Republic of the Philippines

SUPREME COURT
Manila
EN BANC

G.R. No. L-13250 October 29, 1971

THE COLLECTOR OF INTERNAL REVENUE, petitioner,
vs.
ANTONIO CAMPOS RUEDA, respondent..
Assistant Solicitor General Jose P. Alejandro and Special Attorney Jose G. Azurin,
(O.S.G.) for petitioner.
Ramirez and Ortigas for respondent.

FERNANDO, J.:
The basic issue posed by petitioner Collector of Internal Revenue in this appeal
from a decision of the Court of Tax Appeals as to whether or not the requisites
of statehood, or at least so much thereof as may be necessary for the acquisition
of an international personality, must be satisfied for a "foreign country" to fall
within the exemption of Section 122 of the National Internal Revenue Code 1 is
now ripe for adjudication. The Court of Tax Appeals answered the question in
the negative, and thus reversed the action taken by petitioner Collector, who
would hold respondent Antonio Campos Rueda, as administrator of the estate of
the late Estrella Soriano Vda. de Cerdeira, liable for the sum of P161,874.95 as
deficiency estate and inheritance taxes for the transfer of intangible personal
properties in the Philippines, the deceased, a Spanish national having been a
resident of Tangier, Morocco from 1931 up to the time of her death in 1955. In
an earlier resolution promulgated May 30, 1962, this Court on the assumption
that the need for resolving the principal question would be obviated, referred
the matter back to the Court of Tax Appeals to determine whether the alleged
law of Tangier did grant the reciprocal tax exemption required by the aforesaid
Section 122. Then came an order from the Court of Tax Appeals submitting
copies of legislation of Tangier that would manifest that the element of
reciprocity was not lacking. It was not until July 29, 1969 that the case was
deemed submitted for decision. When the petition for review was filed on
January 2, 1958, the basic issue raised was impressed with an element of

novelty. Four days thereafter, however, on January 6, 1958, it was held by this
Court that the aforesaid provision does not require that the "foreign country"
possess an international personality to come within its terms. 2 Accordingly, we
have to affirm.
The decision of the Court of Tax Appeals, now under review, sets forth the
background facts as follows: "This is an appeal interposed by petitioner Antonio
Campos Rueda as administrator of the estate of the deceased Doa Maria de la
Estrella Soriano Vda. de Cerdeira, from the decision of the respondent Collector
of Internal Revenue, assessing against and demanding from the former the sum
P161,874.95 as deficiency estate and inheritance taxes, including interest and
penalties, on the transfer of intangible personal properties situated in the
Philippines and belonging to said Maria de la Estrella Soriano Vda. de Cerdeira.
Maria de la Estrella Soriano Vda. de Cerdeira (Maria Cerdeira for short) is a
Spanish national, by reason of her marriage to a Spanish citizen and was a
resident of Tangier, Morocco from 1931 up to her death on January 2, 1955. At
the time of her demise she left, among others, intangible personal properties in
the Philippines." 3 Then came this portion: "On September 29, 1955, petitioner
filed a provisional estate and inheritance tax return on all the properties of the
late Maria Cerdeira. On the same date, respondent, pending investigation, issued
an assessment for state and inheritance taxes in the respective amounts of
P111,592.48 and P157,791.48, or a total of P369,383.96 which tax liabilities
were paid by petitioner ... . On November 17, 1955, an amended return was filed
... wherein intangible personal properties with the value of P396,308.90 were
claimed as exempted from taxes. On November 23, 1955, respondent, pending
investigation, issued another assessment for estate and inheritance taxes in the
amounts of P202,262.40 and P267,402.84, respectively, or a total of
P469,665.24 ... . In a letter dated January 11, 1956, respondent denied the
request for exemption on the ground that the law of Tangier is not reciprocal to
Section 122 of the National Internal Revenue Code. Hence, respondent
demanded the payment of the sums of P239,439.49 representing deficiency
estate and inheritance taxes including ad valorem penalties, surcharges,
interests and compromise penalties ... . In a letter dated February 8, 1956, and
received by respondent on the following day, petitioner requested for the
reconsideration of the decision denying the claim for tax exemption of the
intangible personal properties and the imposition of the 25% and 5% ad
valorem penalties ... . However, respondent denied request, in his letter dated
May 5, 1956 ... and received by petitioner on May 21, 1956. Respondent
premised the denial on the grounds that there was no reciprocity [with Tangier,
which was moreover] a mere principality, not a foreign country. Consequently,
respondent demanded the payment of the sums of P73,851.21 and P88,023.74
respectively, or a total of P161,874.95 as deficiency estate and inheritance taxes
including surcharges, interests and compromise penalties." 4

The matter was then elevated to the Court of Tax Appeals. As there was no
dispute between the parties regarding the values of the properties and the
mathematical correctness of the deficiency assessments, the principal question
as noted dealt with the reciprocity aspect as well as the insisting by the
Collector of Internal Revenue that Tangier was not a foreign country within the
meaning of Section 122. In ruling against the contention of the Collector of
Internal Revenue, the appealed decision states: "In fine, we believe, and so hold,
that the expression "foreign country", used in the last proviso of Section 122 of
the National Internal Revenue Code, refers to a government of that foreign
power which, although not an international person in the sense of international
law, does not impose transfer or death upon intangible person properties of our
citizens not residing therein, or whose law allows a similar exemption from
such taxes. It is, therefore, not necessary that Tangier should have been
recognized by our Government order to entitle the petitioner to the exemption
benefits of the proviso of Section 122 of our Tax. Code." 5
Hence appeal to this court by petitioner. The respective briefs of the parties
duly submitted, but as above indicated, instead of ruling definitely on the
question, this Court, on May 30, 1962, resolve to inquire further into the
question of reciprocity and sent back the case to the Court of Tax Appeals for
the motion of evidence thereon. The dispositive portion of such resolution reads
as follows: "While section 122 of the Philippine Tax Code aforequoted speaks of
'intangible personal property' in both subdivisions (a) and (b); the alleged laws
of Tangier refer to 'bienes muebles situados en Tanger', 'bienes muebles
radicantes en Tanger', 'movables' and 'movable property'. In order that this
Court may be able to determine whether the alleged laws of Tangier grant the
reciprocal tax exemptions required by Section 122 of the Tax Code, and without,
for the time being, going into the merits of the issues raised by the petitionerappellant, the case is [remanded] to the Court of Tax Appeals for the reception
of evidence or proof on whether or not the words `bienes muebles', 'movables'
and 'movable properties as used in the Tangier laws, include or embrace
'intangible person property', as used in the Tax Code." 6 In line with the above
resolution, the Court of Tax Appeals admitted evidence submitted by the
administrator petitioner Antonio Campos Rueda, consisting of exhibits of laws
of Tangier to the effect that "the transfers by reason of death of movable
properties, corporeal or incorporeal, including furniture and personal effects as
well as of securities, bonds, shares, ..., were not subject, on that date and in said
zone, to the payment of any death tax, whatever might have been the nationality
of the deceased or his heirs and legatees." It was further noted in an order of
such Court referring the matter back to us that such were duly admitted in
evidence during the hearing of the case on September 9, 1963. Respondent
presented no evidence." 7
The controlling legal provision as noted is a proviso in Section 122 of the
National Internal Revenue Code. It reads thus: "That no tax shall be collected

under this Title in respect of intangible personal property (a) if the decedent at
the time of his death was a resident of a foreign country which at the time of his
death did not impose a transfer tax or death tax of any character in respect of
intangible person property of the Philippines not residing in that foreign
country, or (b) if the laws of the foreign country of which the decedent was a
resident at the time of his death allow a similar exemption from transfer taxes
or death taxes of every character in respect of intangible personal property
owned by citizens of the Philippines not residing in that foreign country." 8 The
only obstacle therefore to a definitive ruling is whether or not as vigorously
insisted upon by petitioner the acquisition of internal personality is a condition
sine qua non to Tangier being considered a "foreign country". Deference to the
De Lara ruling, as was made clear in the opening paragraph of this opinion, calls
for an affirmance of the decision of the Court of Tax Appeals.
It does not admit of doubt that if a foreign country is to be identified with a
state, it is required in line with Pound's formulation that it be a politically
organized sovereign community independent of outside control bound by
penalties of nationhood, legally supreme within its territory, acting through a
government functioning under a regime of
law. 9 It is thus a sovereign person with the people composing it viewed as an
organized corporate society under a government with the legal competence to
exact obedience to its commands. 10 It has been referred to as a body-politic
organized by common consent for mutual defense and mutual safety and to
promote the general welfare. 11 Correctly has it been described by Esmein as
"the juridical personification of the nation." 12 This is to view it in the light of its
historical development. The stress is on its being a nation, its people occupying
a definite territory, politically organized, exercising by means of its government
its sovereign will over the individuals within it and maintaining its separate
international personality. Laski could speak of it then as a territorial society
divided into government and subjects, claiming within its allotted area a
supremacy over all other institutions. 13 McIver similarly would point to the
power entrusted to its government to maintain within its territory the
conditions of a legal order and to enter into international relations. 14 With the
latter requisite satisfied, international law do not exact independence as a
condition of statehood. So Hyde did opine. 15
Even on the assumption then that Tangier is bereft of international personality,
petitioner has not successfully made out a case. It bears repeating that four days
after the filing of this petition on January 6, 1958 in Collector of Internal Revenue
v. De Lara, 16 it was specifically held by us: "Considering the State of California
as a foreign country in relation to section 122 of our Tax Code we believe and
hold, as did the Tax Court, that the Ancilliary Administrator is entitled the
exemption from the inheritance tax on the intangible personal property found
in the Philippines." 17 There can be no doubt that California as a state in the
American Union was in the alleged requisite of international personality.

Nonetheless, it was held to be a foreign country within the meaning of Section

122 of the National Internal Revenue Code. 18
What is undeniable is that even prior to the De Lara ruling, this Court did
commit itself to the doctrine that even a tiny principality, that of Liechtenstein,
hardly an international personality in the sense, did fall under this exempt
category. So it appears in an opinion of the Court by the then Acting Chief
Justicem Bengson who thereafter assumed that position in a permanent
capacity, in Kiene v. Collector of Internal Revenue. 19 As was therein noted: 'The
Board found from the documents submitted to it proof of the laws of
Liechtenstein that said country does not impose estate, inheritance and gift
taxes on intangible property of Filipino citizens not residing in that country.
Wherefore, the Board declared that pursuant to the exemption above
established, no estate or inheritance taxes were collectible, Ludwig Kiene being
a resident of Liechtestein when he passed away." 20 Then came this definitive
ruling: "The Collector hereafter named the respondent cites decisions of
the United States Supreme Court and of this Court, holding that intangible
personal property in the Philippines belonging to a non-resident foreigner, who
died outside of this country is subject to the estate tax, in disregard of the
principle 'mobilia sequuntur personam'. Such property is admittedly taxable
here. Without the proviso above quoted, the shares of stock owned here by the
Ludwig Kiene would be concededly subject to estate and inheritance taxes.
Nevertheless our Congress chose to make an exemption where conditions are
such that demand reciprocity as in this case. And the exemption must be
honored." 21
WHEREFORE, the decision of the respondent Court of Tax Appeals of October
30, 1957 is affirmed. Without pronouncement as to costs.
Concepcion, C.J., Makalintal, Zaldivar, Castro, Villamor and Makasiar, JJ., concur.
Reyes, J.B.L., J., concurs in the result.
Teehankee and Barredo, JJ., took no part.

Republic of the Philippines

SUPREME COURT
Manila

COMMISSIONER OF INTERNAL REVENUE, petitioner,

vs.
MANUEL B. PINEDA, as one of the heirs of deceased ATANASIO PINEDA,
respondent.
Office of the Solicitor General for petitioner.
Manuel B. Pineda for and in his own behalf as respondent.

