G.R. No. L-57455 January 18, 1990 EVELYN DE LUNA, ROSALINA DE LUNA, PRUDENCIO DE LUNA, JR.

, WILLARD DE LUNA, ANTONIO DE LUNA, and JOSELITO DE LUNA, petitioners, vs. HON. SOFRONIO F. ABRIGO, Presiding Judge of the Court of First Instance of Quezon, Branch IX, and LUZONIAN UNIVERSITY FOUNDATION, INC., respondents. Milberto B. Zurbano for petitioners. Joselito E. Talabong for private respondent. MEDIALDEA, J.: This is a petition for review on certiorari of the Order dated July 7, 1981 of respondent judge Sofronio F. Abrigo of the Court of First Instance of Quezon, Branch IX in Civil Case No. 8624 dismissing the complaint of petitioners on the ground of prescription of action. The antecedent facts are as follows: On January 24, 1965, Prudencio de Luna donated a portion of 7,500 square meters of Lot No. 3707 of the Cadastral Survey of Lucena covered by Transfer Certificate of Title No. 1-5775 to the Luzonian Colleges, Inc., (now Luzonian University Foundation, Inc., herein referred to as the foundation). The donation, embodied in a Deed of Donation Intervivos (Annex "A" of Petition) was subject to certain terms and conditions and provided for the automatic reversion to the donor of the donated property in case of violation or non-compliance (pars. 7 and 10 of Annex "A", p. 20, Rollo). The foundation failed to comply with the conditions of the donation. On April 9, 1971, Prudencio de Luna "revived" the said donation in favor of the foundation, in a document entitled "Revival of Donation Intervivos" (Annex "B" of Petition) subject to terms and conditions which among others, required: xxx xxx xxx 3. That the DONEE shall construct at its own expense a Chapel, a Nursery and Kindergarten School, to be named after St. Veronica, and other constructions and Accessories shall be constructed on the land herein being donated strictly in accordance with the plans and specifications prepared by the O.R. Quinto & Associates and made part of this donation; provided that the flooring of the Altar and parts of the Chapel shall be of granoletic marble. 4. That the construction of the Chapel, Nursery and Kindergarten School shall start immediately and must be at least SEVENTY (70) PER CENTUM finished by the end of THREE (3) YEARS from the date hereof, however, the whole project as drawn in the plans and specifications made parts of this donation must be completed within FIVE (5) YEARS from the date hereon, unless extensions are granted by the DONOR in writing; . . . . (p. 23, Rollo) As in the original deed of donation, the "Revival of Donation Intenrivos" also provided for the automatic reversion to the donor of the donated area in case of violation of the conditions thereof, couched in the following terms:

xxx xxx xxx. 11. That violation of any of the conditions herein provided shall cause the automatic reversion of the donated area to the donor, his heirs, assigns and representatives, without the need of executing any other document for that purpose and without obligation whatever on the part of the DONOR. (p. 24, Rollo). The foundation, through its president, accepted the donation in the same document, subject to all the terms and conditions stated in the donation (p. 24, Rollo). The donation was registered and annotated on April 15, 1971 in the memorandum of encumbrances as Entry No. 17939 of Transfer Certificate of Title No. T-5775 (p. 15, Rollo). On August 3, 1971, Prudencio de Luna and the foundation executed a 'Deed of Segregation" (Annex "C" of Petition) whereby the area donated which is now known as Lot No. 3707-B of Subdivision Plan Psd-40392 was adjudicated to the foundation. As a result, transfer certificate of title No. T-16152 was issued in the name of the foundation. The remaining portion known as Lot No. 3707-A was retained by the donor. (p. 16, Rollo). On September 23, 1980, herein petitioners, Evelyn, Rosalina, Prudencio, Jr., Willard, Antonio and Joselito, all surnamed de Luna, who claim to be the children and only heirs of the late Prudencio de Luna who died on August 18, 1980, filed a complaint (pp. 14-17, Rollo) with the Regional Trial Court of Quezon alleging that the terms and conditions of the donation were not complied with by the foundation. Among others, it prayed for the cancellation of the donation and the reversion of the donated land to the heirs. The complaint was docketed as Civil Case No. 8624. In its answer (pp. 29-36, Rollo), respondent foundation claimed that it had partially and substantially complied with the conditions of the donation and that the donor has granted the foundation an indefinite extension of time to complete the construction of the chapel. It also invoked the affirmative defense of prescription of action and prayed for the dismissal of the complaint. During the pre-trial of the case, the foundation moved for a preliminary hearing of its affirmative defense of prescription of action which was opposed by the plaintiffs. After the parties have filed their respective written motions, oppositions and memoranda, an Order (pp., 40-43, Rollo) dated July 7, 1981 was issued dismissing the complaint. The dispositive portion of the Order states: In view of the foregoing considerations, this Court finds the motion to dismiss deemed filed by the defendant on the ground of prescription to be well-taken and the same is hereby GRANTED. WHEREFORE, DISMISSED. the instant complaint is hereby ordered

On July 22, 1981, petitioners brought the instant petition for review with the following assignments of error: I. THE LOWER COURT ERRED IN HOLDING THAT THE DONEE'S CONSENT TO THE REVOCATION OF A DONATION TO BE VALID MUST BE GIVEN SUBSEQUENT TO THE EFFECTIVITY OF THE DONATION OR VIOLATION OF (THE) ANY OF THE CONDITIONS IMPOSED THEREIN. II. THE LOWER COURT ERRED IN TREATING THE COMPLAINT AS ONE FOR JUDICIAL DECREE OF REVOCATION OF THE DONATION IN QUESTION AS CONTEMPLATED IN ARTICLE 764 OF THE CIVIL CODE OF THE PHILIPPINES AND WHICH PRESCRIBES IN FOUR (4) YEARS AND IN NOT CONSIDERING IT AS AN ACTION TO ENFORCE A WRITTEN CONTRACT WHICH PRESCRIBES IN TEN (10) YEARS AS PROVIDED IN ARTICLE 1144, HENCE, THE LOWER COURT ERRED IN DISMISSING THE COMPLAINT. III. THE LOWER COURT ERRED IN NOT RENDERING JUDGMENT ON THE MERITS BY WAY OF JUDGMENT ON THE PLEADINGS. (pp. 1-2, Petitioner's Brief) We gave due course to the petition on August 3, 1981 (p. 45, Rollo). After the parties' submission of their respective briefs, the Court resolved to consider the petition submitted for decision on January 27, 1982 (p. 62, Rollo). The assailed order of the trial court stated that revocation (of a donation) will be effective only either upon court judgment or upon consent of the donee as held in the case of Parks v. Province of Tarlac, No. 24190, July 13, 1926, 49 Phil. 143. The trial court dismissed the claim of petitioners that the stipulation in the donation providing for revocation in case of non-compliance of conditions in the donation is tantamount to the consent of the donee, opining that the consent contemplated by law should be such consent given by the donee subsequent to the effectivity of the donation or violation of the conditions imposed therein. The trial court further held that, far from consenting to the revocation, the donee claimed that it had already substantially complied with the conditions of the donation by introducing improvements in the property donated valued at more than the amount of the donated land. In view thereof, a judicial decree revoking the subject donation is necessary. Accordingly, under Article 764 of the New Civil Code, actions to revoke a donation on the ground of noncompliance with any of the conditions of the donation shall prescribe in four years counted from such non-compliance. In the instant case, the four-year period for filing the complaint for revocation commenced on April 9, 1976 and expired on April 9, 1980. Since the complaint was brought on September 23, 1980 or more than five (5) months beyond the prescriptive period, it was already barred by prescription. On the other hand, petitioners argue that Article 764 of the New Civil Code was adopted to provide a judicial remedy in case of non-fulfillment of conditions when revocation of the donation has not been agreed upon by the parties. By way of contrast, when there is a stipulation agreed upon by the parties providing for revocation in case of non-compliance, no judicial action is necessary. It is then petitioners' claim that the action filed before

No pronouncement as to costs. SO ORDERED. (pp. 42-43, Rollo) No motion for reconsideration was filed by petitioners.

the Court of First Instance of Quezon is not one for revocation of the donation under Article 764 of the New Civil Code which prescribes in four (4) years, but one to enforce a written contract which prescribes in ten (10) years. The petition is impressed with merit. From the viewpoint of motive, purpose or cause, donations may be 1) simple, 2) remuneratory or 3) onerous. A simple donation is one the cause of which is pure liberality (no strings attached). A remuneratory donation is one where the donee gives something to reward past or future services or because of future charges or burdens, when the value of said services, burdens or charges is less than the value of the donation. An onerous donation is one which is subject to burdens, charges or future services equal (or more) in value than that of the thing donated (Edgardo L. Paras, Civil Code of the Philippines Annotated, 11 ed., Vol. 11, p. 726). It is the finding of the trial court, which is not disputed by the parties, that the donation subject of this case is one with an onerous cause. It was made subject to the burden requiring the donee to construct a chapel, a nursery and a kindergarten school in the donated property within five years from execution of the deed of donation. Under the old Civil Code, it is a settled rule that donations with an onerous cause are governed not by the law on donations but by the rules on contracts, as held in the cases of Carlos v. Ramil, L-6736, September 5, 1911, 20 Phil. 183, Manalo vs. de Mesa, L-9449, February 12, 1915, 29 Phil. 495. On the matter of prescription of actions for the revocation of onerous donation, it was held that the general rules on prescription applies. (Parks v. Province of Tarlac, supra.). The same rules apply under the New Civil Code as provided in Article 733 thereof which provides: Art. 733. Donations with an onerous cause shall be governed by the rules on contracts, and remuneratory donations by the provisions of the present Title as regards that portion which exceeds the value of the burden imposed. It is true that under Article 764 of the New Civil Code, actions for the revocation of a donation must be brought within four (4) years from the non-compliance of the conditions of the donation. However, it is Our opinion that said article does not apply to onerous donations in view of the specific provision of Article 733 providing that onerous donations are governed by the rules on contracts. In the light of the above, the rules on contracts and the general rules on prescription and not the rules on donations are applicable in the case at bar. Under Article 1306 of the New Civil Code, the parties to a contract have the right "to establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order or public policy." Paragraph 11 of the "Revival of Donation Intervivos, has provided that "violation of any of the conditions (herein) shall cause the automatic reversion of the donated area to the donor, his heirs, . . ., without the need of executing any other document for that purpose and without obligation on the part of the DONOR".

Said stipulation not being contrary to law, morals, good customs, public order or public policy, is valid and binding upon the foundation who voluntarily consented thereto. The validity of the stipulation in the contract providing for the automatic reversion of the donated property to the donor upon noncompliance cannot be doubted. It is in the nature of an agreement granting a party the right to rescind a contract unilaterally in case of breach, without need of going to court. Upon the happening of the resolutory condition of non-compliance with the conditions of the contract, the donation is automatically revoked without need of a judicial declaration to that effect. In the case of University of the Philippines v. de los Angeles, L-28602, September 29, 1970, 35 SCRA 102-107, it was held: . . . There is nothing in the law that prohibits the parties from entering into agreement that violation of the terms of the contract would cause cancellation thereof. even without court intervention. In other words, it is not always necessary for the injured party to resort to court for rescission of the contract (Froilan v. Pan Oriental Shipping Co., et al., L-11897, 31 October 1964, 12 SCRA 276). This was reiterated in the case of Angeles v. Calasanz, L-42283, March 18, 1985: Well settled is, however, the rule that a judicial action for the rescission of a contract is not necessary where the contract provides that it may be revoked and cancelled for violation of any of its terms and conditions (Lopez v. Commissioner of Customs, 37 SCRA 327, 334, and cases cited therein). Resort to judicial action for rescission is obviously not contemplated. The validity of the stipulation can not be seriously disputed. It is in the nature of a facultative resolutory condition which in many cases has been upheld, by this court. (Ponce Enrile v. Court of Appeals, 29 SCRA 504) However, in the University of the Philippines v. Angeles case, (supra), it was held that in cases where one of the parties contests or denies the rescission, "only the final award of the court of competent jurisdiction can conclusively settle whether the resolution is proper or not." It was held, thus: . . . since in every case, where the extrajudicial resolution is contested, only the final award of the court of competent jurisdiction can conclusively settle whether the resolution was proper or not. It is in this sense that judicial action will be necessary as without it, the extrajudicial resolution will remain contestable and subject to judicial invalidation, unless attack thereon should become barred by acquiescence, estoppel or prescription. It is clear, however, that judicial intervention is necessary not for purposes of obtaining a judicial declaration rescinding a contract already deemed rescinded by virtue of an agreement providing for rescission even without judicial intervention, but in order to determine whether or not the recession was proper. The case of Parks v. Province of Tarlac, supra, relied upon by the trial court, is not applicable in the case at bar. While the donation

involved therein was also onerous, there was no agreement in the donation providing for automatic rescission, thus, the need for a judicial declaration revoking said donation. The trial court was therefore not correct in holding that the complaint in the case at bar is barred by prescription under Article 764 of the New Civil Code because Article 764 does not apply to onerous donations. As provided in the donation executed on April 9, 1971, complaince with the terms and conditions of the contract of donation, shall be made within five (5) years from its execution. The complaint which was filed on September 23, 1980 was then well within the ten (10) year prescriptive period to enforce a written contract (Article 1144[1], New Civil Code), counted from April 9, 1976. Finally, considering that the allegations in the complaint on the matter of the donee's non-compliance with the conditions of the donation have been contested by private respondents who claimed that improvements more valuable than the donated property had been introduced, a judgment on the pleadings is not proper. Moreover, in the absence of a motion for judgment on the pleadings, the court cannot motu proprio render such judgment. Section 1 of Rule 19 provides: "Where an answer fails to tender an issue, or otherwise admits the material allegations of the adverse party's pleading, the court may, on motion of that party, direct judgment on such pleading." (Emphasis supplied) ACCORDINGLY, the petition is GRANTED. Civil Case No. 8624 is hereby ordered reinstated. Respondent judge is ordered to conduct a trial on the merits to determine the propriety of the revocation of the subject donation. SO ORDERED

G.R. No. 77425 June 19, 1991 THE ROMAN CATHOLIC ARCHBISHOP OF MANILA, THE ROMAN CATHOLIC BISHOP OF IMUS, and the SPOUSES FLORENCIO IGNAO and SOLEDAD C. IGNAO, petitioners, vs. HON. COURT OF APPEALS, THE ESTATE OF DECEASED SPOUSES EUSEBIO DE CASTRO and MARTINA RIETA, represented by MARINA RIETA GRANADOS and THERESA RIETA TOLENTINO, respondents. G.R. No. 77450 June 19, 1991 THE ROMAN CATHOLIC ARCHBISHOP OF MANILA, THE ROMAN CATHOLIC BISHOP OF IMUS, and the SPOUSES FLORENCIO IGNAO and SOLEDAD C. IGNAO, petitioners, vs. HON. COURT OF APPEALS, THE ESTATE OF DECEASED SPOUSES EUSEBIO DE CASTRO and MARTINA RIETA, represented by MARINA RIETA GRANADOS and THERESA RIETA TOLENTINO, respondents. Severino C. Dominguez for petitioner Roman Catholic Bishop of Imus, Cavite. Dolorfino and Dominguez Law Offices for Sps. Ignao. Joselito R. Enriquez for private respondents. REGALADO, J.:p These two petitions for review on certiorari 1 seek to overturn the decision of the Court of Appeals in CA-G.R. CV No. 05456 2 which reversed and set aside the order of the Regional Trial Court of Imus, Cavite dismissing Civil Case No. 095-84, as well as the order of said respondent court denying petitioner's motions for the reconsideration of its aforesaid decision. On November 29, 1984, private respondents as plaintiffs, filed a complaint for nullification of deed of donation, rescission of contract and reconveyance of real property with damages against petitioners Florencio and Soledad C. Ignao and the Roman Catholic Bishop of Imus, Cavite, together with the Roman Catholic Archbishop of Manila, before the Regional Trial Court, Branch XX, Imus, Cavite and which was docketed as Civil Case No. 09584 therein. 3 In their complaint, private respondents alleged that on August 23, 1930, the spouses Eusebio de Castro and Martina Rieta, now both deceased, executed a deed of donation in favor of therein defendant Roman Catholic Archbishop of Manila covering a parcel of land (Lot No. 626, Cadastral Survey of Kawit), located at Kawit, Cavite, containing an area of 964 square meters, more or less. The deed of donation allegedly provides that the donee shall not dispose or sell the property within a period of one hundred (100) years from the execution of the deed of donation, otherwise a violation of such condition would render ipso facto null and void the deed of donation and the property would revert to the estate of the donors. It is further alleged that on or about June 30, 1980, and while still within the prohibitive period to dispose of the property, petitioner Roman Catholic Bishop of Imus, in whose administration all

properties within the province of Cavite owned by the Archdiocese of Manila was allegedly transferred on April 26, 1962, executed a deed of absolute sale of the property subject of the donation in favor of petitioners Florencio and Soledad C. Ignao in consideration of the sum of P114,000. 00. As a consequence of the sale, Transfer Certificate of Title No. 115990 was issued by the Register of Deeds of Cavite on November 15, 1980 in the name of said petitioner spouses. What transpired thereafter is narrated by respondent court in its assailed decision. 4 On December 17, 1984, petitioners Florencio Ignao and Soledad C. Ignao filed a motion to dismiss based on the grounds that (1) herein private respondents, as plaintiffs therein, have no legal capacity to sue; and (2) the complaint states no cause of action. On December 19, 1984, petitioner Roman Catholic Bishop of Imus also filed a motion to dismiss on three (3) grounds, the first two (2) grounds of which were identical to that of the motion to dismiss filed by the Ignao spouses, and the third ground being that the cause of action has prescribed. On January 9, 1985, the Roman Catholic Archbishop of Manila likewise filed a motion to dismiss on the ground that he is not a real party in interest and, therefore, the complaint does not state a cause of action against him. After private respondents had filed their oppositions to the said motions to dismiss and the petitioners had countered with their respective replies, with rejoinders thereto by private respondents, the trial court issued an order dated January 31, 1985, dismissing the complaint on the ground that the cause of action has prescribed. 5 Private respondents thereafter appealed to the Court of Appeals raising the issues on (a) whether or not the action for rescission of contracts (deed of donation and deed of sale) has prescribed; and (b) whether or not the dismissal of the action for rescission of contracts (deed of donation and deed of sale) on the ground of prescription carries with it the dismissal of the main action for reconveyance of real property. 6 On December 23, 1986, respondent Court of Appeals, holding that the action has not yet prescibed, rendered a decision in favor of private respondents, with the following dispositive portion: WHEREFORE, the Order of January 31, 1985 dismissing appellants' complaint is SET ASIDE and Civil Case No. 095-84 is hereby ordered REINSTATED and REMANDED to the lower court for further proceedings. No Costs. 7 Petitioners Ignao and the Roman Catholic Bishop of Imus then filed their separate motions for reconsideration which were denied by respondent Court of Appeals in its resolution dated February 6, 1987, 8 hence, the filing of these appeals by certiorari. It is the contention of petitioners that the cause of action of herein private respondents has already prescribed, invoking Article 764 of the Civil Code which provides that "(t)he donation shall be revoked at the instance of the donor, when the donee fails to comply with any of the conditions which the former imposed upon

