/34

ad(inistration. )e is accountable for the 5hole decedent8s estate 5hich has co(e into his possession, 5ith all the interest, profit, andinco(e thereof, and 5ith the proceeds of so (uch of such estate as is sold b& hi(, at the price at 5hich it 5as sold 9 ec. ", Rule >4 ecs.

and 1, Rule >0, Rules of Court:.

One of the Conditions of the ad(inistrator8s bond is that he should render a true and ;ust account of his ad(inistration to the court. 'hecourt (a& e2a(ine hi( upon oath ith respect to ever& (atter relatin* to his accountin* 8t and shall so e2a(ine hi( as to the correctnessof his account before the sa(e is allo5ed, e2cept 5hen no ob;ection is (ade to the allo5ance of the account and its correctness issatisfactoril& established b& co(petent proof. 'he heirs, le*atees, distributes, and creditors of the estate shall have the sa(e privile*e asthe e2ecutor or ad(inistrator of bein* e2a(ined on oath on an& (atter relatin* to an ad(inistration account. 9 ec. 6c Rule > and secs.> and !, Rule >0, Rules of Court:.

A hearin* is usuall& held before an ad(inistrator8s account is approved, especiall& if an interested Part& raises ob;ections to certain ite(sin the accountin* report 9 ec. /, Rule >0:.

At that hearin*, the practice is for the ad(inistrator to ta=e the 5itness stand, testif& under oath on his accounts and dentif& the receipts,vouchers and docu(ents evidencin* his disburse(ents 5hich are offered as e2hibits. )e (a& be interro*ated b& the court and crossed b&the oppositors8s counsel. 'he oppositors (a& present proofs to rebut the ad. ad(inistrator8s evidence in support of his accounts.

. E2penses for the renovation and i(prove(ent of the fa(il& residence H P /,"!!.0!. H As alread& sho5n above, these e2pensesconsisted of disburse(ents for the repair of the terrace and interior of the fa(il& ho(e, the renovation of the bathroo(, and theconstruction of a fence. 'he probate court allo5ed those e2penses because an ad(inistrator has the dut& to (aintain in tenantable repairthe houses and other structures and fences belon*in* to the estate, and deliver the sa(e in such repair to the heirs or devises 5hen

directed to do so b& the court 9 ec. #, Rule >4, Rules of Court:.

On the other hand, the oppositors-appellants contend that the trial court erred in allo5in* those e2penses because the sa(e did not co(e5ithin the cate*or& of necessar& e2penses of ad(inistration 5hich are understood to be the reasonable and necessar& e2penses of carin*for the propert& and (ana*in* it until the debts are paid and the estate is partitioned and distributed a(on* the heirs 9$i%arra*a )er(anosvs. Abada, 4/ Phil. #4:.

As clarified in the Lizarra!a case , ad(inistration e2penses should be those 5hich are necessar& for the (ana*e(ent of the estate, forprotectin* it a*ainst destruction or deterioration, and, possibl&, for the production of fruits. 'he& are e2penses entailed for the preservationand productivit& of the estate and its (ana*e(ent for purposes of li7uidation, pa&(ent of debts, and distribution of the residue a(on* thepersons entitled thereto.

t should be noted that the fa(il& residence 5as partitioned proindiviso a(on* the decedent8s ei*ht children. Each one of the( 5as *iven aone-ei*hth share in confor(it& 5ith the testator8s 5ill. +ive of the ei*ht co-o5ners consented to the use of the funds of the estate for repairand i(prove(ent of the fa(il& ho(e. t is obvious that the e2penses in 7uestion 5ere incurred to preserve the fa(il& ho(e and to (aintainthe fa(il&8s social standin* in the co((unit&.

Obviousl&, those e2penses redounded to the benefit of an the co- o5ners. 'he& 5ere necessar& for the preservation and use of the fa(il&residence. As a result of those e2penses, the co-o5ners, includin* the three oppositors, 5ould be able to use the fa(il& ho(e in co(fort,convenience and securit&.

e hold that the probate court did not err in approvin* the use of the inco(e of the estate to defra& those e2

. %&penses incurred b" Librada de Guzman as occupant of the famil" residence 4ithout pa"in! rent 7 P3 89:.33 H 'he probate courtallo5ed the inco(e of the estate to be used for those e2penses on the theor& that the occupanc& of the house b& one heir did not deprivethe other seven heirs fro( livin* in it. 'hose e2penses consist of the salaries of the house helper, li*ht and 5ater bills, and the cost of *as,oil floor 5a2 and s5itch nail

e are of the opinion that those e2penses 5ere personal e2penses of $ibrada de @u%(an, inurin* & to her benefit. 'hose e2penses, notbein* reasonable ad(inistration e2penses incurred b& the ad(inistrator, should not be char*ed a*ainst the inco(e of the estate.

$ibrada de @u%(an, as an heir, is entitled to share in the net inco(e of the estate. he occupied the house 5ithout pa&in* rent. heshould use her inco(e for her livin* e2penses 5hile occup&in* the fa(il& residence.

'he trial court erred in approvin* those e2penses in the ad(inistrator8s accounts. 'he& should be, as the& are hereb&, disallo5ed 9 ee ""C. . #"!-4/:.