BENGZON, J.P., J.:

On May 23, 1945 Atanasio Pineda died, survived by his wife, Felicisima Bagtas,
and 15 children, the eldest of whom is Manuel B. Pineda, a lawyer. Estate
proceedings were had in the Court of First Instance of Manila (Case No. 71129)
wherein the surviving widow was appointed administratrix. The estate was
divided among and awarded to the heirs and the proceedings terminated on
June 8, 1948. Manuel B. Pineda's share amounted to about P2,500.00.
After the estate proceedings were closed, the Bureau of Internal Revenue
investigated the income tax liability of the estate for the years 1945, 1946, 1947
and 1948 and it found that the corresponding income tax returns were not filed.
Thereupon, the representative of the Collector of Internal Revenue filed said
returns for the estate on the basis of information and data obtained from the
aforesaid estate proceedings and issued an assessment for the following:
1. Deficiency income tax
1945
P135.83
1946
436.95
1947
1,206.91
Add: 5% surcharge
1% monthly interest from
November 30, 1953 to April
15, 1957
Compromise for late filing
Compromise for late
payment
Total amount due

EN BANC
G.R. No. L-22734

September 15, 1967

P1,779.69
88.98

720.77
80.00
40.00

P2,707.44
===========
P14.50
2. Additional residence tax for 1945
===========

3. Real Estate dealer's tax for the

fourth quarter of 1946 and the
whole year of 1947

P207.50
===========

Manuel B. Pineda, who received the assessment, contested the same.

Subsequently, he appealed to the Court of Tax Appeals alleging that he was
appealing "only that proportionate part or portion pertaining to him as one of
the heirs."
After hearing the parties, the Court of Tax Appeals rendered judgment reversing
the decision of the Commissioner on the ground that his right to assess and
collect the tax has prescribed. The Commissioner appealed and this Court
affirmed the findings of the Tax Court in respect to the assessment for income
tax for the year 1947 but held that the right to assess and collect the taxes for
1945 and 1946 has not prescribed. For 1945 and 1946 the returns were filed on
August 24, 1953; assessments for both taxable years were made within five
years therefrom or on October 19, 1953; and the action to collect the tax was
filed within five years from the latter date, on August 7, 1957. For taxable year
1947, however, the return was filed on March 1, 1948; the assessment was
made on October 19, 1953, more than five years from the date the return was
filed; hence, the right to assess income tax for 1947 had prescribed. Accordingly,
We remanded the case to the Tax Court for further appropriate proceedings. 1
In the Tax Court, the parties submitted the case for decision without additional
evidence.
On November 29, 1963 the Court of Tax Appeals rendered judgment holding
Manuel B. Pineda liable for the payment corresponding to his share of the
following taxes:
Deficiency income tax
1945

P135.8
3
436.95

1946
Real estate dealer's
fixed tax 4th quarter of
1946 and whole year of
1947
P187.50
The Commissioner of Internal Revenue has appealed to Us and has proposed to
hold Manuel B. Pineda liable for the payment of all the taxes found by the Tax

Court to be due from the estate in the total amount of P760.28 instead of only
for the amount of taxes corresponding to his share in the estate.1awphl.nt
Manuel B. Pineda opposes the proposition on the ground that as an heir he is
liable for unpaid income tax due the estate only up to the extent of and in
proportion to any share he received. He relies on Government of the Philippine
Islands v. Pamintuan2 where We held that "after the partition of an estate, heirs
and distributees are liable individually for the payment of all lawful outstanding
claims against the estate in proportion to the amount or value of the property
they have respectively received from the estate."
We hold that the Government can require Manuel B. Pineda to pay the full
amount of the taxes assessed.
Pineda is liable for the assessment as an heir and as a holder-transferee of
property belonging to the estate/taxpayer. As an heir he is individually
answerable for the part of the tax proportionate to the share he received from
the inheritance.3 His liability, however, cannot exceed the amount of his share.4
As a holder of property belonging to the estate, Pineda is liable for he tax up to
the amount of the property in his possession. The reason is that the Government
has a lien on the P2,500.00 received by him from the estate as his share in the
inheritance, for unpaid income taxes4a for which said estate is liable, pursuant to
the last paragraph of Section 315 of the Tax Code, which we quote hereunder:
If any person, corporation, partnership, joint-account (cuenta en
participacion), association, or insurance company liable to pay the
income tax, neglects or refuses to pay the same after demand, the
amount shall be a lien in favor of the Government of the Philippines
from the time when the assessment was made by the Commissioner of
Internal Revenue until paid with interest, penalties, and costs that may
accrue in addition thereto upon all property and rights to property
belonging to the taxpayer: . . .
By virtue of such lien, the Government has the right to subject the property in
Pineda's possession, i.e., the P2,500.00, to satisfy the income tax assessment in
the sum of P760.28. After such payment, Pineda will have a right of contribution
from his co-heirs,5 to achieve an adjustment of the proper share of each heir in
the distributable estate.
All told, the Government has two ways of collecting the tax in question. One, by
going after all the heirs and collecting from each one of them the amount of the
tax proportionate to the inheritance received. This remedy was adopted in
Government of the Philippine Islands v. Pamintuan, supra. In said case, the

Government filed an action against all the heirs for the collection of the tax. This
action rests on the concept that hereditary property consists only of that part
which remains after the settlement of all lawful claims against the estate, for the
settlement of which the entire estate is first liable.6 The reason why in case suit
is filed against all the heirs the tax due from the estate is levied proportionately
against them is to achieve thereby two results: first, payment of the tax; and
second, adjustment of the shares of each heir in the distributed estate as
lessened by the tax.
Another remedy, pursuant to the lien created by Section 315 of the Tax Code
upon all property and rights to property belonging to the taxpayer for unpaid
income tax, is by subjecting said property of the estate which is in the hands of
an heir or transferee to the payment of the tax due, the estate. This second
remedy is the very avenue the Government took in this case to collect the tax.
The Bureau of Internal Revenue should be given, in instances like the case at
bar, the necessary discretion to avail itself of the most expeditious way to collect
the tax as may be envisioned in the particular provision of the Tax Code above
quoted, because taxes are the lifeblood of government and their prompt and
certain availability is an imperious need.7 And as afore-stated in this case the
suit seeks to achieve only one objective: payment of the tax. The adjustment of
the respective shares due to the heirs from the inheritance, as lessened by the
tax, is left to await the suit for contribution by the heir from whom the
Government recovered said tax.
WHEREFORE, the decision appealed from is modified. Manuel B. Pineda is
hereby ordered to pay to the Commissioner of Internal Revenue the sum of
P760.28 as deficiency income tax for 1945 and 1946, and real estate dealer's
fixed tax for the fourth quarter of 1946 and for the whole year 1947, without
prejudice to his right of contribution for his co-heirs. No costs. So ordered.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Angeles
and Fernando, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-31364 March 30, 1979

MISAEL P. VERA, as Commissioner of Internal Revenue, and JAIME

ARANETA, as Regional Director, Revenue Region No. 14, Bureau of
Internal Revenue, petitioners,
vs.
HON. JOSE F. FERNANDEZ, Judge of the Court of First Instance of Negros
Occidental, Branch V, and FRANCIS A. TONGOY, Administrator of the Estate
of the late LUIS D. TONGOY respondents.

DE CASTRO, J.:
Appeal from two orders of the Court of First Instance of Negros Occidental,
Branch V in Special Proceedings No. 7794, entitled: "Intestate Estate of Luis D.
Tongoy," the first dated July 29, 1969 dismissing the Motion for Allowance of
Claim and for an Order of Payment of Taxes by the Government of the Republic
of the Philippines against the Estate of the late Luis D. Tongoy, for deficiency
income taxes for the years 1963 and 1964 of the decedent in the total amount of
P3,254.80, inclusive 5% surcharge, 1% monthly interest and compromise
penalties, and the second, dated October 7, 1969, denying the Motion for
reconsideration of the Order of dismissal.
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. 11-5029-1-11061-21-63 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, petitioner assigning the following errors:
1. The lower court erred in holding that the claim for taxes by
the government against the estate of Luis D. Tongoy was filed
beyond the period provided in Section 2, Rule 86 of the Rules
of Court.

2. The lower court erred in holding that the claim for taxes of
the government was already barred under Section 5, Rule 86 of
the Rules of Court.
which raise the sole issue of 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.
Section 5, Rule 86, as invoked by the respondent Administrator in hid
Oppositions to the Motion for Allowance of Claim, etc. of the petitioners reads as
follows:
All claims for money against the decedent, arising from
contracts, 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, must be filed within the time
limited in they notice; otherwise they are barred forever,
except that they may be set forth as counter claims in any
action that the executor or administrator may bring against the
claimants. Where the executor or administrator commence an
action, or prosecutes an action already commenced by the
deceased in his lifetime, the debtor may set forth may answer
the claims he has against the decedents, instead of presenting
them independently to the court has herein provided, and
mutual claims may be set off against each other in such action;
and in final judgment is rendered in favored of the decedent,
the amount to determined shall be considered the true balance
against the estate, as though the claim has been presented
directly before the court in the administration proceedings.
Claims not yet due, or contingent may be approved at their
present value.
A perusal of the aforequoted provisions shows that it makes no mention of
claims for monetary obligation 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
claim 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

(Crawford, Statutory Construction, pp. 334-335).
In the case of Commissioner of Internal Revenue vs. Ilagan Electric & Ice Plant, et
al., G.R. No. L-23081, December 30, 1969, it was held that the assessment,
collection and recovery of taxes, as well as the matter of prescription thereof are
governed by the provisions of the National Internal revenue Code, particularly
Sections 331 and 332 thereof, and not by other provisions of law. (See also Lim
Tio, Dy Heng and Dee Jue vs. Court of Tax Appeals & Collector of Internal
Revenue, G.R. No. L-10681, March 29, 1958). Even without being specifically
mentioned, the provisions of Section 2 of Rule 86 of the Rules of Court may
reasonably be presumed to have been also in the mind of the Court as not
affecting the aforecited Section of the National Internal Revenue Code.
In the case of Pineda vs. CFI of Tayabas, 52 Phil. 803, it was even more pointedly
held that "taxes assessed against the estate of a deceased person ... need not be
submitted to the committee on claims in the ordinary course of administration.
In the exercise of its control over the administrator, the court may direct the
payment of such taxes upon motion showing that the taxes have been assessed
against the estate." The abolition of the Committee on Claims does not alter the
basic ruling laid down giving exception to 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 be 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 be 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. (Republic vs. Caballero, L-27437, September 30, 1977, 79 SCRA 177;
Manila Lodge No. 761, Benevolent and Protective Order of the Elks Inc. vs. Court
of Appeals, L-41001, September 30, 1976, 73 SCRA 162; Sy vs. Central Bank of
the Philippines, L-41480, April 30,1976, 70 SCRA 571; Balmaceda vs. Corominas
& Co., Inc., 66 SCRA 553; Auyong Hian vs. Court of Tax Appeals, 59 SCRA 110;

Republic vs. Philippine Rabbit Bus Lines, Inc., 66 SCRA 553; Republic vs.
Philippine Long Distance Telephone Company, L-18841, January 27, 1969, 26
SCRA 620; Zamora vs. Court of Tax Appeals, L-23272, November 26, 1970, 36
SCRA 77; E. Rodriguez, Inc. vs. Collector of Internal Revenue, L- 23041, July 31,
1969, 28 SCRA 119.) As already shown, taxes may be collected even after the
distribution of the estate of the decedent among his heirs (Government of the
Philippines vs. Pamintuan, supra; Pineda vs. CFI of Tayabas, supra Clara
Diluangco Palanca vs. Commissioner of Internal Revenue, G. R. No. L-16661,
January 31, 1962).
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 86 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 above cited, 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.

