Dison v. Posadas
The Court ruled that the facts warrant the inference
GR L-36770 | Nov. 4, 1932 | J. Butte
Facts:
Luis Dison filed for recovery of an inheritance tax (P2,808.73) paid
under protest against Juan Posadas, Collector of Internal Revenue.
The CFI ruled in favor of Posadas.
Dison alleged that the tax is illegal because he received the property,
the basis of the tax, from his father before his death by a deed of gift
inter vivos which was duly accepted and registered before the death of
his father. The theory of Luis is that he received and holds the
property as a gift and Act 2601 (the inheritance tax statute) does not
tax gifts. Involved is Section 1540 of the Administrative Code1.
Posadas answered with a general denial and with a counterdemand for
P1,245.56 which is the balance still due on account of said tax.
CFI had held that the cause of action set up in the counterdemand was
not proven and dismissed it. Both sides appealed to the SC but the
cross complaint and appeal of the CIR were dismissed.
Evidence given at trial was proof of payment of the tax under protests
and the deed of gift executed by Felix Dison in favor of his son Luis
Dison. 22 tracts of land were transferred to Luis. This was
acknowledged before a notary public by Felix on April 16, 1928. Luis
formally accepted on April 17 by an instrument in writing which he
acknowledged before a notary public on April 20.
At trial were the following stipulations:
(1) That Felix Dison died April 21, 1928; (2) that Felix made a gift
inter vivos before his death in favor of Luis; (3) that Luis did not
receive property of any kind upon the death of Felix; and (4) that Luis
was the legitimate and only child of Felix.
Issue: Does Section 1540 subject Luis Dison to the payment of an
inheritance tax?
Ruling:
Luis argued there was no evidence to support a finding that the gift
was simulated and that it was an artifice to evade the payment of the
1
Additions of Gifts and Advances. — After the aforementioned deductions have
been made, there shall be added to the resulting amount the value of all gifts or
inheritance tax.
that the transfer was an advancement upon the inheritance that Luis
would be entitled to receive upon Felix’s death. His argument that he
is not an heir of his deceased father within the meaning of Section
1540 because his father had given him all his property and therefore
left no property to be inherited is fallacious. No will was left and Luis
could not be deprived of his share because under the Civil Code, he is
a forced heir.
Section 1540 (“any of those who, after his death, shall prove to be his
heirs”) was construed by the Court to include those who by our by our
law, are given the status and rights of heirs, regardless of the quantity
of property they may receive as such heirs. Luis was unquestionably
an heir and the conveyance being an advance by Felix to his only child,
Section 1540 is applicable. Thus, the tax was properly assessed by the
CIR.
Other issues:
Constitutionality of Section 1540:
Appeal was originally assigned to a division of five but referred to the
SC en banc by reason of Dison’s attack upon the constitutionality of
Section 1540. The argument was that the levying of taxes upon gifts
inter vivos violated section 3 of the organic act of the Philippine
Islands. Act 2601 does not make any reference to a tax on gifts – it
does not tax gifts per se but only gifts made to those who shall prove
to be heirs. No merit in Dison’s attack upon the constitutionality of
Section 1540.
Interpretation of “gifts”:
Tuason and Tuason v. Posadas: “all gifts” refers to gifts inter vivos
and not mortis causa. To make it refer to gifts mortis cause is to give
it an interpretation that vitiates its language.
advances made by the predecessor to any of those who, after his death, shall prove
to be his heirs, devises, legatees, or donees mortis causa.