15/34

.Other e&penses H P;;$., !1> e2plained that the ite( of P ,"#/ represented the allot(ents for irri*ationfees to ei*ht tenants 5ho cultivated the ntan crop, 5hich allot(ents 5ere treated as assu(ed e2penses deducted as far(in* e2pensesfro( the value of the net harvests.

'he e2planation is not 7uite clear but it 5as not disputed b& the appellants. 'he fact is that the said su( of P ,/4!.0> 5as paid b& thead(inistrator to the Penaranda rri*ation &ste( as sho5n in Official Receipt No. "0!3"1> dated April #>, !31. t 5as included in hisaccountin* as part of the far(in* e2penses. 'he a(ount 5as properl& allo5ed as a le*iti(ate e2pense of ad(inistration.

)ERE+ORE, the lo5er court8s order of April #!, !3> is affir(ed 5ith the (odifications that the su( of 9a: P ,3/". as the livin*e2penses of $ibrada de @u%(an. 9b: P // for steno*raphic notes, 9c: P#3.#0 as representation e2penses, and 9d: P#3>.30 as e2pensesfor the celebration of the first anniversar& of the decedent8s death are disallo5ed in the ad(inistrator8s accounts. No costs.

O OR?ERE?.


Manila

EN BANC

G.R. No. L-191 3 June 30, 1922

B. E. JO(ANNES, !" ;$5n 5;!) !+'5n5"#$!#o$ o% #&e e"#!#e o% C!$'en T&eo+o$! Jo&!nne", relator,vs.CARLOS A. MPER AL, !" ell" for relator.*isher and De 'itt and 'illiam /. 1rad" for respondent.

'A'EMEN'

Case No >3//, in 5hich B. E. ohannes, husband of Car(en 'heodora ohannes, deceased as ad(inistrator, et al., 5ere relators, andthe )onorable @eor*e R. )arve&, as ;ud*e of the Court of +irst nstance of Manila, et al., 5ere respondents 5as a petition for certiorari and

a te(porar& in;unction, in 5hich the relators pra&ed for an order this court0.0!,representin* erroneousl& paid estate ta2 for the &ear !>> .0 A(on* the deductions fro( the *ross estate allo5ed b& the C'A 5ere thea(ounts of P3/,10" representin* the notarial fee for the E2tra;udicial ettle(ent and the a(ount of P0/,/// as the attorne&8s fees in

pecial Proceedin*s No. #04 for *uardianship .3

On une 0, !!", the Co((issioner of nternal Revenue filed a (otion for reconsideration 1 of the C'A8s Ma& 3, !!" decision assertin*,a(on* others, that the notarial fee for the E2tra;udicial ettle(ent and the attorne&8s fees in the *uardianship proceedin*s are notdeductible e2penses.

On une 1, !!4, the C'A issued the assailed Resolution > orderin* the Co((issioner of nternal Revenue to refund osefina Pa;onar, asad(inistratri2 of the estate of Pedro Pa;onar, the a(ount of P13,0/#.4# representin* erroneousl& paid estate ta2 for the &ear !>>. Also,the C'A upheld the validit& of the deduction of the notarial fee for the E2tra;udicial ettle(ent and the attorne&8s fees in the *uardianshipproceedin*s.
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19/34

On ul& 0, !!4, the Co((issioner of nternal Revenue filed 5ith the Court of Appeals a petition for revie5 of the C'A8s Ma& 3, !!"?ecision and its une 1, !!4 Resolution, 7uestionin* the validit& of the above(entioned deductions. On ?ece(ber # , !!0, the Court ofAppeals denied the Co((issioner8s petition. !

)ence, the present appeal b& the Co((issioner of nternal Revenue.

'he sole issue in this case involves the construction of section 1! / of the National nternal Revenue Code 9'a2 Code: 5hich providesfor the allo5able deductions fro( the *ross estate of the decedent. More particularl&, the 7uestion is 5hether the notarial fee paid for thee2tra;udicial settle(ent in the a(ount of P3/,10" and the attorne&8s fees in the *uardianship proceedin*s in the a(ount of P0/,/// (a& be

allo5ed as deductions fro( the *ross estate of decedent in order to arrive at the value of the net estate.

e ans5er this 7uestion in the affir(ative, thereb& upholdin* the decisions of the appellate courts.

n its Ma& 3, !!" ?ecision, the Court of 'a2 Appeals ruled thus

2 2 2 2 2 2 2 2 2

'he attorne&8s fees of P0/,///.//, 5hich 5ere alread& incurred but not &et paid, refers to the *uardianship proceedin* filed b&PNB, as *uardian over the 5ard of Pedro Pa;onar, doc=eted as pecial Proceedin* No. #04 in the R'C 9Branch LLL : of?u(a*uete Cit&. . . .

2 2 2 2 2 2 2 2 2

'he *uardianship proceedin* had been ter(inated upon deliver& of the residuar& estate to the heirs entitled thereto. 'hereafter,PNB 5as dischar*ed of an& further responsibilit&.

Attorne&8s fees in order to be deductible fro( the *ross estate (ust be essential to the collection of assets, pa&(ent of debtsor the distribution of the propert" to the persons entitled to it . 'he services for 5hich the fees are char*ed (ust relate to theproper settle(ent of the estate. 6"4 A(. ur. #d 131. n this case, the *uardianship proceedin* 5as necessar& for the distributionof the propert& of the late Pedro Pa;onar to his ri*htful heirs.