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, specially
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 that the claim was filed out of the previously limited period,
sustaining thereby private respondents' contention, erroneously as has been
demonstrated.
WHEREFORE, the order appealed from is reverse. Since the Tax Commissioner's
assessment in the total amount of P3,254.80 with 5 % surcharge and 1 %
monthly interest as provided in the Tax Code is a final one and the respondent
estate's sole defense of prescription has been herein overruled, the Motion for
Allowance of Claim is herein granted and respondent estate is ordered to pay
and discharge the same, subject only to the limitation of the interest collectible
thereon as provided by the Tax Code. No pronouncement as to costs.
SO ORDERED.
Teehankee (Chairman), Makasiar, Fernandez, Guerrero, and Melencio-Herrera, JJ.,
concur.

Republic of the Philippines

SUPREME COURT
Manila

Even assuming arguendo that claims for taxes have to be filed within the time
prescribed in Section 2, Rule 86 of the Rules of Court, the claim in question may
be filed even after the expiration of the time originally fixed therein, as may be
gleaned from the italicized portion of the Rule herein cited which reads:
Section 2. Time within which claims shall be filed. - In the
notice provided in the preceding section, the court shall state
the time for the filing of claims against the estate, which shall
not be more than twelve (12) nor less than six (6) months after
the date of the first publication of the notice. However, at any
time before an order of distribution is entered, on application of
a creditor who has failed to file his claim within the time
previously limited the court may, for cause shown and on such
terms as are equitable, allow such claim to be flied within a time
not exceeding one (1) month. (Emphasis supplied)
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

SECOND DIVISION

G.R. No. 120880 June 5, 1997

FERDINAND R. MARCOS II, petitioner,
vs.
COURT OF APPEALS, THE COMMISSIONER OF THE BUREAU OF INTERNAL
REVENUE and HERMINIA D. DE GUZMAN, respondents.

TORRES, JR., J.:

In this Petition for Review on Certiorari, Government action is once again

assailed as precipitate and unfair, suffering the basic and oftly implored
requisites of due process of law. Specifically, the petition assails the Decision 1
of the Court of Appeals dated November 29, 1994 in CA-G.R. SP No. 31363,
where the said court held:
In view of all the foregoing, we rule that the deficiency income
tax assessments and estate tax assessment, are already final
and (u)nappealable-and-the subsequent levy of real properties
is a tax remedy resorted to by the government, sanctioned by
Section 213 and 218 of the National Internal Revenue Code.
This summary tax remedy is distinct and separate from the
other tax remedies (such as Judicial Civil actions and Criminal
actions), and is not affected or precluded by the pendency of
any other tax remedies instituted by the government.
WHEREFORE, premises considered, judgment is hereby
rendered DISMISSING the petition for certiorari with prayer
for Restraining Order and Injunction.
No pronouncements as to costs.
SO ORDERED.
More than seven years since the demise of the late Ferdinand E. Marcos, the
former President of the Republic of the Philippines, the matter of the settlement
of his estate, and its dues to the government in estate taxes, are still unresolved,
the latter issue being now before this Court for resolution. Specifically,
petitioner Ferdinand R. Marcos II, the eldest son of the decedent, questions the
actuations of the respondent Commissioner of Internal Revenue in assessing,
and collecting through the summary remedy of Levy on Real Properties, estate
and income tax delinquencies upon the estate and properties of his father,
despite the pendency of the proceedings on probate of the will of the late
president, which is docketed as Sp. Proc. No. 10279 in the Regional Trial Court
of Pasig, Branch 156.
Petitioner had filed with the respondent Court of Appeals a Petition for
Certiorari and Prohibition with an application for writ of preliminary injunction
and/or temporary restraining order on June 28, 1993, seeking to
I. Annul and set aside the Notices of Levy on real property
dated February 22, 1993 and May 20, 1993, issued by
respondent Commissioner of Internal Revenue;

II. Annul and set aside the Notices of Sale dated May 26, 1993;
III. Enjoin the Head Revenue Executive Assistant Director II
(Collection Service), from proceeding with the Auction of the
real properties covered by Notices of Sale.
After the parties had pleaded their case, the Court of Appeals rendered its
Decision 2 on November 29, 1994, ruling that the deficiency assessments for
estate and income tax made upon the petitioner and the estate of the deceased
President Marcos have already become final and unappealable, and may thus be
enforced by the summary remedy of levying upon the properties of the late
President, as was done by the respondent Commissioner of Internal Revenue.
WHEREFORE, premises considered judgment is hereby
rendered DISMISSING the petition for Certiorari with prayer
for Restraining Order and Injunction.
No pronouncements as to cost.
SO ORDERED.
Unperturbed, petitioner is now before us assailing the validity of the appellate
court's decision, assigning the following as errors:
A. RESPONDENT COURT MANIFESTLY ERRED IN RULING
THAT THE SUMMARY TAX REMEDIES RESORTED TO BY THE
GOVERNMENT ARE NOT AFFECTED AND PRECLUDED BY THE
PENDENCY OF THE SPECIAL PROCEEDING FOR THE
ALLOWANCE OF THE LATE PRESIDENT'S ALLEGED WILL. TO
THE CONTRARY, THIS PROBATE PROCEEDING PRECISELY
PLACED ALL PROPERTIES WHICH FORM PART OF THE LATE
PRESIDENT'S ESTATE IN CUSTODIA LEGIS OF THE PROBATE
COURT TO THE EXCLUSION OF ALL OTHER COURTS AND
ADMINISTRATIVE AGENCIES.
B. RESPONDENT COURT ARBITRARILY ERRED IN
SWEEPINGLY DECIDING THAT SINCE THE TAX ASSESSMENTS
OF PETITIONER AND HIS PARENTS HAD ALREADY BECOME
FINAL AND UNAPPEALABLE, THERE WAS NO NEED TO GO
INTO THE MERITS OF THE GROUNDS CITED IN THE
PETITION. INDEPENDENT OF WHETHER THE TAX
ASSESSMENTS HAD ALREADY BECOME FINAL, HOWEVER,
PETITIONER HAS THE RIGHT TO QUESTION THE UNLAWFUL
MANNER AND METHOD IN WHICH TAX COLLECTION IS

SOUGHT TO BE ENFORCED BY RESPONDENTS

COMMISSIONER AND DE GUZMAN. THUS, RESPONDENT
COURT SHOULD HAVE FAVORABLY CONSIDERED THE
MERITS OF THE FOLLOWING GROUNDS IN THE PETITION:
(1) The Notices of Levy on Real Property were
issued beyond the period provided in the
Revenue Memorandum Circular No. 38-68.
(2) [a] The numerous pending court cases
questioning the late President's ownership or
interests in several properties (both personal
and real) make the total value of his estate,
and the consequent estate tax due, incapable
of exact pecuniary determination at this time.
Thus, respondents' assessment of the estate
tax and their issuance of the Notices of Levy
and Sale are premature, confiscatory and
oppressive.
[b] Petitioner, as one of the late President's
compulsory heirs, was never notified, much
less served with copies of the Notices of Levy,
contrary to the mandate of Section 213 of the
NIRC. As such, petitioner was never given an
opportunity to contest the Notices in violation
of his right to due process of law.
C. ON ACCOUNT OF THE CLEAR MERIT OF THE PETITION,
RESPONDENT COURT MANIFESTLY ERRED IN RULING THAT
IT HAD NO POWER TO GRANT INJUNCTIVE RELIEF TO
PETITIONER. SECTION 219 OF THE NIRC
NOTWITHSTANDING, COURTS POSSESS THE POWER TO ISSUE
A WRIT OF PRELIMINARY INJUNCTION TO RESTRAIN
RESPONDENTS COMMISSIONER'S AND DE GUZMAN'S
ARBITRARY METHOD OF COLLECTING THE ALLEGED
DEFICIENCY ESTATE AND INCOME TAXES BY MEANS OF
LEVY.
The facts as found by the appellate court are undisputed, and are hereby
adopted:
On September 29, 1989, former President Ferdinand Marcos
died in Honolulu, Hawaii, USA.

On June 27, 1990, a Special Tax Audit Team was created to

conduct investigations and examinations of the tax liabilities
and obligations of the late president, as well as that of his
family, associates and "cronies". Said audit team concluded its
investigation with a Memorandum dated July 26, 1991. The
investigation disclosed that the Marcoses failed to file a written
notice of the death of the decedent, an estate tax returns [sic],
as well as several income tax returns covering the years 1982
to 1986, all in violation of the National Internal Revenue
Code (NIRC).
Subsequently, criminal charges were filed against Mrs. Imelda
R. Marcos before the Regional Trial of Quezon City for
violations of Sections 82, 83 and 84 (has penalized under
Sections 253 and 254 in relation to Section 252 a & b) of the
National Internal Revenue Code (NIRC).
The Commissioner of Internal Revenue thereby caused the
preparation and filing of the Estate Tax Return for the estate of
the late president, the Income Tax Returns of the Spouses
Marcos for the years 1985 to 1986, and the Income Tax
Returns of petitioner Ferdinand "Bongbong" Marcos II for the
years 1982 to 1985.
On July 26, 1991, the BIR issued the following: (1) Deficiency
estate tax assessment no. FAC-2-89-91-002464 (against the
estate of the late president Ferdinand Marcos in the amount of
P23,293,607,638.00 Pesos); (2) Deficiency income tax
assessment no. FAC-1-85-91-002452 and Deficiency income
tax assessment no. FAC-1-86-91-002451 (against the Spouses
Ferdinand and Imelda Marcos in the amounts of P149,551.70
and P184,009,737.40 representing deficiency income tax for
the years 1985 and 1986); (3) Deficiency income tax
assessment nos. FAC-1-82-91-002460 to FAC-1-85-91-002463
(against petitioner Ferdinand "Bongbong" Marcos II in the
amounts of P258.70 pesos; P9,386.40 Pesos; P4,388.30 Pesos;
and P6,376.60 Pesos representing his deficiency income taxes
for the years 1982 to 1985).
The Commissioner of Internal Revenue avers that copies of the
deficiency estate and income tax assessments were all
personally and constructively served on August 26, 1991 and
September 12, 1991 upon Mrs. Imelda Marcos (through her
caretaker Mr. Martinez) at her last known address at No. 204
Ortega St., San Juan, M.M. (Annexes "D" and "E" of the Petition).