the latter," and that "(t)his action shall prescribe after four years from the non-compliance with the condition, may be transmitted to the heirs of the donor, and may be exercised against the donee's heirs. We do not agree. Although it is true that under Article 764 of the Civil Code an action for the revocation of a donation must be brought within four (4) years from the non-compliance of the conditions of the donation, the same is not applicable in the case at bar. The deed of donation involved herein expressly provides for automatic reversion of the property donated in case of violation of the condition therein, hence a judicial declaration revoking the same is not necessary, As aptly stated by the Court of Appeals: By the very express provision in the deed of donation itself that the violation of the condition thereof would render ipso facto null and void the deed of donation, WE are of the opinion that there would be no legal necessity anymore to have the donation judicially declared null and void for the reason that the very deed of donation itself declares it so. For where (sic) it otherwise and that the donors and the donee contemplated a court action during the execution of the deed of donation to have the donation judicially rescinded or declared null and void should the condition be violated, then the phrase reading "would render ipso facto null and void" would not appear in the deed of donation. 9 In support of its aforesaid position, respondent court relied on the rule that a judicial action for rescission of a contract is not necessary where the contract provides that it may be revoked and cancelled for violation of any of its terms and conditions. 10 It called attention to the holding that there is nothing in the law that prohibits the parties from entering into an agreement that a violation of the terms of the contract would cause its cancellation even without court intervention, and that it is not always necessary for the injured party to resort to court for rescission of the contract. 11 It reiterated the doctrine that a judicial action is proper only when there is absence of a special provision granting the power of cancellation. 12 It is true that the aforesaid rules were applied to the contracts involved therein, but we see no reason why the same should not apply to the donation in the present case. Article 732 of the Civil Code provides that donations inter vivos shall be governed by the general provisions on contracts and obligations in all that is not determined in Title III, Book III on donations. Now, said Title III does not have an explicit provision on the matter of a donation with a resolutory condition and which is subject to an express provision that the same shall be considered ipso facto revoked upon the breach of said resolutory condition imposed in the deed therefor, as is the case of the deed presently in question. The suppletory application of the foregoing doctrinal rulings to the present controversy is consequently justified. The validity of such a stipulation in the deed of donation providing for the automatic reversion of the donated property to the donor upon non-compliance of the condition was upheld in the recent case of De Luna, et al. vs. Abrigo, et al. 13 It was held therein that said stipulation is in the nature of an agreement granting a party the right to rescind a contract unilaterally in case of breach, without

need of going to court, and that, upon the happening of the resolutory condition or non-compliance with the conditions of the contract, the donation is automatically revoked without need of a judicial declaration to that effect. While what was the subject of that case was an onerous donation which, under Article 733 of the Civil Code is governed by the rules on contracts, since the donation in the case at bar is also subject to the same rules because of its provision on automatic revocation upon the violation of a resolutory condition, from parity of reasons said pronouncements in De Luna pertinently apply. The rationale for the foregoing is that in contracts providing for automatic revocation, judicial intervention is necessary not for purposes of obtaining a judicial declaration rescinding a contract already deemed rescinded by virtue of an agreement providing for rescission even without judicial intervention, but in order to determine whether or not the rescission was proper. 14 When a deed of donation, as in this case, expressly provides for automatic revocation and reversion of the property donated, the rules on contract and the general rules on prescription should apply, and not Article 764 of the Civil Code. Since Article 1306 of said Code authorizes the parties to a contract to establish such stipulations, clauses, terms and conditions not contrary to law, morals, good customs, public order or public policy, we are of the opinion that, at the very least, that stipulation of the parties providing for automatic revocation of the deed of donation, without prior judicial action for that purpose, is valid subject to the determination of the propriety of the rescission sought. Where such propriety is sustained, the decision of the court will be merely declaratory of the revocation, but it is not in itself the revocatory act. On the foregoing ratiocinations, the Court of Appeals committed no error in holding that the cause of action of herein private respondents has not yet prescribed since an action to enforce a written contract prescribes in ten (10) years. 15 It is our view that Article 764 was intended to provide a judicial remedy in case of non-fulfillment or contravention of conditions specified in the deed of donation if and when the parties have not agreed on the automatic revocation of such donation upon the occurrence of the contingency contemplated therein. That is not the situation in the case at bar. Nonetheless, we find that although the action filed by private respondents may not be dismissed by reason of prescription, the same should be dismissed on the ground that private respondents have no cause of action against petitioners. The cause of action of private respondents is based on the alleged breach by petitioners of the resolutory condition in the deed of donation that the property donated should not be sold within a period of one hundred (100) years from the date of execution of the deed of donation. Said condition, in our opinion, constitutes an undue restriction on the rights arising from ownership of petitioners and is, therefore, contrary to public policy. Donation, as a mode of acquiring ownership, results in an effective transfer of title over the property from the donor to the donee. Once a donation is accepted, the donee becomes the absolute owner of the property donated. Although the donor may impose

certain conditions in the deed of donation, the same must not be contrary to law, morals, good customs, public order and public policy. The condition imposed in the deed of donation in the case before us constitutes a patently unreasonable and undue restriction on the right of the donee to dispose of the property donated, which right is an indispensable attribute of ownership. Such a prohibition against alienation, in order to be valid, must not be perpetual or for an unreasonable period of time. Certain provisions of the Civil Code illustrative of the aforesaid policy may be considered applicable by analogy. Under the third paragraph of Article 494, a donor or testator may prohibit partition for a period which shall not exceed twenty (20) years. Article 870, on its part, declares that the dispositions of the testator declaring all or part of the estate inalienable for more than twenty (20) years are void. It is significant that the provisions therein regarding a testator also necessarily involve, in the main, the devolution of property by gratuitous title hence, as is generally the case of donations, being an act of liberality, the imposition of an unreasonable period of prohibition to alienate the property should be deemed anathema to the basic and actual intent of either the donor or testator. For that reason, the regulatory arm of the law is or must be interposed to prevent an unreasonable departure from the normative policy expressed in the aforesaid Articles 494 and 870 of the Code. In the case at bar, we hold that the prohibition in the deed of donation against the alienation of the property for an entire century, being an unreasonable emasculation and denial of an integral attribute of ownership, should be declared as an illegal or impossible condition within the contemplation of Article 727 of the Civil Code. Consequently, as specifically stated in said statutory provision, such condition shall be considered as not imposed. No reliance may accordingly be placed on said prohibitory paragraph in the deed of donation. The net result is that, absent said proscription, the deed of sale supposedly constitutive of the cause of action for the nullification of the deed of donation is not in truth violative of the latter hence, for lack of cause of action, the case for private respondents must fail. It may be argued that the validity of such prohibitory provision in the deed of donation was not specifically put in issue in the pleadings of the parties. That may be true, but such oversight or inaction does not prevent this Court from passing upon and resolving the same. It will readily be noted that the provision in the deed of donation against alienation of the land for one hundred (100) years was the very basis for the action to nullify the deed of d donation. At the same time, it was likewise the controverted fundament of the motion to dismiss the case a quo, which motion was sustained by the trial court and set aside by respondent court, both on the issue of prescription. That ruling of respondent court interpreting said provision was assigned as an error in the present petition. While the issue of the validity of the same provision was not squarely raised, it is ineluctably related to petitioner's aforesaid assignment of error since both issues are grounded on and refer to the very same provision.

This Court is clothed with ample authority to review matters, even if they are not assigned as errors on appeal, if it finds that their consideration is necessary in arriving at a just decision of the case: 16 Thus, we have held that an unassigned error closely related to an error properly assigned, 17 or upon which the determination of the question properly assigned is dependent, will be considered by the appellate court notwithstanding the failure to assign it as error. 18 Additionally, we have laid down the rule that the remand of the case to the lower court for further reception of evidence is not necessary where the Court is in a position to resolve the dispute based on the records before it. On many occasions, the Court, in the public interest and for the expeditious administration of justice, has resolved actions on the merits instead of remanding them to the trial court for further proceedings, such as where the ends of justice, would not be subserved by the remand of the case. 19 The aforestated considerations obtain in and apply to the present case with respect to the matter of the validity of the resolutory condition in question. WHEREFORE, the judgment of respondent court is SET ASIDE and another judgment is hereby rendered DISMISSING Civil Case No. 095-84 of the Regional Trial Court, Branch XX, Imus, Cavite. SO ORDERED

G.R. No. 74203 April 17, 1990 REV./ATTY. JOSE T. TAYOTO, substituted by his heir, JULIETA ESPANTO VDA. DE TAYOTO, petitioner, vs. THE HEIRS OF CABALO KUSOP namely HADJI LUCAYA CABALO VDA. DE RASIM, SALUDIN CABALO, MAMAGUS CABALO, MAMASALANGA CABALO, BIDALIA CABALO, KAMSIYA KAHAL, NANG CABALO, JALIPA KAHAL, IMA KAHAL, and ILON KAHAL, represented by HADJI LUCAYA CABALO VDA. DE RASIM; ROGELIO V. GARCIA and THE CITY OF GENERAL SANTOS as intervenors, and the INTERMEDIATE APPELLATE COURT, respondents. Alfredo B. Odi for respondent City Government. Nilo J. Flaviano for respondents. Rogelio V. Garcia for himself as Intervenor. FERNAN, C.J.: In the instant petition for review on certiorari of the decision of the then Intermediate Appellate Court affirming the dismissal of the complaint for quieting of title/specific performance with preliminary injunction, the Court is confronted with the question of the validity of a donation in favor of an educational institution which was represented in the deed of donation by a lawyer who, thereafter, helped obtain a presidential proclamation declaring a portion of the donated parcel of land as disposable under the provisions of the Public Land Act. On October 2, 1963, then President Diosdado Macapagal issued Proclamation No. 168 withdrawing from sale or settlement and reserving for recreational and health resort site purposes a 52,678square meter parcel of land of the public domain in the then Municipality of General Santos in the Province of Cotabato. Known as the Magsaysay Park, said parcel of land is bounded on the south and southwest by the Sarangani Bay; on the west by Lot 1 of Psu-133253; on the north by Albert Morrow Boulevard, and on the east and northeast by Gallego Boulevard. According to said presidential proclamation, the park would be under the administration of the Municipality of General Santos "subject to private rights, if any there be." 1 General Santos became a city by virtue of Republic Act No. 5412 which took effect on June 15, 1968. Under Section 98 of said law, the national government ceded to General Santos City "the ownership and possession to all lands of the public domain within the city." Magsaysay Park became known as the Lion's Beach after it was developed by the Matutum Lion's Club into a public park with swings and a skating rink. The beach also became an ideal place to go swimming. 2 On February 5, 1973, the herein private respondents who are Moslem Filipinos and residents of Polomolok, South Cotabato, claiming ownership over the entire 52,678-square meter Magsaysay Park, donated one-half of the western side thereof to the John F. Kennedy Memorial Lyceum (Far East), Inc. (hereinafter referred to as the Lyceum), a non-stock private

corporation, represented by Atty. Jose T. Tayoto. Herein quoted in full is the deed of donation: DEED OF DONATION KNOW ALL MEN BY THESE PRESENTS: THIS DEED OF DONATION, made and executed in the City of General Santos, Philippines, on this 5th day of February, 1973 by 1. HADJI LUKAYA Mohammad Rasim 2. 3. KABALO married to Hadji

Triangulation Station Sarangani West Base. Area FIFTY TWO THOUSAND SIX HUNDRED SEVENTY EIGHT (52,678) SQUARE METERS, more or less. Declared for taxation purposes under tax declaration No. 8715, in the name of the late Kabalo Kusop, issued by the Treasurer's office of General Santos, Cotabato, now General Santos City; and the corresponding previous tax declarations thereof; That for and in consideration of the love and affection which the DONOR has for the purposes for which the DONEE is existing, which is education, and of the faithful service as legal counsel which the President/Director and Founder of the Donee, has rendered and is rendering to the DONOR, the said DONOR by these presents, cedes, transfers, and conveys, by way of DONATION, unto said DONEE the ONE-HALF PORTION AT THE WESTERN SIDE of the above described property, subject to the outcome of the case involving said parcel of land, with the herein DONORS as plaintiffs/complainants/petitioners and the City of General Santos as defendant/respondents to be handled and ventilated with the above said Atty. Jose T. Tayoto, as legal counsel: That the DONORS does (sic) hereby state for the purpose of giving full effect to this donation that they have reserved for themselves in full ownership other properties sufficient to support them in a manner appropriate to their station; That the DONEE does hereby accept the donation of the abovementioned property, and does by these presents express (sic) its sincerest appreciation and thanks for the kindness and liberality shown by the DONORS. IN WITNESS WHEREOF, the above named parties have signed and executed this instrument, at the place and on the date first above written (Sgd.) HADJI LUKAYA KABALO JOHN F. KENNEDY

UDIN KABALO married to Kabiba Malang MAMAGAS KABALO married to Omon Saligan

4. MAMASALANGA KABALO married to Camalia Andagay 5. 6. 7. 8. 9. 10. BIDALIA KABALO married to Mad Guaybar NANG KABALO married to Guimbang Lava HAMSIYA KAHAL married to Zabal Mula JALIPA KAHAL married to Kosin Alibasa IMA KAHAL married to Mamaluba Sedik ILON KAHAL married to Amina Sedik

of legal ages, Moslem Filipinos and residents of Polomolok, South Cotabato, Mindanao, Republic of the Philippines, hereinafter called the DONORS. in favor of

MEMORIAL LYCEUM The JOHN F. KENNEDY MEMORIAL LYCEUM (FAR EAST) INC., a duly organized non-stock private corporation, existing under and by virtue of the laws of the Republic of the Philippines, with principal office at General Santos City, Republic of the Philippines, represented in this act by its President/Director and Founder, Atty. Jose T. Tayoto, who is likewise of legal age, Filipino, married to Juliet P. Espanto and resident of General Santos City, Republic of the Philippines, hereinafter called the DONEE. WITNESSETH (Thumbmarked) That the DONOR is the absolute owner of that certain real property situated in General Santos City and more particularly described as follows: A parcel of land (plan MR-1160-D) situated in the Barrio of Dadiangas, City of General Santos, bounded on the N. by the Albert Morrow Boulevard; on the NE and E, by the Gallego Blvd.; on the SW by the Sarangani Bay; and on the W. by the Sufragia Salazar. Point . . . is S. 20 deg 35'E., 6682.40 M. from BIDALIA KABALO By: (Sgd) MAMASALANGA KABALO (Sgd) (Sgd.) (FAIR EAST) INC.

