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.: Supr-ema

Assailed in this petition for review on certiorari is the December 21, 1995 Decision[1] of the Court of Appeals[2] 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] Jur-is

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]Juri-ssc

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

On June 7, 1994, the CTA issued the assailed Resolution[8] 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.

1
The sole issue in this case involves the construction of section 79 [10] of the National Internal Revenue Code[11] (Tax Code) which
provides for the allowable deductions from the gross estate of the decedent. More particularly, the question is whether the notarial fee
paid for the extrajudicial settlement in the amount of P60,753 and the attorney's fees in the guardianship proceedings in the amount of
P50,000 may be allowed as deductions from the gross estate of decedent in order to arrive at the value of the net estate.

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

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

Respondent maintains that only judicial expenses of the testamentary or intestate proceedings are allowed as a
deduction to the gross estate. The amount of P60,753.00 is quite extraordinary for a mere notarial fee.

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

xxx.....xxx.....xxx

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

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. Sc-juris

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. ] Nc-mmis

In the United States, [a]dministrative expenses, executor's commissions and attorney's fees are considered allowable
deductions from the Gross Estate. Administrative expenses are limited to such expenses as are actually and
necessarily incurred in the administration of a decedent's estate. [PRENTICE-HALL, Federal Taxes Estate and Gift
Taxes (1936), p. 120, 533. ] Necessary expenses of administration are such expenses as are entailed for the
preservation and productivity of the estate and for its management for purposes of liquidation, payment of debts and
distribution of the residue among the persons entitled thereto. [Lizarraga Hermanos vs. Abada, 40 Phil. 124. ] They
must be incurred for the settlement of the estate as a whole. [34 Am. Jur. 2d, p. 765. ] Thus, where there were no
substantial community debts and it was unnecessary to convert community property to cash, the only practical

2
 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 estate 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: Newmiso

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. Acctmis

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. x x x

xxx.....xxx.....xxx

3
 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] Scc-alr

Judicial expenses are expenses of administration. [19] Administration expenses, as an allowable deduction from the gross estate of the
decedent for purposes of arriving at the value of the net estate, have been construed by the federal and state courts of the United
States to include all expenses "essential to the collection of the assets, payment of debts or the distribution of the property to the
persons entitled to it."[20] In other words, the expenses must be essential to the proper settlement of the estate. Expenditures incurred
for the individual benefit of the heirs, devisees or legatees are not deductible. [21] This distinction has been carried over to our
jurisdiction. Thus, in Lorenzo v. Posadas[22] the Court construed the phrase "judicial expenses of the testamentary or intestate
proceedings" as not including the compensation paid to a trustee of the decedent's estate when it appeared that such trustee was
appointed for the purpose of managing the decedent's real estate for the benefit of the testamentary heir. In another case, the Court
disallowed the premiums paid on the bond filed by the administrator as an expense of administration since the giving of a bond is in the
nature of a qualification for the office, and not necessary in the settlement of the estate.[23] Neither may attorney's fees incident to
litigation incurred by the heirs in asserting their respective rights be claimed as a deduction from the gross estate.[24]

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.

SO ORDERED.

Melo, (Chairman), Vitug, Panganiban, and Purisima, JJ., concur. Calrs-pped

THIRD DIVISION

RAFAEL ARSENIO S. DIZON, in his capacity as the Judicial G.R. No. 140944
Administrator of the Estate of the deceased JOSE P.
FERNANDEZ, Present:
Petitioner,
YNARES-SANTIAGO, J.,
Chairperson,
- versus - AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
NACHURA, and
COURT OF TAX APPEALS andCOMMISSIONER OF REYES, JJ.
INTERNAL REVENUE,
Respondents. Promulgated:

April 30, 2008

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

DECISION

4
NACHURA, J.:

Before this Court is a Petition for Review on Certiorari[1] under Rule 45 of the Rules of Civil Procedure seeking the reversal of the Court

of Appeals (CA) Decision[2] datedApril 30, 1999 which affirmed the Decision[3] of the Court of Tax Appeals (CTA) dated June 17, 1997.[4]

The Facts

On November 7, 1987, Jose P. Fernandez (Jose) died. Thereafter, a petition for the probate of his will [5] was filed with Branch 51 of the

Regional Trial Court (RTC) of Manila(probate court).[6] The probate court then appointed retired Supreme Court Justice Arsenio P.

Dizon (Justice Dizon) and petitioner, Atty. Rafael Arsenio P. Dizon (petitioner) as Special and Assistant Special Administrator,

respectively, of the Estate of Jose (Estate). In a letter[7] dated October 13, 1988, Justice Dizon informed respondent Commissioner of

the Bureau of Internal Revenue (BIR) of the special proceedings for the Estate.

Petitioner alleged that several requests for extension of the period to file the required estate tax return were granted by the BIR since
the assets of the estate, as well as the claims against it, had yet to be collated, determined and identified. Thus, in a

letter[8] dated March 14, 1990, Justice Dizon authorized Atty. Jesus M. Gonzales (Atty. Gonzales) to sign and file on behalf of the Estate

the required estate tax return and to represent the same in securing a Certificate of Tax Clearance. Eventually, on April 17, 1990, Atty.

Gonzales wrote a letter[9] addressed to the BIR Regional Director for San Pablo City and filed the estate tax return[10] with the same BIR

Regional Office, showing therein a NIL estate tax liability, computed as follows:

COMPUTATION OF TAX

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

Conjugal Personal Property (Sch.2) 3,460,591.34
Taxable Transfer (Sch. 3)
Gross Conjugal Estate 14,315,611.34
Less: Deductions (Sch. 4) 187,822,576.06
Net Conjugal Estate NIL
Less: Share of Surviving Spouse NIL .
Net Share in Conjugal Estate NIL
xxx
Net Taxable Estate NIL .
Estate Tax Due NIL .[11]

On April 27, 1990, BIR Regional Director for San Pablo City, Osmundo G. Umali issued Certification Nos. 2052 [12] and
2053[13] stating that the taxes due on the transfer of real and personal properties [14] of Jose had been fully paid and said properties may

be transferred to his heirs. Sometime in August 1990, Justice Dizon passed away. Thus, onOctober 22, 1990, the probate court

appointed petitioner as the administrator of the Estate. [15]

Petitioner requested the probate court's authority to sell several properties forming part of the Estate, for the purpose of paying

its creditors, namely: Equitable Banking Corporation (P19,756,428.31), Banque de L'Indochine et. de Suez (US$4,828,905.90 as of

January 31, 1988), Manila Banking Corporation (P84,199,160.46 as of February 28, 1989) and State Investment House, Inc.

(P6,280,006.21). Petitioner manifested that Manila Bank, a major creditor of the Estate was not included, as it did not file a claim with

the probate court since it had security over several real estate properties forming part of the Estate. [16]

5
 However, on November 26, 1991, the Assistant Commissioner for Collection of the BIR, Themistocles Montalban, issued

Estate Tax Assessment Notice No. FAS-E-87-91-003269,[17] demanding the payment of P66,973,985.40 as deficiency estate tax,

itemized as follows:

Deficiency Estate Tax- 1987

Estate tax P31,868,414.48

25% surcharge- late filing 7,967,103.62
late payment 7,967,103.62
Interest 19,121,048.68
Compromise-non filing 25,000.00
non payment 25,000.00
no notice of death 15.00
no CPA Certificate 300.00

Total amount due & collectible P66,973,985.40[18]

In his letter[19] dated December 12, 1991, Atty. Gonzales moved for the reconsideration of the said estate tax assessment. However, in

her letter[20] dated April 12, 1994, the BIR Commissioner denied the request and reiterated that the estate is liable for the payment

of P66,973,985.40 as deficiency estate tax. On May 3, 1994, petitioner received the letter of denial. On June 2, 1994, petitioner filed a

petition for review[21] before respondent CTA. Trial on the merits ensued.

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

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

Nature of Document (sic) Exhibits 7. Claim of the Manila Banking

Corporation (MBC) which as of
1. Letter dated October 13, 1988 November 7, 1987 amounts to
from Arsenio P. Dizon addressed P65,158,023.54, but recomputed
to the Commissioner of Internal as of February 28, 1989 at a
Revenue informing the latter of total amount of P84,199,160.46;
the special proceedings for the together with the demand letter
settlement of the estate (p. 126, from MBC's lawyer (pp. 194-197,
BIR records); "A" BIR records); "F" to "F-3"

2. Petition for the probate of the 8. Demand letter of Manila Banking

will and issuance of letter of Corporation prepared by Asedillo,
administration filed with the Ramos and Associates Law Offices
Regional Trial Court (RTC) of addressed to Fernandez Hermanos,
Manila, docketed as Sp. Proc. Inc., represented by Jose P.
No. 87-42980 (pp. 107-108, BIR Fernandez, as mortgagors, in the
records); "B" & "B-1 total amount of P240,479,693.17
as of February 28, 1989
3. Pleading entitled "Compliance" (pp. 186-187, BIR records); "G" & "G-1"
filed with the probate Court
submitting the final inventory 9. Claim of State Investment
of all the properties of the House, Inc. filed with the
deceased (p. 106, BIR records); "C" RTC, Branch VII of Manila,
docketed as Civil Case No.
4. Attachment to Exh. "C" which 86-38599 entitled "State
is the detailed and complete Investment House, Inc.,
listing of the properties of Plaintiff, versus Maritime
the deceased (pp. 89-105, BIR rec.); "C-1" to "C-17" Company Overseas, Inc. and/or
Jose P. Fernandez, Defendants,"
5. Claims against the estate filed (pp. 200-215, BIR records); "H" to "H-16"
by Equitable Banking Corp. with
the probate Court in the amount 10. Letter dated March 14, 1990
of P19,756,428.31 as of March 31, of Arsenio P. Dizon addressed
1988, together with the Annexes to Atty. Jesus M. Gonzales,
to the claim (pp. 64-88, BIR records); "D" to "D-24" (p. 184, BIR records); "I"

6. Claim filed by Banque de L' 11. Letter dated April 17, 1990
Indochine et de Suez with the from J.M. Gonzales addressed
probate Court in the amount of to the Regional Director of
US $4,828,905.90 as of January 31, BIR in San Pablo City
1988 (pp. 262-265, BIR records); "E" to "E-3" (p. 183, BIR records); "J"

6
 12. Estate Tax Return filed by Dizon as Judicial Administrator
the estate of the late Jose P. of the estate of Jose P.
Fernandez through its authorized Fernandez; (p. 102, CTA records)
representative, Atty. Jesus M. and "L"
Gonzales, for Arsenio P. Dizon,
with attachments (pp. 177-182, 14. Certification of Payment of
BIR records); "K" to "K-5" estate taxes Nos. 2052 and
2053, both dated April 27, 1990,
issued by the Office of the
13. Certified true copy of the Regional Director, Revenue
Letter of Administration Region No. 4-C, San Pablo
issued by RTC Manila, Branch City, with attachments
51, in Sp. Proc. No. 87-42980 (pp. 103-104, CTA records.). "M" to "M-5"
appointing Atty. Rafael S.

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

7. Signature of Maximino V.
Tagle also appearing on
Documents/ p. 2 of Exh. "2"; -do-
Signatures BIR Record
8. Summary of revenue
1. Estate Tax Return prepared by Enforcement Officers Audit
the BIR; p. 138 Report, dated July 19, 1991; p. 139

2. Signatures of Ma. Anabella 9. Signature of Alberto

Abuloc and Alberto Enriquez, Enriquez at the lower
Jr. appearing at the lower portion of Exh. "3"; -do-
Portion of Exh. "1"; -do-
10. Signature of Ma. Anabella A.
3. Memorandum for the Commissioner, Abuloc at the lower
dated July 19, 1991, prepared by portion of Exh. "3"; -do-
revenue examiners, Ma. Anabella A.
Abuloc, Alberto S. Enriquez and 11. Signature of Raymond S.
Raymund S. Gallardo; Reviewed by Gallardo at the lower
Maximino V. Tagle pp. 143-144 portion of Exh. "3"; -do-

4. Signature of Alberto S. 12. Signature of Maximino

Enriquez appearing at the V. Tagle at the lower
lower portion on p. 2 of Exh. "2"; -do- portion of Exh. "3"; -do-

5. Signature of Ma. Anabella A. 13. Demand letter (FAS-E-87-91-00),

Abuloc appearing at the signed by the Asst. Commissioner
lower portion on p. 2 of Exh. "2"; -do- for Collection for the Commissioner
of Internal Revenue, demanding
6. Signature of Raymund S. payment of the amount of
Gallardo appearing at the P66,973,985.40; and p. 169
Lower portion on p. 2 of Exh. "2"; -do-
14. Assessment Notice FAS-E-87-91-00 pp. 169-170[22]

The CTA's Ruling

On June 17, 1997, the CTA denied the said petition for review. Citing this Court's ruling in Vda. de Oate v. Court of Appeals,[23] the CTA

opined that the aforementioned pieces of evidence introduced by the BIR were admissible in evidence. The CTA ratiocinated:
Although the above-mentioned documents were not formally offered as evidence for respondent, considering that
respondent has been declared to have waived the presentation thereof during the hearing on March 20, 1996, still
they could be considered as evidence for respondent since they were properly identified during the presentation of
respondent's witness, whose testimony was duly recorded as part of the records of this case. Besides, the documents
marked as respondent's exhibits formed part of the BIR records of the case.[24]

Nevertheless, the CTA did not fully adopt the assessment made by the BIR and it came up with its own computation of the deficiency

estate tax, to wit:

Conjugal Real Property P 5,062,016.00

Conjugal Personal Prop. 33,021,999.93
7
 Gross Conjugal Estate 38,084,015.93
Less: Deductions 26,250,000.00
Net Conjugal Estate P 11,834,015.93
Less: Share of Surviving Spouse 5,917,007.96
Net Share in Conjugal Estate P 5,917,007.96
Add: Capital/Paraphernal
Properties P44,652,813.66
Less: Capital/Paraphernal
Deductions 44,652,813.66
Net Taxable Estate P 50,569,821.62
============

Estate Tax Due P 29,935,342.97

Add: 25% Surcharge for Late Filing 7,483,835.74
Add: Penalties for-No notice of death 15.00
No CPA certificate 300.00
Total deficiency estate tax P 37,419,493.71
=============

exclusive of 20% interest from due date of its payment until full payment thereof
[Sec. 283 (b), Tax Code of 1987].[25]

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

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

SO ORDERED.[26]

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

The CA's Ruling

On April 30, 1999, the CA affirmed the CTA's ruling. Adopting in full the CTA's findings, the CA ruled that the petitioner's act of filing an

estate tax return with the BIR and the issuance of BIR Certification Nos. 2052 and 2053 did not deprive the BIR Commissioner of her

authority to re-examine or re-assess the said return filed on behalf of the Estate.[28]

On May 31, 1999, petitioner filed a Motion for Reconsideration [29] which the CA denied in its Resolution[30] dated November 3, 1999.
Hence, the instant Petition raising the following issues:

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

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

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

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

8
The petitioner claims that in as much as the valid claims of creditors against the Estate are in excess of the gross estate, no estate tax
was due; that the lack of a formal offer of evidence is fatal to BIR's cause; that the doctrine laid down in Vda. de Oate has already been

abandoned in a long line of cases in which the Court held that evidence not formally offered is without any weight or value; that Section

34 of Rule 132 of the Rules on Evidence requiring a formal offer of evidence is mandatory in character; that, while BIR's witness Alberto

Enriquez (Alberto) in his testimony before the CTA identified the pieces of evidence aforementioned such that the same were marked,

BIR's failure to formally offer said pieces of evidence and depriving petitioner the opportunity to cross-examine Alberto, render the same
inadmissible in evidence; that assuming arguendo that the ruling in Vda. de Oate is still applicable, BIR failed to comply with the

doctrine's requisites because the documents herein remained simply part of the BIR records and were not duly incorporated in the court

records; that the BIR failed to consider that although the actual payments made to the Estate creditors were lower than their respective

claims, such were compromise agreements reached long after the Estate's liability had been settled by the filing of its estate tax return

and the issuance of BIR Certification Nos. 2052 and 2053; and that the reckoning date of the claims against the Estate and the

settlement of the estate tax due should be at the time the estate tax return was filed by the judicial administrator and the issuance of

said BIR Certifications and not at the time the aforementioned Compromise Agreements were entered into with the Estate's creditors. [32]

On the other hand, respondent counters that the documents, being part of the records of the case and duly identified in a duly recorded

testimony are considered evidence even if the same were not formally offered; that the filing of the estate tax return by the Estate and

the issuance of BIR Certification Nos. 2052 and 2053 did not deprive the BIR of its authority to examine the return and assess the

estate tax; and that the factual findings of the CTA as affirmed by the CA may no longer be reviewed by this Court via a petition for

review.[33]

The Issues

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

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

offered by the BIR; and

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

Estate.
The Courts Ruling

The Petition is impressed with merit.

Under Section 8 of RA 1125, the CTA is categorically described as a court of record. As cases filed before it are litigated de novo,

party-litigants shall prove every minute aspect of their cases. Indubitably, no evidentiary value can be given the pieces of evidence

submitted by the BIR, as the rules on documentary evidence require that these documents must be formally offered before the
CTA.[34] Pertinent is Section 34, Rule 132 of the Revised Rules on Evidence which reads:

SEC. 34. Offer of evidence. The court shall consider no evidence which has not been formally offered. The purpose
for which the evidence is offered must be specified.
9
 The CTA and the CA rely solely on the case of Vda. de Oate, which reiterated this Court's previous rulings in People v. Napat-

a[35] and People v. Mate[36] on the admission and consideration of exhibits which were not formally offered during the trial. Although in a

long line of cases many of which were decided after Vda. de Oate, we held that courts cannot consider evidence which has not been

formally offered,[37] nevertheless, petitioner cannot validly assume that the doctrine laid down in Vda. de Oate has already been

abandoned. Recently, in Ramos v. Dizon,[38] this Court, applying the said doctrine, ruled that the trial court judge therein committed no

error when he admitted and considered the respondents' exhibits in the resolution of the case, notwithstanding the fact that the same
were not formally offered. Likewise, in Far East Bank & Trust Company v. Commissioner of Internal Revenue,[39] the Court made

reference to said doctrine in resolving the issues therein. Indubitably, the doctrine laid down in Vda. De Oate still subsists in this

jurisdiction. In Vda. de Oate, we held that:

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

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

From the foregoing declaration, however, it is clear that Vda. de Oate is merely an exception to the general rule. Being an

exception, it may be applied only when there is strict compliance with the requisites mentioned therein; otherwise, the general rule in

Section 34 of Rule 132 of the Rules of Court should prevail.

In this case, we find that these requirements have not been satisfied. The assailed pieces of evidence were presented and marked

during the trial particularly when Alberto took the witness stand. Alberto identified these pieces of evidence in his direct testimony.[41] He

was also subjected to cross-examination and re-cross examination by petitioner.[42]But Albertos account and the exchanges between
Alberto and petitioner did not sufficiently describe the contents of the said pieces of evidence presented by the BIR. In fact, petitioner

sought that the lead examiner, one Ma. Anabella A. Abuloc, be summoned to testify, inasmuch as Alberto was incompetent to answer

questions relative to the working papers. [43] The lead examiner never testified. Moreover, while Alberto's testimony identifying the BIR's

evidence was duly recorded, the BIR documents themselves were not incorporated in the records of the case.

A common fact threads through Vda. de Oate and Ramos that does not exist at all in the instant case. In the aforementioned cases, the

exhibits were marked at the pre-trial proceedings to warrant the pronouncement that the same were duly incorporated in the records of
the case. Thus, we held in Ramos:

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

xxxx
10
 But what further defeats petitioner's cause on this issue is that respondents' exhibits were marked and admitted
during the pre-trial stage as shown by the Pre-Trial Order quoted earlier.[44]

While the CTA is not governed strictly by technical rules of evidence, [45] as rules of procedure are not ends in themselves and are

primarily intended as tools in the administration of justice, the presentation of the BIR's evidence is not a mere procedural technicality

which may be disregarded considering that it is the only means by which the CTA may ascertain and verify the truth of BIR's claims

against the Estate.[46] The BIR's failure to formally offer these pieces of evidence, despite CTA's directives, is fatal to its cause.[47] Such

failure is aggravated by the fact that not even a single reason was advanced by the BIR to justify such fatal omission. This, we take

against the BIR.

Per the records of this case, the BIR was directed to present its evidence [48] in the hearing of February 21, 1996, but BIR's counsel

failed to appear.[49] The CTA denied petitioner's motion to consider BIR's presentation of evidence as waived, with a warning to BIR that

such presentation would be considered waived if BIR's evidence would not be presented at the next hearing. Again, in the hearing of

March 20, 1996, BIR's counsel failed to appear. [50] Thus, in its Resolution[51] dated March 21, 1996, the CTA considered the BIR to have

waived presentation of its evidence. In the same Resolution, the parties were directed to file their respective memorandum. Petitioner

complied but BIR failed to do so.[52] In all of these proceedings, BIR was duly notified. Hence, in this case, we are constrained to apply
our ruling in Heirs of Pedro Pasag v. Parocha:[53]

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

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

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

Ordinarily, the CTA's findings, as affirmed by the CA, are entitled to the highest respect and will not be disturbed on appeal

unless it is shown that the lower courts committed gross error in the appreciation of facts. [54] In this case, however, we find the decision

of the CA affirming that of the CTA tainted with palpable error.

It is admitted that the claims of the Estate's aforementioned creditors have been condoned. As a mode of extinguishing an

obligation,[55] condonation or remission of debt[56] is defined as:

an act of liberality, by virtue of which, without receiving any equivalent, the creditor renounces the enforcement of the
obligation, which is extinguished in its entirety or in that part or aspect of the same to which the remission refers. It is
an essential characteristic of remission that it be gratuitous, that there is no equivalent received for the benefit given;
once such equivalent exists, the nature of the act changes. It may become dation in payment when the creditor
11
 receives a thing different from that stipulated; or novation, when the object or principal conditions of the obligation
should be changed; or compromise, when the matter renounced is in litigation or dispute and in exchange of some
concession which the creditor receives.[57]

Verily, the second issue in this case involves the construction of Section 79 [58] of the National Internal Revenue Code[59] (Tax Code)

which provides for the allowable deductions from the gross estate of the decedent. The specific question is whether the actual claims of

the aforementioned creditors may be fully allowed as deductions from the gross estate of Jose despite the fact that the said claims were

reduced or condoned through compromise agreements entered into by the Estate with its creditors.

Claims against the estate, as allowable deductions from the gross estate under Section 79 of the Tax Code, are basically a

reproduction of the deductions allowed under Section 89 (a) (1) (C) and (E) of Commonwealth Act No. 466 (CA 466), otherwise known

as the National Internal Revenue Code of 1939, and which was the first codification of Philippine tax laws. Philippine tax laws were, in

turn, based on the federal tax laws of the United States. Thus, pursuant to established rules of statutory construction, the decisions of

American courts construing the federal tax code are entitled to great weight in the interpretation of our own tax laws. [60]

It is noteworthy that even in the United States, there is some dispute as to whether the deductible amount for a claim against the estate

is fixed as of the decedent's death which is the general rule, or the same should be adjusted to reflect post-death developments, such

as where a settlement between the parties results in the reduction of the amount actually paid. [61] On one hand, the U.S. court ruled that
the appropriate deduction is the value that the claim had at the date of the decedent's death. [62] Also, as held in Propstra v.

U.S.,[63] where a lien claimed against the estate was certain and enforceable on the date of the decedent's death, the fact that the

claimant subsequently settled for lesser amount did not preclude the estate from deducting the entire amount of the claim for estate tax

purposes. These pronouncements essentially confirm the general principle that post-death developments are not material in

determining the amount of the deduction.

On the other hand, the Internal Revenue Service (Service) opines that post-death settlement should be taken into

consideration and the claim should be allowed as a deduction only to the extent of the amount actually paid. [64] Recognizing the dispute,

the Service released Proposed Regulations in 2007 mandating that the deduction would be limited to the actual amount paid. [65]

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

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

We express our agreement with the date-of-death valuation rule, made pursuant to the ruling of the U.S. Supreme Court in Ithaca Trust

Co. v. United States.[68] First. There is no law, nor do we discern any legislative intent in our tax laws, which disregards the date-of-

death valuation principle and particularly provides that post-death developments must be considered in determining the net value of the

estate. It bears emphasis that tax burdens are not to be imposed, nor presumed to be imposed, beyond what the statute expressly and

12
clearly imports, tax statutes being construed strictissimi juris against the government.[69] Any doubt on whether a person, article or

activity is taxable is generally resolved against taxation. [70] Second. Such construction finds relevance and consistency in our Rules on

Special Proceedings wherein the term "claims" required to be presented against a decedent's estate is generally construed to mean

debts or demands of a pecuniary nature which could have been enforced against the deceased in his lifetime, or liability contracted by
the deceased before his death.[71] Therefore, the claims existing at the time of death are significant to, and should be made the basis of,

the determination of allowable deductions.

WHEREFORE, the instant Petition is GRANTED. Accordingly, the assailed Decision dated April 30, 1999 and the Resolution dated

November 3, 1999 of the Court of Appeals in CA-G.R. S.P. No. 46947 are REVERSED and SET ASIDE. The Bureau of Internal

Revenue's deficiency estate tax assessment against the Estate of Jose P. Fernandez is hereby NULLIFIED. No costs.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

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

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

Pelaez, Pelaez, & Pelaez Law Office for petitioners.

Ceniza, Rama & Associates for private respondents.

PLANA, J.:

I. FACTS:

This is a case of hereditary succession.

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

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

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

On December 7, 1970, QUEMADA as special administrator, instituted against PASTOR, JR. and his wife an action for reconveyance of
alleged properties of the estate, which included the properties subject of the legacy and which were in the names of the spouses

13
PASTOR, JR. and his wife, Maria Elena Achaval de Pastor, who claimed to be the owners thereof in their own rights, and not by
inheritance. The action, docketed as Civil Case No. 274-R, was filed with the Court of First Instance of Cebu, Branch IX.

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

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

For two years after remand of the case to the PROBATE COURT, QUEMADA filed pleading after pleading asking for payment of his
legacy and seizure of the properties subject of said legacy. PASTOR, JR. and SOFIA opposed these pleadings on the ground of
pendency of the reconveyance suit with another branch of the Cebu Court of First Instance. All pleadings remained unacted upon by
the PROBATE COURT.