Likewise, copies of the deficiency tax assessments issued

against petitioner Ferdinand "Bongbong" Marcos II were also
personally and constructively served upon him (through his
caretaker) on September 12, 1991, at his last known address at
Don Mariano Marcos St. corner P. Guevarra St., San Juan, M.M.
(Annexes "J" and "J-1" of the Petition). Thereafter, Formal
Assessment notices were served on October 20, 1992, upon
Mrs. Marcos c/o petitioner, at his office, House of
Representatives, Batasan Pambansa, Quezon City. Moreover, a
notice to Taxpayer inviting Mrs. Marcos (or her duly
authorized representative or counsel), to a conference, was
furnished the counsel of Mrs. Marcos, Dean Antonio Coronel
but to no avail.
The deficiency tax assessments were not protested
administratively, by Mrs. Marcos and the other heirs of the late
president, within 30 days from service of said assessments.
On February 22, 1993, the BIR Commissioner issued twentytwo 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.
It has been repeatedly observed, and not without merit, that the enforcement of
tax laws and the collection of taxes, is of paramount importance for the
sustenance of government. Taxes are the lifeblood of the government and
should be collected without unnecessary hindrance. However, such collection
should be made in accordance with law as any arbitrariness will negate the very
reason for government itself. It is therefore necessary to reconcile the
apparently conflicting interests of the authorities and the taxpayers so that the
real purpose of taxation, which is the promotion of the common good, may be
achieved. 3
Whether or not the proper avenues of assessment and collection of the said tax
obligations were taken by the respondent Bureau is now the subject of the
Court's inquiry.
Petitioner posits that notices of levy, notices of sale, and subsequent sale of
properties of the late President Marcos effected by the BIR are null and void for
disregarding the established procedure for the enforcement of taxes due upon
the estate of the deceased. The case of Domingo vs. Garlitos 4 is specifically cited
to bolster the argument that "the ordinary procedure by which to settle claims
of indebtedness against the estate of a deceased, person, as in an inheritance
(estate) tax, is for the claimant to present a claim before the probate court so
that said court may order the administrator to pay the amount therefor." This
remedy is allegedly, exclusive, and cannot be effected through any other means.
Petitioner goes further, submitting that the probate court is not precluded from
denying a request by the government for the immediate payment of taxes, and
should order the payment of the same only within the period fixed by the
probate court for the payment of all the debts of the decedent. In this regard,
petitioner cites the case of Collector of Internal Revenue vs. The Administratrix of
the Estate of Echarri (67 Phil 502), where it was held that:
The case of Pineda vs. Court of First Instance of Tayabas and
Collector of Internal Revenue (52 Phil 803), relied upon by the
petitioner-appellant is good authority on the proposition that
the court having control over the administration proceedings

has jurisdiction to entertain the claim presented by the

government for taxes due and to order the administrator to
pay the tax should it find that the assessment was proper, and
that the tax was legal, due and collectible. And the rule laid
down in that case must be understood in relation to the case of
Collector of Customs vs. Haygood, supra., as to the procedure to
be followed in a given case by the government to effectuate the
collection of the tax. Categorically stated, where during the
pendency of judicial administration over the estate of a
deceased person a claim for taxes is presented by the
government, the court has the authority to order payment by
the administrator; but, in the same way that it has authority to
order payment or satisfaction, it also has the negative
authority to deny the same. While there are cases where courts
are required to perform certain duties mandatory and
ministerial in character, the function of the court in a case of
the present character is not one of them; and here, the court
cannot be an organism endowed with latitude of judgment in
one direction, and converted into a mere mechanical
contrivance in another direction.
On the other hand, it is argued by the BIR, that the state's authority to collect
internal revenue taxes is paramount. Thus, the pendency of probate
proceedings over the estate of the deceased does not preclude the assessment
and collection, through summary remedies, of estate taxes over the same.
According to the respondent, claims for payment of estate and income taxes due
and assessed after the death of the decedent need not be presented in the form
of a claim against the estate. These can and should be paid immediately. The
probate court is not the government agency to decide whether an estate is liable
for payment of estate of income taxes. Well-settled is the rule that the probate
court is a court with special and limited jurisdiction.
Concededly, the authority of the Regional Trial Court, sitting, albeit with limited
jurisdiction, as a probate court over estate of deceased individual, is not a
trifling thing. The court's jurisdiction, once invoked, and made effective, cannot
be treated with indifference nor should it be ignored with impunity by the very
parties invoking its authority.
In testament to this, it has been held that it is within the jurisdiction of the
probate court to approve the sale of properties of a deceased person by his
prospective heirs before final adjudication; 5 to determine who are the heirs of
the decedent; 6 the recognition of a natural child; 7 the status of a woman
claiming to be the legal wife of the decedent; 8 the legality of disinheritance of
an heir by the testator; 9 and to pass upon the validity of a waiver of hereditary
rights. 10

The pivotal question the court is tasked to resolve refers to the authority of the
Bureau of Internal Revenue to collect by the summary remedy of levying upon,
and sale of real properties of the decedent, estate tax deficiencies, without the
cognition and authority of the court sitting in probate over the supposed will of
the deceased.
The nature of the process of estate tax collection has been described as follows:
Strictly speaking, the assessment of an inheritance tax does not
directly involve the administration of a decedent's estate,
although it may be viewed as an incident to the complete
settlement of an estate, and, under some statutes, it is made the
duty of the probate court to make the amount of the
inheritance tax a part of the final decree of distribution of the
estate. It is not against the property of decedent, nor is it a
claim against the estate as such, but it is against the interest or
property right which the heir, legatee, devisee, etc., has in the
property formerly held by decedent. Further, under some
statutes, it has been held that it is not a suit or controversy
between the parties, nor is it an adversary proceeding between
the state and the person who owes the tax on the inheritance.
However, under other statutes it has been held that the hearing
and determination of the cash value of the assets and the
determination of the tax are adversary proceedings. The
proceeding has been held to be necessarily a proceeding in
rem. 11
In the Philippine experience, the enforcement and collection of estate tax, is
executive in character, as the legislature has seen it fit to ascribe this task to the
Bureau of Internal Revenue. Section 3 of the National Internal Revenue Code
attests to this:
Sec. 3. Powers and duties of the Bureau. The powers and
duties of the Bureau of Internal Revenue shall comprehend the
assessment and collection of all national internal revenue
taxes, fees, and charges, and the enforcement of all forfeitures,
penalties, and fines connected therewith, including the
execution of judgments in all cases decided in its favor by the
Court of Tax Appeals and the ordinary courts. Said Bureau shall
also give effect to and administer the supervisory and police
power conferred to it by this Code or other laws.
Thus, it was in Vera vs. Fernandez 12 that the court recognized the liberal
treatment of claims for taxes charged against the estate of the decedent. Such
taxes, we said, were exempted from the application of the statute of non-claims,

and this is justified by the necessity of government funding, immortalized in the

maxim that taxes are the lifeblood of the government. Vectigalia nervi sunt rei
publicae taxes are the sinews of the state.
Taxes assessed against the estate of a deceased person, after
administration is opened, need not be submitted to the
committee on claims in the ordinary course of administration.
In the exercise of its control over the administrator, the court
may direct the payment of such taxes upon motion showing
that the taxes have been assessed against the estate.
Such liberal treatment of internal revenue taxes in the probate proceedings
extends so far, even to allowing the enforcement of tax obligations against the
heirs of the decedent, even after distribution of the estate's properties.
Claims for taxes, whether assessed before or after the death of
the deceased, can be collected from the heirs even after the
distribution of the properties of the decedent. They are
exempted from the application of the statute of non-claims.
The heirs shall be liable therefor, in proportion to their share
in the inheritance. 13
Thus, the Government has two ways of collecting the taxes in
question. One, by going after all the heirs and collecting from
each one of them the amount of the tax proportionate to the
inheritance received. Another remedy, pursuant to the lien
created by Section 315 of the Tax Code upon all property and
rights to property belong to the taxpayer for unpaid income
tax, is by subjecting said property of the estate which is in the
hands of an heir or transferee to the payment of the tax due the
estate. (Commissioner of Internal Revenue vs. Pineda, 21 SCRA
105, September 15, 1967.)
From the foregoing, it is discernible that the approval of the court, sitting in
probate, or as a settlement tribunal over the deceased is not a mandatory
requirement in the collection of estate taxes. It cannot therefore be argued that
the Tax Bureau erred in proceeding with the levying and sale of the properties
allegedly owned by the late President, on the ground that it was required to
seek first the probate court's sanction. There is nothing in the Tax Code, and in
the pertinent remedial laws that implies the necessity of the probate or estate
settlement court's approval of the state's claim for estate taxes, before the same
can be enforced and collected.

On the contrary, under Section 87 of the NIRC, it is the probate or settlement

court which is bidden not to authorize the executor or judicial administrator of
the decedent's estate to deliver any distributive share to any party interested in
the estate, unless it is shown a Certification by the Commissioner of Internal
Revenue that the estate taxes have been paid. This provision disproves the
petitioner's contention that it is the probate court which approves the
assessment and collection of the estate tax.
If there is any issue as to the validity of the BIR's decision to assess the estate
taxes, this should have been pursued through the proper administrative and
judicial avenues provided for by law.
Section 229 of the NIRC tells us how:
Sec. 229. Protesting of assessment. When the Commissioner
of Internal Revenue or his duly authorized representative finds
that proper taxes should be assessed, he shall first notify the
taxpayer of his findings. Within a period to be prescribed by
implementing regulations, the taxpayer shall be required to
respond to said notice. If the taxpayer fails to respond, the
Commissioner shall issue an assessment based on his findings.
Such assessment may be protested administratively by filing a
request for reconsideration or reinvestigation in such form and
manner as may be prescribed by implementing regulations
within (30) days from receipt of the assessment; otherwise, the
assessment shall become final and unappealable.
If the protest is denied in whole or in part, the individual,
association or corporation adversely affected by the decision
on the protest may appeal to the Court of Tax Appeals within
thirty (30) days from receipt of said decision; otherwise, the
decision shall become final, executory and demandable. (As
inserted by P.D. 1773)
Apart from failing to file the required estate tax return within the time required
for the filing of the same, petitioner, and the other heirs never questioned the
assessments served upon them, allowing the same to lapse into finality, and
prompting the BIR to collect the said taxes by levying upon the properties left
by President Marcos.
Petitioner submits, however, that "while the assessment of taxes may have been
validly undertaken by the Government, collection thereof may have been done
in violation of the law. Thus, the manner and method in which the latter is

enforced may be questioned separately, and irrespective of the finality of the

former, because the Government does not have the unbridled discretion to
enforce collection without regard to the clear provision of law." 14

judicially taken cognizance of in the civil or criminal action for

the collection thereof.
xxx xxx xxx

Petitioner specifically points out that applying Memorandum Circular No. 38-68,
implementing Sections 318 and 324 of the old tax code (Republic Act 5203), the
BIR's Notices of Levy on the Marcos properties, were issued beyond the allowed
period, and are therefore null and void:
. . . the Notices of Levy on Real Property (Annexes O to NN of
Annex C of this Petition) in satisfaction of said assessments
were still issued by respondents well beyond the period
mandated in Revenue Memorandum Circular No. 38-68. These
Notices of Levy were issued only on 22 February 1993 and 20
May 1993 when at least seventeen (17) months had already
lapsed from the last service of tax assessment on 12 September
1991. As no notices of distraint of personal property were first
issued by respondents, the latter should have complied with
Revenue Memorandum Circular No. 38-68 and issued these
Notices of Levy not earlier than three (3) months nor later than
six (6) months from 12 September 1991. In accordance with
the Circular, respondents only had until 12 March 1992 (the
last day of the sixth month) within which to issue these Notices
of Levy. The Notices of Levy, having been issued beyond the
period allowed by law, are thus void and of no effect. 15
We hold otherwise. The Notices of Levy upon real property were issued within
the prescriptive period and in accordance with the provisions of the present Tax
Code. The deficiency tax assessment, having already become final, executory,
and demandable, the same can now be collected through the summary remedy
of distraint or levy pursuant to Section 205 of the NIRC.
The applicable provision in regard to the prescriptive period for the assessment
and collection of tax deficiency in this instance is Article 223 of the NIRC, which
pertinently provides:
Sec. 223. Exceptions as to a period of limitation of assessment
and collection of taxes. (a) In the case of a false or
fraudulent return with intent to evade tax or of a failure to file
a return, the tax may be assessed, or a proceeding in court for
the collection of such tax may be begun without assessment, at
any time within ten (10) years after the discovery of the falsity,
fraud, or omission: Provided, That, in a fraud assessment which
has become final and executory, the fact of fraud shall be

(c) Any internal revenue tax which has been assessed within
the period of limitation above prescribed, may be collected by
distraint or levy or by a proceeding in court within three years
following the assessment of the tax.
xxx xxx xxx
The omission to file an estate tax return, and the subsequent failure to contest
or appeal the assessment made by the BIR is fatal to the petitioner's cause, as
under the above-cited provision, in case of failure to file a return, the tax may be
assessed at any time within ten years after the omission, and any tax so
assessed may be collected by levy upon real property within three years
following the assessment of the tax. Since the estate tax assessment had become
final and unappealable by the petitioner's default as regards protesting the
validity of the said assessment, there is now no reason why the BIR cannot
continue with the collection of the said tax. Any objection against the
assessment should have been pursued following the avenue paved in Section
229 of the NIRC on protests on assessments of internal revenue taxes.
Petitioner further argues that "the numerous pending court cases questioning
the late president's ownership or interests in several properties (both real and
personal) make the total value of his estate, and the consequent estate tax due,
incapable of exact pecuniary determination at this time. Thus, respondents'
assessment of the estate tax and their issuance of the Notices of Levy and sale
are premature and oppressive." He points out the pendency of Sandiganbayan
Civil Case Nos. 0001-0034 and 0141, which were filed by the government to
question the ownership and interests of the late President in real and personal
properties located within and outside the Philippines. Petitioner, however,
omits to allege whether the properties levied upon by the BIR in the collection
of estate taxes upon the decedent's estate were among those involved in the
said cases pending in the Sandiganbayan. Indeed, the court is at a loss as to how
these cases are relevant to the matter at issue. The mere fact that the decedent
has pending cases involving ill-gotten wealth does not affect the enforcement of
tax assessments over the properties indubitably included in his estate.
Petitioner also expresses his reservation as to the propriety of the BIR's total
assessment of P23,292,607,638.00, stating that this amount deviates from the
findings of the Department of Justice's Panel of Prosecutors as per its resolution

of 20 September 1991. Allegedly, this is clear evidence of the uncertainty on the

part of the Government as to the total value of the estate of the late President.

sent to herein petitioner Ferdinand "Bongbong" Marcos as well

as to his mother Mrs. Imelda Marcos.