UDIN KABALO DONEE (Sgd.) MAMAGAS KABALO

(Thumbmarked) NANG KABALO & Founder (Thumbmarked) KAMSIYA KAHAL (Sgd) JALIPA KAHAL (Thumbmarked) IMA KAHAL (Sgd.) ILON KAHAL DONORS

ATTY. JOSE TAYOTO President/Director

there and that he realized that the transfer to him, although approved by the Southern Philippines Development Administration, was already a second transfer of the property. 7 Thereafter, Tayoto introduced improvements on Lot Y-1 including a "guardhouse-shade-temporary-office combine" and later on, he filed a free patent application therefor. 8 For a while, Tayoto nurtured the belief that Lot Y-1 would eventually be his. However, subsequent acts of herein private respondents led him to file a case in court against them. According to Tayoto, as soon as private respondents took hold of a copy of Proclamation No. 2273, they disowned the deed of donation in his favor, caused the survey of the lot without consulting him and, when he confronted them, they promised to give him 2,000 square meters of Lot Y-1. Furthermore, private respondents, through one Mad Guaybar, threatened his employees and through hired malefactors, destroyed the walls of the guardhouse and the furniture therein. 9 Claiming that private respondents were poised to induce mass squatting on Lot Y-1; that private respondents had disregarded ten years of his "incessant legal battles and follow-ups to obtain Proclamation No. 2273; that his travail led to his hospitalization for heart ailment; that Udin Saludin Kabalo called him up by long distance telephone threatening to kill him unless he accepted 2,500 square meters of Lot Y-1, and that he had granted special privileges to the Kusop heirs of school age, 10 Tayoto filed on May 15, 1983 a complaint for quieting of title/specific performance with preliminary injunction and prayer for immediate issuance of status quo order with damages before the Regional Trial Court of General Santos City. 11 In their answer, the heirs of Cabalo Kusop averred that there was in fact no donation as their signatures were obtained thru the fraudulent manipulation and misrepresentation of Tayoto who, being their lawyer, exerted undue influence and moral ascendancy over them who are illiterates and unlearned. Tayoto allegedly made them believe that by affixing their signatures to the deed of donation, the approval of their petition to segregate the area involved from the operation of Proclamation No. 168 would be facilitated. 12 Atty. Rogelio Garcia, as a taxpayer, and the City Fiscal, in behalf of the city government, intervened in the case. Thereafter, the heirs of Cabalo Kusop filed an urgent motion to dismiss the complaint on the following grounds: [a] invalidity of the donation as the subject thereof had not vet been excluded from the Magsaysay Park; [b] nullity of the donation as it contravened Article 1491, paragraph 5 of the Civil Code; [c] the donor did not in fact execute the deed of donation; and [d] the complaint did not state a cause of action. In dismissing the complaint, the lower court 13 held that at the time of the donation, Proclamation No. 168 was still in force and hence, the donated property was still part of Magsaysay Park. Necessarily, the donors could not dispose of the property which was not theirs. The lower court found that although the ostensible donee was the Lyceum, "the donation was actually for attorney's fee" 14 as proven by the fact that later, the Lyceum assigned the donated property to Tayoto. Moreover, should the donated

property be considered as a contingent fee, collection of the same could not be enforced "while the case is pending or during the pendency of the case." 15 The lower court did not deem it necessary to discuss the third ground for dismissal but it upheld the defendants' contention that the complaint did not state a cause of action. The court noted that there was a "lull" in the disposition of the case after the assassination of the judge * handling it and before it was transferred to another branch. Tayoto appealed to the then Intermediate Appellate Court. In its decision of September 30, 1985, said court dismissed the appeal. It ruled that the lower court correctly nullified the donation as the donated lot was still part of the public domain. It added that although Proclamation No. 168 states that the reservation of the Magsaysay Park is "subject to private rights, if any there be Proclamation No. 2273 does not recognize the private claim or right of the heirs of Cabalo Kusop as the latter proclamation still required the claimants to the excluded lots to comply with the provisions of the Public Land Act on free patents, sales patents or homesteads. The appellate court, noting that in his brief Tayoto did not clearly state whether he was the lawyer of the herein private respondents in the litigations pending before the lower courts, 16 also ruled that the provisions of Article 1491, paragraph 5 were violated when the parties executed the deed of donation at the time of the existence of the lawyer-client relationship. His motion for reconsideration of the appellate court's decision having been denied, Tayoto came to this Court through this petition for review on certiorari. He contends herein that the proviso in Proclamation No. 2273 that portions of Magsaysay Park "shall be open for disposition in accordance with the public land law" does "not per se or automatically mean that the private rights or ownership of the heirs of Cabalo Kusop are not recognized" 17 in view of the various documents recognizing said private rights over Lots Y-1 and Y-2 as well as "official documents of several imports (which) were the basis for the issuance of Proclamation No. 2273." 18 Hence, petitioner cites the fact that on December 29, 1983, the Bureau of Lands disposed of portions of Lot Y-2 under Free Patent No. (XXI-21) 475 and the same was registered in the name of the heirs of Cabalo Kusop under Original Certificate of Title No. P-4900. 19 Petitioner also contends that the deed of donation does not violate Article 1491 paragraph 5 of the Civil Code because the deed "could not take effect but only upon the success of the case being advocated by" him. 20 The deed of donation "must be construed as a contingent onerous donation" . . . "effective only after the happening of the suspensive condition" consisting of the issuance of a presidential proclamation segregating portions of Magsaysay Park in favor of the donors. 21 The resolution of this case hinges on the validity of the donation, the deed of which has been quoted above. Both the courts below appear to have proceeded from the presumption that the donation is actually in favor of the petitioner. The deed of donation itself and subsequent acts of Tayoto,

SIGNED IN THE PRESENCE OF: (Sgd.) 1. (Sgd.) Witness 2. Witness

(Acknowledgment Omitted) 3 A decade later, or on February 25, 1983, the then President of the Philippines issued Proclamation No. 2273 excluding from the operation of Proclamation No. 168 "certain portions of the lands embraced therein and declaring the same open to disposition under the provisions of the Public Land Act." 4 After a survey had been conducted, said portions were identified as Lot Y-1 and Lot Y-2, MR-1160-D, respectively containing areas of 18,695 and 18,963 square meters. On March 28, 1983, the board of trustees of the Lyceum adopted Resolution No. 1 authorizing Jose T. Tayoto as its president and chairman of the board and Mrs. Juliet E. Tayoto as its treasurer/trustee, "to cede, transfer, convey and assign Lot Y-1, MR-1160-D in partial settlement of years of accumulated salaries." The resolution states that the one-half western side of the Magsaysay Park had been "definitely identified" as Lot Y-1, MR1160-D with an area of 18,695 square meters. Present during the meeting were three of the five members of the board of trustees, namely, Jose T. Tayoto, his wife Juliet and Rev. Juan T. Tayoto. 5 Accordingly, on April 9, 1983, the Lyceum, represented by Jose T. Tayoto and his wife, executed a deed assigning its ownership rights over Lot Y-1 in favor of Jose T. Tayoto. 6 As the heirs of Cabalo Kusop had on June 25, 1975 sold for P5,000 Lot Y-1 with an area of 30,000 square meters and Lot Y-3 with an area of 1,500 square meters in favor of Fortunato Falalimpa, on April 13, 1983, Falalimpa executed a deed of assignment of real rights over Lot Y-1 in favor of Tayoto on the grounds that he had been a beneficiary of the Lyceum, his grandchildren having studied

however, reveal that the donee is the John F. Kennedy Memorial Lyceum (Far East), Inc. and not the herein petitioner. Admittedly, there appears to be a confusion as to the personalities of the Lyceum and Tayoto as shown by the facts that one of the reasons stated for the donation is Tayoto's "faithful service as a legal counsel" and that the deed states that the donation is "subject to the outcome of the cases" involving the donated property which cases would be handled by Tayoto. However, the undisputable fact is that Tayoto affixed his signature on the deed of donation and accepted the donation in his capacity as "President/Director & Founder" of the Lyceum and not in his personal capacity. The deed itself acknowledges the fact that the Lyceum is "a duly organized non-stock private corporation." Hence, legally, it is a separate corporate entity with a personality distinct from that of its representative in the donation, petitioner herein. Moreover, petitioner is bound by his actuations subsequent to the execution of the deed of donation which negate his claim that the donation is really a "contingent onerous donation" in his favor. After the issuance of Proclamation No. 2273, when it became apparent that the donors would eventually have a right to claim the property excluded from the Magsaysay Park, petitioner still moved to solidify his claim over the donated property. Thus, he saw to the adoption by the Lyceum board of trustees of Resolution No. 1 which resulted in the execution of the document by which petitioner, in his capacity as president of the lyceum and his wife as treasurer thereof, assigned the ownership rights over the donated land to petitioner himself. Be that as it may, the donation is void. There are three essential elements of donation is [1] the reduction of the patrimony of the donor, [2] the increase in the patrimony of the donee, and [3] the intent to do an act of liberality (animus donandi). 22 Granting that there is an animus donandi we find that the alleged donation lacks the first two elements which presuppose the donor's ownership rights over the subject of the donation which he transmits to the donee thereby enlarging the donee's estate. This is in consonance with the rule that a donor cannot lawfully convey what is not his property. 23 In other words, a donation of a parcel of land the dominical rights of which do not belong to the donor at the time of the donation, is void. This holds true even of the subject of the donation is not the land itself but the possessory and proprietary rights over said land. 24 In this case, although they allegedly declared Magsaysay Park as their own for taxation purposes, the heirs of Cabalo Kusop did not have any transmissible proprietary rights over the donated property at the time of the donation. In fact, with respect to Lot Y-2, they still had to file a free patents application to obtain an original certificate of title thereon. This is because Proclamation No. 2273 declaring as "open to disposition under the provisions of the Public Land Act" some portions of the Magsaysay Park, is not an operative law which automatically vests rights of ownership on the heirs of Cabalo Kusop over their claimed parcels of land. The import of said quoted proviso in a presidential proclamation is discussed in the aforecited Republic v. Court of Appeals case which dealt with the validity of a donation by a sales awardee of a parcel of land which was later reserved by presidential proclamation for medical center site purposes. We held therein that

where the land is withdrawn from the public domain and declared as disposable by the Director of Lands under the Public Land Act, the Sales Award covering the same confers on a sales awardee only a possessory and not proprietary right over the land applied for. The disposition of the land by the Director is merely provisional as the applicant still has to comply with the requirements of the law before any patent is issued. It is only after the compliance with such requirements that the patent is issued and the land applied for considered "permanently disposed of by the Government." 25 The interpretation of said proviso should even be more stringent in this case considering that with respect to Lot Y-1, the heirs of Cabalo Kusop do not appear to have taken even the initial steps mandated by the Public Land Act for claimants of the land excluded from the public domain. The alleged donation was therefore no more than an exercise in futility. The donation being void, petitioner is not entitled to any rights otherwise emanating therefrom. Hence, we do not find it necessary to determine the applicability of Article 1491, paragraph 5 of the Civil Code. However, it appearing that petitioner's legal services to private respondents have not been paid as the donation which was supposedly in payment thereof has been declared null and void in the present case, we deem it just, fair and equitable to fix a reasonable amount of attorney's fees in favor of petitioner. We would have ordinarily remanded the case for reception of evidence on the nature and character of the services rendered by petitioner to private respondents, but so as not to unduly prolong the resolution of this controversy, more so now that petitioner is dead, ** we fix the amount of attorney's fees to be paid by private respondents to the estate of petitioner at Ten Thousand Pesos. WHEREFORE, the petition for review on certiorari is hereby DENIED for lack of merit. The motion to substitute petitioner filed by his widow, Mrs. Juliet Espanto vda. de Tayoto, is GRANTED. Private respondents are ordered to pay the amount of Ten Thousand Pesos as attorney's fees to the estate of the late Rev./Atty. Jose T. Tayoto for the legal services rendered by the latter to them. No pronouncement as to costs. SO ORDERED.

G.R. No. L-8327

December 14, 1955

ANTONINA CUEVAS, plaintiff-appellant, vs. CRISPULO CUEVAS, defendant-appellee. Pedro D. Maldia for appellant. Teodoro P. Santiago for appellee.

while I am not deprived of life by the Almighty"; but right after, the same donor states that she "will not takle away" (the property) "because I reserve it for him (the donee) when I die." The question to be decided is whetehr the donor intended to part with the title to the property immediately upon the execution of the deed, or only later, when she had died. If the first, the donation is operative inter vivos; if the second, we would be confronted with a disposition mortis causa, void from the beginning because the formalities of testaments were not observed (new Civil Code, Arts. 728 and 828; heirs of Bonsato vs. Court of Appeals, 250 Off. Gaz. (8), p. 3568; Tuason vs. Posadas, 54 Phil., 289; Sent. Trib. Sup. of Spain, 8 July 1943). We agree with the Court below that the decisive proof that the present donation is operative inter vivor lies in the final phrase to the effect that the donor will not dispose or take away ("hindi ko nga iya-alis" in the original) the land "because I am reserving it to him upon my death." By these words the donor expressly renounced the right to freely dispose of the property in favor of another (a right essential to full ownership) and manifested the irrevocability of the conveyance of the naked title to the property in favor of the donee. As stated in our decision in Bonsato vs. Court of Appeals, ante, such irrevocability is characteristic of donations inter vivos, because it is incompatible with the idea of a disposition post mortem. Witness article 828 of the New Civil Code, that provides: ART. 828. A will may be revoked by the testator at any time before his death. Any waiver or restriction of this right is void. It is apparent from the entire context of the deed of donation that the donor intended that she should retain the entire beneficial ownership during her lifetime, but that the naked title should irrevocably pass to the donee. It is only thus that all the expressions heretofore discussed can be given full effect; and when the donor stated that she would continue to retain the "possession, cultivation, harvesting and all other rights and attributes of ownership," she meant only the dominium utile, not the full ownership. As the Court below correctly observed, the words "rights and attributes of ownership" should be construed ejusdem generis with the preceding rights of "possession, cultivation and harvesting" expressly enumerated in the deed. Had the donor meant to retain full or absolute ownership she had no need to specify possession, cultivation and harvesting, since all these rights are embodied in full or absolute ownership; nor would she then have excluded the right of free disposition from the "rights and attributes of ownership" that she reserved for herself.lawphi1.net Hence, the Court below rightly concluded that the deed Exhibit A was a valid donation inter vivos, with reservation of beneficial title during the lifetime of the donor. We may add that it is highly desirable that all those who are called to prepare or notarize deeds of donation should call the attention of the donors to the necessity of clearly specifying whether, notwithstanding the donation, they wish to retain the right to control and dispose at will of the property before their death, without need of the consent or intervention of the beneficiary, since the express reservation of such right would be conclusive indication that the liberality is to exist only at the donor's death, and therefore, the formalities of testaments should be observed; while, a converso, the express

waiver of the right of free disposition would place the inter vivos character of the donation beyond dispute (Heirs of Bonsato vs. Court of Appeals, 50 Off. Gaz. (8), p. 3568). The argument that there was no sufficient acceptance, because the deed "merely recites that (1) the donee has duly read all the contents of this donation; (2) that he 'shall fully respect all its terms'; and (3) that 'for the act of benevolence' he is expressing his gratitude" but there is no show of acceptance (Appellant's brief, p. 7), is without basis. To respect the terms of the donation, and at the same time express gratitude for the donor's benevolence, constitutes sufficient acceptance, If the donee did not accept, what had he to be grateful about? We are no longer under the formulary system of the Roman law, when specific expressions had to be used under paid of nullity. Also unmeritoriious is the contention that the donation is void because the donor failed to reserve enough for ther own support. As we have seen, she expressly reserved to herself all the benefits derivable from the donated property as long as she lived. During that time, she suffered no diminution of income. If that was not enough to support her, the deficiency was not dur to the donation. Finally, the donee is not rightfully chargeaboe with ingratitude, because it was expressly stipulated that the donee had a total income of only P30 a month, out of which he had to support himself, his wife and his two children. Evidently his means did not allow him to add the donor's support to his own burdens. Wherefore, the decision appealed from is affirmed. No costs in this instance, appellant having obtained leave to litigate as a pauper. So ordered

REYES, J. B. L., J.: On September 18, 1950, Antonina Cuevas executed a notarized conveyance entitled "Donacin Mortis Causa," ceding to her nephew Crispulo Cuevas the northern half of a parcel of unregistered land in barrio Sinasajan, municipality of Penaranda, Province of Nueva Ecija (Exhibit A). In the same instrument appears the acceptance of Crispulo Cuevas. "Subsequently, on May 26, 1952, the donor executed another notarial instrument entitled "Revocacion de Donacion Mortis Causa" (Exhibit B) purporting to set aside the preceding conveyance; and on August 26, 1952, she brought action in the Court of First Instance to recover the land conveyed, on the ground (1) that the donation being mortis causa, it had been lawfully revoked by the donor; and (2) even it if were a donation inter vivos, the same was invalidated because (a) it was not properly accepted; (b) because the donor did not reserve sufficient property for her own maintenance, and (c) because the donee was guilty of ingratitute, for having refused to support the donor. Issues having been joined, and trial had, the Court of First Instance denied the recovery sought, and Antonina Cuevas thereupon appealed. The Court of Appeals forwarded the case to this Court because, the case having been submitted on a stipulation of facts, the appellant raised only questions of law. The first issue tendered converns the true nature of the deed "Exhibit A"; whether it embodies a donation inter vivos, or a disposition of property mortis causa revocable freely by the transferor at any time before death. 1 It has been rules that neither the designation mortis causa, nor the provision that a donation is "to take effect at the death of the donor", is a controlling criterion in defining the true nature of donations (Laureta vs. Mata, 44 Phil., 668; Concepcion vs. Concepcion, 91 Phil., 823). Hence, the crux of the controversy revolves around the following provisions of the deed of donation: Dapat maalaman ni Crispulo Cuevas na samantalang ako ay nabubuhay, and lupa na ipinagkakaloob ko sa kaniya ay ako pa rin and patuloy na mamomosecion, makapagparatrabaho, makikinabang at ang iba pang karapatan sa pagmamayari ay sa akin pa rin hanggang hindo ko binabawian ny buhay ng Maykapal at ito naman ay hindi ko nga iya-alis pagkat kung ako ay mamatay na ay inilalaan ko sa kaniya. There is an apparent conflict in the expression above quoted, in that the donor reserves to herself "the right of possession, cultivation, harvesting and other rights and attributes of ownership

Ortiz, et al. vs. Court of Appeals and Basada May 19, 1955 [GRN L-7307 May 19, 1955] PACITA ORTIZ, et al., petitioners, vs. THE COURT OF APPEALS and ANDRES BASADA, respondents 1. DONATION OF REAL PROPERTY; WHEN DONEE ACQUIRES OWNERSHIP AND POSSESSION OF DONATED PROPERTY.-From the time the public instrument of donation is simultaneously executed and acknowledged by donors and donees, the latter acquired not only the ownership but also the possession of the donated property, since the execution of a public instrument of conveyance is one of the recognized ways in which delivery (tradition) of lands may be made, unless the countrary is expressed or inferable from the terms of the deeds. 2. ID.; DONATION IS ABSOLUTE AND UNCONDITIONAL IN THE ABSENCE OF RESERVATION.- Where the donation is on its face absolute land unconditional and nothing in its text authorizes us to conclude that it is limited to the naked ownership of the land donated, the absence in the deed of any express reservation of usufruct in favor of the donors is proof that no such reservation was ever intended considering that under the law, a donation of land by public instrument is required to express the charges that the donee must assume. PETITION for review by certiorari of a decision of the Court of Appeals. The facts are stated in the opinion of the Court. Marciano Chitongco for petitioners. Flaviano de Asis for respondents. REYES, J. B. L., J.: Pacita Ortiz and Cresencia Ortiz pray for a review of the decision of the Court of Appeals in its CA-G. R. No.7691-R, dismissing their complaint against Andres Basada for recovery of a parcel of land in Lapinig, Samar, described as follows: "Terreno cocalero ubicado en el municipio de Lapinig, Samar, lindante al NorteBasilio Piangdon, ahora Pedro Mojica; al Este Eugenio Montibon, ahora solar de la escuela; al Sur-Colina; y al Oeste Octavia Anacta, ahora Donata Abique, con un area, de 3,200 m.c., poco mas o menos avaluado en P100.00 bajo el Tax No. 4649." (Dec. CA. p. 1). As determined by the Court of Appeals, the parcel of land in question belonged originally to the spouses Bonifacio Yupo and Vicenta, de Guerra. On April 19, 1940, the owners donated the lot (among others) to their grandchildren, petitioners Ortiz, by public document acknowledged before Notary Public Liberato Cinco, and couched in the following terms: "DEED OF DONATION LET IT BE KNOWN BY ANYBODY WHO MIGHT SEE THIS: That, we, BONIFACIO YUPO AND VICENTA DE GUERRA, Married to each other, both of age, residing at barrio Lapinig, Palapag, Samar, Philippine and CRESENCIA ORTIZPINANGAY, ALEJANDRO ORTIZ and PACITA ORTIZ, also of age all of them, the first one residing at the same place and the two others at barrio Potong, Palapag, Samar, have agreed on the following: THAT BONIFACIO YUPO and VICENTA DE GUERRA, for and in consideration of the liberality and love to their grandchildren, CRESENCIA ORTIZ-PINANGAY, ALEJANDRO ORTIZ and PACITA ORTIZ, announce to everybody that that at their free will give and donate to CRECENCIA ORTIZ-PINANGAY ALEJANDRO ORTIZ and PACITA ORTIZ three (3) parcels of land which are as follows: Tax No. 19738, Awang, Lapinig, Palapag, Samar, bounded in the North-Jacoba Enage; East-Jacoba Enage and Swamp, South-