2 2 2 2 2 2 2 2 2

PNB 5as appointed as *uardian over the assets of the late Pedro Pa;onar, 5ho, even at the ti(e of his death, 5as inco(petentb& reason of insanit&. 'he e2penses incurred in the *uardianship proceedin* 5as but a necessar& e2pense in the settle(ent ofthe decedent8s estate. 'herefore, the attorne&8s fee incurred in the *uardianship proceedin*s a(ountin* to P0/,///.// is areasonable and necessar& business e2pense deductible fro( the *ross estate of the decedent. #

Ipon a (otion for reconsideration filed b& the Co((issioner of nternal Revenue, the Court of 'a2 Appeals (odified its previous rulin* b&reducin* the refundable a(ount to P13,0/#.4" since it found that a deficienc& interest should be i(posed and the co(pro(ise penalt&e2cluded. " )o5ever, the ta2 court upheld its previous rulin* re*ardin* the le*alit& of the deductions H

t is si*nificant to note that the inclusion of the estate ta2 la5 in the codification of all our national internal revenue la5s 5ith the enact(entof the National nternal Revenue Code in !"! 5ere copied fro( the +ederal $a5 of the Inited tates. 6 IMA$ , Revie5er in 'a2ation9 !>0:, p. #>0 'he !11 'a2 Code, pro(ul*ated b& Presidential ?ecree No. 0>, effective une ", !11, reenacted substantiall& all theprovisions of the old la5 on estate and *ift ta2es, e2cept the sections relatin* to the (eanin* of *ross estate and *ift. 6 (bid , p. #>3.

n the Inited tates, 6a d(inistrative e2penses, e2ecutor8s co((issions and attorne&8s fees are considered allo5able deductions fro( the@ross Estate. Ad(inistrative e2penses are li(ited to such e2penses as are actuall& and necessaril& incurred in the ad(inistration of a
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decedent8s estate. 6PREN' CE-)A$$, +ederal 'a2es Estate and @ift 'a2es 9 !"3:, p. #/, 0"". Necessar& e2penses of ad(inistration aresuch e2penses as are entailed for the preservation and productivit& of the estate and for its (ana*e(ent for purposes of liquidationpa"ment of debts and distribution of the residue amon! the persons entitled thereto . 6$i%arra*a )er(anos vs. Abada, 4/ Phil. #4. 'he&(ust be incurred for the settle(ent of the estate as a 5hole. 6"4 A(. ur. #d, p. 130. 'hus, 5here there 5ere no substantial co((unit&debts and it 5as unnecessar& to convert co((unit& propert& to cash, the onl& practical purpose of ad(inistration bein* the pa&(ent ofestate ta2es, full deduction 5as allo5ed for attorne&8s fees and (iscellaneous e2penses char*ed 5holl& to decedent8s estate. 6 (bid ., citin*Estate of )elis, #3 '.C. 4" 9A:.

Petitioner stated in her protest filed 5ith the B R that upon the death of the 5ard, the PNB, 5hich 5as still the *uardian of the estate,9Anne2 :, did not file an estate ta2 return ho5ever, it advised the heirs to e&ecute an e&tra udicial settlement to pa" ta&es and to post abond e7ual to the value of the estate, for 5hich the state paid P0!,"4 .4/ for the pre(iu(s. 9 See Anne2 J :. 6p. 1, C'A record.'herefore, it 5ould appear fro( the records of the case that the onl& practical purpose of settlin* the estate b& (eans of an e2tra;udicialsettle(ent pursuant to ection of Rule 14 of the Rules of Court 5as for the pa&(ent of ta2es and the distribution of the estate to theheirs. A fortiori, since our estate ta2 la5s are of A(erican ori*in, the interpretation adopted b& A(erican Courts has so(e persuasive effecton the interpretation of our o5n estate ta2 la5s on the sub;ect.

Anent the contention of respondent that the attorne&8s fees of P0/,///.// incurred in the *uardianship proceedin* should not be deductedfro( the @ross Estate, e consider the sa(e un(eritorious. Attorne&s8 and *uardians8 fees incurred in a trustee8s accountin* of a ta2ableinter vivos trust attributable to the usual issues involved in such an accountin* 5as held to be proper deductions because these aree2penses incurred in ter(inatin* an inter vivos trust that 5as includible in the decedent8s estate. 6Prentice )all, +ederal 'a2es on Estateand @ift, p. #/, >3 Attorne&8s fees are allo5able deductions if incurred for the settle(ent of the estate. t is note5orth& to point that PNB5as appointed the *uardian over the assets of the deceased. Necessaril& the assets of the deceased for(ed part of his *ross estate.