On March 5, 1980, the PROBATE COURT set the hearing on the intrinsic validity of the will for March 25, 1980, but upon objection of
PASTOR, JR. and SOFIA on the e ground of pendency of the reconveyance suit, no hearing was held on March 25. Instead, the
PRO14BATE COURT required the parties to submit their respective position papers as to how much inheritance QUEMADA was
entitled to receive under the wig. Pursuant thereto, PASTOR. JR. and SOFIA submitted their Memorandum of authorities dated April
10, which in effect showed that determination of how much QUEMADA should receive was still premature. QUEMADA submitted his
Position paper dated April 20, 1980. ATLAS, upon order of the Court, submitted a sworn statement of royalties paid to the Pastor Group
of tsn from June 1966 (when Pastor, Sr. died) to February 1980. The statement revealed that of the mining claims being operated by
ATLAS, 60% pertained to the Pastor Group distributed as follows:

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

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

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

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

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

The order being "immediately executory", QUEMADA succeeded in obtaining a Writ of Execution and Garnishment on September 4,
1980, and in serving the same on ATLAS on the same day. Notified of the Order on September 6, 1980, the oppositors sought
reconsideration thereof on the same date primarily on the ground that the PROBATE COURT gravely abused its discretion when it
resolved the question of ownership of the royalties and ordered the payment of QUEMADA's legacy after prematurely passing upon the
intrinsic validity of the will. In the meantime, the PROBATE COURT ordered suspension of payment of all royalties due PASTOR, JR.
and/or his assignees until after resolution of oppositors' motion for reconsideration.

Before the Motion for Reconsideration could be resolved, however, PASTOR, JR., this time joined by his wife Ma. ELENA ACHAVAL
DE PASTOR, filed with the Court of Appeals a Petition for certiorari and Prohibition with a prayer for writ of preliminary injunction (CA-
G.R. No. SP- 11373-R). They assailed the Order dated August 20, 1980 and the writ of execution and garnishment issued pursuant
thereto. The petition was denied on November 18, 1980 on the grounds (1) that its filing was premature because the Motion for
Reconsideration of the questioned Order was still pending determination by the PROBATE COURT; and (2) that although "the rule that
a motion for reconsideration is prerequisite for an action for certiorari is never an absolute rule," the Order assailed is "legally valid. "

On December 9, 1980, PASTOR, JR. and his wife moved for reconsideration of the Court of Appeal's decision of November 18, 1980,
calling the attention of the appellate court to another order of the Probate Court dated November 11, 1980 (i.e., while their petition for
certiorari was pending decision in the appellate court), by which the oppositors' motion for reconsideration of the Probate Court's Order

14
of August 20, 1980 was denied. [The November 11 Order declared that the questions of intrinsic validity of the will and of ownership
over the mining claims (not the royalties alone) had been finally adjudicated by the final and executory Order of December 5, 1972, as
affirmed by the Court of Appeals and the Supreme Court, thereby rendering moot and academic the suit for reconveyance then pending
in the Court of First Instance of Cebu, Branch IX. It clarified that only the 33% share of PASTOR, JR. in the royalties (less than 7.5%
share which he had assigned to QUEMADA before PASTOR, SR. died) was to be garnished and that as regards PASTOR, SR.'s 42%
share, what was ordered was just the transfer of its possession to the custody of the PROBATE COURT through the special
administrator. Further, the Order granted QUEMADA 6% interest on his unpaid legacy from August 1980 until fully paid.] Nonetheless,
the Court of Appeals denied reconsideration.

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

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

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

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

Upon Motion for Reconsideration of the October 18, 1982 and December 13, 1982 Resolutions, the Court en banc resolved to
CONFIRM the questioned resolutions insofar as hey resolved that the petition in fact and in effect had been given due course.

II. ISSUES:

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

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

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

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

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

III. DISCUSSION:

1. Issue of Ownership

15
(a) In a special proceeding for the probate of a will, the issue by and large is restricted to the extrinsic validity of the will, i.e., whether
the testator, being of sound mind, freely executed the will in accordance with the formalities prescribed by law. (Rules of Court, Rule 75,
Section 1; Rule 76, Section 9.) As a rule, the question of ownership is an extraneous matter which the Probate Court cannot resolve
with finality. Thus, for the purpose of determining whether a certain property should or should not be included in the inventory of estate
properties, the Probate Court may pass upon the title thereto, but such determination is provisional, not conclusive, and is subject to the
final decision in a separate action to resolve title. [3 Moran, Comments on the Rules of Court (1980 ed.), p. 458; Valero Vda. de
Rodriguez vs. Court of Appeals, 91 SCRA 540.]

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

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

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

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

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

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

Then came what purports to be the dispositive portion:

Upon the foregoing premises, this Court rules on and resolves some of the problems and issues presented in these
proceedings, as follows:

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

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

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

1. To submit a complete inventory of the estate of the decedent-testator Alvaro

Pastor, Sr.

16
 2. To administer and to continue to put to prolific utilization of the properties of
the decedent;

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

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

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

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

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

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

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

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

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

2. Issue of Intrinsic Validity of the Holographic Will -

(a) When PASTOR, SR. died in 1966, he was survived by his wife, aside from his two legitimate children and one illegitimate son.
There is therefore a need to liquidate the conjugal partnership and set apart the share of PASTOR, SR.'s wife in the conjugal
partnership preparatory to the administration and liquidation of the estate of PASTOR, SR. which will include, among others, the

17
determination of the extent of the statutory usufructuary right of his wife until her death. * When the disputed Probate order was issued
on December 5, 1972, there had been no liquidation of the community properties of PASTOR, SR. and his wife.

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

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

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

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

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

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

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

3. Propriety of certiorari

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

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

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

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

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

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

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

18
The above provision clearly authorizes execution to enforce payment of debts of estate. A legacy is not a debt of the estate; indeed,
legatees are among those against whom execution is authorized to be issued.

... there is merit in the petitioners' contention that the probate court generally cannot issue a writ of execution. It is not
supposed to issue a writ of execution because its orders usually refer to the adjudication of claims against the estate
which the executor or administrator may satisfy without the necessity of resorting to a writ of execution. The probate
court, as such, does not render any judgment enforceable by execution.

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

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

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

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

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

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

SO ORDERED.

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.

DECISION
TORRES, JR., J.:

19
 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.
20
 (2) [a] The numerous pending court cases questioning the late President's ownership or interests in several properties (both personal and real)
make the total value of his estate, and the consequent estate tax due, incapable of exact pecuniary determination at this time. Thus, respondents
assessment of the estate tax and their issuance of the Notices of Levy and Sale are premature, confiscatory and oppressive.

[b] Petitioner, as one of the late President's compulsory heirs, was never notified, much less served with copies of the Notices of Levy, contrary
to the mandate of Section 213 of the NIRC. As such, petitioner was never given an opportunity to contest the Notices in violation of his right to
due process of law.

C. ON ACCOUNT OF THE CLEAR MERIT OF THE PETITION, RESPONDENT COURT MANIFESTLY ERRED IN RULING
THAT IT HAD NO POWER TO GRANT INJUNCTIVE RELIEF TO PETITIONER. SECTION 219 OF THE NIRC NOTWITHSTANDING,
COURTS POSSESS THE POWER TO ISSUE A WRIT OF PRELIMINARY INJUNCTION TO RESTRAIN RESPONDENTS
COMMISSIONER'S AND DE GUZMAN'S ARBITRARY METHOD OF COLLECTING THE ALLEGED DEFICIENCY ESTATE AND
INCOME TAXES BY MEANS OF LEVY.
The facts as found by the appellate court are undisputed, and are hereby adopted:

"On September 29, 1989, former President Ferdinand Marcos died in Honolulu, Hawaii, USA.

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

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

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

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

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

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

On February 22, 1993, the BIR Commissioner issued twenty-two notices of levy on real property against certain parcels of land owned by the
Marcoses - to satisfy the alleged estate tax and deficiency income taxes of Spouses Marcos.

On May 20, 1993, four more Notices of Levy on real property were issued for the purpose of satisfying the deficiency income taxes.

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

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

21
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]

22
 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

23
separately, and irrespective of the finality of the former, because the Government does not have the unbridled discretion to enforce
collection without regard to the clear provision of law."[14]
Petitioner specifically points out that applying Memorandum Circular No. 38-68, implementing Sections 318 and 324 of the old tax
code (Republic Act 5203), the BIR's Notices of Levy on the Marcos properties, were issued beyond the allowed period, and are
therefore null and void:

"...the Notices of Levy on Real Property (Annexes 0 to NN of Annex C of this Petition) in satisfaction of said assessments were still issued by
respondents well beyond the period mandated in Revenue Memorandum Circular No. 38-68. These Notices of Levy were issued only on 22 February
1993 and 20 May 1993 when at least seventeen (17) months had already lapsed from the last service of tax assessment on 12 September 1991. As no
notices of distraint of personal property were first issued by respondents, the latter should have complied with Revenue Memorandum Circular No.
38-68 and issued these Notices of Levy not earlier than three (3) months nor later than six (6) months from 12 September 1991. In accordance with
the Circular, respondents only had until 12 March 1992 (the last day of the sixth month) within which to issue these Notices of Levy. The Notices of
Levy, having been issued beyond the period allowed by law, are thus void and of no effect." [15]

We hold otherwise. The Notices of Levy upon real property were issued within the prescriptive period and in accordance with the
provisions of the present Tax Code. The deficiency tax assessment, having already become final, executory, and demandable, the
same can now be collected through the summary remedy of distraint or levy pursuant to Section 205 of the NIRC.
The applicable provision in regard to the prescriptive period for the assessment and collection of tax deficiency in this instance is
Article 223 of the NIRC, which pertinently provides:

"Sec. 223. Exceptions as to a period of limitation of assessment and collection of taxes.- (a) In the case of a false or fraudulent return with intent to
evade tax or of a failure to file a return, the tax may be assessed, or a proceeding in court for the collection of such tax may be begun without
assessment, at any time within ten (10) years after the discovery of the falsity, fraud, or omission: Provided, That, in a fraud assessment which has
become final and executory, the fact of fraud shall be judicially taken cognizance of in the civil or criminal action for the collection thereof.

xxx

(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
The omission to file an estate tax return, and the subsequent failure to contest or appeal the assessment made by the BIR is fatal
to the petitioner's cause, as under the above-cited provision, in case of failure to file a return, the tax may be assessed at any time
within ten years after the omission, and any tax so assessed may be collected by levy upon real property within three years following
the assessment of the tax. Since the estate tax assessment had become final and unappealable by the petitioner's default as regards
protesting the validity of the said assessment, there is now no reason why the BIR cannot continue with the collection of the said
tax. Any objection against the assessment should have been pursued following the avenue paved in Section 229 of the NIRC on
protests on assessments of internal revenue taxes.
Petitioner further argues that "the numerous pending court cases questioning the late president's ownership or interests in several
properties (both real and personal) make the total value of his estate, and the consequent estate tax due, incapable of exact pecuniary
determination at this time. Thus, respondents' assessment of the estate tax and their issuance of the Notices of Levy and sale are
premature and oppressive." He points out the pendency of Sandiganbayan Civil Case Nos. 0001-0034 and 0141, which were filed by
the government to question the ownership and interests of the late President in real and personal properties located within and outside
the Philippines. Petitioner, however, omits to allege whether the properties levied upon by the BIR in the collection of estate taxes upon
the decedent's estate were among those involved in the said cases pending in the Sandiganbayan. Indeed, the court is at a loss as to
how these cases are relevant to the matter at issue. The mere fact that the decedent has pending cases involving ill-gotten wealth does
not affect the enforcement of tax assessments over the properties indubitably included in his estate.
Petitioner also expresses his reservation as to the propriety of the BIR's total assessment of P23,292,607,638.00, stating that this
amount deviates from the findings of the Department of Justice's Panel of Prosecutors as per its resolution of 20 September
1991. Allegedly, this is clear evidence of the uncertainty on the part of the Government as to the total value of the estate of the late
President.
This is, to our mind, the petitioner's last ditch effort to assail the assessment of estate tax which had already become final and
unappealable.
It is not the Department of Justice which is the government agency tasked to determine the amount of taxes due upon the subject
estate, but the Bureau of Internal Revenue [16] whose determinations and assessments are presumed correct and made in good
faith.[17] The taxpayer has the duty of proving otherwise. In the absence of proof of any irregularities in the performance of official duties,
an assessment will not be disturbed. Even an assessment based on estimates is prima facie valid and lawful where it does not appear
to have been arrived at arbitrarily or capriciously. The burden of proof is upon the complaining party to show clearly that the
assessment is erroneous. Failure to present proof of error in the assessment will justify the judicial affirmance of said assessment.[18] In
this instance, petitioner has not pointed out one single provision in the Memorandum of the Special Audit Team which gave rise to the
24
questioned assessment, which bears a trace of falsity. Indeed, the petitioner's attack on the assessment bears mainly on the alleged
improbable and unconscionable amount of the taxes charged. But mere rhetoric cannot supply the basis for the charge of impropriety of
the assessments made.
Moreover, these objections to the assessments should have been raised, considering the ample remedies afforded the taxpayer
by the Tax Code, with the Bureau of Internal Revenue and the Court of Tax Appeals, as described earlier, and cannot be raised now via
Petition for Certiorari, under the pretext of grave abuse of discretion. The course of action taken by the petitioner reflects his disregard
or even repugnance of the established institutions for governance in the scheme of a well-ordered society. The subject tax
assessments having become final, executory and enforceable, the same can no longer be contested by means of a disguised
protest. In the main, Certiorari may not be used as a substitute for a lost appeal or remedy. [19]This judicial policy becomes more
pronounced in view of the absence of sufficient attack against the actuations of government.
On the matter of sufficiency of service of Notices of Assessment to the petitioner, we find the respondent appellate court's
pronouncements sound and resilient to petitioner's attacks.