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

Even if we are to rule out the notices of assessments personally

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

It is not the Department of Justice which is the government agency tasked to

determine the amount of taxes due upon the subject estate, but the Bureau of
Internal Revenue, 16 whose determinations and assessments are presumed
correct and made in good faith. 17 The taxpayer has the duty of proving
otherwise. In the absence of proof of any irregularities in the performance of
official duties, an assessment will not be disturbed. Even an assessment based
on estimates is prima facie valid and lawful where it does not appear to have
been arrived at arbitrarily or capriciously. The burden of proof is upon the
complaining party to show clearly that the assessment is erroneous. Failure to
present proof of error in the assessment will justify the judicial affirmance of
said assessment. 18 In this instance, petitioner has not pointed out one single
provision in the Memorandum of the Special Audit Team which gave rise to the
questioned assessment, which bears a trace of falsity. Indeed, the petitioner's
attack on the assessment bears mainly on the alleged improbable and
unconscionable amount of the taxes charged. But mere rhetoric cannot supply
the basis for the charge of impropriety of the assessments made.
Moreover, these objections to the assessments should have been raised,
considering the ample remedies afforded the taxpayer by the Tax Code, with the
Bureau of Internal Revenue and the Court of Tax Appeals, as described earlier,
and cannot be raised now via Petition for Certiorari, under the pretext of grave
abuse of discretion. The course of action taken by the petitioner reflects his
disregard or even repugnance of the established institutions for governance in
the scheme of a well-ordered society. The subject tax assessments having
become final, executory and enforceable, the same can no longer be contested
by means of a disguised protest. In the main, Certiorari may not be used as a
substitute for a lost appeal or remedy. 19 This judicial policy becomes more
pronounced in view of the absence of sufficient attack against the actuations of
government.
On the matter of sufficiency of service of Notices of Assessment to the
petitioner, we find the respondent appellate court's pronouncements sound and
resilient to petitioner's attacks.
Anent grounds 3(b) and (B) both alleging/claiming lack of
notice We find, after considering the facts and
circumstances, as well as evidences, that there was sufficient,
constructive and/or actual notice of assessments, levy and sale,

Thus, on October 20, 1992, formal assessment notices were

served upon Mrs. Marcos c/o the petitioner, at his office, House
of Representatives, Batasan Pambansa, Q.C. (Annexes "A", "A1", "A-2", "A-3"; pp. 207-210, Comment/Memorandum of OSG).
Moreover, a notice to taxpayer dated October 8, 1992 inviting
Mrs. Marcos to a conference relative to her tax liabilities, was
furnished the counsel of Mrs. Marcos Dean Antonio Coronel
(Annex "B", p. 211, ibid). Thereafter, copies of Notices were
also served upon Mrs. Imelda Marcos, the petitioner and their
counsel "De Borja, Medialdea, Ata, Bello, Guevarra and Serapio
Law Office", on April 7, 1993 and June 10, 1993. Despite all of
these Notices, petitioner never lifted a finger to protest the
assessments, (upon which the Levy and sale of properties were
based), nor appealed the same to the Court of Tax Appeals.
There being sufficient service of Notices to herein petitioner
(and his mother) and it appearing that petitioner continuously
ignored said Notices despite several opportunities given him to
file a protest and to thereafter appeal to the Court of Tax
Appeals, the tax assessments subject of this case, upon
which the levy and sale of properties were based, could no
longer be contested (directly or indirectly) via this instant
petition for certiorari. 20
Petitioner argues that all the questioned Notices of Levy, however, must be
nullified for having been issued without validly serving copies thereof to the
petitioner. As a mandatory heir of the decedent, petitioner avers that he has an
interest in the subject estate, and notices of levy upon its properties should have
been served upon him.

We do not agree. In the case of notices of levy issued to satisfy the delinquent
estate tax, the delinquent taxpayer is the Estate of the decedent, and not
necessarily, and exclusively, the petitioner as heir of the deceased. In the same
vein, in the matter of income tax delinquency of the late president and his
spouse, petitioner is not the taxpayer liable. Thus, it follows that service of
notices of levy in satisfaction of these tax delinquencies upon the petitioner is
not required by law, as under Section 213 of the NIRC, which pertinently states:
xxx xxx xxx
. . . Levy shall be effected by writing upon said certificate a
description of the property upon which levy is made. At the
same time, written notice of the levy shall be mailed to or
served upon the Register of Deeds of the province or city
where the property is located and upon the delinquent
taxpayer, or if he be absent from the Philippines, to his agent or
the manager of the business in respect to which the liability
arose, or if there be none, to the occupant of the property in
question.
xxx xxx xxx
The foregoing notwithstanding, the record shows that notices of warrants of
distraint and levy of sale were furnished the counsel of petitioner on April 7,
1993, and June 10, 1993, and the petitioner himself on April 12, 1993 at his
office at the Batasang Pambansa. 21 We cannot therefore, countenance
petitioner's insistence that he was denied due process. Where there was an
opportunity to raise objections to government action, and such opportunity was
disregarded, for no justifiable reason, the party claiming oppression then
becomes the oppressor of the orderly functions of government. He who comes
to court must come with clean hands. Otherwise, he not only taints his name,
but ridicules the very structure of established authority.
IN VIEW WHEREOF, the Court RESOLVED to DENY the present petition. The
Decision of the Court of Appeals dated November 29, 1994 is hereby AFFIRMED
in all respects.
SO ORDERED.
Regalado, Romero, Puno and Mendoza, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 123206

March 22, 2000

COMMISSIONER OF INTERNAL REVENUE, petitioner,

vs.
COURT OF APPEALS, COURT OF TAX APPEALS and JOSEFINA P. PAJONAR,
as Administratrix of the Estate of Pedro P. Pajonar, respondents.
RESOLUTION
GONZAGA-REYES, J.:
Assailed in this petition for review on certiorari is the December 21, 1995
Decision1 of the Court of Appeals2 in CA-G.R. Sp. No. 34399 affirming the June 7,
1994 Resolution of the Court of Tax Appeals in CTA Case No. 4381 granting
private respondent Josefina P. Pajonar, as administratrix of the estate of Pedro
P. Pajonar, a tax refund in the amount of P76,502.42, representing erroneously
paid estate taxes for the year 1988.
Pedro Pajonar, a member of the Philippine Scout, Bataan Contingent, during the
second World War, was a part of the infamous Death March by reason of which
he suffered shock and became insane. His sister Josefina Pajonar became the
guardian over his person, while his property was placed under the guardianship
of the Philippine National Bank (PNB) by the Regional Trial Court of Dumaguete
City, Branch 31, in Special Proceedings No. 1254. He died on January 10, 1988.
He was survived by his two brothers Isidro P. Pajonar and Gregorio Pajonar, his
sister Josefina Pajonar, nephews Concordio Jandog and Mario Jandog and niece
Conchita Jandog.
On May 11, 1988, the PNB filed an accounting of the decedent's property under
guardianship valued at P3,037,672.09 in Special Proceedings No. 1254.
However, the PNB did not file an estate tax return, instead it advised Pedro
Pajonar's heirs to execute an extrajudicial settlement and to pay the taxes on his
estate. On April 5, 1988, pursuant to the assessment by the Bureau of Internal
Revenue (BIR), the estate of Pedro Pajonar paid taxes in the amount of P2,557.
On May 19, 1988, Josefina Pajonar filed a petition with the Regional Trial Court
of Dumaguete City for the issuance in her favor of letters of administration of
the estate of her brother. The case was docketed as Special Proceedings No.

2399. On July 18, 1988, the trial court appointed Josefina Pajonar as the regular
administratrix of Pedro Pajonar's estate.
On December 19, 1988, pursuant to a second assessment by the BIR for
deficiency estate tax, the estate of Pedro Pajonar paid estate tax in the amount
of P1,527,790.98. Josefina Pajonar, in her capacity as administratrix and heir of
Pedro Pajonar's estate, filed a protest on January 11, 1989 with the BIR praying
that the estate tax payment in the amount of P1,527,790.98, or at least some
portion of it, be returned to the heirs. 3

deductions from the gross estate of the decedent. More particularly, the
question is whether the notarial fee paid for the extrajudicial settlement in the
amount of P60,753 and the attorney's fees in the guardianship proceedings in
the amount of P50,000 may be allowed as deductions from the gross estate of
decedent in order to arrive at the value of the net estate.
We answer this question in the affirmative, thereby upholding the decisions of
the appellate courts.
In its May 6, 1993 Decision, the Court of Tax Appeals ruled thus:

However, on August 15, 1989, without waiting for her protest to be resolved by
the BIR, Josefina Pajonar filed a petition for review with the Court of Tax
Appeals (CTA), praying for the refund of P1,527,790.98, or in the alternative,
P840,202.06, as erroneously paid estate tax. 4 The case was docketed as CTA
Case No. 4381.
On May 6, 1993, the CTA ordered the Commissioner of Internal Revenue to
refund Josefina Pajonar the amount of P252,585.59, representing erroneously
paid estate tax for the year 1988.5 Among the deductions from the gross estate
allowed by the CTA were the amounts of P60,753 representing the notarial fee
for the Extrajudicial Settlement and the amount of P50,000 as the attorney's
fees in Special Proceedings No. 1254 for guardianship.6
On June 15, 1993, the Commissioner of Internal Revenue filed a motion for
reconsideration7 of the CTA's May 6, 1993 decision asserting, among others,
that the notarial fee for the Extrajudicial Settlement and the attorney's fees in
the guardianship proceedings are not deductible expenses.
On June 7, 1994, the CTA issued the assailed Resolution8 ordering the
Commissioner of Internal Revenue to refund Josefina Pajonar, as administratrix
of the estate of Pedro Pajonar, the amount of P76,502.42 representing
erroneously paid estate tax for the year 1988. Also, the CTA upheld the validity
of the deduction of the notarial fee for the Extrajudicial Settlement and the
attorney's fees in the guardianship proceedings.
On July 5, 1994, the Commissioner of Internal Revenue filed with the Court of
Appeals a petition for review of the CTA's May 6, 1993 Decision and its June 7,
1994 Resolution, questioning the validity of the abovementioned deductions. On
December 21, 1995, the Court of Appeals denied the Commissioner's petition. 9
Hence, the present appeal by the Commissioner of Internal Revenue.
The sole issue in this case involves the construction of section 79 10 of the
National Internal Revenue Code 11 (Tax Code) which provides for the allowable