Awang Stream; and on the WestFermin Espinisin, Teresa Cesesta and Francisco Donceras. Tax No: 4649, Lapinig, Palapag, Samar; bounded in the North Easilio Piangdon; on East-Eugenio Montibon; and the South-Colina; and the West-Octavio Anacta. Tax No. 12144, Potong, Palapag, Samar, bounded on the North-Bo. de Potong; on the East-Playa Mar; South-Juan Sidro; on the West-Juan Sidro. We trust that the donees would divide the lands donated to them by themselves. That CRESENCIA ORTIZ-PINANGAY, ALEJANDRO ORTIZ and PACITA ORTIZ, hereby accept this donation intervivos of the above-mentioned three (3) parcels of land and that they hereby manifest their gratefulness to the sympathy, love and liberality and benevolence of BONIFICIO YUPO and VICENTA DE GUERRA. "In truth hereof, we have placed our names below this 19th day of April, 1940 at Palapag, Samar. (Sgd.) CRESENCIA ORTIZ-PINANGAY (SGD.) ALEJANDRO ORTIZ(FDO.) BONIFACIO YUPO (SGD.) PACITA ORTIZ(FDO.) VICENTA DE GUERRA Signed in the presence of: Signature illegible ACKNOWLEDGMENT By NOTARYY PUBLIC LIBERATO B. CINCO. '(Exhibit D-2, trans. of Exh. D)" (Dec. CA. pp. 2-3). The donors were duly notified of donee's acceptance. Alejandro Ortiz died without issue in Capas, Tarlac, as a prisoner of war, during the last occupation by the Japanese. It appears further that on August 14, 1941, the donor spouses executed another notarial deed of donation of the same property, in favor of Andres Basada, nephew of the donor Vicenta de Guerra, subject to the condition that the donee would serve and take care of the donors until their death. This donation was also duly accepted by the donee in the same instrument (Exh. 1-a). In 1947, the first donee (Ortiz) filed revindicatory action against the second donee (Basada) alleging that in 1946, the latter entered and usurped the land donated to and owned by them, and refused to vacate the same. Basada claimed ownership of the land on the ground that the donation in favor of the Ortizes had been revoked. The Court of First Instance of Samar upheld Basada's claim and dismissed the complaint, on the ground that the donees Ortiz had abandoned the donors "to public mercy", with" most base ingratitude and highly condemnable heartlessness". Upon appeal to the Court of Appeals, the latter correctly held that the donation in favor of appellants Ortiz had been duly perfected in accordance with law, and it should "stand until after its revocation should have been asked and granted in the proper proceedings," citing our decision in Ventura vs. Felix, 26 Phil. 500-503. It added that the subsequent donation of the property to Basada "is not, certainly, the way a prior donation should be revoked." Nevertheless, the Court of Appeals upheld the dismissal of the complaint, holding that: "However, to all appearances, the donors in the instant case had always reserved for themselves the possession and use of the properties donated. This may be inferred from the fact that the Ortizes were in possession of the land in question from the time it was donated to them until the donors left their house, and that later, we believe, Basada took possession of it after the donation thereof in his favor was signed and the donors went to live with him. The recovery of possession of the land sought by plaintiffs is, therefore, premature because one of the donors in behalf of whom Basada is now in occupancy of the property is still living. At least he should

have been included in the case to determine whether he really had parted definitely not only with the ownership but also with the use and possession of the land." Dec. CA p. 9). We agree with the petitioners that the conclusion thus drawn is unwarranted. From the time the public instrument of donation (Exh. D) was executed and acknowledged by donors and donees in 1940, the latter acquired not only the ownership but also the possession of the donated property, since the execution of a public instrument of conveyance is one of the recognized ways in which delivery (tradition) of lands may be made (Civ. Code of 1889, Art. 1463; new Civil Code, Art. 1498), unless from the terms of the deed, the contrary is expressed or inferable. In the present case, the donation (Exh. D) is on its face absolute and unconditional,and nothing in its text authorizes us to conclude that it was limited to the naked ownership of the land donated. Considering that under the law, a donation of land by Public instrument is required to express the charges that the donee must assume (old Civil Code, Art. 633; new Civil Code, Art. 749), the absence in the deed of any express reservation of usufruct in favor of the donors is proof that no such reservation was ever intended. The mere fact that the donors remain in the property after donating it is susceptible of varied explanations and does not necessarily imply that possession or usufruct was excluded from the donation. And the donees Ortiz having been vested with ownership and attendant possession since 1940, it is clear that the subsequent donation of the property in favor of respondent Basada confered on the latter no right whatever over the property as against the former donees. Wherefore, and without prejudice to any action of revocation that may lawfully apertain to the donors, the decisions of the Court of Appeals and of the Court of First Instance of Samar dismissing the complaint are hereby reversed, and the respondent Andres Basada is sentenced to restore possesion to petitioners Cresencia and Pacita Ortiz. The records of the case are ordered remanded to the Court of origin for assessment of the damages suffered by the petitioners. Cost against respondent Andres Basada. Pablo, Bengzon, Padilla, Montemayor, Reyes, A., Bautista Angelo, Labrador, and Concepcion, JJ., concur. Decision reversed.

G.R. No. L-33849 August 18, 1977 TEODORICO ALEJANDRO, IRENEO POLICARPIO, VIRGINIA ALEJANDRO, MARIA ALEJANDRO, SALUD ALEJANDRO, EMILIA ALEJANDRO, FLORENCIO ALEJANDRO and DIONISIA ALEJANDRO, petitioners, vs. HON. AMBROSIO M. GERALDEZ, Presiding Judge, Court of First Instance of Bulacan, Branch V, Sta. Maria, ANDREA DIAZ and ANGEL DIAZ, respondents. G.R. No. L-33968 August 18, 1977 ANDREA DIAZ, petitioner, vs. HON. AMBROSIO M. GERALDEZ, in his capacity as Presiding Judge of the Court of First Instance of Bulacan, Branch V, TEODORICO ALEJANDRO, IRENEO POLICARPIO, VIRGINIA ALEJANDRO, MARIA ALEJANDRO, EMILIA ALEJANDRO, FLORENCIO ALEJANDRO and DIONISIA ALEJANDRO, respondents. Ponciano G. Hernandez for Teodorico Alejandro, et al. Porfirio Villaroman for Andrea Diaz and Angel Diaz. AQUINO. J. This is a case about donations inter vivos and mortis causa . The bone of contention is Lot No. 2502 of the Lolomboy Friar Lands Estate with an area of 5,678 square meters, situated in Sta. Maria, Bulacan and covered by Transfer Certificate of Title No. 7336. The facts are as follows: On January 20, 1949 the spouses Gabino (Gavino) Diaz and Severa Mendoza, their daughter-in-law Regina Fernando and their three children, Olimpia Diaz, Angel Diaz and Andrea Diaz, executed a deed of donation covering eight lots of the Lolomboy Friar Lands Estate, owned by the Diaz spouses, located at Barrio Parada, Sta. Maria, Bulacan. The deed reads as follows: KASULATAN DONATION) NG PAGKAKALOOB (A DEED OF

Na ang Nagkaloob (DONORS) ay siyang mayari, at kamayari at namomosision sa kasalukuyan ng mga parcelang lupa kasama ang mga kagalingan na nasa lugar ng Parada, Sta. Maria, Bulacan, mapagkikilala sa paraang mga sumusunod (description and statements as to registration are omitted): 1. 2. 3. 4. 5. 6. 7. 8. TCT No. 7336, Lot No. 2502, 5,678 square meters. TCT No. 10998, Lot No. 2485, 640 square meters. TCT No. 10840, Lot No. 2377,16,600 square meters. TCT No. 10997, Lot No. 2448,12,478 square meters. TCT No. 2051, Lot No. 4168, 1,522 square meters. TCT No. 17960, Lot No. 2522, 3,418 square meters. TCT No. 17961, Lot No. 2521, 715 square meters. TCT No. 21453, Lot No. 2634, 8,162 square meters.

(f) Lot No. 2643, TCT No. 21453, to Regina Fernando and her children with the deceased Miguel Diaz in whose name the said Lot was already registered. Na kaming mga pinagkakalooban (DONEES) na sila Regina Fernando, Olimpia Diaz, Angel Diaz at Andrea Diaz ay tinatanggap namin ng buong kasiyahang loob ang pagkakaloob (Donation.) na ito, at sa pamamagitan nito ay kinikilala, pinahahalagahan, at lubos na pinasasalamatan namin ang kagandahang loob at paglingap na ipinakita at ginawa ng nagkakaloob (Donors). AT SA WAKAS, ang pagkakaloob na ito (DONATION), ay sumasailalim sa paraang mga sumusunod: 1. Ang mga Pinagkakalooban (Donatarios) na sila Regina Fernando, Olimpia Diaz, Angel Diaz, at Andrea Diaz, siyang nakaaalam sa mga gastos sa pagkakasakit at sa libing ng NAGKALOOB (DONANTE); 2. Na ang mga Pinagkalooban (DONATARIOS) ay hindi maaaring makapagbili sa pangatlong tao ng nasabing mga pagaari samantalang ang nagkaloob (Donante) ay buhay Datapwa't kung ang pagbibiling gagawin ay upang malunasan ang mga gastos at menitencion ng Nagkaloob (Donante) samakatuwid ang nasabing pagbibili ay matuwid; 3. Gayun din, samantalang kaming mag-asawang Gabino Diaz at Severa Mendoza ay buhay, patuloy ang aming pamamahala, karapatan, at pagkamay-ari sa mga nasabing pagaari na sinasaysay sa unahan nito na pag-aari namin; ngunit sakaling kami ay bawian ng buhay ng Panginoong Dios at mamatay na ang mga karapatan at pagkamay-ari ng bawa't Pinagkalooban (Donatarios) sa bawa't pag-aari na nauukol sa bawa't isa ay may lubos na kapangyarihan." SA KATUNAYAN NG LAHAT, linagdaan namin ang kasulatang ito, dito sa Sta. Maria, Bulacan, ngayon ika 20 ng Enero, 1949, sa patibay ng dalawang sacsing kaharap. Signature Thumbmark Signature GABINO DIAZ SEVERA MENDOZA REGINA FERNANDO Thumbmark Signature Signature OLIMPIA DIAZ ANGEL DIAZ ANDREA DIAZ (Acknowledgment signed by Notary Celedonio Reyes is omitted) Gabino Diaz died in 1962. On October 20, 1964 Severa Mendoza and her two children, Andrea Diaz and Angel Diaz, executed a deed of donation denominated as "Kasulatan ng Pagbibigay na Magkakabisa Pagkamatay (Donation Mortis causa )" over one-half of Lot No. 2377-A, which is a portion of Lot No. 2377 of the Lolomboy Friar Lands Estate (which in turn is item 3 or [c] in the 1949 deed of donation already mentioned). In that deed of donation, Severa Mendoza donated to Andrea Diaz her one-half share in Lot 2377-A, which one-half share is Identified as Lot 2377-A-1, on condition that Andrea Diaz would bear the funeral expenses to be incurred after the donor's death. She died in 1964. It should be noted that the other one-half share in Lot 2377-A or Lot No. 2377-A-2 was previously adjudicated to Angel Diaz

Na dahil at alang-alang sa pagmamahal at masuyong pagtingin na taglay ng NAGKAKALOOB (DONORS) sa Pinagkakalooban (DONEES) gayun din sa tapat at mahalagang paglilingkod noong mga lumipas na panahon na ginawa ng huli sa una, ang nabanggit na nagkakaloob sa pamamagitan ng kasulatang ito ng pagkakaloob (Donation) ay buong pusong inililipat at lubos na ibinibigay sa nasabing pinagkakalooban ang lupang binabanggit at makikilala sa unahan nito, laya sa ano mang sagutin at pagkakautang, katulad nito: (a) Na ang lupang sinasaysay sa Lote No. 2502 o Titulo No. 7336, (No. 1) sa unahan nito ay hinati sa dalawang parte ang unang parte (1/2) na nasa bandang Kanluran (West) ay ipinagkakaloob ng mag-asawang Gabino Diaz at Severa Mendoza sa kanilang anak na si Angel Diaz, kasal kay Catalina Marcelo; at ang ikalawang parte (1/2) na nasa 'bandang silangan (East) ay ipinagkakaloob ng magasawang Gabino Diaz at Severa Mendoza sa kanilang anak na si Andrea Diaz, kasal kay Perfecto Marcelo." (Note Some dispositions are not reproduced verbatim but are merely summarized because they are not involved in this case. Paragraph (a) above is the one involved herein). (b) Lot No. 2485, TCT No.10998, to Regina Fernando (daughter- in-law of the donors and widow of their deceased son, Miguel Diaz) and Olimpia Diaz in equal shares. (c) Lot No. 2377, TCT No. 10840, 1/3 to Angel Diaz, 1/3 to Andrea Diaz, and 1/3 "ay inilalaan o inihahanda ng mag-asawang Gabino Diaz at Severa Mendoza sa kanilang sariling kapakanan o mga gastos nila. (d) Lot No. 2448, TCT No. 10997 to Olimpia Diaz sa condicion na pagkakalooban ni Olimpia Diaz si Crisanta de la Cruz, asawa ni Alejandro - - - - - (sic) sakaling si Crisanta ay mamatay ng halagang isang daang piso (P100), bilang gastos sa libing." (e) Na ang lupang-solar na sinasaysay sa Lote No. 4168 o Titulo No. 2051 (No. 5); lupang-bukid na sinasaysay sa Lote No. 25?2 o Titulo No. 17960 (No. 6); at lupang-bukid na sinasaysay sa Lote No. 2521 o Titulo No. 17961 (No. 7) sa unahan nito ay inilalaan o inihahanda ng mag-asawang Gabino Diaz at Severa Mendoza sa kanilang sariling kapakanan o mga gastos nila.

ALAMIN NG LAHAT NG MAKATUTUNGHAY NITO: Ang pagkakaloob (donation) na ito, ginawa at pinagtibay dito sa municipio ng Sta. Maria, lalawigan ng Bulacan, Pilipinas, ngayong ika 20 ng Enero, 1949, ng mag-asawang GABINO DIAZ at SEVERA MENDOZA, filipinos, may mga sapat na gulang, naninirahan sa nayon ng Parada, Sta. Maria, Bulacan na dito'y kinikilalang NAGKALOOB (DONORS), sa kapakanan nila REGINA FERNANDO, filipina, may sapat na gulang, viuda; OLIMPIA DIAZ, filipina, may sapat na gulang, kasal kay Teodorico Alejandro, ANGEL DIAZ, filipino, may sapat na gulang, kasal kay Catalina Marcelo, at ANDREA DIAZ, filipina, may sapat na gulang, kasal kay Perfecto Marcelo, mga naninirahan sa nayon ng Parada, Sta. Maria, Bulacan, na dito'y kinikilalang PINAGKALOOBAN (DONEES). PAGPAPATUNAY:

because he defrayed the funeral expenses on the occasion of the death of Gabino Diaz. On May 12, 1970 Andrea Diaz sued her brother, Angel Diaz, in the Court of First Instance of Bulacan, Sta. Maria Branch V for the partition of Lots Nos. 2377-A and 2502 (Civil Case No. SM-357). Teodorico Alejandro, the surviving spouse of Olimpia Diaz, and their children intervened in the said case. They claimed one-third of Lot No. 2502. Angel Diaz alleged in his answer that he had. been occupying his share of Lot No. 2502 "for more than twenty years". The intervenors claimed that the 1949 donation was a void mortis causa disposition. On March 15, 1971 the lower court rendered a partial decision with respect to Lot No. 2377-A. The case was continued with respect to Lot No. 2502 which is item No. 1 or (a) in the 1949 deed of donation. The record does not show what happened to the other six lots mentioned in the deed of donation. The trial court in its decision of June 30, 1971 held that the said deed of donation was a donation mortis causa because the ownership of the properties donated did not pass to the donees during the donors' lifetime but was transmitted to the donees only "upon the death of the donors". However, it sustained the division of Lot No. 2502 into two equal parts between Angel Diaz and Andrea Diaz on the theory that the said deed of donation was effective "as an extra-judicial partition among the parents and their children. Consequently, the Alejandro intervenors were not given any share in Lot No. 2502. Angel Diaz and the intervenors were ordered to pay Andrea Diaz "attorney's fees of P1,000 each or a total of P2,000". The Alejandro intervenors filed a motion for reconsideration, On July 16, 1971 the trial court denied that motion but eliminated the attorney's fees. Andrea Diaz and the Alejandro intervenors filed separate appeals to this Court under Republic Act No. 5440. Andrea Diaz contends that the 1949 deed of donation is a valid donation inter vivos and that the trial court erred in deleting the award for attorney's fees. The Alejandro intervenors contend that the said donation is mortis causa ; that they are entitled to a one-third share in Lot No, 2502, and that the trial court erred in characterizing the deed as a valid partition. In the ultimate analysis, the appeal involves the issue of whether the Alejandro intervenors should be awarded one-third of Lot No. 2502, or 1,892 square meters thereof, as intestate heirs of the Diaz spouses. To resolve that issue, it is necessary to determine whether the deed of donation is inter vivos or mortis causa. A brief exposition on the nature of donation inter vivos and mortis causa may facilitate the resolution of that issue. Many legal battles have been fought on the question of whether a particular deed is an inter vivos or mortis causa donation. The copious jurisprudence on that point sheds light on that vexed question. The Civil Code provides: ART. 728. Donations which are to take effect upon the death of the donor partake of the nature of testamentary provisions, and shall be governed by the rules established in the Title on Succession. (620).