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

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

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

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

Petitioner argues that all the questioned Notices of Levy, however, must be nullified for having been issued without validly serving
copies thereof to the petitioner. As a mandatory heir of the decedent, petitioner avers that he has an interest in the subject estate, and
notices of levy upon its properties should have been served upon him.
We do not agree. In the case of notices of levy issued to satisfy the delinquent estate tax, the delinquent taxpayer is the Estate of
the decedent, and not necessarily, and exclusively, the petitioner as heir of the deceased. In the same vein, in the matter of income tax
delinquency of the late president and his spouse, petitioner is not the taxpayer liable. Thus, it follows that service of notices of levy in
satisfaction of these tax delinquencies upon the petitioner is not required by law, as under Section 213 of the NIRC, which pertinently
states:
"xxx

...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"
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.
25
 SO ORDERED.
Regalado, (Chairman), Romero, Puno, and Mendoza, JJ., concur.

FIRST DIVISION
[G.R. No. 155541. January 27, 2004]
ESTATE OF THE LATE JULIANA DIEZ VDA. DE GABRIEL, petitioner, vs. COMMISSIONER OF INTERNAL
REVENUE, respondent.

DECISION
YNARES-SANTIAGO, J.:

This petition for review on certiorari assails the decision of the Court of Appeals in CA-G.R. CV No. 09107, dated September 30,
2002,[1] which reversed the November 19, 1995 Order of Regional Trial Court of Manila, Branch XXXVIII, in Sp. Proc. No. R-82-6994,
entitled Testate Estate of Juliana Diez Vda. De Gabriel. The petition was filed by the Estate of the Late Juliana Diez Vda. De Gabriel,
represented by Prudential Bank as its duly appointed and qualified Administrator.
As correctly summarized by the Court of Appeals, the relevant facts are as follows:
During the lifetime of the decedent, Juliana Vda. De Gabriel, her business affairs were managed by the Philippine Trust Company
(Philtrust). The decedent died on April 3, 1979. Two days after her death, Philtrust, through its Trust Officer, Atty. Antonio M. Nuyles,
filed her Income Tax Return for 1978. The return did not indicate that the decedent had died.
On May 22, 1979, Philtrust also filed a verified petition for appointment as Special Administrator with the Regional Trial Court of
Manila, Branch XXXVIII, docketed as Sp. Proc. No. R-82-6994. The court a quo appointed one of the heirs as Special
Administrator. Philtrusts motion for reconsideration was denied by the probate court.
On January 26, 1981, the court a quo issued an Order relieving Mr. Diez of his appointment, and appointed Antonio Lantin to take
over as Special Administrator. Subsequently, on July 30, 1981, Mr. Lantin was also relieved of his appointment, and Atty. Vicente
Onosa was appointed in his stead.
In the meantime, the Bureau of Internal Revenue conducted an administrative investigation on the decedents tax liability and
found a deficiency income tax for the year 1977 in the amount of P318,233.93. Thus, on November 18, 1982, the BIR sent by
registered mail a demand letter and Assessment Notice No. NARD-78-82-00501 addressed to the decedent c/o Philippine Trust
Company, Sta. Cruz, Manila which was the address stated in her 1978 Income Tax Return. No response was made by Philtrust. The
BIR was not informed that the decedent had actually passed away.
In an Order dated September 5, 1983, the court a quo appointed Antonio Ambrosio as the Commissioner and Auditor Tax
Consultant of the Estate of the decedent.
On June 18, 1984, respondent Commissioner of Internal Revenue issued warrants of distraint and levy to enforce collection of the
decedents deficiency income tax liability, which were served upon her heir, Francisco Gabriel. On November 22, 1984, respondent filed
a Motion for Allowance of Claim and for an Order of Payment of Taxes with the court a quo. On January 7, 1985, Mr. Ambrosio filed a
letter of protest with the Litigation Division of the BIR, which was not acted upon because the assessment notice had allegedly become
final, executory and incontestable.
On May 16, 1985, petitioner, the Estate of the decedent, through Mr. Ambrosio, filed a formal opposition to the BIRs Motion for
Allowance of Claim based on the ground that there was no proper service of the assessment and that the filing of the aforesaid claim
had already prescribed. The BIR filed its Reply, contending that service to Philippine Trust Company was sufficient service, and that the
filing of the claim against the Estate on November 22, 1984 was within the five-year prescriptive period for assessment and collection of
taxes under Section 318 of the 1977 National Internal Revenue Code (NIRC).
On November 19, 1985, the court a quo issued an Order denying respondents claim against the Estate, [2] after finding that there
was no notice of its tax assessment on the proper party. [3]
On July 2, 1986, respondent filed an appeal with the Court of Appeals, docketed as CA-G.R. CV No. 09107,[4] assailing the Order
of the probate court dated November 19, 1985. It was claimed that Philtrust, in filing the decedents 1978 income tax return on April 5,
1979, two days after the taxpayers death, had constituted itself as the administrator of the estate of the deceased at least insofar as
said return is concerned.[5] Citing Basilan Estate Inc. v. Commissioner of Internal Revenue,[6] respondent argued that the legal
requirement of notice with respect to tax assessments[7] requires merely that the Commissioner of Internal Revenue release, mail and
send the notice of the assessment to the taxpayer at the address stated in the return filed, but not that the taxpayer actually receive
said assessment within the five-year prescriptive period.[8] Claiming that Philtrust had been remiss in not notifying respondent of the
decedents death, respondent therefore argued that the deficiency tax assessment had already become final, executory and
incontestable, and that petitioner Estate was liable therefor.
On September 30, 2002, the Court of Appeals rendered a decision in favor of the respondent. Although acknowledging that the
bond of agency between Philtrust and the decedent was severed upon the latters death, it was ruled that the administrator of the Estate
26
had failed in its legal duty to inform respondent of the decedents death, pursuant to Section 104 of the National Internal Revenue Code
of 1977. Consequently, the BIRs service to Philtrust of the demand letter and Notice of Assessment was binding upon the Estate, and,
upon the lapse of the statutory thirty-day period to question this claim, the assessment became final, executory and incontestable. The
dispositive portion of said decision reads:

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

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

b. The costs of the suit.

SO ORDERED.[9]

Hence, the instant petition, raising the following issues:

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

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

Petitioner Estate denies that Philtrust had any legal personality to represent the decedent after her death. As such, petitioner
argues that there was no proper notice of the assessment which, therefore, never became final, executory and
incontestable.[10] Petitioner further contends that respondents failure to file its claim against the Estate within the proper period
prescribed by the Rules of Court is a fatal error, which forever bars its claim against the Estate. [11]
Respondent, on the other hand, claims that because Philtrust filed the decedents income tax return subsequent to her death,
Philtrust was the de facto administrator of her Estate.[12]Consequently, when the Assessment Notice and demand letter dated
November 18, 1982 were sent to Philtrust, there was proper service on the Estate. [13] Respondent further asserts that Philtrust had the
legal obligation to inform petitioner of the decedents death, which requirement is found in Section 104 of the NIRC of 1977. [14] Since
Philtrust did not, respondent contends that petitioner Estate should not be allowed to profit from this omission. [15] Respondent further
argues that Philtrusts failure to protest the aforementioned assessment within the 30-day period provided in Section 319-A of the NIRC
of 1977 meant that the assessment had already become final, executory and incontestable. [16]
The resolution of this case hinges on the legal relationship between Philtrust and the decedent, and, by extension, between
Philtrust and petitioner Estate. Subsumed under this primary issue is the sub-issue of whether or not service on Philtrust of the demand
letter and Assessment Notice No. NARD-78-82-00501 was valid service on petitioner, and the issue of whether Philtrusts inaction
thereon could bind petitioner. If both sub-issues are answered in the affirmative, respondents contention as to the finality of Assessment
Notice No. NARD-78-82-00501 must be answered in the affirmative. This is because Section 319-A of the NIRC of 1977 provides a
clear 30-day period within which to protest an assessment. Failure to file such a protest within said period means that the
assessment ipso jure becomes final and unappealable, as a consequence of which legal proceedings may then be initiated for
collection thereof.
We find in favor of the petitioner.
The first point to be considered is that the relationship between the decedent and Philtrust was one of agency, which is a personal
relationship between agent and principal. Under Article 1919 (3) of the Civil Code, death of the agent or principal automatically
terminates the agency. In this instance, the death of the decedent on April 3, 1979 automatically severed the legal relationship between
her and Philtrust, and such could not be revived by the mere fact that Philtrust continued to act as her agent when, on April 5, 1979, it
filed her Income Tax Return for the year 1978.
Since the relationship between Philtrust and the decedent was automatically severed at the moment of the Taxpayers
death, none of Philtrusts acts or omissions could bind the estate of the Taxpayer. Service on Philtrust of the demand letter and
Assessment Notice No. NARD-78-82-00501 was improperly done.
It must be noted that Philtrust was never appointed as the administrator of the Estate of the decedent, and, indeed, that the
court a quo twice rejected Philtrusts motion to be thus appointed. As of November 18, 1982, the date of the demand letter and
Assessment Notice, the legal relationship between the decedent and Philtrust had already been non-existent for three years.
Respondent claims that Section 104 of the National Internal Revenue Code of 1977 imposed the legal obligation on Philtrust to
inform respondent of the decedents death. The said Section reads:

27
SEC. 104. Notice of death to be filed. In all cases of transfers subject to tax or where, though exempt from tax, the gross value of the estate exceeds
three thousand pesos, the executor, administrator, or any of the legal heirs, as the case may be, within two months after the decedents death, or within
a like period after qualifying as such executor or administrator, shall give written notice thereof to the Commissioner of Internal Revenue.

The foregoing provision falls in Title III, Chapter I of the National Internal Revenue Code of 1977, or the chapter on Estate Tax,
and pertains to all cases of transfers subject to tax or where the gross value of the estate exceeds three thousand pesos. It has
absolutely no applicability to a case for deficiency income tax, such as the case at bar. It further lacks applicability since Philtrust
was never the executor, administrator of the decedents estate, and, as such, never had the legal obligation, based on the above
provision, to inform respondent of her death.
Although the administrator of the estate may have been remiss in his legal obligation to inform respondent of the decedents death,
the consequences thereof, as provided in Section 119 of the National Internal Revenue Code of 1977, merely refer to the imposition of
certain penal sanctions on the administrator. These do not include the indefinite tolling of the prescriptive period for making deficiency
tax assessments, or the waiver of the notice requirement for such assessments.
Thus, as of November 18, 1982, the date of the demand letter and Assessment Notice No. NARD-78-82-00501, there
was absolutely no legal obligation on the part of Philtrust to either (1) respond to the demand letter and assessment notice, (2) inform
respondent of the decedents death, or (3) inform petitioner that it had received said demand letter and assessment notice. This lack of
legal obligation was implicitly recognized by the Court of Appeals, which, in fact, rendered its assailed decision on grounds of equity. [17]
Since there was never any valid notice of this assessment, it could not have become final, executory and incontestable, and, for
failure to make the assessment within the five-year period provided in Section 318 of the National Internal Revenue Code of 1977,
respondents claim against the petitioner Estate is barred. Said Section 18 reads:

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

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

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

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

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

In this case, the assessment was served not even on an heir of the Estate, but on a completely disinterested third party. This
improper service was clearly not binding on the petitioner.
By arguing that (1) the demand letter and assessment notice were served on Philtrust, (2) Philtrust was remiss in its obligation to
respond to the demand letter and assessment notice, (3) Philtrust was remiss in its obligation to inform respondent of the decedents
death, and (4) the assessment notice is therefore binding on the Estate, respondent is arguing in circles. The most crucial point to be
remembered is that Philtrust had absolutely no legal relationship to the deceased, or to her Estate. There was therefore no assessment
served on the Estate as to the alleged underpayment of tax. Absent this assessment, no proceedings could be initiated in court for the
collection of said tax,[21] and respondents claim for collection, filed with the probate court only on November 22, 1984, was barred for
having been made beyond the five-year prescriptive period set by law.
WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals in CA-G.R. CV No. 09107, dated September 30,
2002, is REVERSED and SET ASIDE. The Order of the Regional Trial Court of Manila, Branch XXXVIII, in Sp. Proc. No. R-82-6994,
dated November 19, 1985, which denied the claim of the Bureau of Internal Revenue against the Estate of Juliana Diez Vda. De
Gabriel for the deficiency income tax of the decedent for the year 1977 in the amount of P318,223.93, is AFFIRMED.

28
 No pronouncement as to costs.
SO ORDERED.

FIRST DIVISION
COMMISSIONER OF G.R. No. 159694
INTERNAL REVENUE,
Petitioner, Present:
Panganiban, CJ,
- versus - Chairman,
Ynares-Santiago,
Austria-Martinez,
AZUCENA T. REYES, Callejo, Sr., and
Respondent. Chico-Nazario, JJ
x -- -- -- -- -- -- -- -- -- -- -- -- -- x

AZUCENA T. REYES, G.R. No. 163581

Petitioner,
- versus -
COMMISSIONER OF Promulgated:
INTERNAL REVENUE,
Respondent. January 27, 2006
x -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- x

DECISION

PANGANIBAN, CJ.:

Under the present provisions of the Tax Code and pursuant to elementary due process, taxpayers must be informed in writing of the

law and the facts upon which a tax assessment is based; otherwise, the assessment is void. Being invalid, the assessment cannot in

turn be used as a basis for the perfection of a tax compromise.

The Case

Before us are two consolidated[1] Petitions for Review[2] filed under Rule 45 of the Rules of Court, assailing the August 8, 2003
Decision[3] of the Court of Appeals (CA) in CA-GR SP No. 71392. The dispositive portion of the assailed Decision reads as follows:

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

The Facts
The CA narrated the facts as follows:

On July 8, 1993, Maria C. Tancinco (or decedent) died, leaving a 1,292 square-meter residential lot and an old house
thereon (or subject property) located at4931 Pasay Road, Dasmarias Village, Makati City.