Respondent maintains that only judicial expenses of the testamentary

or intestate proceedings are allowed as a deduction to the gross estate.
The amount of P60,753.00 is quite extraordinary for a mere notarial
fee.
This Court adopts the view under American jurisprudence that
expenses incurred in the extrajudicial settlement of the estate should
be allowed as a deduction from the gross estate. "There is no
requirement of formal administration. It is sufficient that the expense
be a necessary contribution toward the settlement of the case." [ 34 Am.
Jur. 2d, p. 765; Nolledo, Bar Reviewer in Taxation, 10th Ed. (1990), p.
481]
xxx

xxx

xxx

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

xxx

xxx

The guardianship proceeding had been terminated upon delivery of the

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

xxx

xxx

xxx

PNB was appointed as guardian over the assets of the late Pedro
Pajonar, who, even at the time of his death, was incompetent by reason
of insanity. The expenses incurred in the guardianship proceeding was
but a necessary expense in the settlement of the decedent's estate.
Therefore, the attorney's fee incurred in the guardianship proceedings
amounting to P50,000.00 is a reasonable and necessary business
expense deductible from the gross estate of the decedent. 12
Upon a motion for reconsideration filed by the Commissioner of Internal
Revenue, the Court of Tax Appeals modified its previous ruling by reducing the
refundable amount to P76,502.43 since it found that a deficiency interest should
be imposed and the compromise penalty excluded. 13 However, the tax court
upheld its previous ruling regarding the legality of the deductions
It is significant to note that the inclusion of the estate tax law in the codification
of all our national internal revenue laws with the enactment of the National
Internal Revenue Code in 1939 were copied from the Federal Law of the United
States. [ UMALI, Reviewer in Taxation (1985), p. 285 ] The 1977 Tax Code,
promulgated by Presidential Decree No. 1158, effective June 3, 1977, reenacted
substantially all the provisions of the old law on estate and gift taxes, except the
sections relating to the meaning of gross estate and gift. [ Ibid, p. 286. ]
In the United States, [a]dministrative expenses, executor's commissions and
attorney's fees are considered allowable deductions from the Gross Estate.
Administrative expenses are limited to such expenses as are actually and
necessarily incurred in the administration of a decedent's estate. [PRENTICEHALL, Federal Taxes Estate and Gift Taxes (1936), p. 120, 533.] Necessary
expenses of administration are such expenses as are entailed for the
preservation and productivity of the estate and for its management for purposes
of liquidation, payment of debts and distribution of the residue among the persons
entitled thereto. [Lizarraga Hermanos vs. Abada, 40 Phil. 124.] They must be
incurred for the settlement of the estate as a whole. [34 Am. Jur. 2d, p. 765.]
Thus, where there were no substantial community debts and it was
unnecessary to convert community property to cash, the only practical purpose
of administration being the payment of estate taxes, full deduction was allowed
for attorney's fees and miscellaneous expenses charged wholly to decedent's
estate. [Ibid., citing Estate of Helis, 26 T.C. 143 (A).]
Petitioner stated in her protest filed with the BIR that "upon the death of the
ward, the PNB, which was still the guardian of the estate, (Annex "Z"), did not
file an estate tax return; however, it advised the heirs to execute an extrajudicial
settlement, to pay taxes and to post a bond equal to the value of the estate, for
which the state paid P59,341.40 for the premiums. (See Annex "K")." [p. 17, CTA

record.] Therefore, it would appear from the records of the case that the only
practical purpose of settling the estate by means of an extrajudicial settlement
pursuant to Section 1 of Rule 74 of the Rules of Court was for the payment of
taxes and the distribution of the estate to the heirs. A fortiori, since our estate
tax laws are of American origin, the interpretation adopted by American Courts
has some persuasive effect on the interpretation of our own estate tax laws on
the subject.
Anent the contention of respondent that the attorney's fees of P50,000.00
incurred in the guardianship proceeding should not be deducted from the Gross
Estate, We consider the same unmeritorious. Attorneys' and guardians' fees
incurred in a trustee's accounting of a taxable inter vivos trust attributable to
the usual issues involved in such an accounting was held to be proper
deductions because these are expenses incurred in terminating an inter vivos
trust that was includible in the decedent's estate. [Prentice Hall, Federal Taxes
on Estate and Gift, p. 120, 861] Attorney's fees are allowable deductions if
incurred for the settlement of the estate. It is noteworthy to point that PNB was
appointed the guardian over the assets of the deceased. Necessarily the assets of
the deceased formed part of his gross estate. Accordingly, all expenses incurred
in relation to the estate of the deceased will be deductible for estate tax
purposes provided these are necessary and ordinary expenses for
administration of the settlement of the estate. 14
In upholding the June 7, 1994 Resolution of the Court of Tax Appeals, the Court
of Appeals held that:
2. Although the Tax Code specifies "judicial expenses of the testamentary or
intestate proceedings," there is no reason why expenses incurred in the
administration and settlement of an estate in extrajudicial proceedings should
not be allowed. However, deduction is limited to such administration expenses
as are actually and necessarily incurred in the collection of the assets of the
estate, payment of the debts, and distribution of the remainder among those
entitled thereto. Such expenses may include executor's or administrator's fees,
attorney's fees, court fees and charges, appraiser's fees, clerk hire, costs of
preserving and distributing the estate and storing or maintaining it, brokerage
fees or commissions for selling or disposing of the estate, and the like.
Deductible attorney's fees are those incurred by the executor or administrator
in the settlement of the estate or in defending or prosecuting claims against or
due the estate. (Estate and Gift Taxation in the Philippines, T. P. Matic, Jr., 1981
Edition, p. 176).
xxx

xxx

xxx

It is clear then that the extrajudicial settlement was for the purpose of payment
of taxes and the distribution of the estate to the heirs. The execution of the

extrajudicial settlement necessitated the notarization of the same. Hence the

Contract of Legal Services of March 28, 1988 entered into between respondent
Josefina Pajonar and counsel was presented in evidence for the purpose of
showing that the amount of P60,753.00 was for the notarization of the
Extrajudicial Settlement. It follows then that the notarial fee of P60,753.00 was
incurred primarily to settle the estate of the deceased Pedro Pajonar. Said
amount should then be considered an administration expenses actually and
necessarily incurred in the collection of the assets of the estate, payment of
debts and distribution of the remainder among those entitled thereto. Thus, the
notarial fee of P60,753 incurred for the Extrajudicial Settlement should be
allowed as a deduction from the gross estate.
3. Attorney's fees, on the other hand, in order to be deductible from the gross
estate must be essential to the settlement of the estate.
The amount of P50,000.00 was incurred as attorney's fees in the guardianship
proceedings in Spec. Proc. No. 1254. Petitioner contends that said amount are
not expenses of the testamentary or intestate proceedings as the guardianship
proceeding was instituted during the lifetime of the decedent when there was
yet no estate to be settled.
Again, this contention must fail.
The guardianship proceeding in this case was necessary for the distribution of
the property of the deceased Pedro Pajonar. As correctly pointed out by
respondent CTA, the PNB was appointed guardian over the assets of the
deceased, and that necessarily the assets of the deceased formed part of his
gross estate. . . .
xxx

xxx

xxx

It is clear therefore that the attorney's fees incurred in the guardianship

proceeding in Spec. Proc. No. 1254 were essential to the distribution of the
property to the persons entitled thereto. Hence, the attorney's fees incurred in
the guardianship proceedings in the amount of P50,000.00 should be allowed as
a deduction from the gross estate of the decedent. 15
The deductions from the gross estate permitted under section 79 of the Tax
Code basically reproduced the deductions allowed under Commonwealth Act
No. 466 (CA 466), otherwise known as the National Internal Revenue Code of
1939, 16 and which was the first codification of Philippine tax laws. Section 89
(a) (1) (B) of CA 466 also provided for the deduction of the "judicial expenses of
the testamentary or intestate proceedings" for purposes of determining the
value of the net estate. Philippine tax laws were, in turn, based on the federal tax

laws of the United States. 17 In accord with established rules of statutory

construction, the decisions of American courts construing the federal tax code
are entitled to great weight in the interpretation of our own tax laws. 18
Judicial expenses are expenses of administration. 19 Administration expenses, as
an allowable deduction from the gross estate of the decedent for purposes of
arriving at the value of the net estate, have been construed by the federal and
state courts of the United States to include all expenses "essential to the
collection of the assets, payment of debts or the distribution of the property to
the persons entitled to it." 20 In other words, the expenses must be essential to
the proper settlement of the estate. Expenditures incurred for the individual
benefit of the heirs, devisees or legatees are not deductible. 21 This distinction
has been carried over to our jurisdiction. Thus, in Lorenzo v. Posadas 22 the
Court construed the phrase "judicial expenses of the testamentary or intestate
proceedings" as not including the compensation paid to a trustee of the
decedent's estate when it appeared that such trustee was appointed for the
purpose of managing the decedent's real estate for the benefit of the
testamentary heir. In another case, the Court disallowed the premiums paid on
the bond filed by the administrator as an expense of administration since the
giving of a bond is in the nature of a qualification for the office, and not
necessary in the settlement of the estate. 23 Neither may attorney's fees incident
to litigation incurred by the heirs in asserting their respective rights be claimed
as a deduction from the gross estate. 241wphi1
Coming to the case at bar, the notarial fee paid for the extrajudicial settlement is
clearly a deductible expense since such settlement effected a distribution of
Pedro Pajonar's estate to his lawful heirs. Similarly, the attorney's fees paid to
PNB for acting as the guardian of Pedro Pajonar's property during his lifetime
should also be considered as a deductible administration expense. PNB
provided a detailed accounting of decedent's property and gave advice as to the
proper settlement of the latter's estate, acts which contributed towards the
collection of decedent's assets and the subsequent settlement of the estate.
We find that the Court of Appeals did not commit reversible error in affirming
the questioned resolution of the Court of Tax Appeals.
WHEREFORE, the December 21, 1995 Decision of the Court of Appeals is
AFFIRMED. The notarial fee for the extrajudicial settlement and the attorney's
fees in the guardianship proceedings are allowable deductions from the gross
estate of Pedro Pajonar.1wphi1.nt
SO ORDERED.
Melo, Vitug, Panganiban and Purisima, JJ., concur.

Upon investigation however the Bureau of Internal Revenue found the following
properties:
Republic of the Philippines
SUPREME COURT
Manila

Personal properties:
Palay
Carabaos
Packard Automobile
2 Aparadors

EN BANC
G.R. No. L-19495

November 24, 1966

COMMISSIONER OF INTERNAL REVENUE, petitioner,

vs.
LILIA YUSAY GONZALES and THE COURT OF TAX APPEALS, respondents.
Office of the Solicitor General for the petitioner.
Ramon A. Gonzales for respondent Lilia Yusay Gonzales.

P6,444.00
1,500.00
2,000.00
500.00

Real properties:
Capital, 25 parcels assessed at
1/2 of Conjugal, 130 parcels
assessed at

BENGZON, J.P., J.:

Matias Yusay, a resident of Pototan, Iloilo, died intestate on May 13, 1948,
leaving two heirs, namely, Jose S. Yusay, a legitimate child, and Lilia Yusay
Gonzales, an acknowledged natural child. Intestate proceedings for the
settlement of his estate were instituted in the Court of First Instance of Iloilo
(Special Proceedings No. 459). Jose S. Yusay was therein appointed
administrator.
On May 11, 1949 Jose S. Yusay filed with the Bureau of Internal Revenue an
estate and inheritance tax return declaring therein the following properties:

P87,715.32
P121,425.00

Total

P10,444.00

P209,140.32
P219,584.32

The fair market value of the real properties was computed by increasing the
assessed value by forty percent.
Based on the above findings, the Bureau of Internal Revenue assessed on
October 29, 1953 estate and inheritance taxes in the sums of P6,849.78 and
P16,970.63, respectively.
On January 25, 1955 the Bureau of Internal Revenue increased the assessment
to P8,225.89 as estate tax and P22,117.10 as inheritance tax plus delinquency
interest and demanded payment thereof on or before February 28, 1955.
Meanwhile, on February 16, 1955, the Court of First Instance of Iloilo required
Jose S. Yusay to show proof of payment of said estate and inheritance taxes.