ART. 729. When the donor intends that the donation shall take effect during the lifetime of the donor, though the property shall not be delivered till after the donor's death, this shall be a donation inter vivos. The fruits of the property from the time of the acceptance of the donation, shall pertain to the donee, unless the donor provides otherwise. (n) ART. 730. The fixing of an event or the imposition of a suspensive condition, which may take place beyond the natural expectation of life of the donor, does not destroy the nature of the act as a donation inter vivos unless a contrary intention appears. (n) ART. 731. When a person donates something subject to the resolutory condition of the donor's survival, there is a donation inter vivos. (n) ART. 732. Donations which are to take effect inter vivos shall be governed by the general provisions on contracts and obligations in all that is not determined in this Title. (621)." Nature of donations inter vivos and mortis causa transfers. Before tackling the issues raised in this appeal, it is necessary to have some familiarization with the distinctions between donations inter vivos and mortis causa because the Code prescribes different formalities for the two kinds of donations. An utter vivos donation of real property must be evidenced by a public document and should be accepted by the donee in the same deed of donation or in a separate instrument. In the latter case, the donor should be notified of the acceptance in an authentic form and that step should be noted in both instruments. (Art. 749, Civil Code. As to inter vivos donation of personal property, see art. 748). On the other hand, a transfer mortis causa should be embodied in a last will and testament (Art. 728, supra). It should not be called donation mortis causa . It is in reality a legacy (5 Manresa, Codigo Civil, 6th Ed., p. 107). If not embodied in a valid will, the donation is void (Narag vs. Cecilio, 109 Phil. 299; Aznar vs. Sucilla 102 Phil. 902; Tuazon vs. Posadas, 54 Phil. 289; Serrano vs. Solomon, 105 Phil. 998, 1002). This Court advised notaries to apprise donors of the necessity of clearly specifying whether, notwithstanding the donation, they wish to retain the right to control and dispose at will of the property before their death, without the consent or intervention of the beneficiary, since the reservation of such right would be a conclusive indication that the transfer' would be effective only at the donor's death, and, therefore, the formalities of testaments should be observed; while, a converso, the express waiver of the right of free disposition would place the inter vivos character of the donation beyond dispute (Cuevas vs. Cuevas, 98 Phil. 68,72). From the aforequoted articles 728 to 732, it is evident that it is the time of effectivity (aside from the form) which distinguishes a donation inter vivos from a donation mortis causa . And the effectivity is determined by the time when the full or naked ownership (dominum plenum or dominium directum) of the donated properties is transmitted to the donees. (See Lopez vs. Olbes, 15 Phil. 540; Gonzales and Fuster Fabra vs. Gonzales Mondragon, 35 Phil. 105). The execution of a public instrument is a mode of delivery or tradition (Ortiz vs. Court of Appeals, 97 Phil. 46).

If the donation is made in contemplation of the donor's death, meaning that the full or naked ownership of the donated properties will pass to the donee only because of the donor's death, then it is at that time that the donation takes effect, and it is a donation mortis causa which should be embodied in a last will and testament (Bonsato vs. Court of Appeals, 95 Phil. 481). But if the donation takes effect during the donor's lifetime or independently of the donor's death, meaning that the full or naked ownership (nuda proprietas) ) of the donated properties passes to the donee during the donor's lifetime, not by reason of his death but because of the deed of donation, then the donation is inter vivos (Castro vs. Court of Appeals, L-20122, April 28, 1969, 27 SCRA 1076). The effectivity of the donation should be ascertained from the deed of donation and the circumstances surrounding its execution. Where, for example, it is apparent from the document of trust that the donee's acquisition of the property or right accrued immediately upon the effectivity of the instrument and not upon the donor's death, the donation is inter vivos (Kiene vs. Collector of Internal Revenue, 97 Phil. 352). There used to be a prevailing notion, spawned by a study of Roman Law, that the Civil Code recognizes a donation mortis as a juridical act in contraposition to a donation inter vivos. That impression persisted because the implications of article 620 of the Spanish Civil Code, now article 728, that "las donaciones que hayan de producir sus efectos pro muerte del donante participan de la naturaleza de las disposiciones de ultima voluntad, y se regiran por las reglas establecidas en el capitulo de la sucesion testamentaria" had not been fully expounded in the law schools. Notaries assumed that the donation mortis causa of the Roman Law was incorporated into the Civil Code. As explained by Justice J. B. L. Reyes in the Bonsato case, supra, article 620 broke away from the Roman Law tradition and followed the French doctrine that no one may both donate and retain. Article 620 merged donations mortis causa with testamentary dispositions and thus suppressed the said donations as an independent legal concept. Castan Tobenas says: (b) Subsisten hoy en nuestro Derecho las donaciones mortis causa ? De lo que acabamos de decir se desprende que las donaciones mortis causa han perdido en el Codigo civil su caracter distintivo y su naturaleza, y hay que considerarlas hoy como una institucion suspirimida, refundida en la del legado. ... La tesis de la desaparicion de las donaciones mortis causa en nuestro Codigo Civil, acusada ya precedentemente por el projecto de 1851, puede decirse que constituye una communis opinio entre nuestros expositores, incluso los mas recientes. ... Garcia Goyena, comentando dicho proyecto, decia que la Comision se habia adherido al acuerdo de suprimir las donaciones mortis causa , seguido por casi todos los Codigos modernos. Las donaciones mortis causa a;adia-eran una especie de montsruo entre los contratos y ultimas voluntades; las algarabia del Derecho romano y patrio sobre los puntos de semenjanza y disparidad de estas donaciones con los pactos y legados no podia producir sino dudas, confusion y pleitos en los rarisimos casos que ocurriesen

por la dificuldad de apreciar y fijar sus verdaderos caracteres' "(4 Derecho Civil Espanol, Comun y Foral, 8th Ed., 1956, pp. 182-3). Manresa is more explicit. He says that "la disposicion del articulo 620 significa, por lo tanto: (1) que han desaperacido las llamadas antes donaciones mortis causa , por lo que el Codigo no se ocupa de ellas en absoluto; (2) que toda disposicion de bienes para despues de la muerte sigue las reglas establecidas para la sucesion testamentaria" (5 Comentarios al Codigo Civil Espanol, 6th Ed., p.107). Note that the Civil Code does not use the term donation mortis causa . ( Section 1536 of the Revised Administrative Code in imposing the inheritance tax uses the term "gift mortis causa ").lwphl@it What are the distinguishing characteristics of a donation mortis causa? Justice Reyes in the Bonsato case says that in a disposition post mortem (1) the transfer conveys no title or ownership to the transferee before the death of the tansferor, or the transferor (meaning testator) retains the ownership, full or naked (domino absoluto or nuda proprietas) (Vidal vs. Posadas, 58 Phil. 108; De Guzman vs. Ibea, 67 Phil. 633; (2) the transfer is revocable before the transferor's death and revocabllity may be provided for indirectly by means of a reserved power in the donor to dispose of the properties conveyed (Bautista vs. Sabiniano, 92 Phil. 244), and (3) the transfer would be void if the transferor survived the transferee. In other words, in a donation mortis causa it is the donor's death that determines that acquisition of, or the right to, the property donated, and the donation is revocable at the donor's will, Where the donation took effect immediately upon the donee's acceptance thereof and it was subject to the resolutory condition that the donation would be revoked if the donee did not give the donor a certain quantity of rice or a sum of money, the donation is inter vivos (Zapanta vs. Posadas, Jr., 52 Phil. 557). Justice Reyes in the subsequent cast of Puig vs. Penaflorida, L15939, November 29, 1965, 15 SCRA 276, synthesized the rules as follows: 1. That the Civil Code recognizes only gratuitous transfers of property which are effected by means of donations inter vivos or by last will and testament executed with the requisite legal formalities. 2. That in inter vivos donations the act is immediately operative even if the material or physical deliver (execution) of the property may be deferred until the donor's death, whereas, in a testamentary disposition, nothing is conveyed to the grantee and nothing is acquired by him until the death of the grantortestator. The disposition is ambulatory and not final. 3. That in a mortis causa disposition the conveyance or alienation should be (expressly or by necessary implication) revocable ad nutum or at the discretion of the grantor or so called donor if he changes his mind (Bautista vs. Saniniano, 92 Phil. 244). 4. That, consequently, the specification in the deed of the cases whereby the act may be revoked by the donor indicates that the donation is inter vivos and not a mortis causa disposition (Zapanta vs. Posadas, 52 Phil. 557). 5. That the designation of the donation as mortis causa , or a provision in the deed to the effect the donation "is to take effect at the death of the donor", is not a controlling criterion because

those statements are to be construed together with the rest of the instrument in order to give effect to the real intent of the transferor (Laureta vs. Mata and Mango, 44 Phil. 668; Concepcion vs. Concepcion, 91 Phil. 823; Cuevas vs. Cuevas, 98 Phil. 68). 6. That a conveyance for an onerous consideration is governed by the rules of contracts and not by those of donations or testaments (Carlos vs. Ramil, 20 Phil. 183; Manalo vs. De Mesa, 29 Phil. 495). 7. That in case of doubt the conveyance should be deemed a donation inter vivos rather than mortis causa , in order to avoid uncertainty as to the ownership of the property subject of the deed. It may be added that the fact that the donation is given in consideration of love and affection or past or future services is not a characteristic of donations inter vivos because transfers mortis causa may be made also for those reasons. There is difficulty in applying the distinctions to controversial cases because it is not easy sometimes to ascertain when the donation takes effect or when the full or naked title passes to the transferee. As Manresa observes, "when the time fixed for the commencement of the enjoyment of the property donated be at the death of the donor, or when the suspensive condition is related to his death, confusion might arise" (5 Codigo Civil, 6th Ed., p. 108). The existence in the deed of donation of conflicting stipulations as to its effectivity may generate doubt as to the donor's intention and as to the nature of the donation (Concepcion vs. Concepcion, 91 Phil. 823). Where the donor declared in the deed that the conveyance was mortis causa and forbade the registration of the deed before her death, the clear inference is that the conveyance was not intended to produce any definitive effect nor to pass any interest to the grantee except after her death. In such a case, the grantor's reservation of the right to dispose of the property during her lifetime means that the transfer is not binding on her until she dies. It does not mean that the title passed to the grantee during her lifetime. (Ubalde Puig vs. Magbanua Penaflorida, L-15939, Resolution of January 31, 1966, 16 SCRA 136). In the following cases, the conveyance was considered a void mortis causa transfer because it was not cast in the form of a last will and testament as required in article 728, formerly article 620: (a) Where it was stated in the deed of donation that the donor wanted to give the donee something "to take effect after his death" and that "this donation shall produce effect only by and because of the death of the donor, the property herein donated to pass title after the donor's death" (Howard vs. Padilla, 96 Phil. 983). In the Padilla case the donation was regarded as mortis causa although the donated property was delivered to the donee upon the execution of the deed and although the donation was accepted in the same deed. (b) Where it was provided that the donated properties would be given to the donees after the expiration of thirty days from the donor's death, the grant was made in the future tense, and the word "inherit" was used (Carino vs. Abaya, 70 Phil. 182). (c) Where the donor has the right to dispose of all the donated properties and the products thereof. Such reservation is

tantamount to a reservation of the right to revoke the donation (Bautista vs. Sabiniano 92 Phil. 244). (d) Where the circumstances surrounding the execution of the deed of donation reveal that the donation could not have taken effect before the donor's death and the rights to dispose of the donated properties and to enjoy the fruits remained with the donor during her lifetime (David vs. Sison, 76 Phil. 418). But if the deed of donation makes an actual conveyance of the property to the donee, subject to a life estate in the donors, the donation is is inter vivos (Guarin vs. De Vera, 100 Phil. 1100). Articles 729, 730 and 731 have to some extent dissipated the confusion surrounding the two kinds of donation. The rule in article 729 is a crystallization of the doctrine announced in decided cases. A clear instance where the donor made an inter vivos donation is found in De Guzman vs. Ibea 67 Phil. 633. In that case, it was provided in the deed that the donor donated to the donee certain properties so that the donee "may hold the same as her own and always" and that the donee would administer the lands donated and deliver the fruits thereof to the donor, as long as the donor was alive, but upon the donor's death the said fruits would belong to the donee. It was held that the naked ownership was conveyed to the donee upon the execution of the deed of donation and, therefore, the donation became effective during the donor's lifetime. In Sambaan vs. Villanueva, 71 Phil. 303, the deed of donation, as in Balaqui vs. Dongso, 53 Phil. 673, contained conflicting provision. It was provided in the deed that the donation was made "en consideracion al afecto y carino" of the donor for the donee but that the donation "surtira efectos despues de ocurrida mi muerte (donor's death). That donation was held to be inter vivos because death was not the consideration for the donation but rather the donor's love and affection for the donee. The stipulation that the properties would be delivered only after the donor's death was regarded as a mere modality of the contract which did not change its inter vivos character. The donor had stated in the deed that he was donating, ceding and transferring the donated properties to the donee. (See Joya vs. Tiongco, 71 Phil. 379). In Laureta vs. Mata and Magno, 44 Phil. 668 the deed of donation provided that the donor was donating mortis causa certain properties as a reward for the donee's services to the donor and as a token of the donor's affection for him. The donation was made under the condition that "the donee cannot take possession of the properties donated before the death of the donor"; that the ' donee should cause to be held annually masses for the repose of the donor's soul, and that he should defray the expenses for the donor's funeral. It was held that the said donation was inter vivos despite the statement in the deed that it was mortis causa . The donation was construed as a conveyance in praesenti ("a present grant of a future interest") because it conveyed to the donee the title to the properties donated "subject only to the life estate of the donor" and because the conveyance took effect upon the making and delivery

of the deed. The acceptance of the donation was a circumstance which was taken into account in characterizing the donation as inter vivos. In Balacui vs. Dongso, supra, the deed of donation involved was more confusing than that found in the Laureta case. In the Balaqui case, it was provided in the deed that the donation was made in consideration of the services rendered to the donor by the donee; that "title" to the donated properties would not pass to the donee during the donor's lifetime, and that it would be only upon the donor's death that the donee would become the "true owner" of the donated properties. However, there was the stipulation that the donor bound herself to answer to the donee for the property donated and that she warranted that nobody would disturb or question the donee's right. Notwithstanding the provision in the deed that it was only after the donor's death when the 'title' to the donated properties would pass to the donee and when the donee would become the owner thereof, it was held in the Balaqui case that the donation was inter vivos. It was noted in that case that the donor, in making a warranty, implied that the title had already been conveyed to the donee upon the execution of the deed and that the donor merely reserved to herself the "possesion and usufruct" of the donated properties. In Concepcion vs. Concepcion, 91 Phil. 823, it was provided in the deed of donation, which was also styled as mortis causa , that the donation was made in consideration of the services rendered by the donee to the donor and of the donor's affection for the donee; that the donor had reserved what was necessary for his maintenance, and that the donation "ha de producir efectos solamente por muerte de la donante". It was ruled that the donation was inter vivos because the stipulation that the donation would take effect only after the donor's death "simply meant that the possession and enjoyment, of the fruits of the properties donated' should take effect only after the donor's death and not before". Resolution of the instant case. The donation in the instant case is inter vivos because it took effect during the lifetime of the donors. It was already effective during the donors' lifetime, or immediately after the execution of the deed, as shown by the granting, habendum and warranty clause of the deed (quoted below). In that clause it is stated that, in consideration of the affection and esteem of the donors for the donees and the valuable services rendered by the donees to the donors, the latter, by means of the deed of donation, wholeheartedly transfer and unconditionally give to the donees the lots mentioned and described in the early part of the deed, free from any kind of liens and debts: Na dahil at alang-alang sa pagmamahal at masuyong pagtingin na taglay ng NAGKAKALOOB (DONORS) sa Pinagkakalooban (DONEES) gayun din sa tapat at mahalagang paglilingkod noong mga lumipas na panahon na ginawa ng huli sa una ang nabanggit na nagkakaloob sa pamagitan ng kasulatang ito ng pagkakaloob (Donation) ay buong pusong inililipat at lubos na ibinibigay sa nasabing pinagkakalooban ang lupang binabanggit at makikilala sa