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

On February 12, 1998, the Chief, Assessment Division, Bureau of Internal Revenue (or BIR), issued a preliminary
assessment notice against the estate in the amount of P14,580,618.67. On May 10, 1998, the heirs of the decedent

29
(or heirs) received a final estate tax assessment notice and a demand letter, both dated April 22, 1998, for the
amount of P14,912,205.47, inclusive of surcharge and interest.

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

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

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

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

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

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

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

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

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

On July 17, 2000, [Reyes] filed a Motion for the Issuance of a Writ of Preliminary Injunction or Status Quo Order,
which was granted by the CTA on July 26, 2000.Upon [Reyess] filing of a surety bond in the amount
of P27,000,000.00, the CTA issued a [R]esolution dated August 16, 2000 ordering [the CIR] to desist and refrain from
proceeding with the auction sale of the subject property or from issuing a [W]arrant of [D]istraint or [G]arnishment of
[B]ank [A]ccount[,] pending determination of the case and/or unless a contrary order is issued.

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

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

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

On December 26, 2000, [Reyes] filed an Ex-Parte Motion for Postponement of the hearing before the CTA scheduled
on January 9, 2001, citing her pending application for compromise with the BIR. The motion was granted and the
hearing was reset to February 6, 2001.

On January 29, 2001, [Reyes] moved for postponement of the hearing set on February 6, 2001, this time on the
ground that she had already paid the compromise amount of P1,062,778.20 but was still awaiting approval of the
National Evaluation Board (or NEB). The CTA granted the motion and reset the hearing to February 27, 2001.

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

30
 compromise is signed by the [CIR]. [Reyes] posited that the absence of the requisite initials and signature[s] on said
documents does not vitiate the perfected compromise.

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

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

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

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

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

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

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

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

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

xxxxxxxxx

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

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

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

Ruling of the Court of Appeals

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

The appellate court added, however, that it was premature to declare as perfected and consummated the compromise of the estates
tax liability. It explained that, where the basic tax assessed exceeded P1 million, or where the settlement offer was less than the
prescribed minimum rates, the National Evaluation Boards (NEB) prior evaluation and approval were the conditio sine qua non to the

31
perfection and consummation of any compromise.[8] Besides, the CA pointed out, Section 204(A) of the Tax Code applied to all
compromises, whether government-initiated or not.[9] Where the law did not distinguish, courts too should not distinguish.

Hence, this Petition.[10]

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

I.

Whether petitioners assessment against the estate is valid.

II.

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

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

First Issue:

Validity of the Assessment Against the Estate

The second paragraph of Section 228 of the Tax Code [12] is clear and mandatory. It provides as follows:

Sec. 228. Protesting of Assessment. --

xxxxxxxxx

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

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

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

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

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

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

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

32
Second, the non-retroactive application of Revenue Regulation (RR) No. 12-99 is of no moment, considering that it merely implements
the law.

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

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

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

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

Third, neither Section 229 nor RR 12-85 can prevail over Section 228 of the Tax Code.

No doubt, Section 228 has replaced Section 229. The provision on protesting an assessment has been amended. Furthermore, in case
of discrepancy between the law as amended and its implementing but old regulation, the former necessarily prevails. [18] Thus, between
Section 228 of the Tax Code and the pertinent provisions of RR 12-85, the latter cannot stand because it cannot go beyond the
provision of the law. The law must still be followed, even though the existing tax regulation at that time provided for a different
procedure. The regulation then simply provided that notice be sent to the respondent in the form prescribed, and that no consequence
would ensue for failure to comply with that form.

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

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

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

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

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

Second Issue:

Validity of Compromise

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

33
prescribed minimum rates, the compromise shall be subject to the approval of theNEB composed of the petitioner and four deputy
commissioners.

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

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

SO ORDERED.

SECOND DIVISION
[G.R. No. 155810. August 13, 2004]
LYDIA SUMIPAT, LAURITO SUMIPAT, ALEJANDRO SUMIPAT, ALICIA SUMIPAT, and LIRAFE SUMIPAT, petitioners,
vs. BRIGIDO BANGA, HERMINIGILDO TABOTABO, VIVIANO TABOTABO, BERNARDITA ANION, and LEONIDA
TABOTABO, respondents.

DECISION
TINGA, J.:

This is a Petition for Review on Certiorari[1] of the Decision[2] of the Court of Appeals which reversed and set aside the
decision[3] of the Regional Trial Court (RTC) and partially annulled the Deed of Absolute Transfer and/or Quitclaim (the deed) subject of
this case.
We quote the appellate courts findings of fact:

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

The couple was childless.

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

On January 5, 1983, Lauro Sumipat executed a document denominated DEED OF ABSOLUTE TRANSFER AND/OR QUIT-CLAIM
OVER REAL PROPERTIES (the assailed document) in favor of defendants-appellees covering the three parcels of land (the
properties). On the document appears the signature of his wife Placida which indicates that she gave her marital consent thereto.

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

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

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

Defendant-appellee Lydia disclaims participation in the execution of the assailed document, she claiming to have acquired knowledge
of its existence only on January 10, 1983 or five days after its execution when Lauro Sumipat gave the same to her.

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

The trial court found that the subject properties are conjugal having been acquired during the marriage of Lauro Sumipat and
Placida Tabotabo (Placida). However, because Placida failed to question the genuineness and due execution of the deed and even

34
admitted having affixed her signature thereon, the trial court declared that the entirety of the subject properties, and not just Lauro
Sumipats conjugal share, were validly transferred to the defendants, the petitioners herein. [5]
On appeal,[6] the appellate court held that since Placida was unlettered, [7] the appellees, the petitioners herein, as the parties
interested in enforcing the deed, have the burden of proving that the terms thereof were fully explained to her. [8] This they failed to do.
Under the Civil Code, a contract where consent is given through mistake, violence, intimidation, undue influence or fraud is
voidable.[9] In order that mistake may invalidate consent, it should refer to the substance of the thing which is the object of the contract,
or to those conditions which have principally moved one or both parties to enter into the contract. [10]
The appellate court found that Placida did not understand the full import of the deed because the terms thereof were not explained
to her either by the petitioners or by the notary public before whom the deed was acknowledged. According to the appellate court,
Judge Pacifico Garcia (Judge Garcia), before whom the deed was acknowledged, did not identify Placida as having appeared before
him on January 5, 1983 to acknowledge the deed. The jurat indicates that it was only Lauro Sumipat who appeared before Judge
Garcia and to whom he explained the contents of the deed. Further, the appellate court noted that Judge Garcia himself was under the
impression that the deed conveyed the exclusive properties of Lauro Sumipat. Hence, he could not have explained to Placida that the
deed actually transferred the conjugal properties of Lauro Sumipat and Placida. [11]
The Court of Appeals, therefore, annulled the deed insofar as it covers Placidas conjugal share in the subject properties because
the latters consent thereto was vitiated by mistake when she affixed her signature on the document.
The petitioners filed a Motion for Reconsideration on the grounds of estoppel, absence of fraud and prescription. The appellate
court denied the Motion for Reconsideration in its Resolution[12] dated October 16, 2002 ruling that the grounds relied upon have been
addressed in its Decision dated April 11, 2002. Anent the ground of prescription, the appellate court held that since the properties were
acquired through fraud or mistake, the petitioners are considered trustees of an implied trust for the benefit of Placida. Citing
jurisprudence,[13] the Court of Appeals ruled that actions based on implied or constructive trust prescribe 10 years from the issuance of
a Torrens Title over the property. Since two (2) of the subject properties were issued Transfer Certificates of Title (TCT) Numbered T-
40037[14] and T-40038[15] under the petitioners names on August 18, 1987, the Complaint for declaration of nullity of titles, partition,
recovery of ownership and possession, reconveyance, accounting and damages, which was filed on March 3, 1993, was filed well
within the prescriptive period.
The petitioners are now before this Court principally claiming that Placida freely consented to the execution of the deed and that
they did not commit fraudulent acts in connection with its execution. They also reiterate their argument that the Court of Appeals should
have dismissed the case on the ground of prescription. It is their contention that the present action being one to annul a contract on the
ground of fraud, it should have been filed within four (4) years from the discovery of fraud or registration of the instrument with the
Registry of Deeds.
The respondents filed their Comment[16] dated February 7, 2003, essentially echoing the findings of the Court of Appeals on the
matter of Placidas consent. According to them, Placida was deceived and misled into affixing her signature on the deed. They further
claim that Placida did not actually appear before the notary public to acknowledge the instrument.
In their Reply[17] dated April 29, 2003, the petitioners insist that Placida was not illiterate and that Lauro Sumipat validly transferred
the titles over the properties in question to them. They also argue that if Placida did not understand the import of the deed, she could
have questioned Lauro Sumipat about it since the deed was executed a year before the latter died.
The trial court and the Court of Appeals are in agreement that the subject properties are conjugal, having been acquired during
the marriage of Lauro Sumipat and Placida. They came out, however, with disparate denouements. While the trial court upheld the
validity of the deed as an instrument of transfer of all the litigated parcels of land in their entirety on the ground that Placida failed to
question its authenticity and due execution, the appellate court struck the deed down insofar as the conjugal share of Placida is
concerned based on its finding that her consent was vitiated by mistake.
At bottom, the crux of the controversy is whether the questioned deed by its terms or under the surrounding circumstances has
validly transferred title to the disputed properties to the petitioners.
A perusal of the deed reveals that it is actually a gratuitous disposition of property a donation although Lauro Sumipat imposed
upon the petitioners the condition that he and his wife, Placida, shall be entitled to one-half (1/2) of all the fruits or produce of the
parcels of land for their subsistence and support. The preliminary clauses of the deed read:

That conscious of my advanced age and failing health, I feel that I am not capable anymore of attending to and maintaining and
keeping in continuous cultivation my above described properties;

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

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

35
 The deed covers three (3) parcels of land.[19] Being a donation of immovable property, the requirements for validity set forth in
Article 749 of the Civil Code should have been followed, viz:

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

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

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

Title to immovable property does not pass from the donor to the donee by virtue of a deed of donation until and unless it has been
accepted in a public instrument and the donor duly notified thereof. The acceptance may be made in the very same instrument of
donation. If the acceptance does not appear in the same document, it must be made in another. Where the deed of donation fails to
show the acceptance, or where the formal notice of the acceptance, made in a separate instrument, is either not given to the donor or
else not noted in the deed of donation and in the separate acceptance, the donation is null and void.[20]
In this case, the donees acceptance of the donation is not manifested either in the deed itself or in a separate document. Hence,
the deed as an instrument of donation is patently void.
We also note the absence of any proof of filing of the necessary return, payment of donors taxes on the transfer, or exemption
from payment thereof. Under the National Internal Revenue Code of 1977, the tax code in force at the time of the execution of the deed,
an individual who makes any transfer by gift shall make a return and file the same within 30 days after the date the gift is made with the
Revenue District Officer, Collection Agent or duly authorized Treasurer of the municipality in which the donor was domiciled at the time
of the transfer.[21]The filing of the return and payment of donors taxes are mandatory. In fact, the registrar of deeds is mandated not to
register in the registry of property any document transferring real property by way of gifts inter vivos unless a certification that the taxes
fixed and actually due on the transfer had been paid or that the transaction is tax exempt from the Commissioner of Internal Revenue,
in either case, is presented.[22]
Neither can we give effect to the deed as a sale, barter or any other onerous conveyance, in the absence of valid cause or
consideration and consent competently and validly given. [23]While it is true that the appellate court found Placidas consent to have been
vitiated by mistake, her testimony on the matter actually makes out a case of total absence of consent, not merely vitiation thereof. She
testified in this regard, thus:
Q- What have you been doing on that day on January 5, 1983?

A- I was at home boiling water.

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

A- Lydia Sumipat arrived.

Court:-(To the witness)

Q- Who is this Lydia Sumipat?

A- The daughter of my husband with his paramour.

Q- How old was she?

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

Atty. Legorio:-(To the witness)

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

A- Yes, sir. She is the one.

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

A- She has already finished schooling.

Q- Do you know what she obtained?

A- Teacher.

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

A- She brought with her a paper.

Q- What did she say to you?

36
 A- She told me to sign that paper immediately because there is the witness waiting and so I asked from her what was that paper I am going
to sign. I asked her because I am unlettered but she said never mind just sign this immediately.

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

A- I have never gone to school.

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

A- I know how to write only my name.

Q- You know how to write your name only?

A- Yes, sir.

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

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

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

A- I did not give my land.[24]

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

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

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

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

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

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

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

q So you signed that paper?

a I signed it because she was in a hurry.

q That was done during the lifetime of your husband?

a Yes, sir.

q And your husband also signed that paper?