Accordin*l&, all e2penses incurred in relation to the estate of the deceased 5ill be deductible for estate ta2 purposes provided these arenecessar& and ordinar& e2penses for ad(inistration of the settle(ent of the estate. 4

n upholdin* the une 1, !!4 Resolution of the Court of 'a2 Appeals, the Court of Appeals held that,

!>> entered into bet5een respondent osefina Pa;onar and counsel 5as presented in evidence for the purpose of sho5in* that thea(ount of P3/,10".// 5as for the notari%ation of the E2tra;udicial ettle(ent. t follo5s then that the notarial fee of P3/,10".// 5asincurred pri(aril& to settle the estate of the deceased Pedro Pa;onar. aid a(ount should then be considered an ad(inistration e2pensesactuall& and necessaril& incurred in the collection of the assets of the estate, pa&(ent of debts and distribution of the re(ainder a(on*those entitled thereto. 'hus, the notarial fee of P3/,10" incurred for the E2tra;udicial ettle(ent should be allo5ed as a deduction fro( the*ross estate.

". Attorne&8s fees, on the other hand, in order to be deductible fro( the *ross estate (ust be essential to the settle(ent of the estate.

'he a(ount of P0/,///.// 5as incurred as attorne&8s fees in the *uardianship proceedin*s in pec. Proc. No. #04. Petitioner contendsthat said a(ount are not e2penses of the testa(entar& or intestate proceedin*s as the *uardianship proceedin* 5as instituted durin* thelifeti(e of the decedent 5hen there 5as &et no estate to be settled.

A*ain, this contention (ust fail.

'he *uardianship proceedin* in this case 5as necessar& for the distribution of the propert& of the deceased Pedro Pa;onar. As correctl&pointed out b& respondent C'A, the PNB 5as appointed *uardian over the assets of the deceased, and that necessaril& the assets of thedeceased for(ed part of his *ross estate. . . .
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t is clear therefore that the attorne&8s fees incurred in the *uardianship proceedin* in pec. Proc. No. #04 5ere essential to thedistribution of the propert& to the persons entitled thereto. )ence, the attorne&8s fees incurred in the *uardianship proceedin*s in thea(ount of P0/,///.// should be allo5ed as a deduction fro( the *ross estate of the decedent. 0

'he deductions fro( the *ross estate per(itted under section 1! of the 'a2 Code basicall& reproduced the deductions allo5ed underCo((on5ealth Act No. 433 9CA 433:, other5ise =no5n as the National nternal Revenue Code of !"!, 3 and 5hich 5as the firstcodification of Philippine ta2 la5s. ection >! 9a: 9 : 9B: of CA 433 also provided for the deduction of the ;udicial e2penses of the

testa(entar& or intestate proceedin*s for purposes of deter(inin* the value of the net estate. Philippine ta2 la5s 5ere, in turn, based onthe federal ta2 la5s of the Inited tates. 1 n accord 5ith established rules of statutor& construction, the decisions of A(erican courtsconstruin* the federal ta2 code are entitled to *reat 5ei*ht in the interpretation of our o5n ta2 la5s. >

udicial e2penses are e2penses of ad(inistration. ! Ad(inistration e2penses, as an allo5able deduction fro( the *ross estate of thedecedent for purposes of arrivin* at the value of the net estate, have been construed b& the federal and state courts of the Inited tates toinclude all e2penses essential to the collection of the assets, pa&(ent of debts or the distribution of the propert& to the persons entitled toit. #/ n other 5ords, the e2penses (ust be essential to the proper settle(ent of the estate. E2penditures incurred for the individual benefitof the heirs, devisees or le*atees are not deductible. # 'his distinction has been carried over to our ;urisdiction. 'hus, in Lorenzov . Posadas ## the Court construed the phrase ;udicial e2penses of the testa(entar& or intestate proceedin*s as not includin* theco(pensation paid to a trustee of the decedent8s estate 5hen it appeared that such trustee 5as appointed for the purpose of (ana*in* thedecedent8s real estate for the benefit of the testa(entar& heir. n another case, the Court disallo5ed the pre(iu(s paid on the bond filed b&the ad(inistrator as an e2pense of ad(inistration since the *ivin* of a bond is in the nature of a 7ualification for the office, and not

necessar& in the settle(ent of the estate. #"

Neither (a& attorne&8s fees incident to liti*ation incurred b& the heirs in assertin* theirrespective ri*hts be clai(ed as a deduction fro( the *ross estate. #4 3?4phi3

Co(in* to the case at bar, the notarial fee paid for the e2tra;udicial settle(ent is clearl& a deductible e2pense since such settle(enteffected a distribution of Pedro Pa;onar8s estate to his la5ful heirs. i(ilarl&, the attorne&8s fees paid to PNB for actin* as the *uardian ofPedro Pa;onar8s propert& durin* his lifeti(e should also be considered as a deductible ad(inistration e2pense. PNB provided a detailedaccountin* of decedent8s propert& and *ave advice as to the proper settle(ent of the latter8s estate, acts 5hich contributed to5ards thecollection of decedent8s assets and the subse7uent settle(ent of the estate.

e find that the Court of Appeals did not co((it reversible error in affir(in* the 7uestioned resolution of the Court of 'a2 Appeals.

)ERE+ORE, the ?ece(ber # , !!0 ?ecision of the Court of Appeals is A++ RME?. 'he notarial fee for the e2tra;udicial settle(ent and

the attorne&8s fees in the *uardianship proceedin*s are allo5able deductions fro( the *ross estate of Pedro Pa;onar. 3?4phi3.n@t

O OR?ERE?.