unahan nito, laya sa ano mang sagutin at pagkakautang, katulad nito: Following the above-ousted granting, habendum and warranty clause is the donors' declaration that they donate (ipinagkakaloob) Lot No. 2502, the property in litigation, in equal shares to their children Angel Diaz and Andrea Diaz, the western part to Angel and the eastern part to Andrea. The acceptance clause is another indication that the donation is inter vivos. Donations mortis causa , being in the form of a will, are never accepted by the donees during the donors' lifetime. Acceptance is a requirement for donations inter vivos. In the acceptance clause herein, the donees declare that they accept the donation to their entire satisfaction and, by means of the deed, they acknowledge and give importance to the generosity and solicitude shown by the donors and sincerely thank them. In the reddendum or reservation clause of the deed of donation, it is stipulated that the donees would shoulder the expenses for the illness and the funeral of the donors and that the donees cannot sell to a third person the donated properties during the donors' lifetime but if the sale is necessary to defray the expenses and support of the donors, then the sale is valid. The limited right to dispose of the donated lots, which the deed gives to the donees, implies that ownership had passed to them by means of' the donation and that, therefore, the donation was already effective during the donors' lifetime. That is a characteristic of a donation inter vivos. However, paragraph 3 of the reddendum in or reservation clause provides that "also, while we, the spouses Gabino Diaz and Severa Mendoza, are alive, our administration, right, and ownership of the lots mentioned earlier as our properties shall continue but, upon our death, the right and ownership of the donees to each of the properties allocated to each of them shall be fully effective." The foregoing is the translation of the last paragraph of the deed of donation which reads: (3) Gayun din samantalang kaming mag-asawang Gabino Diaz at Severa Mendoza ay buhay, patuloy and aming pamamahala, karapatan, at pagkamayari sa mga nasabing pagaari na sinasaysay sa unahan nito na pagaari namin; ngunit sakaling kami ay bawian ng buhay ng Panginoong Dios at mamatay na, ang mga karapatan at pagkamayari ng bawa't pinagkalooban (Donatorios) sa bawa't pagaari nauukol sa bawa't isa ay may lubos na kapangyarihan. Evidently, the draftsman of the deed did not realize the discordant and ambivalent provisions thereof. The habendum clause indicates the transfer of the ownership over the donated properties to the donees upon the execution of the deed. But the reddendum clause seems to imply that the ownership was retained by the donors and would be transferred to the donees only after their death. We have reflected on the meaning of the said contradictory clauses. All the provisions of the deed, like those of a statute and testament, should be construed together in order to ascertain the intention of the parties. That task would have been rendered easier

if the record shows the conduct of the donors and the donees after the execution of the deed of donation. But the record is silent on that point, except for the allegation of Angel Diaz in his answer (already mentioned) that he received his share of the disputed lot long before the donors' death and that he had been "openly and adversely occupying" his share "for more than twenty years". (Andrea Diaz on page 17 of her brief in L33849 states that the donees took possession of their respective shares as stipulated in the deed of donation. Pages 3,4,18 and 19, tsn March, 1971). Our conclusion is that the aforequoted paragraph 3 of the reddendum or reservation clause refers to the beneficial ownership (dominium utile) and not to the naked title and that what the donors reserved to themselves, by means of that clause, was the management of the donated lots and the fruits thereof. But, notwithstanding that reservation, the donation, as shown in the habendum clause, was already effective during their lifetime and was not made in contemplation of their death because the deed transferred to the donees the naked ownership of the donated properties. That conclusion is further supported by the fact that in the deed of donation, out of the eight lots owned by the donors, only five were donated. Three lots, Lots Nos. 4168, 2522 and 2521 were superflously reserved for the spouses or donors in addition to onethird of Lot No. 2377. If the deed of donation in question was intended to be a mortis causa disposition, then all the eight lots would have been donated or devised to the three children and daughter-in-law of the donors. The trial court's conclusion that the said deed of donation, although void as a donation inter vivos is valid "as an extrajudicial partition among the parents and their children" is not well-taken. Article 1080 of the Civil Code provides that 46 should a person make a partition of his estate by an act inter vivos or by will, such partition shall be respected, insofar as it does not prejudice the legitime of the compulsory heirs." We have already observed that the said donation was not a partition of the entire estate of the Diaz spouses since, actually, only five of the eight lots, constituting their estate, were partitioned. Hence, that partition is not the one contemplated in article 1080. There is another circumstance which strengthens ' the view that the 1949 deed of donation in question took effect during the donors' lifetime. It may he noted that in that deed Lot No. 2377 (items 3 and [c]) was divided into three equal parts: one-third was donated to Andrea Diaz and one-third to Angel Diaz. The remaining onethird was reserved and retained by the donors, the spouses Gabino Diaz and Severo Mendoza, for their support. That reserved onethird portion came to be known as Lot No. 2377-A. In 1964 or after the death of Gabino Diaz, his surviving spouse Severa Mendoza executed a donation mortis causa wherein she conveyed to her daughter, Andrea Diaz (plaintiff-appellant herein), her one-half share in Lot No. 2377-A, which one-half share is known as Lot No. 2377-A-1, the other half or Lot No. 2377-A-2 having been already conveyed to Angel Diaz.

Translation That disposition of Lot No. 2377-A-2 clearly implies that the conveyance in the 1949 deed of donation as to Lot No. 2377 took effect during the lifetime of the donors, Gabino Diaz and Severa Mendoza, and proves that the 1949 donation was inter vivos. The instant case has a close similarity to the pre-war cases already cited and to three post-liberation cases. In the Bonsato case, the deed of donation also contained contradictory dispositions which rendered the deed susceptible of being construed as a donation inter vivos or as a donation causa. It was stated in one part of the deed that the donor was executing "una donacion perfects e irrevocable consumada" in favor of the donee in consideration of his past services to the donor; that at the time of the execution of the deed, the donor "ha entregado" to the donee "dichos terrenos donados'; that while the donor was alive, he would receive the share of the fruits corresponding to the owner; and "que en vista de la vejez del donante, el donatario Felipe Bonsato tomara posesion inmediatamente de dichos terrenos a su favor". These provisions indicate that the donation in question was inter vivos However, in the last clause of the deed in the Bonsato case (as in the instant case), it was provided 'que despues de la muerte del donante entrara en vigor dicha donacion y el donatario Felipe Bonsato tendra todos log derechos de dichos terrernos en concepto de dueno absolute de la propriedad libre de toda responsabilidad y gravemen y pueda ejercitar su derecho que crea conveniente". These provisions would seem to show that the donation was mortis causa . Nevertheless, it was held in the Bonsato case that the donation was inter vivos because (1) the ownership of the things donated passed to the donee; (2) it was not provided that the transfer was revocable before the donor's death, and (3) it was not stated that the transfer would be void if the transferor should survive the transferee. It was further held in the Bonsato case that the stipulation "que despues de la muerte del donante entrara en vigor dicha donacion", should be interpreted together with the prior provision regarding its irrevocable and consummated character, and that would mean that the charge or condition as to the donor's share of the fruits would be terminated upon the donor's death. The Puig case, supra, is even more doubtful and controversial than the instant case. In the Puig case, the donor, Carmen Ubalde Vda. de Parcon, in a deed entitled "Donacion Mortis causa dated November 24, 1948 cede y transfiere en concepto de donacion mortis causa to the donee, Estela Magbanua Penaflorida three parcels of land in consideration of the donee's past services and the donor's love and affection for the latter. It was stipulated in the deed that the donor could alienate or mortgage the donated properties "cuando y si necesita fondos para satisfacer sus proprias necesidades sin que para ello tega que intervener la Donataria, pues su consentimiento se sobre entiende aqui parte de que la donacion que aqui se hace es mortis causa , es decir que la donacion surtira sus efectos a la muerte de la donante". It was repeated in another clause of the deed "que lacesion y transferencia aqui provista surtira efecto al fallecer la Donante". It was further stipulated that the donee would defray the medical and funeral expen of the donor unless the donor had funds in the bank or "haya cosecho levantada or recogida en cual caso dichos recursos responderan portales gastos a disposicion y direccion de la donataria". Another provision of the deed was that it would be registered only after the donor's death. In the same deed the donee accepted the donation. In the Puig case the donor in another deed entitled Escritura de Donacion mortis causa " dated December 28, 1949 donated to the same donee, Estela Magbanua Penaflorida three parcels of land en concepto de una donacion mortis causa " in consideration of past services. It was provided in the deed "que antes de su nuerte la donante, podra enajenar vender traspasar o hipotecar a cualesquiera persona o entidades los bienes aqui donados a favor de la donataria en concepto de una donacion mortis causa ". The donee accepted the donation in the same deed. After the donor's death both deeds were recorded in the registry of deeds. In the donor's will dated March 26, 1951, which was duly probated, the donation of a parcel of land in the second deed of donation was confirmed. Under these facts, it was held that the 1948 deed of donation mortis causa was inter vivos in character in spite of repeated expressions therein that it was a mortis causa donation and that it would take effect only upon the donor's death. Those expressions were not regarded as controlling because they were contradicted by the provisions that the donee would defray the donor's expenses even if not connected with her illness and that the donee's husband would assume her obligations under the deed, should the donee predecease the donor. Moreover, the donor did not reserve in the deed the absolute right to revoke the donation. But the 1949 deed of donation was declared void because it was a true conveyance mortis causa which was not embodied in a last will and testament. The mortis causa character of the disposition is shown by the donor's reservation of the right to alienate or encumber the donated properties to any person or entity. In the Cuevas case, supra, one Antonina Cuevas executed on September 18, 1950 a notarial conveyance styled as "Donacion Mortis causa " where she ceded to her nephew Crispulo Cuevas a parcel of unregistered land. Crispulo accepted the donation in the same instrument. Subsequently, or on May 26, 1952, the donor revoked the donation. The deed of donation in the Cuevas case contained the following provisions which, as in similar cases, are susceptible of being construed as making the conveyance an inter vivos or a mortis causa transfer: "Dapat maalaman ni Crispulo Cuevas na samantalang ako ay nabubuhay, ang lupa na ipinagkakaloob ko sa kaniya ay ako pa rin ang patuloy na mamomosecion, makapagpapatrabajo, makikinabang at ang iba pang karapatan sa pagmamayari ay sa akin pa rin hanggang hindi ako binabawian ng buhay ng Maykapal at ito naman ay hindi ko nga iyaalis pagkat kung ako ay mamatay na ay inilalaan ko sa kaniya." "Crispulo Cuevas should know that while I am alive, the land which I donated to him will still be under my continued possession; I will be the one to have it cultivated; I will enjoy its fruits and all the other rights of ownership until Providence deprives me of life and I cannot take away the property from him because when I die I reserve the property for him." (sic) It was held that the donation was inter vivos because the phrase "hindi ko nga iyaalis (I will not take away the property") meant that the donor expressly renounced the right to freely dispose of the property in favor of another person and thereby manifested the irrevocability of the conveyance of the naked title to the donee. The donor retained the beneficial ownership or dominium utile Being an inter vivos donation, it could be revoked by the donor only on the grounds specified by law. No such grounds existed. The donee was not guilty of ingratitude. The other point to be disposed of is the matter of the claim for attorney's fees of Andrea Diaz against the Alejandro intervenors. The other point to be disposed of is the matter of the claim for attorney's fees of Andrea Diaz against the Alejandro intervenors. After a careful consideration of the facts and circumstances of the case, particularly the apparent good faith of the Alejandro intervenors in asserting a one-third interest in the disputed lot and their close relationship to Andrea Diaz, we find that it is not proper to require them to pay attorney's fees (Salao vs. Salao, L-26699, March 16, 1976, 70 SCRA 65). (Andrea Diaz did not implead Angel Diaz as a respondent in her petition for review.) WHEREFORE, the trial court's amended decision is reversed insofar as it pronounces that the deed of donation is void. That donation is declared valid as a donation inter vivos. The disputed lot should be partitioned in accordance with that deed between Andrea Diaz and Angel Diaz. The decision is affirmed insofar as it does not require the Alejandro intervenors to pay attorney's fees to Andrea Diaz. No costs. SO ORDERED. Fernando (Chairman), Barredo, Concepcion, Jr. and Santos, JJ., concur.

Separate Opinions ANTONIO, J., concurring: I concur. I agree that all the features pointed out by Justice Aquino indicate that the conveyance was intended to produce definitive effect upon the execution of said instrument. For the important characteristic of a donation inter vivos is that it takes effect independently of the donor's death. Thus, when the donor states that he donates the properties subject to the "condition that the donee cannot take ion of the properties donated until after my death'. 1 or the ownership and possession of the property, as wen as its administration,. were turned over to the donee, but the right to reap and dispose of the fruits was deferred until after the death

of the donor 2 or when it was expressly stated that the donation would take effect upon acceptance, but would be revoked ipso facto upon the non-fulfillment of certain conditions, 3 it has been held that the donation is inter vivos, and the ownership over the property donated is transferred to the donee. 4 A donation inter vivos is a gratuitous contract whereby the donor divests himself, at present and irrevocably, of the thing given in favor of the donee and, therefore, like any other contract, requires the concurrence of the reciprocal consent of the parties, and does not become perfect until it is accepted by the donee. 5 As observed by Manresa, 6 upon acceptance by the donee, the donor can no longer withdraw, and he can be compelled to comply with his offering or to deliver the things he wanted to donate. Consequently, it may not be revoked unilaterally or by the sole and arbitrary will of the donor. The donation, however, may be made revocable upon the fulfillment of resolutory conditions, 7 or may be revoked only for the reasons provided in Articles 760, 764 and 765 of the Civil Code. As explained in Bautista, et al. v. Sabiniano, 8 except "in the instances expressly provided by law, such as the subsequent birth of children of the donor, failure by the donee to comply with the conditions imposed, ingratitude of the donee and reduction of the donation in the event of inofficiousness thereof, a donation is irrevocable. If the donor reserves the right to revoke it or if he reserves the right to dispose of all the properties purportedly donated, there is no donation. If the disposition or conveyance or transfer takes effect. upon the donor's death and becomes irrevocable only upon his death, it is not inter vivos but a mortis causa donation." Here, the conveyance or alienation of the properties donated is not revocable ad nutum Separate Opinions ANTONIO, J., concurring: I concur. I agree that all the features pointed out by Justice Aquino indicate that the conveyance was intended to produce definitive effect upon the execution of said instrument. For the important characteristic of a donation inter vivos is that it takes effect independently of the donor's death. Thus, when the donor states that he donates the properties subject to the "condition that the donee cannot take ion of the properties donated until after my death'. 1 or the ownership and possession of the property, as wen as its administration,. were turned over to the donee, but the right to reap and dispose of the fruits was deferred until after the death of the donor 2 or when it was expressly stated that the donation would take effect upon acceptance, but would be revoked ipso facto upon the non-fulfillment of certain conditions, 3 it has been held that the donation is inter vivos, and the ownership over the property donated is transferred to the donee. 4 A donation inter vivos is a gratuitous contract whereby the donor divests himself, at present and irrevocably, of the thing given in favor of the donee and, therefore, like any other contract, requires the concurrence of the reciprocal consent of the parties, and does not become perfect until it is accepted by the donee. 5 As observed by Manresa, 6 upon acceptance by the donee, the donor can no longer withdraw, and he can be compelled to comply with his offering or to deliver the things he wanted to donate. Consequently, it may not be revoked unilaterally or by the sole and arbitrary will of the donor. The donation, however, may be made

revocable upon the fulfillment of resolutory conditions, 7 or may be revoked only for the reasons provided in Articles 760, 764 and 765 of the Civil Code. As explained in Bautista, et al. v. Sabiniano, 8 except "in the instances expressly provided by law, such as the subsequent birth of children of the donor, failure by the donee to comply with the conditions imposed, ingratitude of the donee and reduction of the donation in the event of inofficiousness thereof, a donation is irrevocable. If the donor reserves the right to revoke it or if he reserves the right to dispose of all the properties purportedly donated, there is no donation. If the disposition or conveyance or transfer takes effect. upon the donor's death and becomes irrevocable only upon his death, it is not inter vivos but a mortis causa donation." Here, the conveyance or alienation of the properties donated is not revocable ad nutum

G.R. No. L-6600 July 30, 1954 HEIRS OF JUAN BONSATO and FELIPE BONSATO, petitioners, vs. COURT OF APPEALS and JOSEFA UTEA, ET AL., respondents. Benedict C. Balderrama for petitioners. Inocencio Rosete for respondents. REYES, J.B.L., J.: This is a petition for review of a decision of the Court of Appeals holding two deeds of donation executed on the first day of December, 1939 by the late Domingo Bonsato in favor of his brother Juan Bonsato and of his nephew Felipe Bonsato, to be void for being donations mortis causa accomplished without the formalities required by law for testamentary dispositions. The case was initiated in the Court of First Instance of Pangasinan (Case No. 8892) on June 27, 1945, by respondents Josefa Utea and other heirs of Domingo Bonsato and his wife Andrea Nacario, both deceased. Their complaint (for annulment and damages) charged that on the first day of December, 1949, Domingo Bonsato, then already a widower, had been induced and deceived into signing two notarial deeds of donations (Exhibits 1 and 2) in favor of his brother Juan Bonsato and of his nephew Felipe Bonsato, respectively, transferring to them several parcels of land covered by Tax Declaration Nos. 5652, 12049, and 12052, situated in the municipalities of Mabini and Burgos, Province of Pangasinan, both donations having been duly accepted in the same act and documents. Plaintiffs likewise charged that the donations were mortis causa and void for lack of the requisite formalities. The defendants, Juan Bonsato and Felipe Bonsato, answered averring that the donations made in their favor were voluntarily executed in consideration of past services rendered by them to the late Domingo Bonsato; that the same were executed freely without the use of force and violence, misrepresentation or intimidation; and prayed for the dismissal of the case and for damages in the sum of P2,000. After trial, the Court of First Instance rendered its decision on November 13, 1949, finding that the deeds of donation were executed by the donor while the latter was of sound mind, without pressure or intimidation; that the deeds were of donation inter vivos without any condition making their validity or efficacy dependent upon the death of the donor; but as the properties donated were presumptively conjugal, having been acquired during the coverture of Domingo Bonsato and his wife Andrea Nacario, the donations were only valid as to an undivided one-half share in the three parcels of land described therein. Thereupon the plaintiffs duly appealed to the Court of Appeals, assigning as primary error the holding of the court below that the donations are inter vivos; appellants contending that they were mortis causa donations, and invalid because they had not been executed with the formalities required for testamentary disposition. A division of five of the Court of Appeals took the case under consideration, and on January 12, 1953, the majority rendered judgment holding the aforesaid donations to be null and void, because they were donations mortis causa and were executed

without the testamentary formalities prescribed by law, and ordered the defendants-appellees Bonsato to surrender the possession of the properties in litigation to the plaintiffs-appellants. Two Justices dissented, claiming that the said donations should be considered as donations inter vivos and voted for the affirmance of the decision of the Court of First Instance. The donees then sought a review by this Court. The sole issue submitted to this Court, therefore, is the juridical nature of the donations in question. Both deeds (Exhs. 1 and 2) are couched in identical terms, with the exception of the names of the donees and the number and description of the properties donated. The principal provisions are the following. ESCRITURA DE DONATION Yo, Domingo Bonsato, viudo de Andrea Nacario, mayor de edad, vencino y residente del municipio de Agno, Pangasinan, I.F., por la presente declaro lo siguiente: Que mi osbrino Felipe Bonsato, casado, tambien mayor de edad, vecino de Agno, Pangasinan, I.F., en consideracion de su largo servicio a Domingo Bonsato, por la presente hagor y otorgo una donacion perfecta e irrevocable consumada a favor del citado Felipe Bonsato de dos parcelas de terreno palayero como se describe mas abajo. (Description omitted) Que durante su menor de edad de mi citado sobrino Felipe Bonsato hasta en estos dias, siempre me ha apreciado y estimado como uno de mis hijos y siempre ha cumplido todas mis ordenes, y por esta razon bajo su pobriza sea movido mi sentimiento para dar una recompensa de sus trabajos y aprecios a mi favor. Que en este de 1939 el donante Domingo Bonsato ha entregado a Felipe Bonsato dichos terrenos donados y arriba citados pero de los productos mientras vive el donante tomara la parte que corresponde como dueo y la parte como inquilino tomara Felipe Bonsato. Que en vista de la vejez del donante, el donatorio Felipe Bonsato tomara posesion inmediatamente de dichos terrenos a su favor. Que despues de la muerte del donante entrara en vigor dicha donancion y el donatario Felipe Bonsato tendra todos los derechos de dichos terrenos en concepto de dueo absoluto de la propiedad libre de toda responsibilidad y gravamen y pueda ejercitar su derecho que crea conveniente. En Testimonio de todo lo Cual, signo la presente en Agno, Pangasinan, I.F., hoy dia 1.0 de Diciembre, 1939. Domingo (His thumbmark) Bonsato Yo, Felipe Bonsato, mayor de edad, casado, Vecino de Mabini, Pangasinan, I.F., declaro por la presente que acepto la donacion anterior otorgado por Domingo Bonsato a mi favor. (Sgd.) Felipe Bonsato