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

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

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

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

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

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

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

In Baranda v. Baranda,[26] this Court declared that the deeds of sale questioned therein are not merely voidable (as intimated by
the plaintiffs themselves in their complaint for annulment of the deeds and reconveyance of the lots) but null and void ab initio as the
supposed seller declared under oath that she signed the deeds without knowing what they were. The significant circumstance meant,
the Court added, that her consent was not merely marred by vices of consent so as to make the contracts voidable, but that she had
not given her consent at all.
Parenthetically, as Placidas Complaint is entitled Declaration of Nullity of Titles; Contracts; Partition, Recovery of Ownership and
Possession; Reconveyance; Accounting and Damages with Prayer for Preliminary Injunction and Receivership, the validity of the deed
was directly assailed, but its absolute nullity was not specifically raised as an issue. Nevertheless, both the RTC and the appellate court
took the cue from Placidas theory that the deed is merely voidable as regards her conjugal share of the properties. However, since the
real issue is whether the questioned deed has validly transferred ownership of the litigated properties, it is appropriate for the Court to
inquire into the form of the deed and the existence of valid consent thereto to ascertain the validity or nullity of the deed.
From the substantive and procedural standpoints, the objectives to write finis to a protracted litigation and avoid multiplicity of suits
are worth pursuing at all times. Conformably, we have ruled in a number of cases that an appellate court is accorded broad

37
discretionary power to consider even errors not assigned. We have applied this tenet, albeit as a matter of exception, in the following
instances: (1) grounds not assigned as errors but affecting jurisdiction over the subject matter; (2) matters not assigned as errors on
appeal but are evidently plain or clerical errors within contemplation of law; (3) matters not assigned as errors on appeal but
consideration of which is necessary in arriving at a just decision and complete resolution of the case or to serve the interests of justice
or to avoid dispensing piecemeal justice; (4) matters not specifically assigned as errors on appeal but raised in the trial court and are
matters of record having some bearing on the issue submitted which the parties failed to raise or which the lower court ignored; (5)
matters not assigned as errors on appeal but closely related to an error assigned; and (6) matters not assigned as errors on appeal but
upon which the determination of a question properly assigned is dependent. [27]
In the instant case, the validity of the deed was directly assailed although both parties are of the view that it is not an absolute
nullity. The correct characterization of the deed is, therefore, determinative of the present controversy. Elsewise framed, the issue of
validity or nullity is interwoven with the positions adopted by the parties and the rulings made by the courts below. Hence, we shall be
resolute in striking down the deed especially as it appears on its face to be a patent nullity.
Having said this, we shall now proceed to the issue of prescription. Being an absolute nullity, both as a donation and as a sale, the
deed is subject to attack at any time, in accordance with the rule in Article 1410 of the Civil Code that an action to declare the
inexistence of a void contract does not prescribe.
We are thus unimpressed by the petitioners contention that the appellate court should have dismissed Placidas appeal on the
ground of prescription. Passage of time cannot cure the fatal flaw in an inexistent and void contract.[28] The defect of inexistence of a
contract is permanent and incurable; hence, it cannot be cured either by ratification or by prescription. [29]
Turning now to the effects of the absolute nullity of the deed, it is well-settled that when there is a showing of illegality, the property
registered is deemed to be simply held in trust for the real owner by the person in whose name it is registered, and the former then has
the right to sue for the reconveyance of the property. The action for the purpose is also imprescriptible. As long as the land wrongfully
registered under the Torrens system is still in the name of the person who caused such registration, an action in personam will lie to
compel him to reconvey the property to the real owner. [30]
One final note. After this Decision shall have become final and executory, the parties may either extrajudicially divide the estates
of Lauro Sumipat and Placida Tabotabo pursuant to Rule 74 of the Rules of Court or judicially settle the estates pursuant to Rules
78, et seq., in accordance with this Decision and the law.
WHEREFORE, the instant Petition for Review on Certiorari is DENIED. The Decision of the Regional Trial Court dated September
29, 1997 and the Decision of the Court of Appeals dated April 11, 2002, as well as its Resolution dated October 16, 2002, are
VACATED. In lieu thereof, judgment is hereby rendered in favor of the respondents, to wit: (i) DECLARING the Deed of Absolute
Transfer and/or Quitclaim dated January 5, 1983 NULL AND VOID; and (ii) ORDERING the CANCELLATION of Transfer Certificates of
Title Numbered T-40037 and T-40038 (Zamboanga del Norte) and the tax declaration covering the unregistered parcel of land, all
issued in the names of the petitioners Lydia, Laurito, Alicia, Alejandro and Lirafe, all surnamed Sumipat, and the REINSTATEMENT of
Original Certificate of Title No. P-17842 (Zamboanga del Norte) Transfer Certificate Title No. T-15826 (Zamboanga del Norte) and the
tax declaration covering the unregistered parcel of land, all in the name of Lauro Sumipat . . . married to Placida Tabotabo.
Costs against the petitioners.
SO ORDERED.

FIRST DIVISION
[G.R. No. 120721. February 23, 2005]
MANUEL G. ABELLO, JOSE C. CONCEPCION, TEODORO D. REGALA, AVELINO V. CRUZ, petitioners, vs. COMMISSIONER OF
INTERNAL REVENUE and COURT OF APPEALS, respondents.

DECISION
AZCUNA, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Civil Procedure, assailing the decision of the Court of
Appeals in CA G.R. SP No. 27134, entitled Comissioner of Internal Revenue v. Manuel G. Abello, Jose C. Concepcion, Teodoro D.
Regala, Avelino V. Cruz and Court of Tax Appeals, which reversed and set aside the decision of the Court of Tax Appeals (CTA),
ordering the Commissioner of Internal Revenue (Commissioner) to withdraw his letters dated April 21, 1988 and August 4, 1988
assessing donors taxes and to desist from collecting donors taxes from petitioners.
During the 1987 national elections, petitioners, who are partners in the Angara, Abello, Concepcion, Regala and Cruz (ACCRA)
law firm, contributed P882,661.31 each to the campaign funds of Senator Edgardo Angara, then running for the Senate. In letters dated
April 21, 1988, the Bureau of Internal Revenue (BIR) assessed each of the petitioners P263,032.66 for their contributions. On August 2,
1988, petitioners questioned the assessment through a letter to the BIR. They claimed that political or electoral contributions are not
considered gifts under the National Internal Revenue Code (NIRC), and that, therefore, they are not liable for donors tax. The claim for
exemption was denied by the Commissioner.[1]

38
 On September 12, 1988, petitioners filed a petition for review with the CTA, which was decided on October 7, 1991 in favor of the
petitioners. As aforestated, the CTA ordered the Commissioner to desist from collecting donors taxes from the petitioners. [2]
On appeal, the Court of Appeals reversed and set aside the CTA decision on April 20, 1994. [3] The appellate Court ordered the
petitioners to pay donors tax amounting to P263,032.66 each, reasoning as follows:

The National Internal Revenue Code, as amended, provides:

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

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

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

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

As correctly pointed out by the Solicitor General:

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

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

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

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

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

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

Petitioners filed a motion for reconsideration, which the Court of Appeals denied in its resolution of June 16, 1995. [5]
Petitioners thereupon filed the instant petition on July 26, 1995. Raised are the following issues:
1. DID THE HONORABLE COURT OF APPEALS ERR WHEN IT FAILED TO CONSIDER IN ITS DECISION THE PURPOSE BEHIND THE
ENACTMENT OF OUR GIFT TAX LAW?

2. DID THE HONORABLE COURT OF APPEALS ERR IN NOT CONSIDERING THE INTENTION OF THE GIVERS IN DETERMINING
WHETHER OR NOT THE PETITIONERS POLITICAL CONTRIBUTIONS WERE GIFTS SUBJECT TO DONORS TAX?

3. DID THE HONORABLE COURT OF APPEALS ERR WHEN IT FAILED TO CONSIDER THE DEFINITION OF AN ELECTORAL
CONTRIBUTION UNDER THE OMNIBUS ELECTION CODE IN DETERMINING WHETHER OR NOT POLITICAL CONTRIBUTIONS
ARE TAXABLE?

39
 4. DID THE HONORABLE COURT OF APPEALS ERR IN NOT CONSIDERING THE ADMINISTRATIVE PRACTICE OF CLOSE TO HALF
A CENTURY OF NOT SUBJECTING POLITICAL CONTRIBUTIONS TO DONORS TAX?

5. DID THE HONORABLE COURT OF APPEALS ERR IN NOT CONSIDERING THE AMERICAN JURISPRUDENCE RELIED UPON BY
THE COURT OF TAX APPEALS AND BY THE PETITIONERS TO THE EFFECT THAT POLITICAL CONTRIBUTIONS ARE NOT
TAXABLE GIFTS?

6. DID THE HONORABLE COURT OF APPEALS ERR IN NOT APPLYING AMERICAN JURISPRUDENCE ON THE GROUND THAT THIS
WAS NOT KNOWN AT THE TIME THE PHILIPPINES GIFT TAX LAW WAS ADOPTED IN 1939?

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

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

First, Fifth and Sixth Issues

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

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

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

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

In matters which are governed by the Code of Commerce and special laws, their deficiency shall be supplied by the provisions of this Code.

Thus, reference may be made to the definition of a donation in the Civil Code. Article 725 of said Code defines donation as:

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

Donation has the following elements: (a) the reduction of the patrimony of the donor; (b) the increase in the patrimony of the donee;
and, (c) the intent to do an act of liberality or animus donandi.[7]
The present case falls squarely within the definition of a donation. Petitioners, the late Manuel G. Abello [8], Jose C. Concepcion,
Teodoro D. Regala and Avelino V. Cruz, each gave P882,661.31 to the campaign funds of Senator Edgardo Angara, without any
material consideration. All three elements of a donation are present. The patrimony of the four petitioners were reduced by P882,661.31
each. Senator Edgardo Angaras patrimony correspondingly increased by P3,530,645.24[9]. There was intent to do an act of liberality
or animus donandi was present since each of the petitioners gave their contributions without any consideration.
Taken together with the Civil Code definition of donation, Section 91 of the NIRC is clear and unambiguous, thereby leaving no
room for construction. In Rizal Commercial Banking Corporation v. Intermediate Appellate Court [10] the Court enunciated:

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

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

Only when the law is ambiguous or of doubtful meaning may the court interpret or construe its true intent. Ambiguity is a condition of admitting two
or more meanings, of being understood in more than one way, or of referring to two or more things at the same time. A statute is ambiguous if it is
admissible of two or more possible meanings, in which case, the Court is called upon to exercise one of its judicial functions, which is to interpret the
law according to its true intent.

Second Issue

40
 Since animus donandi or the intention to do an act of liberality is an essential element of a donation, petitioners argue that it is
important to look into the intention of the giver to determine if a political contribution is a gift. Petitioners argument is not tenable. First of
all, donative intent is a creature of the mind. It cannot be perceived except by the material and tangible acts which manifest its
presence. This being the case, donative intent is presumed present when one gives a part of ones patrimony to another without
consideration. Second, donative intent is not negated when the person donating has other intentions, motives or purposes which do not
contradict donative intent. This Court is not convinced that since the purpose of the contribution was to help elect a candidate, there
was no donative intent. Petitioners contribution of money without any material consideration evinces animus donandi. The fact that their
purpose for donating was to aid in the election of the donee does not negate the presence of donative intent.

Third Issue

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

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

Since the purpose of an electoral contribution is to influence the results of the election, petitioners again claim that donative intent
is not present. Petitioners attempt to place the barrier of mutual exclusivity between donative intent and the purpose of political
contributions. This Court reiterates that donative intent is not negated by the presence of other intentions, motives or purposes which do
not contradict donative intent.
Petitioners would distinguish a gift from a political donation by saying that the consideration for a gift is the liberality of the donor,
while the consideration for a political contribution is the desire of the giver to influence the result of an election by supporting candidates
who, in the perception of the giver, would influence the shaping of government policies that would promote the general welfare and
economic well-being of the electorate, including the giver himself.
Petitioners attempt is strained. The fact that petitioners will somehow in the future benefit from the election of the candidate to
whom they contribute, in no way amounts to a valuable material consideration so as to remove political contributions from the purview
of a donation. Senator Angara was under no obligation to benefit the petitioners. The proper performance of his duties as a legislator is
his obligation as an elected public servant of the Filipino people and not a consideration for the political contributions he received. In
fact, as a public servant, he may even be called to enact laws that are contrary to the interests of his benefactors, for the benefit of the
greater good.
In fine, the purpose for which the sums of money were given, which was to fund the campaign of Senator Angara in his bid for a
senatorial seat, cannot be considered as a material consideration so as to negate a donation.

Fourth Issue

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

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

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

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

Seventh Issue

41
 Petitioners question the fact that the Court of Appeals decision is based on a BIR ruling, namely BIR Ruling No. 88-344, which
was issued after the petitioners were assessed for donors tax. This Court does not need to delve into this issue. It is immaterial whether
or not the Court of Appeals based its decision on the BIR ruling because it is not pivotal in deciding this case. As discussed above,
Section 91 (now Section 98) of the NIRC as supplemented by the definition of a donation found in Article 725 of the Civil Code, is clear
and unambiguous, and needs no further elucidation.

Eighth Issue

Petitioners next contend that tax laws are construed liberally in favor of the taxpayer and strictly against the government. This rule
of construction, however, does not benefit petitioners because, as stated, there is here no room for construction since the law is clear
and unambiguous.
Finally, this Court takes note of the fact that subsequent to the donations involved in this case, Congress approved Republic Act
No. 7166 on November 25, 1991, providing in Section 13 thereof that political/electoral contributions, duly reported to the Commission
on Elections, are not subject to the payment of any gift tax. This all the more shows that the political contributions herein made are
subject to the payment of gift taxes, since the same were made prior to the exempting legislation, and Republic Act No. 7166 provides
no retroactive effect on this point.
WHEREFORE, the petition is DENIED and the assailed Decision and Resolution of the Court of Appeals are AFFIRMED.
No costs.
SO ORDERED.

SECOND DIVISION
[G.R. No. 111904. October 5, 2000]
SPS. AGRIPINO GESTOPA and ISABEL SILARIO GESTOPA, petitioners, vs. COURT OF APPEALS and MERCEDES DANLAG y
PILAPIL, respondents.