Personal properties
Palay
Carabaos

P6,444.00
1,000.00

P7,444.00

Real properties:
Capital, 74 parcels )
Conjugal 19 parcels)
Total gross estate
The return mentioned no heir.

assessed at

P179,760.00
P187,204.00

On March 3, 1955 Jose S. Yusay requested an extension of time within which to

pay the tax. He posted a surety bond to guarantee payment of the taxes in
question within one year. The Commissioner of Internal Revenue however
denied the request. Then he issued a warrant of distraint and levy which he
transmitted to the Municipal Treasurer of Pototan for execution. This warrant
was not enforced because all the personal properties subject to distraint were
located in Iloilo City.
On May 20, 1955 the Provincial Treasurer of Iloilo requested the BIR Provincial
Revenue Officer to furnish him copies of the assessment notices to support a
motion for payment of taxes which the Provincial Fiscal would file in Special
Proceedings No. 459 before the Court of First Instance of Iloilo. The papers
requested were sent by the Commissioner of Internal Revenue to the Provincial

Revenue Officer of Iloilo to be transmitted to the Provincial Treasurer. The

records do not however show whether the Provincial Fiscal filed a claim with
the Court of First Instance for the taxes due.
On May 30, 1956 the commissioner appointed by the Court of First Instance for
the purpose, submitted a reamended project of partition which listed the
following properties:

P8,100.00
2,000.00
500.00
8,858.46
6,444.00
1,500.00

P324,797.21
4,500.00
Total

P27,402.46

P329,297.21
P356,699.67

Estate tax

P16,246.04

5% surcharge

411.29

Delinquency interest

11,868.90
P15.00
40.00

Total

1,105.86

Delinquency interest
Compromise for late payment

28,808.75
50.00
P69,142.73
P97,723.96

Like in previous assessments, the fair market value of the real properties was
arrived at by adding 40% to the assessed value.

More than a year later, particularly on July 12, 1957, an agent of the Bureau of
Internal Revenue apprised the Commissioner of Internal Revenue of the
existence of said reamended project of partition. Whereupon, the Internal
Revenue Commissioner caused the estate of Matias Yusay to be reinvestigated
for estate and inheritance tax liability. Accordingly, on February 13, 1958 he
issued the following assessment:

Compromise
No notice of death
Late payment

5% surcharge

Total estate and inheritance taxes

Real properties:
Land, 174 parcels
assessed at
Buildings

P38,178.12

Total

Personal properties:
Buick Sedan
Packard car
Aparadors
Cash in Bank (PNB)
Palay
Carabaos

Inheritance Tax

55.00
P28,581.23

In view of the demise of Jose S. Yusay, said assessment was sent to his widow,
Mrs. Florencia Piccio Vda. de Yusay, who succeeded him in the administration of
the estate of Matias Yusay.
No payment having been made despite repeated demands, the Commissioner of
Internal Revenue filed a proof of claim for the estate and inheritance taxes due
and a motion for its allowance with the settlement court in voting priority of
lien pursuant to Section 315 of the Tax Code.
On June 1, 1959, Lilia Yusay, through her counsel, Ramon Gonzales, filed an
answer to the proof of claim alleging non-receipt of the assessment of February
13, 1958, the existence of two administrators, namely Florencia Piccio Vda. de
Yusay who administered two-thirds of the estate, and Lilia Yusay, who
administered the remaining one-third, and her willingness to pay the taxes
corresponding to her share, and praying for deferment of the resolution on the
motion for the payment of taxes until after a new assessment corresponding to
her share was issued.
On November 17, 1959 Lilia Yusay disputed the legality of the assessment dated
February 13, 1958. She claimed that the right to make the same had prescribed
inasmuch as more than five years had elapsed since the filing of the estate and
inheritance tax return on May 11, 1949. She therefore requested that the
assessment be declared invalid and without force and effect. This request was
rejected by the Commissioner in his letter dates January 20, 1960, received by
Lilia Yusay on March 14, 1960, for the reasons, namely, (1) that the right to
assess the taxes in question has not been lost by prescription since the return
which did not name the heirs cannot be considered a true and complete return
sufficient to start the running of the period of limitations of five years under
Section 331 of the Tax Code and pursuant to Section 332 of the same Code he

has ten years within which to make the assessment counted from the discovery
on September 24, 1953 of the identity of the heirs; and (2) that the estate's
administrator waived the defense of prescription when he filed a surety bond
on March 3, 1955 to guarantee payment of the taxes in question and when he
requested postponement of the payment of the taxes pending determination of
who the heirs are by the settlement court.
On April 13, 1960 Lilia Yusay filed a petition for review in the Court of Tax
Appeals assailing the legality of the assessment dated February 13, 1958. After
hearing the parties, said Court declared the right of the Commissioner of
Internal Revenue to assess the estate and inheritance taxes in question to have
prescribed and rendered the following judgment:
WHEREFORE, the decision of respondent assessing against the estate of
the late Matias Yusay estate and inheritance taxes is hereby reversed.
No costs.
The Commissioner of Internal Revenue appealed to this Court and raises the
following issues:
1. Was the petition for review in the Court of Tax Appeals within the 30-day
period provided for in Section 11 of Republic Act 1125?
2. Could the Court of Tax Appeals take cognizance of Lilia Yusay's appeal despite
the pendency of the "Proof of Claim" and "Motion for Allowance of Claim and for
an Order of Payment of Taxes" filed by the Commissioner of Internal Revenue in
Special Proceedings No. 459 before the Court of First Instance of Iloilo?
3. Has the right of the Commissioner of Internal Revenue to assess the estate
and inheritance taxes in question prescribed?
On November 17, 1959 Lilia Yusay disputed the legality of the assessment of
February 13, 1958. On March 14, 1960 she received the decision of the
Commissioner of Internal Revenue on the disputed assessment. On April 13,
1960 she filed her petition for review in the Court of Tax Appeals. Said Court
correctly held that the appeal was seasonably interposed pursuant to Section 11
of Republic Act 1125. We already ruled in St. Stephen's Association v. Collector of
Internal Revenue,1 that the counting of the thirty days within which to institute
an appeal in the Court of Tax Appeals should commence from the date of receipt
of the decision of the Commissioner on the disputed assessment, not from the
date the assessment was issued.
Accordingly, the thirty-day period should begin running from March 14, 1960,
the date Lilia Yusay received the appealable decision. From said date to April

13, 1960, when she filed her appeal in the Court of Tax Appeals, is exactly thirty
days. Hence, the appeal was timely.
Next, the Commissioner attacks the jurisdiction of the Court of Tax Appeals to
take cognizance of Lilia Yusay's appeal on the ground of lis pendens. He
maintains that the pendency of his motion for allowance of claim and for order
of payment of taxes in the Court of First Instance of Iloilo would preclude the
Court of Tax Appeals from acquiring jurisdiction over Lilia Yusay's appeal. This
contention lacks merit.
Lilia Yusay's cause seeks to resist the legality of the assessment in question.
Should she maintain it in the settlement court or should she elevate her cause to
the Court of Tax Appeals? We say, she acted correctly by appealing to the latter
court. An action involving a disputed assessment for internal revenue taxes falls
within the exclusive jurisdiction of the Court of Tax Appeals.2 It is in that forum,
to the exclusion of the Court of First Instance,3 where she could ventilate her
defenses against the assessment.
Moreover, the settlement court, where the Commissioner would wish Lilia
Yusay to contest the assessment, is of limited jurisdiction. And under the Rules, 4
its authority relates only to matters having to do with the settlement of estates
and probate of wills of deceased persons.5 Said court has no jurisdiction to
adjudicate the contentions in question, which assuming they do not come
exclusively under the Tax Court's cognizance must be submitted to the Court
of First Instance in the exercise of its general jurisdiction.6
We now come to the issue of prescription. Lilia Yusay claims that since the latest
assessment was issued only on February 13, 1958 or eight years, nine months
and two days from the filing of the estate and inheritance tax return, the
Commissioner's right to make it has expired. She would rest her stand on
Section 331 of the Tax Code which limits the right of the Commissioner to
assess the tax within five years from the filing of the return.
The Commissioner claims that fraud attended the filing of the return; that this
being so, Section 332(a) of the Tax Code would apply.7 It may be well to note
that the assessment letter itself (Exhibit 22) did not impute fraud in the return
with intent to evade payment of tax. Precisely, no surcharge for fraud was
imposed. In his answer to the petition for review filed by Lilia Yusay in the
Court of Tax Appeals, the Commissioner alleged no fraud. Instead, he broached
the insufficiency of the return as barring the commencement of the running of
the statute of limitations. He raised the point of fraud for the first time in the
proceedings, only in his memorandum filed with the Tax Court subsequent to
resting his case. Said Court rejected the plea of fraud for lack of allegation and
proof, and ruled that the return, although not accurate, was sufficient to start
the period of prescription.

Fraud is a question of fact.8 The circumstances constituting it must be alleged

and proved in the court below.9 And the finding of said court as to its existence
and non-existence is final unless clearly shown to be erroneous.10 As the court a
quo found that no fraud was alleged and proved therein, We see no reason to
entertain the Commissioner's assertion that the return was fraudulent.

Second, the return mentioned no heir. Thus, no inheritance tax could be

assessed. As a matter of law, on the basis of the return, there would be no
occasion for the imposition of estate and inheritance taxes. When there is no
heir - the return showed none - the intestate estate is escheated to the State.12
The State taxes not itself.

The conclusion, however, that the return filed by Jose S. Yusay was sufficient to
commence the running of the prescriptive period under Section 331 of the Tax
Code rests on no solid ground.

In a case where the return was made on the wrong form, the Supreme Court of
the United States held that the filing thereof did not start the running of the
period of limitations.13 The reason is that the return submitted did not contain
the necessary information required in the correct form. In this jurisdiction,
however, the Supreme Court refrained from applying the said ruling of the
United States Supreme Court in Collector of Internal Revenue v. Central
Azucarera de Tarlac, L-11760-61, July 31, 1958, on the ground that the return
was complete in itself although inaccurate. To our mind, it would not make
much difference where a return is made on the correct form prescribed by the
Bureau of Internal Revenue if the data therein required are not supplied by the
taxpayer. Just the same, the necessary information for the assessment of the tax
would be missing.

Paragraph (a) of Section 93 of the Tax Code lists the requirements of a valid
return. It states:
(a) Requirements.In all cases of inheritance or transfers subject to
either the estate tax or the inheritance tax, or both, or where, though
exempt from both taxes, the gross value of the estate exceeds three
thousand pesos, the executor, administrator, or anyone of the heirs, as
the case may be, shall file a return under oath in duplicate, setting forth
(1) the value of the gross estate of the decedent at the time of his death,
or, in case of a nonresident not a citizen of the Philippines ; (2) the
deductions allowed from gross estate in determining net estate as
defined in section eighty-nine; (3) such part of such information as may
at the time be ascertainable and such supplemental data as may be
necessary to establish the correct taxes.
A return need not be complete in all particulars. It is sufficient if it complies
substantially with the law. There is substantial compliance (1) when the return
is made in good faith and is not false or fraudulent; (2) when it covers the entire
period involved; and (3) when it contains information as to the various items of
income, deduction and credit with such definiteness as to permit the
computation and assessment of the tax.11
There is no question that the state and inheritance tax return filed by Jose S.
Yusay was substantially defective.
First, it was incomplete. It declared only ninety-three parcels of land
representing about 400 hectares and left out ninety-two parcels covering 503
hectares. Said huge under declaration could not have been the result of an oversight or mistake. As found in L-11378, supra note 7, Jose S. Yusay very well
knew of the existence of the ommited properties. Perhaps his motive in under
declaring the inventory of properties attached to the return was to deprive Lilia
Yusay from inheriting her legal share in the hereditary estate, but certainly not
because he honestly believed that they did not form part of the gross estate.