SIGNADO Y FIRMADO EN PRESENCIA DE: (Sgd.) Illegible (Sgd.) Illegible The majority of the special divisions of five of the Court of Appeals that took cognizance of this case relied primarily on the last paragraph, stressing the passage: Que despues de la muerte del donante entrara en vigor dicha donacion . . . while the minority opinion lay emphasis on the second paragraph, wherein the donor states that he makes "perfect, irrevocable, and consummated donation" of the properties to the respective donees, petitioners herein. Strictly speaking, the issue is whether the documents in question embody valid donations, or else legacies void for failure to observe the formalities of wills (testaments). Despite the widespread use of the term "donations mortis causa," it is well-established at present that the Civil Code of 1889, in its Art. 620, broke away from the Roman Law tradition, and followed the French doctrine that no one may both donate and retain ("donner at retenir ne vaut"), by merging the erstwhile donations mortis causa with the testamentary dispositions, thus suppressing said donations as an independent legal concept. ART. 620. Donations which are to become effective upon the death of the donor partake of the nature of disposals of property by will and shall be governed by the rules established for testamentary successions. Commenting on this article, Mucius Scaevola (Codigo Civl, Vol. XI, 2 parte, pp. 573, 575 says: No ha mucho formulabamos esta pregunta: Subsisten las donaciones mortis causa como institucion independiente, con propia autonomia y propio compo jurisdiccional? La respuesta debe ser negativa. xxx xxx xxx

Las donaciones mortis causa se consevan en el Codigo como se conserva un cuerpo fosil en las vitrinas de un Museo. La asimilacion entre las donaciones por causa de muerte y las transmissiones por testamento es perfecta. Manresa, in his Commentaries (5th ed.), Vol. V. p. 83, expresses the same opinion: "La disposicion del articulo 620 significa, por lo tanto: 1..o, que han desaparecido las llamas antes donaciones mortis causa por lo que el Codigo no se ocupa de ellas en absoluto; 2.o, que toda disposicion de bienes para despues de la muerte sigue las reglas establecidas para la sucesion testamentaria. And Castan, in his Derecho Civil, Vol. IV (7th Ed., 1953), p. 176, reiterates:

(b) Subsisten hoy en nuestro derecho las donaciones mortis causa? De lo que acabamos de decir se desprende que las donaciones mortis causa han perdido en el Codigo Civil su caracter distintivo y su naturaleza y hay que considerarlos hoy como una institucion suprimida, refundida en el legado ... . Las tesis de la desaparcion de las donaciones mortis causa en nuestro Codigo Civil, acusada ya precedentemente por el pryecto de 1851 puede decirse que constituye una communis opinion entre nuestros expositores, incluso los mas recientes. We have insisted on this phase of the legal theory in order to emphasize that the term "donations mortis causa" as commonly employed is merely a convenient name to designate those dispositions of property that are void when made in the form of donations. Did the late Domingo Bonsato make donations inter vivos or dispositions post mortem in favor of the petitioners herein? If the latter, then the documents should reveal any or all of the following characteristics: (1) Convey no title or ownership to the transferee before the death of the transferor; or, what amounts to the same thing, that the transferor should retain the ownership (full or naked) and control of the property while alive (Vidal vs. Posadas, 58 Phil., 108; Guzman vs. Ibea, 67 Phil., 633); (2) That before his death, the transfer should be revocable by the transferor at will, ad nutum; but revocability may be provided for indirectly by means of a reserved power in the donor to dispose of the properties conveyed (Bautista vs. Sabiniano, G. R. L-4326, November 18, 1952); (3) That the transfer should be void if the transferor should survive the transferee. None of these characteristics is discernible in the deeds of donation, Exhibits 1 and 2, executed by the late Domingo Bonsato. The donor only reserved for himself, during his lifetime, the owner's share of the fruits or produce ("de los productos mientras viva el donante tomara la parte que corresponde como dueo"), a reservation that would be unnecessary if the ownership of the donated property remained with the donor. Most significant is the absence of stipulation that the donor could revoke the donations; on the contrary, the deeds expressly declare them to be "irrevocable", a quality absolutely incompatible with the idea of conveyances mortis causa where revocability is of the essence of the act, to the extent that a testator can not lawfully waive or restrict his right of revocation (Old Civil Code, Art. 737; New Civil Code, Art. 828). It is true that the last paragraph in each donation contains the phrase "that after the death of the donor the aforesaid donation shall become effective" (que despues de la muerte del donante entrara en vigor dicha donacion"). However, said expression must be construed together with the rest of the paragraph, and thus taken, its meaning clearly appears to be that after the donor's death, the donation will take effect so as to make the donees the absolute owners of the donated property, free from all liens and encumbrances; for it must be remembered that the donor reserved for himself a share of the fruits of the land donated. Such

reservation constituted a charge or encumbrance that would disappear upon the donor's death, when full title would become vested in the donees. Que despues de la muerte del donante entrara en vigor dicha donacion y el donatario Felipe Bonsato tendra todos derechos de dichos terrenos en concepto de dueo absoluto de la propiedad libre de toda responsibilidad y gravamen y puede ejercitar su derecho que crea conveniente. Any other interpretation of this paragraph would cause it to conflict with the irrevocability of the donation and its consummated character, as expressed in the first part of the deeds of donation, a conflict that should be avoided (Civ. Code of 1889, Art. 1285; New Civil Code, Art. 1374; Rule 123, sec. 59, Rules of Court). Que mi sobrino FILIPINO BONSATO, casado, tambien mayor de edad, vecino de Agno, Pangasinan, I. F., en consideracion de su largo servicio a Domingo Bonsato, por la presente hago y otorgo una donacion perfecta e irrevocable consumada a favor del citado Felipe Bonsato de dos parcelas de terreno palayero como se describe mas abajo. In the cases held by this Court to be transfers mortis causa and declared invalid for not having been executed with the formalities of testaments, the circumstances clearly indicated the transferor's intention to defer the passing of title until after his death. Thus, in Cario vs. Abaya, 70 Phil., 182, not only were the properties not to be given until thirty days after the death of the last of the donors, but the deed also referred to the donees as "those who had been mentioned to inherit from us", the verb "to inherit" clearly implying the acquisition of property only from and after the death of the alleged donors. In Bautista vs. Sabiniano, 49 Off. Gaz., 549; 92 Phil., 244, the alleged donor expressly reserved the right to dispose of the properties conveyed at any time before his death, and limited the donation "to whatever property or properties left undisposed by me during my lifetime", thus clearly retaining their ownership until his death. While in David vs. Sison, 42 Off. Gaz. (Dec, 1946) 3155, the donor not only reserved for herself all the fruits of the property allegedly conveyed, but what is even more important, specially provided that "without the knowledge and consent of the donor, the donated properties could not be disposed of in any way", thereby denying to the transferees the most essential attribute of ownership, the power to dispose of the properties. No similar restrictions are found in the deeds of donation involved in this appeal. That the conveyance was due to the affection of the donor for the donees and the services rendered by the latter, is of no particular significance in determining whether the deeds Exhibits 1 and 2 constitute transfers inter vivos or not, because a legacy may have identical motivation. Nevertheless, the existence of such consideration corroborates the express irrevocability of the transfers and the absence of any reservation by the donor of title to, or control over, the properties donated, and reinforces the conclusion that the act was inter vivos. Hence, it was error for the Court of Appeals to declare that Exhibits 1 and 2 were invalid because the formalities of testaments were not observed. Being donations inter vivos, the solemnities required for them were those prescribed by Article 633 of the Civil Code of 1889 (reproduced in

Art. 749 of the new Code, and it is undisputed that these were duly complied with. As the properties involved were conjugal, the Court of First Instance correctly decided that the donations could not affect the half interest inherited by the respondents Josefa Utea, et al. from the predeceased wife of the donor. The decision of the Court of Appeals is reversed, and that of the Court of First Instance is revived and given effect. Costs against respondents.

G.R. No. L-45262

July 23, 1990

RUPERTO REYES and REYNALDO C. SAN JUAN, in his capacity as Special Administrator, petitioners, vs. HON. LORENZO R. MOSQUEDA, Judge of CFI, Pampanga (Branch VII), and URSULA D. PASCUAL, respondents. G.R. No. L-45394 July 23, 1990

certificates of titles of these properties, until the issue of ownership is finally determined in a separate action. (G.R. No. 45262, pp. 2324) The Order is now the subject of G.R. Nos. 45262 and 45394. On January 5, 1977, we issued a temporary restraining order enjoining the trial court from enforcing the August 1, 1976 Order. Among the properties included in the "donation mortis causa" in favor of Ursula was Lot 24, Block No. 15 of the subdivision plan Psd-3231, located at 1109-1111 R. Papa St., Tondo, Manila as evidenced by Transfer Certificate of Title No. 17854. The records show that on May 15, 1969, Emilio Pascual executed a deed of donation of real property inter vivos over the abovementioned lot in Manila in favor of Ofelia D. Parungao, petitioner in G.R. Nos. 73241-42 a minor with her mother, Rosario Duncil, accepting the gift and donation for and in her behalf. When Parungao reached the age of majority or on December 20, 1976, she tried to have the donation registered. However, she found out that the certificate of title was missing from where it was supposed to be kept, prompting her to file a petition for reconstitution of title with the Court of First Instance of Manila. The petition was granted in October 1977. Parungao registered the deed of donation with the Register of Deeds of Manila who cancelled Transfer Certificate of Title No. 17854 and issued in lieu thereof Transfer Certificate of Title No. 129092 in the name of Ofelia Parungao. She then filed a motion for exclusion in Special Proceedings No. 73-30-M. In the meantime, on September 23, 1976, Ursula Pascual executed a deed of absolute sale over the Tondo property in favor of Benjamin, Oscar, Jose and Emmanuel, all surnamed Reyes. On May 2, 1978, Benjamin Reyes, private respondent in G.R. Nos. 73241-42 filed a complaint for declaration of nullity of Transfer Certificate of Title No. 129092, Register of Deeds of Manila and/or reconveyance of deed of title against Ofelia Parungao and Rosario Duncil, with the then Court of First Instance of Manila. The case was docketed as Civil Case No. 115164. In their answer with compulsory counterclaim Parungao and Duncil, denied Reyes' assertion of ownership over the Tondo property. On November 6, 1978, Ofelia Parungao filed a complaint for recovery of possession over the Tondo property against Benjamin Reyes and his nephew Oscar Reyes with the Court of First Instance of Manila. The case was docketed as Civil Case No. 119359. In her complaint, Parungao also alleged that as early as 1973, the defendants occupied two (2) doors of the apartment situated at the Tondo property by mere tolerance of the previous owner, Dr. Emilio Pascual, and later by her until April 8, 1978 when she formally demanded that the defendants vacate the premises. Parungao prayed that the defendants be evicted from the premises. The two cases were consolidated. On June 3, 1982, the then Court of First Instance, Branch 8 rendered a joint decision, the dispositive portion of which reads: WHEREFORE, judgment is hereby rendered: In Civil Case No. 115164 1) Declaring TCT No. 129092 in the name of Ofelia Parungao null and void; and ordering the Register of Deeds of Manila to cancel

said title and to restore, in lieu thereof, TCT No. 17854 in the name of Emilio D. Pascual; 2) Ordering Ofelia D. Parungao to pay plaintiff Benjamin P. Reyes the sum of Two Thousand (P2,000.00) Pesos, as and for attorney's fees; and to pay the costs of suit including all fees which the Register of Deeds may prescribe for the full implementation of this decision. For lack of merit, the counterclaim is dismissed. In Civil Case No. 119359 1) Dismissing the complaint for want of merit; and 2) On the counterclaim, ordering Ofelia Parungao to pay defendant defendants the sum of Two Thousand (P2,000.00) Pesos as and for attorney's fees.' Parungao appealed the decision to the then Intermediate Appellate Court. The decision was, however, affirmed, with costs against the appellant. The Intermediate Appellate Court decision is now the subject matter in G.R. Nos. 73241-42. On January 29, 1986, we issued a minute resolution denying the above petition for lack of merit. The resolution became final and executory on March 10, 1986 and on this same day the entry of judgment was effected. The entry of judgment was however set aside in the resolution dated January 19, 1987 on the ground that the January 29, 1986 resolution was not received by the petitioners' counsel of record. The petitioner was granted leave to file a motion for reconsideration of the January 29, 1986 resolution. The motion for reconsideration is now before us for resolution petition. The issues raised in these petitions are two-fold: (1) In G.R. No. L45394, petitioner Pedro Dalusong questions the jurisdiction of the probate court to exclude the properties donated to Ursula Pascual in its Order dated August 1, 1976, and (2) In G.R. No. L-45262 and G.R. Nos. 73241-42 Ruperto Reyes, Reynaldo C. San Juan, in his capacity as special administrator of the estate of Emilio Pascual (petitioner in G.R. No. L- 45262), Ofelia Parungao and Rosario Duncil (petitioners in G.R. Nos. 7324142) question the appellate court's finding that the "Donation Mortis Causa" executed by Emilio Pascual in favor of his sister Ursula Pascual was actually a Donation Inter Vivos. We first discuss the issue on jurisdiction. The questioned August 1, 1976 order of the then Court of First Instance of Pampanga in S.P. Proc. No. 73-30-M categorically stated that the exclusion from the inventory of the estate of the deceased Dr. Emilio D. Pascual was "without prejudice to its final determination in a separate action." The provisional character of the exclusion of the contested properties in the inventory as stressed in the order is within the jurisdiction of the probate court. This was stressed in the case of Cuizon v. Ramolete (129 SCRA 495 [1984]) which we cited in the case of Morales v. Court of First Instance of Cavite, Branch V (146 SCRA 373 [1986]): It is well-settled rule that a probate court or one in charge of proceedings whether testate or intestate cannot adjudicate or