DECISION
QUISUMBING, J.:

This petition for review,[1] under Rule 45 of the Rules of Court, assails the decision[2]of the Court of Appeals dated August 31,
1993, in CA-G.R. CV No. 38266, which reversed the judgment[3] of the Regional Trial Court of Cebu City, Branch 5.
The facts, as culled from the records, are as follows:
Spouses Diego and Catalina Danlag were the owners of six parcels of unregistered lands. They executed three deeds of
donation mortis causa, two of which are dated March 4, 1965 and another dated October 13, 1966, in favor of private respondent
Mercedes Danlag-Pilapil.[4] The first deed pertained to parcels 1 & 2 with Tax Declaration Nos. 11345 and 11347, respectively. The
second deed pertained to parcel 3, with TD No. 018613. The last deed pertained to parcel 4 with TD No. 016821. All deeds contained
the reservation of the rights of the donors (1) to amend, cancel or revoke the donation during their lifetime, and (2) to sell, mortgage, or
encumber the properties donated during the donors' lifetime, if deemed necessary.
On January 16, 1973, Diego Danlag, with the consent of his wife, Catalina Danlag, executed a deed of donation inter
vivos[5] covering the aforementioned parcels of land plus two other parcels with TD Nos. 11351 and 11343, respectively, again in favor
of private respondent Mercedes. This contained two conditions, that (1) the Danlag spouses shall continue to enjoy the fruits of the land
during their lifetime, and that (2) the donee can not sell or dispose of the land during the lifetime of the said spouses, without their prior
consent and approval. Mercedes caused the transfer of the parcels' tax declaration to her name and paid the taxes on them.
On June 28, 1979 and August 21, 1979, Diego and Catalina Danlag sold parcels 3 and 4 to herein petitioners, Mr. and Mrs.
Agripino Gestopa. On September 29, 1979, the Danlags executed a deed of revocation [6]recovering the six parcels of land subject of
the aforecited deed of donation inter vivos.
On March 1, 1983, Mercedes Pilapil (herein private respondent) filed with the RTC a petition against the Gestopas and the
Danlags, for quieting of title[7] over the above parcels of land.She alleged that she was an illegitimate daughter of Diego Danlag; that
she lived and rendered incalculable beneficial services to Diego and his mother, Maura Danlag, when the latter was still alive. In
recognition of the services she rendered, Diego executed a Deed of Donation on March 20, 1973, conveying to her the six (6) parcels of
land. She accepted the donation in the same instrument, openly and publicly exercised rights of ownership over the donated properties,
and caused the transfer of the tax declarations to her name. Through machination, intimidation and undue influence, Diego persuaded
the husband of Mercedes, Eulalio Pilapil, to buy two of the six parcels covered by the deed of donation. Said donation inter vivos was
coupled with conditions and, according to Mercedes, since its perfection, she had complied with all of them; that she had not been guilty
of any act of ingratitude; and that respondent Diego had no legal basis in revoking the subject donation and then in selling the two
parcels of land to the Gestopas.

42
 In their opposition, the Gestopas and the Danlags averred that the deed of donation dated January 16, 1973 was null and void
because it was obtained by Mercedes through machinations and undue influence. Even assuming it was validly executed, the intention
was for the donation to take effect upon the death of the donor. Further, the donation was void for it left the donor, Diego Danlag,
without any property at all.
On December 27, 1991, the trial court rendered its decision, thus:

"WHEREFORE, the foregoing considered, the Court hereby renders judgment in favor of the defendants and against the plaintiff:

1. Declaring the Donations Mortis Causa and Inter Vivos as revoked, and, therefore, has (sic) no legal effect and force of
law.
2. Declaring Diego Danlag the absolute and exclusive owner of the six (6) parcels of land mentioned in the Deed of
revocation (Exh. P-plaintiff, Exh. 6-defendant Diego Danlag).
3. Declaring the Deeds of Sale executed by Diego Danlag in favor of spouses Agripino Gestopa and Isabel Gestopa dated
June 28, 1979 (Exh. S-plaintiff; Exh. 18-defendant); Deed of Sale dated December 18, 1979 (Exh. T plaintiff; Exh. 9-
defendant); Deed of Sale dated September 14, 1979 (Exh. 8); Deed of Sale dated June 30, 1975 (Exh. U); Deed of Sale
dated March 13, 1978 (Exh. X) as valid and enforceable duly executed in accordance with the formalities required by law.
4. Ordering all tax declaration issued in the name of Mercedes Danlag Y Pilapil covering the parcel of land donated
cancelled and further restoring all the tax declarations previously cancelled, except parcels nos. 1 and 5 described, in the
Deed of Donation Inter Vivos (Exh. "1") and Deed of Sale (Exh. "2") executed by defendant in favor of plaintiff and her
husband.
[5.] With respect to the contract of sale of abovestated parcels of land, vendor Diego Danlag and spouse or their estate have
the alternative remedies of demanding the balance of the agreed price with legal interest, or rescission of the contract of
sale.

SO ORDERED."[8]

In rendering the above decision, the trial court found that the reservation clause in all the deeds of donation indicated that Diego
Danlag did not make any donation; that the purchase by Mercedes of the two parcels of land covered by the Deed of Donation Inter
Vivos bolstered this conclusion; that Mercedes failed to rebut the allegations of ingratitude she committed against Diego Danlag; and
that Mercedes committed fraud and machination in preparing all the deeds of donation without explaining to Diego Danlag their
contents.
Mercedes appealed to the Court of Appeals and argued that the trial court erred in (1) declaring the donation dated January 16,
1973 as mortis causa and that the same was already revoked on the ground of ingratitude; (2) finding that Mercedes purchased from
Diego Danlag the two parcels of land already covered by the above donation and that she was only able to pay three thousand pesos,
out of the total amount of twenty thousand pesos; (3) failing to declare that Mercedes was an acknowledged natural child of Diego
Danlag.
On August 31, 1993, the appellate court reversed the trial court. It ruled:

"PREMISES CONSIDERED, the decision appealed from is REVERSED and a new judgment is hereby rendered as follows:

1. Declaring the deed of donation inter vivos dated January 16, 1973 as not having been revoked and consequently the same remains in full force and
effect;

2. Declaring the Revocation of Donation dated June 4, 1979 to be null and void and therefore of no force and effect;

3. Declaring Mercedes Danlag Pilapil as the absolute and exclusive owner of the six (6) parcels of land specified in the above-cited deed of
donation inter vivos;

4. Declaring the Deed of Sale executed by Diego Danlag in favor of spouses Agripino and Isabel Gestopa dated June 28, 1979 (Exhibits S and 18),
Deed of Sale dated December 18, 1979 (Exhibits T and 19), Deed of Sale dated September 14, 1979 (Exhibit 8), Deed of Sale dated June 30, 1975
(Exhibit U), Deed of Sale dated March 13, 1978 (Exhibit X) as well as the Deed of Sale in favor of Eulalio Danlag dated December 27, 1978 (Exhibit
2) not to have been validly executed;

5. Declaring the above-mentioned deeds of sale to be null and void and therefore of no force and effect;

6. Ordering spouses Agripino Gestopa and Isabel Silerio Gestopa to reconvey within thirty (30) days from the finality of the instant judgment to
Mercedes Danlag Pilapil the parcels of land above-specified, regarding which titles have been subsequently fraudulently secured, namely those
covered by O.C.T. T-17836 and O.C.T. No. 17523.
43
7. Failing to do so, ordering the Branch Clerk of Court of the Regional Trial Court (Branch V) at Cebu City to effect such reconveyance of the
parcels of land covered by O.C.T. T-17836 and 17523.

SO ORDERED."[9]

The Court of Appeals held that the reservation by the donor of lifetime usufruct indicated that he transferred to Mercedes the
ownership over the donated properties; that the right to sell belonged to the donee, and the donor's right referred to that of merely
giving consent; that the donor changed his intention by donating inter vivos properties already donated mortis causa; that the transfer to
Mercedes' name of the tax declarations pertaining to the donated properties implied that the donation was inter vivos; and that
Mercedes did not purchase two of the six parcels of land donated to her.
Hence, this instant petition for review filed by the Gestopa spouses, asserting that:

"THE HONORABLE COURT OF APPEALS, TWELFTH DIVISION, HAS GRAVELY ERRED IN REVERSING THE DECISION OF THE
COURT A QUO."[10]

Before us, petitioners allege that the appellate court overlooked the fact that the donor did not only reserve the right to enjoy the
fruits of the properties, but also prohibited the donee from selling or disposing the land without the consent and approval of the Danlag
spouses. This implied that the donor still had control and ownership over the donated properties. Hence, the donation was post mortem.
Crucial in resolving whether the donation was inter vivos or mortis causa is the determination of whether the donor intended to
transfer the ownership over the properties upon the execution of the deed. [11]
In ascertaining the intention of the donor, all of the deed's provisions must be read together. [12] The deed of donation dated
January 16, 1973, in favor of Mercedes contained the following:

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

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

xxx

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

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

Note first that the granting clause shows that Diego donated the properties out of love and affection for the donee. This is a mark of a
donation inter vivos.[14] Second, the reservation of lifetime usufruct indicates that the donor intended to transfer the naked ownership
over the properties. As correctly posed by the Court of Appeals, what was the need for such reservation if the donor and his spouse
remained the owners of the properties? Third, the donor reserved sufficient properties for his maintenance in accordance with his
standing in society, indicating that the donor intended to part with the six parcels of land. [15] Lastly, the donee accepted the donation. In
the case of Alejandro vs. Geraldez, 78 SCRA 245 (1977), we said that an acceptance clause is a mark that the donation is inter
vivos. Acceptance is a requirement for donations inter vivos. Donations mortis causa, being in the form of a will, are not required to be
accepted by the donees during the donors' lifetime.
Consequently, the Court of Appeals did not err in concluding that the right to dispose of the properties belonged to the donee. The
donor's right to give consent was merely intended to protect his usufructuary interests. In Alejandro, we ruled that a limitation on the
right to sell during the donors' lifetime implied that ownership had passed to the donees and donation was already effective during the
donors' lifetime.
The attending circumstances in the execution of the subject donation also demonstrated the real intent of the donor to transfer the
ownership over the subject properties upon its execution.[16] Prior to the execution of donation inter vivos, the Danlag spouses already
executed three donations mortis causa. As correctly observed by the Court of Appeals, the Danlag spouses were aware of the
difference between the two donations. If they did not intend to donate inter vivos, they would not again donate the four lots already
donated mortis causa.Petitioners' counter argument that this proposition was erroneous because six years after, the spouses changed
their intention with the deed of revocation, is not only disingenious but also fallacious. Petitioners cannot use the deed of revocation to
show the spouses' intent because its validity is one of the issues in this case.
Petitioners aver that Mercedes' tax declarations in her name can not be a basis in determining the donor's intent. They claim that it
is easy to get tax declarations from the government offices such that tax declarations are not considered proofs of ownership. However,
unless proven otherwise, there is a presumption of regularity in the performance of official duties. [17] We find that petitioners did not
44
overcome this presumption of regularity in the issuance of the tax declarations. We also note that the Court of Appeals did not refer to
the tax declarations as proofs of ownership but only as evidence of the intent by the donor to transfer ownership.
Petitioners assert that since private respondent purchased two of the six parcels of land from the donor, she herself did not
believe the donation was inter vivos. As aptly noted by the Court of Appeals, however, it was private respondent's husband who
purchased the two parcels of land.
As a rule, a finding of fact by the appellate court, especially when it is supported by evidence on record, is binding on us. [18] On the
alleged purchase by her husband of two parcels, it is reasonable to infer that the purchase was without private respondent's
consent. Purchase by her husband would make the properties conjugal to her own disadvantage. That the purchase is against her self-
interest, weighs strongly in her favor and gives credence to her claim that her husband was manipulated and unduly influenced to make
the purchase, in the first place.
Was the revocation valid? A valid donation, once accepted, becomes irrevocable, except on account of officiousness, failure by
the donee to comply with the charges imposed in the donation, or ingratitude. [19] The donor-spouses did not invoke any of these
reasons in the deed of revocation. The deed merely stated:

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

Petitioners cited Mercedes' vehemence in prohibiting the donor to gather coconut trees and her filing of instant petition for quieting
of title. There is nothing on record, however, showing that private respondent prohibited the donors from gathering coconuts. Even
assuming that Mercedes prevented the donor from gathering coconuts, this could hardly be considered an act covered by Article 765 of
the Civil Code.[21] Nor does this Article cover respondent's filing of the petition for quieting of title, where she merely asserted what she
believed was her right under the law.
Finally, the records do not show that the donor-spouses instituted any action to revoke the donation in accordance with Article 769
of the Civil Code.[22] Consequently, the supposed revocation on September 29, 1979, had no legal effect.
WHEREFORE, the instant petition for review is DENIED. The assailed decision of the Court of Appeals dated August 31, 1993, is
AFFIRMED.
Costs against petitioners.
SO ORDERED.

SECOND DIVISION
[G.R. No. 118671. January 29, 1996]
THE ESTATE OF HILARIO M. RUIZ, EDMOND RUIZ, Executor, petitioner, vs. THE COURT OF APPEALS (Former Special Sixth
Division), MARIA PILAR RUIZ-MONTES, MARIA CATHRYN RUIZ, CANDICE ALBERTINE RUIZ, MARIA ANGELINE RUIZ
and THE PRESIDING JUDGE OF THE REGIONAL TRIAL COURT OF PASIG, BRANCH 156, respondents.