The return filed in this case was so deficient that it prevented the Commissioner
from computing the taxes due on the estate. It was as though no return was
made. The Commissioner had to determine and assess the taxes on data
obtained, not from the return, but from other sources. We therefore hold the
view that the return in question was no return at all as required in Section 93 of
the Tax Code.
The law imposes upon the taxpayer the burden of supplying by the return the
information upon which an assessment would be based. 14 His duty complied
with, the taxpayer is not bound to do anything more than to wait for the
Commissioner to assess the tax. However, he is not required to wait forever.
Section 331 of the Tax Code gives the Commissioner five years within which to
make his assessment.15 Except, of course, if the taxpayer failed to observe the
law, in which case Section 332 of the same Code grants the Commissioner a
longer period. Non-observance consists in filing a false or fraudulent return
with intent to evade the tax or in filing no return at all.
Accordingly, for purposes of determining whether or not the Commissioner's
assessment of February 13, 1958 is barred by prescription, Section 332(a)
which is an exception to Section 331 of the Tax Code finds application. 16 We
quote Section 332(a):
SEC. 332. Exceptions as to period of limitation of assessment and
collection of taxes. (a) In the case of a false or fraudulent return with
intent to evade tax or of a failure to file a return, the tax may be
assessed, or a proceeding in court for the collection of such tax may be

begun without assessment, at any time within ten years after the
discovery of the falsity, fraud or omission.

RESOLUTION
April 24, 1967

As stated, the Commissioner came to know of the identity of the heirs on

September 24, 1953 and the huge underdeclaration in the gross estate on July
12, 1957. From the latter date, Section 94 of the Tax Code obligated him to make
a return or amend one already filed based on his own knowledge and
information obtained through testimony or otherwise, and subsequently to
assess thereon the taxes due. The running of the period of limitations under
Section 332(a) of the Tax Code should therefore be reckoned from said date for,
as aforesaid, it is from that time that the Commissioner was expected by law to
make his return and assess the tax due thereon. From July 12, 1957 to February
13, 1958, the date of the assessment now in dispute, less than ten years have
elapsed. Hence, prescription did not abate the Commissioner's right to issue
said assessment.
Anent the Commissioner's contention that Lilia Yusay is estopped from raising
the defense of prescription because she failed to raise the same in her answer to
the motion for allowance of claim and for the payment of taxes filed in the
settlement court (Court of First Instance of Iloilo), suffice it to state that it would
be unjust to the taxpayer if We were to sustain such a view. The Court of First
Instance acting as a settlement court is not the proper tribunal to pass upon
such defense, therefore it would be but futile to raise it therein. Moreover, the
Tax Code does not bar the right to contest the legality of the tax after a taxpayer
pays it. Under Section 306 thereof, he can pay the tax and claim a refund
therefor. A fortiori his willingness to pay the tax is no waiver to raise defenses
against the tax's legality.
WHEREFORE, the judgment appealed from is set aside and another entered
affirming the assessment of the Commissioner of Internal Revenue dated
February 13, 1958. Lilia Yusay Gonzales, as administratrix of the intestate estate
of Matias Yusay, is hereby ordered to pay the sums of P16,246.04 and
P39,178.12 as estate and inheritance taxes, respectively, plus interest and
surcharge for delinquency in accordance with Section 101 of the National
Internal Revenue Code, without prejudice to reimbursement from her coadministratrix, Florencia Piccio Vda. de Yusay for the latter's corresponding tax
liability. No costs. So ordered.
Concepcion, C.J., Reyes, J.B.L., Barrera, Dizon, Regala, Makalintal, Sanchez and
Castro, JJ., concur.
Zaldivar, J., took no part.

BENGZON, J.P., J.:

Respondent Lilia Yusay Gonzales seeks reconsideration of our decision holding
her liable for the payment of P97,723.96 as estate and inheritance taxes plus
delinquency penalties as administratrix of the intestate estate of Matias Yusay.
The grounds raised by her deserve this extended resolution.
Firstly, movant maintains that the issue of whether or not the estate and
inheritance tax return filed by Jose Yusay on May 13, 1949 was sufficient to
start the running of the statute of limitations on assessment, was neither raised
in the Court of Tax Appeals nor assigned as error before this Court. The records
in the Court of Tax Appeals however show the contrary. Paragraph 2 of the
answer filed by the Commissioner of Internal Revenue states:
2. That he likewise admits, as alleged in paragraph 1 thereof having
received the letter of the petitioner dated November 27, 1959 (Annex
"A" of the Petition for Review), contesting the assessment of estate and
inheritance taxes levied against the Intestate Estate of the late Matias
Yusay, Special Proceedings No. 459, Court of First Instance of Iloilo, on
the ground that the said assessment has already prescribed, but
specifically denies the allegation that the assessment have already
prescribed, the truth of the matter being that the returns filed on May
11, 1949 cannot be considered as a true, and complete return sufficient
to start the running of the period of five (5) years prescribed in Sec. 331
of the Tax Code;
This point was discussed in the memorandum of the Commissioner of Internal
Revenue, thus:
In the estate and inheritance tax return filed by Jose S. Yusay (Exhibits
B & 1, pp. 14-20, B.I.R. records) the net value of the estate of the
deceased was claimed to be P203,354.00 and no inheritance tax was
shown as the heirs were not indicated. In the final computation of the
estate by an examiner of the respondent, the net estate was found to be
worth P410,518.38 (p. 105, B.I.R. records) or about more than twice the
original amount declared in the return. In the subsequent investigation
of this case, it was also determined that the heirs of the deceased were
Jose S. Yusay, a legitimate son, and Lilia Yusay, an acknowledged
natural child, (petitioner herein).

Under the circumstances, we believe the return filed on May 11, 1949
was false or fraudulent in the sense that the value of the properties
were underdeclared and that the said return was also incomplete as the
heirs to the estate were not specified. Inasmuch as the respondent was
not furnished adequate data upon which to base an assessment, the
said return cannot be considered a true and complete return sufficient
to start the running of the period of limitations of five (5) years
prescribed in Section 331 of the Tax Code.
In the lower court the defense of the Commissioner of Internal Revenue against
Lilia Yusay Gonzales' plea of prescription, centered on the insufficiency and
fraudulence or falsity of the return filed by Jose Yusay. The Court of Tax Appeals
overruled the Commissioner of Internal Revenue. Said the Tax Code:
The provision of Section 332(a) of the Tax Code cannot be invoked in
this case as it was neither alleged in respondent's answer, nor proved
during the hearing that the return was false or fraudulent with intent to
evade the payment of tax. Moreover, the failure of respondent to charge
fraud and impose the penalty thereof in the assessments made in 1953,
1955 and 1956 is an eloquent demonstration that the filing of
petitioner's transfer tax return was not attended by falsity or fraud
with intent to evade tax.
xxx

xxx

xxx

But respondent urges upon us that the filing of the return did not start
the running of the five (5) year period for the reason that the return did
not disclose the heirs of the deceased Matias Yusay, and contained
inadequate data regarding the value of the estate. We believe that these
mere omissions do not require additional returns for the same. Altho
incomplete for being deficient on these matters, the return cannot be
regarded as a case of failure to file a return where want of good faith
and intent to evade the tax on the part of petitioner are not charged. It
served as a sufficient notice to the Commissioner of Internal Revenue to
make his assessment and start the running, of the period of limitation.
In this connection, it must be borne in mind that the Commissioner is
not confined to the taxpayer's return in making assessment of the tax,
and for this purpose he may secure additional information from other
sources. As was done in the case at bar, he sends investigators to
examine the taxpayer's records and other pertinent data. His
assessment is based upon the facts uncovered by the investigation
(Collector vs. Central Azucarera de Tarlac, G.R. Nos. L-11760 and L11761, July 31, 1958).

Furthermore, the failure to state the heirs in the return can be

attributed to the then unsettled conflict raging before the probate court
as to who are the heirs of the estate. Such failure could not have been a
deliberate attempt to mislead the government in the assessment of the
correct taxes.
In his appeal, the Commissioner of Internal Revenue assigned as third error of
the Court of Tax Appeals the finding that the assessment in question was "made
beyond the five-year statutory period provided in Section 332 (a) of the Tax
Code," and that the right of the Commissioner of Internal Revenue to assess the
estate and inheritance taxes has already prescribed. To sustain his side, the
Commissioner ventilated in his brief, fraud in the filing of the return, absence of
certain data from the return which prevented him from assessing thereon the
tax due and the pendency in this Court of L-11374 entitled "Intestate Estate of
the late Matias Yusay, Jose C. Yusay, Administrator vs. Lilia Yusay Gonzales"
which allegedly had the effect of suspending the running of the period of
limitations on assessment.
Clearly, therefore, it would be incorrect to say that the question of whether or
not the return filed by Jose Yusay was sufficient to start the running of the
statute of limitations to assess the corresponding tax, was not raised by the
Commissioner in the Court of Tax Appeals and in this Court.
Second. Movant contend that contrary to Our ruling, the return filed by Jose
Yusay was sufficient to start the statute of limitations on assessment. Inasmuch
as this question was amply discussed in Our decision sought to be reconsidered,
and no new argument was advanced, We deem it unnecessary to pass upon the
same. There is no reason for any change on Our stand on this point.
Third. Movant insists that since she administers only one-third of the estate of
Matias Yusay, she should not be liable for the whole tax. And she suggests that
We hold the intestate estate of Matias Yusay liable for said taxes, one-third to be
paid by Lilia Yusay Gonzales and two-thirds to be paid by Florencia P. Vda. de
Yusay.
The foregoing suggestion to require payment of two-thirds of the total taxes by
Florencia P. Vda. de Yusay is not acceptable, for she (Florencia P. Vda. de Yusay)
is not a party in this case.
It should be pointed out that Lilia Yusay Gonzales appealed the whole
assessment to the Court of Tax Appeals. Thereupon, the Commissioner of
Internal Revenue questioned her legal capacity to institute the appeal on the
ground that she administered only one-third of the estate of Matias Yusay. In
opposition, she espoused the view, which was sustained by the Tax Court, that

in co-administration, the administratrices are regarded as one person and the

acts of one of them in relation to the regular administration of the estate are
deemed to be the acts of all; hence, each administratrix can represent the whole
estate. In advancing such proposition, Lilia Yusay Gonzales represented the
whole estate and hoped to benefit from the favorable outcome of the case. For
the same reason that she represented her co-administratrix and the whole
estate of Matias Yusay, she risked being ordered to pay the whole assessment,
should the assessment be sustained.
Her change of stand adopted in the motion for reconsideration to the effect that
she should be made liable for only one-third of the total tax, would negate her
aforesaid proposition before the Court of Tax Appeals. She is now estopped
from denying liability for the whole tax.
At any rate, estate and inheritance taxes are satisfied from the estate and are to
be paid by the executor or administrator.1 Where there are two or more
executors, all of them are severally liable for the payment of the estate tax. 2 The
inheritance tax, although charged against the account of each beneficiary,
should be paid by the executor or administrator.3 Failure to pay the estate and
inheritance taxes before distribution of the estate would subject the executor or
administrator to criminal liability under Section 107(c) of the Tax Code.
It is immaterial therefore that Lilia Yusay Gonzales administers only one-third
of the estate and will receive as her share only said portion, for her right to the
estate comes after taxes.4 As an administratrix, she is liable for the entire estate
tax. As an heir, she is liable for the entire inheritance tax although her liability
would not exceed the amount of her share in the estate.5 The entire inheritance
tax which amounts to P39,178.12 excluding penalties is obviously much less
than her distributive share.
Motion for reconsideration denied.
Concepcion, C.J., Reyes, J.B.L., Dizon, Regala, Makalintal, Sanchez and Castro, JJ.,
concur.
Zaldivar, J., took no part.