THIRD DIVISION
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RAFAEL ARSENIO S. DIZON, in his capacity as the JudicialAd inist!at"! "# the Estate "# the deceased JOSE $.FERNANDEZ,

Petitioner,

- versus -

%O&RT OF TA' A$$EALS and%O((ISSIONER OFINTERNAL REVEN&E,

Respondents.

).R. N". *+ -++ Present: YNARES-SANTIAGO, J., Chairperson,AUSTRIA-MARTINEZ,C ICO-NAZARIO,

NAC URA, !ndREYES, JJ.

Pro"u#$!ted:

Apri# %&, '&&(

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

DE%ISION

NA%H&RA, J .

)e*ore t+is Court is ! Petition *or Revie on Certiorari / under Ru#e 01 o* t+e Ru#es o* Civi# Pro2edure see3in$ t+e revers!# o* t+e Court o* Appe!#s 4CA5 6e2ision '/ d!ted Apri# %&, 777 +i2+ !**ir"ed t+e 6e2ision %/ o* t+e Court o* T!8 Appe!#s 4CTA5 d!ted 9une , 77 . 0/

The Facts

On Nove";er , 7( , 9ose P. / T+e pro;!te 2ourt t+en !ppointed retired Supre"e Court 9usti2e Arsenio P. 6i=on 49usti2e 6i=on5 !ndpetitioner, Att?. R!*!e# Arsenio P. 6i=on 4petitioner5 !s Spe2i!# !nd Assist!nt Spe2i!# Ad"inistr!tor, respe2tive#?, o* t+e Est!te o* 9ose 4Est!te5. In !#etter / d!ted O2to;er %, 7((, 9usti2e 6i=on in*or"ed respondent Co""issioner o* t+e )ure!u o* Intern!# Revenue 4)IR5 o* t+e spe2i!# pro2eedin$s*or t+e Est!te.

Petitioner !##e$ed t+!t sever!# re@uests *or e8tension o* t+e period to *i#e t+e re@uired est!te t!8 return ere $r!nted ;? t+e )IR sin2e t+e !ssets o* t+e est!te, !s e## !s t+e 2#!i"s !$!inst it, +!d ?et to ;e 2o##!ted, deter"ined !nd identi*ied. T+us, in ! #etter (/d!ted M!r2+ 0, 77&, 9usti2e 6i=on!ut+ori=ed Att?. 9esus M. Gon=!#es 4Att?. Gon=!#es5 to si$n !nd *i#e on ;e+!#* o* t+e Est!te t+e re@uired est!te t!8 return !nd to represent t+e s!"e inse2urin$ ! Certi*i2!te o* T!8 C#e!r!n2e. Eventu!##?, on Apri# , 77&, Att?. Gon=!#es rote ! #etter 7/ !ddressed to t+e )IR Re$ion!# 6ire2tor *or S!nP!;#o Cit? !nd *i#ed t+e est!te t!8 return &/ it+ t+e s!"e )IR Re$ion!# O**i2e, s+o in$ t+erein ! NI est!te t!8 #i!;i#it?, 2o"puted !s *o##o s:
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COMPUTATION O< TAB

Con u$!# Re!# Propert? 4S2+. 5 P &,(11,&'&.&&Con u$!# Person!# Propert? 4S2+.'5 %,0>&,17 .%0T!8!;#e Tr!ns*er 4S2+. %5Gross Con u$!# Est!te 0,% 1,> .%0

ess: 6edu2tions 4S2+. 05 ( ,('',1 >.&> Net Con u$!# Est!te NI

ess: S+!re o* Survivin$ Spouse NI . Net S+!re in Con u$!# Est!te NI

8 8 8 Net T!8!;#e Est!te NI .Est!te T!8 6ue NI . /

On Apri# ' , 77&, )IR Re$ion!# 6ire2tor *or S!n P!;#o Cit?, Os"undo G. U"!#i issued Certi*i2!tion Nos. '&1' '/ !nd '&1% %/ st!tin$ t+!t t+et!8es due on t+e tr!ns*er o* re!# !nd person!# properties 0/ o* 9ose +!d ;een *u##? p!id !nd s!id properties "!? ;e tr!ns*erred to +is +eirs. So"eti"e inAu$ust 77&, 9usti2e 6i=on p!ssed ! !?. T+us, on O2to;er '', 77&, t+e pro;!te 2ourt !ppointed petitioner !s t+e !d"inistr!tor o* t+e Est!te. 1/

Petitioner re@uested t+e pro;!te 2ourtDs !ut+orit? to se## sever!# properties *or"in$ p!rt o* t+e Est!te, *or t+e purpose o* p!?in$ its 2reditors,

n!"e#?: E@uit!;#e )!n3in$ Corpor!tion 4P 7, 1>,0'(.% 5, )!n@ue de DIndo2+ine et. de Sue= 4US 0,('(,7&1.7& !s o* 9!nu!r? % , 7((5, M!ni#!)!n3in$ Corpor!tion 4P (0, 77, >&.0> !s o* .' 5. Petitioner "!ni*ested t+!t M!ni#!)!n3, ! "! or 2reditor o* t+e Est!te !s not in2#uded, !s it did not *i#e ! 2#!i" it+ t+e pro;!te 2ourt sin2e it +!d se2urit? over sever!# re!# est!teproperties *or"in$ p!rt o* t+e Est!te . >/

o ever, on Nove";er '>, 77 , t+e Assist!nt Co""issioner *or Co##e2tion o* t+e )IR, T+e"isto2#es Mont!#;!n, issued Est!te T!8Assess"ent Noti2e No. , &%.>' #!te p!?"ent ,7> , &%.>' Interest 7, ' ,&0(.>( Co"pro"ise-non *i#in$ '1,&&&.&& non p!?"ent '1,&&&.&& no noti2e o* de!t+ 1.&& no CPA Certi*i2!te %&&.&& Tot!# !"ount due 2o##e2ti;#e P >>,7 %,7(1.0& (/