DECISION
PUNO, J.:

This petition for review on certiorari seeks to annul and set aside the decision dated November 10, 1994 and the resolution
dated January 5, 1995 of the Court of Appeals in CA-G.R. SP No. 33045.
The facts show that on June 27, 1987, Hilario M. Ruiz1 executed a holographic will naming as his heirs his only son, Edmond
Ruiz, his adopted daughter, private respondent Maria Pilar Ruiz Montes, and his three granddaughters, private respondents Maria
Cathryn, Candice Albertine and Maria Angeline, all children of Edmond Ruiz. The testator bequeathed to his heirs substantial cash,
personal and real properties and named Edmond Ruiz executor of his estate. 2
On April 12, 1988, Hilario Ruiz died. Immediately thereafter, the cash component of his estate was distributed among Edmond
Ruiz and private respondents in accordance with the decedents will. For unbeknown reasons, Edmond, the named executor, did not
take any action for the probate of his fathers holographic will.
On June 29, 1992, four years after the testators death, it was private respondent Maria Pilar Ruiz Montes who filed before the
Regional Trial Court, Branch 156, Pasig, a petition for the probate and approval of Hilario Ruizs will and for the issuance of letters
testamentary to Edmond Ruiz.3 Surprisingly, Edmond opposed the petition on the ground that the will was executed under undue
influence.
On November 2, 1992, one of the properties of the estate - the house and lot at No. 2 Oliva Street, Valle Verde IV, Pasig which
the testator bequeathed to Maria Cathryn, Candice Albertine and Maria Angeline 4 - was leased out by Edmond Ruiz to third persons.

45
 On January 19, 1993, the probate court ordered Edmond to deposit with the Branch Clerk of Court the rental deposit and
payments totalling P540,000.00 representing the one-year lease of the Valle Verde property. In compliance,
on January 25, 1993, Edmond turned over the amount of P348,583.56, representing the balance of the rent after deducting
P191,416.14 for repair and maintenance expenses on the estate. 5
In March 1993, Edmond moved for the release of P50,000.00 to pay the real estate taxes on the real properties of the estate. The
probate court approved the release of P7,722.00 6
On May 14, 1993, Edmond withdrew his opposition to the probate of the will. Consequently, the probate court, on May 18, 1993,
admitted the will to probate and ordered the issuance of letters testamentary to Edmond conditioned upon the filing of a bond in the
amount of P50,000.00. The letters testamentary were issued on June 23, 1993.
On July 28, 1993, petitioner Testate Estate of Hilario Ruiz as executor, filed an Ex-Parte Motion for Release of Funds. It prayed for
the release of the rent payments deposited with the Branch Clerk of Court. Respondent Montes opposed the motion and concurrently
filed a Motion for Release of Funds to Certain Heirs and Motion for Issuance of Certificate of Allowance of Probate Will. Montes prayed
for the release of the said rent payments to Maria Cathryn, Candice Albertine and Maria Angeline and for the distribution of the testators
properties, specifically the Valle Verde property and the Blue Ridge apartments, in accordance with the provisions of the holographic
will.
On August 26, 1993, the probate court denied petitioners motion for release of funds but granted respondent Montes motion in
view of petitioners lack of opposition. It thus ordered the release of the rent payments to the decedents three granddaughters. It further
ordered the delivery of the titleds to and possession of the properties bequeathed to the three granddaughters and respondent Montes
upon the filing of a bond of P50,000.00.
Petitioner moved for reconsideration alleging that he actually filed his opposition to respondent Montes motion for release of rent
payments which opposition the court failed to consider.Petitioner likewise reiterated his previous motion for release of funds.
On November 23, 1993, petitioner, through counsel, manifested that he was withdrawing his motion for release of funds in view of
the fact that the lease contract over Valle Verde property had been renewed for another year. 7
Despite petitioners manifestation, the probate court, on December 22, 1993, ordered the release of the funds to Edmond but only
such amount as may be necessary to cover the espenses of administration and allowanceas for support of the testators three
granddaughters subject to collation and deductible from their share in the inheritance. The court, however, held in abeyance the release
of the titles to respondent Montes and the three granddaughters until the lapse of six months from the date of firast publication of the
notice to creditors.8 The Court stated thus:
xxx xxx xxx

After consideration of the arguments set forth thereon by the parties, the court resolves to allow Administrator Edmond M. Ruiz to take possession of
the rental payments deposited with the Clerk of Court, Pasig Regional Trial Court, but only such amount as may be necessary to cover the expenses
of administration and allowances for support of Maria Cathryn Veronique, Candice Albertine and Maria Angeli, which are subject to collation and
deductible from the share in the inheritance of said heirs and insofar as they exceed the fruits or rents pertaining to them.

As to the release of the titles bequeathed to petitioner Maria Pilar Ruiz-Montes and the above-named heirs, the same is hereby reconsidered and held
in abeyance until the lapse of six (6) months from the date of first publication of Notice to Creditors.

WHEREFORE, Administrator Edmond M. Ruiz is hereby ordered to submit an accounting of the expenses necessary for administration including
provisions for the support Of Maria Cathryn Veronique Ruiz, Candice Albertine Ruiz and Maria Angeli Ruiz before the amount required can be
withdrawn and cause the publication of the notice to creditors with reasonable dispatch.9

Petitioner assailed this order before the Court of Appeals. Finding no grave abuse of discretion on the part of respondent judge, the appellate court
dismissed the petition and sustained the probate courts order in a decision dated November 10, 199410 and a resolution dated January 5, 1995.11

Hence, this petition.

Petitioner claims that:

THE PUBLIC RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR
EXCESS OF JURISDICTION IN AFFIRMING AND CONFIRMING THE ORDER OF RESPONDENT REGIONAL TRIAL COURT OF PASIG,
BRANCH 156, DATED DECEMBER 22, 1993, WHICH WHEN GIVEN DUE COURSE AND IS EFFECTED WOULD: (1) DISALLOW THE
EXECUTOR/ADMINISTRATOR OF THE ESTATE OF THE LATE HILARIO M. RUIZ TO TAKE POSSESSION OF ALL THE REAL AND
PERSONAL PROPERTIES OF THE ESTATE; (2) GRANT SUPPORT, DURING THE PENDENCY OF THE SETTLEMENT OF AN ESTATE,
TO CERTAIN PERSONS NOT ENTITLED THERETO; AND (3) PREMATURELY PARTITION AND DISTRIBUTE THE ESTATE
PURSUANT TO THE PROVISIONS OF THE HOLOGRAPHIC WILL EVEN BEFORE ITS INTRINSIC VALIDITY HAS BEEN
DETERMINED, AND DESPITE THE EXISTENCE OF UNPAID DEBTS AND OBLIGATIONS OF THE ESTATE. 12

46
 The issue for resolution is whether the probate court, after admitting the will to probate but before payment of the estates debts
and obligations, has the authority: (1) to grant an allowance from the funds of the estate for the support of the testators grandchildren;
(2) to order the release of the titles to certain heirs; and (3) to grant possession of all properties of the estate to the executor of the will.
On the matter of allowance, Section 3 of Rule 83 of the Revised Rules of Court provides:

Sec. 3. Allowance to widow and family. - The widow and minor or incapacitated children of a deceased person, during the settlement of the estate,
shall receive therefrom under the direction of the court, such allowance as are provided by law.

Petitioner alleges that this provision only gives the widow and the minor or incapacitated children of the deceased the right to
receive allowances for support during the settlement of estate proceedings. He contends that the testators three granddaughters do not
qualify for an allowance because they are not incapacitated and are no longer minors but of legal age, married and gainfully employed.
In addition, the provision expressly states children of the deceased which excludes the latters grandchildren.
It is settled that allowances for support under Section 3 of Rule 83 should not be limited to the minor or incapacitated children of
the deceased. Article 18813 of the Civil Code of the Philippines, the substantive law in force at the time of the testators death, provides
that during the liquidation of the conjugal partnership, the deceaseds legitimate spouse and children, regardless of their age, civil status
or gainful employment, are entitled to provisional support from the funds of the estate. 14 The law is rooted on the fact that the right and
duty to support, especially the right to education, subsist even beyond the age of majority.15
Be that as it may, grandchildren are not entitled to provisional support from the funds of the decedents estate. The law clearly
limits the allowance to widow and children and does not extend it to the deceaseds grandchildren, regardless of their minority or
incapacity.16 It was error, therefore, for the appellate court to sustain the probate courts order granting an allowance to the
grandchildren of the testator pending settlement of his estate.
Respondent courts also erred when they ordered the release of the titles of the bequeathed properties to private respondents six
months after the date of first publication of notice to creditors. An order releasing titles to properties of the estate amounts to an
advance distribution of the estate which is allowed only under the following conditions:

Sec. 2. Advance distribution in special proceedings. - Nothwithstanding a pending controversy or appeal in proceedings to settle the estate of a
decedent, the court may, in its discretion and upon such terms as it may deem proper and just, permit that such part of the estate as may not be
affected by the controversy or appeal be distributed among the heirs or legatees, upon compliance with the conditions set forth in Rule 90 of these
Rules.17

And Rule 90 provides that:

Sec. 1. When order for distribution of residue made. - When the debts, funeral charges, and expenses of administration, the allowance to the widow,
and inheritance tax, if any, chargeable to the estate in accordance with law, have been paid, the court, on the application of the executor or
administrator, or of a person interested in the estate, and after hearing upon notice, shall assign the residue of the estate to the persons entitled to the
same, naming them and the proportions, or parts, to which each is entitled, and such persons may demand and recover their respective shares from
the executor or administrator, or any other person having the same in his possession. If there is a controversy before the court as to who are the lawful
heirs of the deceased person or as to the distributive shares to which each person is entitled under the law, the controversy shall be heard and decided
as in ordinary cases.

No distribution shall be allowed until the payment of the obligations above-mentioned has been made or provided for, unless the
distributees, or any of them, give a bond, in a sum to be fixed by the court, conditioned for the payment of said obligations within such time
as the court directs.18

In settlement of estate proceedings, the distribution of the estate properties can only be made: (1) after all the debts, funeral charges,
expenses of administration, allowance to the widow, and estate tax have been paid; or (2) before payment of said obligations only if the
distributees or any of them gives a bond in a sum fixed by the court conditioned upon the payment of said obligations within such time
as the court directs, or when provision is made to meet those obligations. 19
In the case at bar, the probate court ordered the release of the titles to the Valle Verde property and the Blue Ridge apartments to
the private respondents after the lapse of six months from the date of first publication of the notice to creditors. The questioned order
speaks of notice to creditors, not payment of debts and obligations. Hilario Ruiz allegedly left no debts when he died but the taxes on
his estate had not hitherto been paid, much less ascertained. The estate tax is one of those obligations that must be paid before
distribution of the estate. If not yet paid, the rule requires that the distributees post a bond or make such provisions as to meet the said
tax obligation in proportion to their respective shares in the inheritance. 20 Notably, at the time the order was issued the properties of the
estate had not yet been inventoried and appraised.
It was also too early in the day for the probate court to order the release of the titles six months after admitting the will to
probate. The probate of a will is conclusive as to its due execution and extrinsic validity 21 and settles only the question of whether the
testator, being of sound mind, freely executed it in accordance with the formalities prescribed by law. 22Questions as to the intrinsic
validity and efficacy of the provisions of the will, the legality of any devise or legacy may be raised even after the will has been
authenticated.23
47
 The intrinsic validity of Hilarios holographic will was controverted by petitioner before the probate court in his Reply to Montes
Opposition to his motion for release of funds 24 and his motion for reconsideration of the August 26, 1993 order of the said
court.25 Therein, petitioner assailed the distributive shares of the devisees and legatees inasmuch as his fathers will included the estate
of his mother and allegedly impaired his legitime as an intestate heir of his mother. The Rules provide that if there is a controversy as to
who are the lawful heirs of the decedent and their distributive shares in his estate, the probate court shall proceed to hear and decide
the same as in ordinary cases.26
Still and all, petitioner cannot correctly claim that the assailed order deprived him of his right to take possession of all the real and
personal properties of the estate. The right of an executor or administrator to the possession and management of the real and personal
properties of the deceased is not absolute and can only be exercised so long as it is necessary for the payment of the debts and
expenses of administration,27 Section 3 of Rule 84 of the Revised Rules of Court explicitly provides:

Sec. 3. Executor or administrator to retain whole estate to pay debts, and to administer estate not willed. - An executor or administrator shall have
the right to the possession and management of the real as well as the personal estate of the deceased so long as it is necessary for the payment of
the debts and expenses for administration.28

When petitioner moved for further release of the funds deposited with the clerk of court, he had been previously granted by the probate
court certain amounts for repair and maintenance expenses on the properties of the estate, and payment of the real estate taxes
thereon. But petitioner moved again for the release of additional funds for the same reasons he previously cited. It was correct for the
probate court to require him to submit an accounting of the necessary expenses for administration before releasing any further money
in his favor.
It was relevantly noted by the probate court that petitioner had deposited with it only a portion of the one-year rental income from
the Valle Verde property. Petitioner did not deposit its succeeding rents after renewal of the lease. 29 Neither did he render an
accounting of such funds.
Petitioner must be reminded that his right of ownership over the properties of his father is merely inchoate as long as the estate
has not been fully settled and partitioned.30 As executor, he is a mere trustee of his fathers estate. The funds of the estate in his hands
are trust funds and he is held to the duties and responsibilities of a trustee of the highest order.31 He cannot unilaterally assign to
himself and possess all his parents properties and the fruits thereof without first submitting an inventory and appraisal of all real and
personal properties of the deceased, rendering a true account of his administration, the expenses of administration, the amount of the
obligations and estate tax, all of which are subject to a determination by the court as to their veracity, propriety and justness. 32
IN VIEW WHEREOF, the decision and resolution of the Court of Appeals in CA-G.R. SP No. 33045 affirming the order dated
December 22, 1993 of the Regional Trial Court, Branch 156, Pasig in SP Proc. No. 10259 are affirmed with the modification that those
portions of the order granting an allowance to the testators grandchildren and ordering the release of the titles to the private
respondents upon notice to creditors are annulled and set aside.
Respondent judge is ordered to proceed with dispatch in the proceedings below.
SO ORDERED.

48