In +is #etter 7/ d!ted 6e2e";er ', 77 , Att?. Gon=!#es "oved *or t+e re2onsider!tion o* t+e s!id est!te t!8 !ssess"ent. o ever, in +er #etter '&/ d!ted Apri# ', 770, t+e )IR Co""issioner denied t+e re@uest !nd reiter!ted t+!t t+e est!te is #i!;#e *or t+e p!?"ent o* P >>,7 %,7(1.0& !de*i2ien2? est!te t!8. On M!? %, 770, petitioner re2eived t+e #etter o* deni!#. On 9une ', 770, petitioner *i#ed ! petition *or revie ' / ;e*ore respondentCTA. Tri!# on t+e "erits ensued.

As *ound ;? t+e CTA, t+e respe2tive p!rties presented t+e *o##o in$ pie2es o* eviden2e, to it:

In t+e +e!rin$s 2ondu2ted, petitioner did not present testi"oni!# eviden2e ;ut "ere#? do2u"ent!r? eviden2e 2onsistin$ o* t+e

*o##o in$: N!ture o* 6o2u"ent 4si25 E8+i;its

. etter d!ted O2to;er %, 7((

*ro" Arsenio P. 6i=on !ddressed to t+e Co""issioner o* Intern!# Revenue in*or"in$ t+e #!tter o* t+e spe2i!# pro2eedin$s *or t+e sett#e"ent o* t+e est!te 4p. '>, )IR re2ords5H A '. Petition *or t+e pro;!te o* t+e

i## !nd issu!n2e o* #etter o* !d"inistr!tion *i#ed it+ t+e Re$ion!# Tri!# Court 4RTC5 o* M!ni#!, do23eted !s Sp. Pro2. No. ( -0'7(& 4pp. & - &(, )IR re2ords5H

) )- J %. P#e!din$ entit#ed Co"p#i!n2e *i#ed it+ t+e pro;!te Court
http://sc.judiciary.gov.ph/jurisprudence/2008/april2008/140944.htm#_ftn11http://sc.judiciary.gov.ph/jurisprudence/2008/april2008/140944.htm#_ftn12http://sc.judiciary.gov.ph/jurisprudence/2008/april2008/140944.htm#_ftn12http://sc.judiciary.gov.ph/jurisprudence/2008/april2008/140944.htm#_ftn13http://sc.judiciary.gov.ph/jurisprudence/2008/april2008/140944.htm#_ftn13http://sc.judiciary.gov.ph/jurisprudence/2008/april2008/140944.htm#_ftn14http://sc.judiciary.gov.ph/jurisprudence/2008/april2008/140944.htm#_ftn15http://sc.judiciary.gov.ph/jurisprudence/2008/april2008/140944.htm#_ftn16http://sc.judiciary.gov.ph/jurisprudence/2008/april2008/140944.htm#_ftn16http://sc.judiciary.gov.ph/jurisprudence/2008/april2008/140944.htm#_ftn17http://sc.judiciary.gov.ph/jurisprudence/2008/april2008/140944.htm#_ftn17http://sc.judiciary.gov.ph/jurisprudence/2008/april2008/140944.htm#_ftn17http://sc.judiciary.gov.ph/jurisprudence/2008/april2008/140944.htm#_ftn18http://sc.judiciary.gov.ph/jurisprudence/2008/april2008/140944.htm#_ftn18http://sc.judiciary.gov.ph/jurisprudence/2008/april2008/140944.htm#_ftn19http://sc.judiciary.gov.ph/jurisprudence/2008/april2008/140944.htm#_ftn19http://sc.judiciary.gov.ph/jurisprudence/2008/april2008/140944.htm#_ftn20http://sc.judiciary.gov.ph/jurisprudence/2008/april2008/140944.htm#_ftn20http://sc.judiciary.gov.ph/jurisprudence/2008/april2008/140944.htm#_ftn21http://sc.judiciary.gov.ph/jurisprudence/2008/april2008/140944.htm#_ftn21http://sc.judiciary.gov.ph/jurisprudence/2008/april2008/140944.htm#_ftn11http://sc.judiciary.gov.ph/jurisprudence/2008/april2008/140944.htm#_ftn12http://sc.judiciary.gov.ph/jurisprudence/2008/april2008/140944.htm#_ftn13http://sc.judiciary.gov.ph/jurisprudence/2008/april2008/140944.htm#_ftn14http://sc.judiciary.gov.ph/jurisprudence/2008/april2008/140944.htm#_ftn15http://sc.judiciary.gov.ph/jurisprudence/2008/april2008/140944.htm#_ftn16http://sc.judiciary.gov.ph/jurisprudence/2008/april2008/140944.htm#_ftn17http://sc.judiciary.gov.ph/jurisprudence/2008/april2008/140944.htm#_ftn18http://sc.judiciary.gov.ph/jurisprudence/2008/april2008/140944.htm#_ftn19http://sc.judiciary.gov.ph/jurisprudence/2008/april2008/140944.htm#_ftn20http://sc.judiciary.gov.ph/jurisprudence/2008/april2008/140944.htm#_ftn21


24/34

su;"ittin$ t+e *in!# inventor? o* !## t+e properties o* t+e de2e!sed 4p. &>, )IR re2ords5H C 0. Att!2+"ent to E8+. C +i2+ is t+e det!i#ed !nd 2o"p#ete #istin$ o* t+e properties o* t+e de2e!sed 4pp. (7- &1, )IR re2.5H C- to C-

1. C#!i"s !$!inst t+e est!te *i#ed ;? E@uit!;#e )!n3in$ Corp. it+ t+e pro;!te Court in t+e !"ount o* P 7, 1>,0'(.% !s o* M!r2+ % , 7((, to$et+er it+ t+e Anne8es to t+e 2#!i" 4pp. >0-((, )IR re2ords5H 6to 6-'0 >. C#!i" *i#ed ;? )!n@ue de D Indo2+ine et de Sue= it+ t+e pro;!te Court in t+e !"ount o* US 0,('(,7&1.7& !s o* 9!nu!r? % , 7(( 4pp. '>'-'>1, )IR re2ords5H E to E-%

. C#!i" o* t+e M!ni#! )!n3in$ Corpor!tion 4M)C5 +i2+ !s o* Nove";er , 7( !"ounts to P>1, 1(,&'%.10, ;ut re2o"puted !s o* 7%. !s o*


25/34

1. Si$n!ture o* M!. An!;e##! A. A;u#o2 !ppe!rin$ !t t+e #o er p ortion on p . ' o* E8+.

' H -do- >. Si$n!ture o* R!?"und S. G!##!rdo !ppe!rin$ !t t+e o er portion on p. ' o * E8+.

' H -do-

. Si$n!ture o* M!8i"ino K. T!$#e !#so !ppe!rin$ on p. ' o* E8+.

' H -do- (. Su""!r? o* revenue En*or2e"ent O**i2ers Audit Report, d!ted 9u#? 7,

77 H p. %7 7. Si$n!ture o* A#;erto Enri@ue= !t t+e #o er portion o* E8+.

% H -do-

&. Si$n!ture o* M!. An!;e##! A. A;u#o2 !t t+e #o er portion o* E8+.

% H -do-

. Si$n!ture o* R!?"ond S. G!##!rdo !t t+e #o er portion o* E8+.

% H -do-

'. Si$n!ture o* M!8i"ino

K. T!$#e !t t+e #o er portion o* E8+.

% H -do-

%. 6e"!nd #etter 4


26/34

The CTA's Ruling

On 9une , 77 , t+e CTA denied t+e s!id petition *or revie . Citin$ t+is CourtDs ru#in$ in Vda. de Oate v. Court of Appeals , '%/ t+e CTA opinedt+!t t+e !*ore"entioned pie2es o* eviden2e introdu2ed ;? t+e )IR ere !d"issi;#e in eviden2e. T+e CTA r!tio2in!ted:

A#t+ou$+ t+e !;ove-"entioned do2u"ents ere not *or"!##? o**ered !s eviden2e *or respondent, 2onsiderin$ t+!t respondent +!s ;een de2#!red to +!ve !ived t+e present!tion t+ereo* durin$ t+e +e!rin$ on M!r2+ '&, 77>, sti## t+e? 2ou#d ;e 2onsidered !seviden2e *or respondent sin2e t+e? ere proper#? identi*ied durin$ t+e present!tion o* respondentDs itness, +ose testi"on? !sdu#? re2orded !s p!rt o* t+e re2ords o* t+is 2!se. )esides, t+e do2u"ents "!r3ed !s respondentDs e8+i;its *or"ed p!rt o* t+e )IR

re2ords o* t+e 2!se.'0/

Nevert+e#ess, t+e CTA did not *u##? !dopt t+e !ssess"ent "!de ;? t+e )IR !nd it 2!"e up it+ its o n 2o"put!tion o* t+e de*i2ien2? est!te t!8, to it:

Con u$!# Re!# Propert? P 1,&>',& >.&&Con u$!# Person!# Prop. %%,&' ,777.7%Gross Con u$!# Est!te %(,&(0,& 1.7%

ess: 6edu2tions '>,'1&,&&&.&& Net Con u$!# Est!te P ,(%0,& 1.7%

ess: S+!re o* Survivin$ Spouse 1,7 ,&& .7> Net S+!re in Con u$!# Est!te P 1,7 ,&& .7>Add: C!pit!#LP!r!p+ern!#Properties P 00,>1',( %.>> ess: C!pit!#LP!r!p+ern!# 6edu2tions 00,>1',( %.>>

Net T!8!;#e Est!te P 1&,1>7,(' .>' Est!te T!8 6ue P '7,7%1,%0'.7Add: '1F Sur2+!r$e *or !te


27/34

'. +et+er or not t+e Court o* T!8 Appe!#s !nd t+e Court o* Appe!#s erred in re2o$ni=in$L2onsiderin$ t+e est!te t!8 return prep!red

!nd *i#ed ;? respondent )IR 3no in$ t+!t t+e pro;!te 2ourt !ppointed !d"inistr!tor o* t+e est!te o* 9ose P.


28/34

T+e CTA !nd t+e CA re#? so#e#? on t+e 2!se o* Vda. de Oate , +i2+ reiter!ted t+is CourtDs previous ru#in$s in People v. Napat-a %1/ !nd Peoplev. ate %>/ on t+e !d"ission !nd 2onsider!tion o* e8+i;its +i2+ ere not *or"!##? o**ered durin$ t+e tri!#. A#t+ou$+ in ! #on$ #ine o* 2!ses "!n? o*

+i2+ ere de2ided !*ter Vda. de Oate , e +e#d t+!t 2ourts 2!nnot 2onsider eviden2e +i2+ +!s not ;een *or"!##? o**ered, % / nevert+e#ess, petitioner2!nnot v!#id#? !ssu"e t+!t t+e do2trine #!id do n in Vda. de Oate +!s !#re!d? ;een !;!ndoned. Re2ent#?, in !a"os v. #i$on , %(/ t+is Court, !pp#?in$ t+es!id do2trine, ru#ed t+!t t+e tri!# 2ourt ud$e t+erein 2o""itted no error +en +e !d"itted !nd 2onsidered t+e respondentsD e8+i;its in t+e reso#ution o* t+e 2!se, not it+st!ndin$ t+e *!2t t+!t t+e s!"e ere not *or"!##? o**ered. i3e ise, in Far %ast &an' ( )rust Co"pan* v. Co""issioner of +nternal !evenue , %7/ t+e Court "!de re*eren2e to s!id do2trine in reso#vin$ t+e issues t+erein. Indu;it!;#?, t+e do2trine #!id do n in Vda. #e Oate sti## su;sists int+is urisdi2tion. In Vda. de Oate , e +e#d t+!t:

SCRA %(1/, e +!d t+e o22!sion to "!3e ! distin2tion ;et eenidenti*i2!tion o* do2u"ent!r? eviden2e !nd its *or"!# o**er !s !n e8+i;it. e s!id t+!t t+e *irst is done in t+e 2ourse o* t+e tri!# !nd is!22o"p!nied ;? t+e "!r3in$ o* t+e eviden2e !s !n e8+i;it +i#e t+e se2ond is done on#? +en t+e p!rt? rests its 2!se !nd not ;e*ore.A p!rt?, t+ere*ore, "!? opt to *or"!##? o**er +is eviden2e i* +e ;e#ieves t+!t it i## !dv!n2e +is 2!use or not to do so !t !##. In t+eevent +e 2+ooses to do t+e #!tter, t+e tri!# 2ourt is not !ut+ori=ed ;? t+e Ru#es to 2onsider t+e s!"e.

o ever, in People v. Napat-a 7 SCRA 0&%/ 2itin$ People v. ate &% SCRA 0(0/,6e !ela;ed the #"!e, ;ut )IRDs 2ounse# *!i#ed to !ppe!r.07/ T+e CTA denied petitionerDs "otion to 2onsider )IRDs present!tion o* eviden2e !s !ived, it+ ! !rnin$ to )IR t+!t su2+ present!tion ou#d ;e2onsidered !ived i* )IRDs eviden2e ou#d not ;e presented !t t+e ne8t +e!rin$. A$!in, in t+e +e!rin$ o* M!r2+ '&, 77>, )IRDs 2ounse# *!i#ed to !ppe!r.

1&/ T+us, in its Reso#ution 1 / d!ted M!r2+ ' , 77>, t+e CTA 2onsidered t+e )IR to +!ve !ived present!tion o* its eviden2e. In t+e s!"e Reso#ution, t+ep!rties ere dire2ted to *i#e t+eir respe2tive "e"or!ndu". Petitioner 2o"p#ied ;ut )IR *!i#ed to do so. 1'/ In !## o* t+ese pro2eedin$s, )IR !s du#?noti*ied. en2e, in t+is 2!se, e !re 2onstr!ined to !pp#? our ru#in$ in eirs of Pedro Pasag v. Parocha 1%/

A *or"!# o**er is ne2ess!r? ;e2!use ud$es !re "!nd!ted to rest t+eir *indin$s o* *!2ts !nd t+eir ud$"ent on#? !nd stri2t#?

upon t+e eviden2e o**ered ;? t+e p!rties !t t+e tri!#. Its *un2tion is to en!;#e t+e tri!# ud$e to 3no t+e purpose or purposes *or +i2+t+e proponent is presentin$ t+e eviden2e. On t+e ot+er +!nd, t+is !##o s opposin$ p!rties to e8!"ine t+e eviden2e !nd o; e2t to its!d"issi;i#it?. Moreover, it *!2i#it!tes revie !s t+e !ppe##!te 2ourt i## not ;e re@uired to revie do2u"ents not previous#?s2rutini=ed ;? t+e tri!# 2ourt.
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