PEDRO DALUSONG, petitioner, vs HON. LORENZO R. MOSQUEDA, JUDGE, BRANCH VII, COURT OF FIRST INSTANCE OF PAMPANGA, and URSULA D. PASCUAL, respondents. G.R. Nos. 73241-42 July 23, 1990 OFELIA D. PARUNGAO and ROSARIO DUNCIL, petitioners, vs. THE HON. INTERMEDIATE APPELLATE COURT, (Third Civil Cases Division), BENJAMIN P. REYES and OSCAR REYES, respondents. GUTIERREZ, JR., J.: The instant petitions have been consolidated as they arose from the same facts and involve similar issues. Dr. Emilio Pascual died intestate and without issue on November 18,1972. He was survived by his sister, Ursula Pascual and the children of his late sisters as follows: (1) Maria Pascual Reyes- Ruperto Reyes and Jose Reyes; (2) Ines Pascual Reyes-Jose P. Reyes, Benito Reyes, and Manna Reyes Manalastas; (3) Josefa Pascual Reyes-Augusto Reyes and Benjamin Reyes; and (4) Escolastica Pascual Dalusong (halfblood Pedro Dalusong. On December 3, 1973, the heirs of Dr. Pascual filed Special Proceedings No. 73-30-M in the then Court of First Instance of Pampanga for the administration of his estate. Atty. Marcela Macapagal, Clerk of Court of Branch VII was appointed special administratrix. Macapagal was, however, replaced by Reynaldo San Juan. On February 12, 1976, Ursula Pascual filed a motion to exclude some properties from the inventory of Pascual's estate and to deliver the titles thereto to her. Ursula alleged that Dr. Pascual during his lifetime or on November 2, 1966 executed a "Donation Mortis Causa" in her favor covering properties which are included in the estate of Dr. Pascual (subject of Special Proceedings No. 7330-M) and therefore should be excluded from the inventory. On August 1, 1976; the trial court issued an order excluding from the inventory of the estate the properties donated to Ursula, to wit: WHEREFORE, in view of all the foregoing discussion, let the properties listed in paragraph 2 of the motion of February 12, 1976 filed by Ursula D. Pascual thru counsel be, as it is hereby ordered, excluded from the inventory of the estate of the deceased Dr. Emilio D. Pascual, without prejudice to its final determination in a separate action. Special Administrator Reynaldo San Juan is hereby ordered to return to Court the custody of the corresponding

determine title to properties claimed to be a part of the estate and which are equally claimed to belong to outside parties. All that the said court could do as regards said properties is to determine whether they should or should not be included in the inventory or list of properties to be administered by the administrator. If there is no dispute, well and good; but if there is, then the parties, the administrator, and the opposing parties have to resort to an ordinary action for a final determination of the conflicting claims of title because the probate court cannot do so (Mallari v. Mallari, 92 Phil. 694; Baquial v. Amihan, 92 Phil. 501).itc-asl Similarly, in Valero Vda. de Rodriguez v. Court of Appeals, (91 SCRA 540) we held that for the purpose of determining whether a certain property should or should not be included in the inventory, the probate court may pass upon the title thereto but such determination is not conclusive and is subject to the final decision in a separate action regarding ownership which may be instituted by the parties (3 Moran's Comments on the Rules of Court, 1970 Edition, pages 448449 and 473; Lachenal v. Salas, L-42257, June 14, 1976, 71 SCRA 262, 266). On the second issue, it may be noted that the Court of Appeals did not pass upon the authenticity of the 1969 donation to Parungao because of its finding that the 1966 donation to Pascual was inter vivos. The petitioners do not press the authenticity of the 1969 donation as their challenge centers on whether or not the 1966 donation was inter vivos. However, the trial court has a lengthy discussion reflecting adversely on the authenticity of the 1969 donation to Parungao. The petitioners assert that the 1966 donation was null and void since it was not executed with the formalities of a will. Therefore, the petitioners in G.R. No. L-45262 insist that the donated properties should revert to the estate of Emilio Pascual while the petitioners in G.R. Nos. 73241-42 insist that the donation of real property inter vivos in favor of Ofelia Parungao be given effect. The subject deed of donation titled "DONATION MORTIS CAUSA" duly notarized by a certain Cornelio M. Sigua states: That Dr. Emilio D. Pascual, Filipino, single, of age and resident of Apalit, Pampanga, hereinafter called the DONOR and Ursula D. Pascual, Filipino, single, also of age, resident of and with postal address at Apalit, Pampanga, hereinafter called the DONEE, have agreed, as they do hereby agree, to the following, to wit: That the said DONOR, Dr. Emilio D. Pascual, for and in consideration of the love and affection which he has and bears unto the said DONEE, as also for the personal services rendered by the said DONEE to the said DONOR, does hereby by these presents voluntarily GIVE, GRANT, and DONATE MORTIS CAUSA unto the said DONEE URSULA D. PASCUAL, her heirs and assigns, all of my rights, title and interest, in and to the following parcels of land with all the improvements thereon, situated in the Municipality of Apalit, Pampanga, and more particularly described and Identified as follows: xxx xxx xxx

Also included in this DONATION MORTIS CAUSA are all personal properties of the DONOR in the form of cash money or bank deposits and insurance in his favor, and his real properties situated in other towns of Pampanga, such as San Simon, and in the province of Rizal, San Francisco del Monte and in the City of Manila. That the said donor has reserved for himself sufficient property to maintain him for life; and that the said DONEE does hereby ACCEPT and RECEIVE this DONATION MORTIS CAUSA and further does express his appreciation and gratefulness for the generosity of said DONOR; (Rollo of G.R. No. L-45262, pp. 1216) xxx xxx xxx Considering the provisions of the DONATION MORTIS CAUSA the appellate court ruled that the deed of donation was actually a donation inter vivos although denominated as DONATION MORTIS CAUSA. It is, now a settled rule that the title given to a deed of donation is not the determinative factor which makes the donation "inter vivos" or "mortis causa" As early as the case of Laureta v. Manta, et al., (44 Phil. 668 [1928]) this Court ruled that the dispositions in a deed of donation-whether "inter vivos" or "mortis causa" do not depend on the title or term used in the deed of donation but on the provisions stated in such deed. This Court explained in Concepcion v. Concepcion (91 Phil. 823 [1952]) ...But, it is a rule consistently followed by the courts that it is the body of the document of donation and the statements contained therein, and not the title that should be considered in ascertaining the intention of the donor. Here, the donation is entitled and called donacion onerosa mortis causa. From the body, however, we find that the donation was of a nature remunerative rather than onerous. It was for past services rendered, services which may not be considered as a debt to be paid by the donee but services rendered to her freely and in goodwill. The donation instead of being onerous or for a valuable consideration, as in payment of a legal obligation, was more of remuneratory or compensatory nature, besides being partly motivated by affection. We should not give too much importance or significance to or be guided by the use of the phrase 'mortis causa in a donation and thereby to conclude that the donation is not one of inter vivos. In the case of De Guzman et al. v. Ibea et al. (67 Phil. 633), this Court through Mr. Chief Justice Avancena said that if a donation by its terms is inter vivos, this character is not altered by the fact that the donor styles it mortis causa. In the case of Laureta v. Mata, et al. (44 Phil. 668), the court held that the donation involved was inter vivos. There, the donor Severa Magno y Laureta gave the properties involved as ... a reward for the services which he is rendering me, and as a token of my affection toward him and of the fact that he stands high in my estimation, I hereby donate 'mortis causa to said youth all the properties described as follows: xxx xxx xxx

I also declare that it is the condition of this donation that the donee cannot take possession of the properties donated before the death of the donor, and in the event of her death the said donee shall be under obligation to cause a mass to be held annually as a suffrage in behalf of my sold, and also to defray the expenses of my burial and funerals.' It will be observed that the present case and that of Laureta above cited are similar in that in both cases the donation was being made as a reward for services rendered and being rendered, and as a token of affection for the donee; the phrase 'mortis causa was used; the donee to take possession of the property donated only after the death of the donor; the donee was under obligation to defray the expenses incident to the celebration of the anniversary of the donor's death, including church fees. The donation in both cases were duly accepted. In said case of Laureta this Court held that the donation was in praesenti and not a gift in futuro. In the later case of Bonsato et al. v. Court of appeals, et al. (95 Phil. 481 [1954]) this Court, distinguished the characteristics of a donation inter vivos and "mortis causa" in this wise: Did the late Domingo Bonsato, make donations inter vivos or dispositions post mortem in favor of the petitioners herein? If the latter, then the documents should reveal any or all of the following characteristics: (1) Convey no title or ownership to the transferee before the death of the transferor; or, what amounts to the same thing, that the transferor should retain the ownership (fun or naked) and control of the property while alive (Vidal v. Posadas, 58 Phil., 108; Guzman v. Ibea 67 Phil., 633); (2) That before his death, the transfer should be revocable by the transferor at will, ad nutum; but revocability may be provided for indirectly by means of a reserved power in the donor to dispose of the properties conveyed (Bautista v. Sabiniano, G.R. No. L- 4326, November 18, 1952); (3) That the transfer should be void if the transferor should survive the transferee. These principles were repeated in the case of Castro v. Court of Appeals (27 SCRA 1076 [1969]), to wit: Whether a donation is inter vivos or mortis causa depends upon the nature of the disposition made. 'Did the donor intend to transfer the ownership of the property donated upon the execution of the donation? If this is so, as reflected from the provisions contained in the donation, then it is inter vivos; otherwise, it is merely mortis causa, or made to take effect after death.' (Howard v. Padilla and Court of Appeals, G.R. No. L-7064 and L-7098, April 22, 1955. Applying the above principles to the instant petitions, there is no doubt that the so-called DONATION MORTIS CAUSA is really a donation inter vivos. The donation was executed by Dr. Pascual in favor of his sister Ursula Pascual out of love and affection as well as a recognition of the personal services rendered by the donee to the donor. The transfer of ownership over the properties donated to the donee was immediate and independent of the death of the donor. The provision as regards the reservation of properties for

(Enumerated herein are 41 parcels of land)

the donor's subsistence in relation to the other provisions of the deed of donation confirms the intention of the donor to give naked ownership of the properties to the donee immediately after the execution of the deed of donation. With these findings we find no need to discuss the other arguments raised by the petitioners. WHEREFORE, this Court hereby renders judgment as follows: 1) In G.R. Nos. 45262 and 45394 the petitions are DENIED. The Temporary Restraining Order issued on January 5, 1977 is hereby LIFTED; and 2) In G.R. Nos. 73241-42, the motion for reconsideration is DENIED. This DENIAL is FINAL. SO ORDERED.

G.R. No. L-61023 August 22, 1984 THE NATIONAL TREASURER OF THE PHILIPPINES, petitioner, vs. PAULINA PEREZ VDA. DE MEIMBAN and COURT OF APPEALS, respondents. The Solicitor General for petitioner. Confessor Sansano for respondents. GUTIERREZ, JR., J.: This petition seeks the reversal of the decision of the Court of Appeals (now Intermediate Appellate Court), dated June 16, 1982, which affirmed the decision of the Court of First Instance of Pangasinan ordering herein petitioner to pay the private respondent P50,000.00 as damages or compensation out of the Assurance Fund. The facts as stated in the decision of the lower court are as follows:

the Office of the Register of Deeds of Pangasinan and discovering that OCT No. 10318 has been cancelled and, in lieu thereof, TCT No. 43170 (or 43710) had been issued pursuant to the subdivision agreement entered into by Filomena Primicias and the transferees of portions of the original Lot 2-C; and that the inscription of her deed of donation mortis causa in OCT No. 10318 had not been carried over into TCT No. 43710. To protect her interest, the plaintiff, on August 1, 1968, registered anew the deed of donation mortis causa (Exhibit C) and caused the entry of an adverse claim on said TCT. On August 7, 1968, the property was sold at public auction; and the PBTC, as highest bidder, was issued the corresponding Sheriff's Certificate of Sale (exhibit 8). On June 17, 1969, plaintiff instituted the instant action against the PBTC and the Register of Deeds of Pangasinan, seeking partial annulment of the Sheriff's Certificate of Sale issued in favor of PBTC to the extent of the 10-hectare portion donated to her. xxx xxx xxx

I WHETHER RESPONDENT COURT OF APPEALS ERRED IN HOLDING THAT THE DEED OF DONATION MORTIS CAUSA EXECUTED BY FILOMENA PRIMICIAS IN FAVOR OF PAULINA PEREZ VDA. DE MEIMBAN IS A DONATION INTER VIVOS AND IN CONSIDERING THAT THERE WAS A VALID TRANSFER TO PAULINA PEREZ VDA. DE MEIMBAN WHO COULD RECOVER FROM THE ASSURANCE FUND. II WHETHER RESPONDENT COURT OF APPEALS ERRED IN NOT FINDING THE PRIVATE RESPONDENT NEGLIGENT FOR NOT SEGREGATING THE TEN-HECTARE PORTION OF THE LAND DONATED TO HER. III WHETHER RESPONDENT COURT OF APPEALS ERRED IN NOT CONSIDERING THE DEFENSE OF PRESCRIPTION. IV WHETHER THE RESPONDENT COURT OF APPEALS ERRED IN HOLDING THE ASSURANCE FUND LIABLE. The principal issue to be determined in the present petition is the nature of the donation, whether it is a donation inter vivos or a donation mortis causa. Whether a donation is inter vivos or mortis causa depends upon the nature of the disposition made. Did the donor intend to transfer the ownership of the property donated upon the execution of the donation? If this is so, as reflected from the provisions contained in the donation, then it is inter vivos; otherwise, it is merely mortis cause or made to take effect after death. (Castro v. Court of Appeals, 27 SCRA 1076, 1082, citing Howard v. Padilla and Court of Appeals, G.R. Nos. L-7064 and L-7098, April 22, 1955). According to the petitioner, the donation in question is mortis causa since it is clear from the provisions thereof that ownership and control of the donated property would be transferred to the private respondent only upon the death of the donor. This being so, therefore the deed of donation should have complied with the formalities of a will in order to become valid. The donation provides: That for and in consideration of the love and affection which the DONOR has for the DONEE, the said Donor by these presents does hereby give, transfer, and convey unto the DONEE, her heirs and assigns a portion of ONE HUNDRED THOUSAND (100,000) SQUARE METERS, on the southeastern part Pro-indiviso of the above described property. (The portion herein donated is within Lot 2-B of the proposed amendment Plan Subdivision of Lots Nos. 1 and 2, Psu 109393), with all the buildings and improvements thereon, to become effective upon the death of the DONOR. (emphasis supplied). It is crystal clear from the above-quoted deed of donation that the donor did not intend to transfer the ownership much less, the possession of the donated property to the donee until after the former's death as evidenced not only by the caption of the deed but

"Filomena Primicias, during her lifetime, was the owner of a parcel of land situated in barrio San Vicente, Municipality of Alcala, Pangasinan, designated as Lot No. 2-C, Plan PSU-109394-Amd. 2, with an area of 613,916 square meters, and registered in her name under OCT 10318 (Exhibit B). On November 24, 1958, she executed a public document styled 'Donation Mortis Causa" (Exhibit A) over a 10-hectare portion of the said land located on the southeastern part thereof in favor of her daughter, plaintiff Paulina Perez, who accepted the donation in the same instrument. On November 26, 1958, the document was duly registered and annotated on the memorandum of encumbrances of OCT 10318. The records disclose that even prior to the execution of the aforestated deed of donation, Filomena, Primicias had sold to certain third parties several portions of Lot 2-C located along the southwestern part thereof. Lot 2-C was subsequently subdivided segregating the portions thus sold, as evidenced by subdivision plan PSU-52185. (Exhibit 4-C); and on March 28, 1963, the Register of Deeds of Pangasinan issued TCT 43170 (Exhibit 4) in the name of Filomena Primicias covering the remaining unsold portion of the said land designated as Lot 2-C 16, with an area of 588, 244 square meters. However, the Register of Deeds, through negligence or over- sight, failed to carry over in TCT 43170 the plaintiff's deed of donation which had been annotated on OCT No. 10318. There after Filomena Primicias obtained from defendant People's Bank and Trust Co. (PBTC) two loans in the amounts of P15,000.00 and P28,000.00 which were secured by Lot 2- C-16, as evidenced by the real estate mortgages dated April 8 and June 10, 1963, respectively (Exhibits 6 and 7). These mortgage deeds were duly registered and the corresponding memoranda thereof annotated on TCT No. 43170 on April 8 and June 10, 1963, respectively. Filomena Primicias died on June 15, 1965 leaving her said obligation unsettled. On July 15, 1968, PBTC instituted foreclosure proceedings, and in due course, the plaintiff as one of the heirs of the deceased, was sent a copy of the notice of extrajudicial sale. Whereupon plaintiff made the necessary inquiries in

After the trial this Court thru the Presiding Judge of Branch V, rendered a decision in favor of the plaintiff and against the defendant bank, ordering the partial annulment of the Sheriff's Certificate of Sale dated August 7, 1968, executed in favor of PBTC to the extent of 10 hectares being claimed by plaintiff and ordering defendant PBTC to immediately segregate and reconvey to the plaintiff the said 10 hectares portion of Lot 2-C-16 in conformity and in accordance with the terms and conditions of the deed of donation inter vivos and, in the alternative ordering defendant PBTC, in the event that reconveyance thereof is not possible, to pay the plaintiff the sum of P10,000.00 representing the fair market value of her claims plus interest thereon computed at the rate of 6% per annum from the date of the filing of the complaint until finally paid and to pay the sum of P1,000.00 as attorney's fees and to pay the costs. (Idem. pp. 5-6). However, on appeal by the defendant PBTC, the Court of Appeals reversed and set aside the decision of this Court in Civil Case No. U-2128 and, accordingly, dismissed the plaintiff's complaint. In reversing and setting aside the decision of Branch V of this Court in Civil Case No. U-2128, the Court of Appeals held that "neither" the honest mistake and inadvertence of the Register of Deeds nor the absence of negligence on the part of the appellee (now plaintiff herein) could prejudice the rights of appellant bank (PBTC) as an innocent mortgagee for value and that the remedy of the appellee was to go against the Assurance fund as provided for by Section 101 of Act 496. ... On the basis of the above findings of the appellate court, the trial court rendered a decision in favor of the private respondent and against herein petitioner, ordering the latter to pay the former out of the Assurance Fund, in the amount of P50,000.00 as damages or compensation. On appeal, the Court affirmed the findings of the lower court, hence, this petition. Petitioner assigns the following errors:

more importantly, by what was expressly provided in the donation itself That the donor retained the ownership of the property was furthermore established by the fact that the donor, after executing the above deed, mortgaged the same to the PBTC and until her death, did not try to fulfill her obligation to the latter in order to free the property from the mortgage lien. As the donation is in the nature of a mortis causa disposition, the formalities of a will should have been complied with under Article 728 of the Civil Code, otherwise, the donation is void and would produce no effect. As we have held in Alejandro v. Geraldez (78 SCRA 245, 253), "If the donation is made in contemplation of the donor's death, meaning that the full or naked ownership of the donated properties will pass to the donee because of the donor's death, then it is at that time that the donation takes effect, and it is a donation mortis causa which should be embodied in a last will and testament. (Citing Bonsato v. Court of Appeals, 95 Phil. 481)." The donation in the case at bar was only embodied in a public instrument and was not executed in accordance with the formalities of a will. Therefore, it could not have transferred ownership of the disputed property to the private respondent and its subsequent annotation of adverse claim in Transfer Certificate of Title No. 43710 did not produce any effect whatsoever. Consequently, the private respondent cannot claim the property, especially after the same had been foreclosed and sold at public auction in favor of PBTC. Necessarily therefore, no damages can also be awarded to said respondent from the Assurance Fund since as far as the law is concerned, no donation existed which the Register of Deeds failed to annotate on the new title of the property. Inasmuch as all the other issues raised by herein petitioner are anchored on the vital question of whether the donation is inter vivos or mortis causa we deem it unnecessary to pass upon these other issues. WHEREFORE, the petition is GRANTED and the decisions of the Court of Appeals dated June 16, 1982 and the Court of First Instance dated July 3, 1980 are hereby REVERSED and SET ASIDE. The complaint filed against the petitioner is DISMISSED. No costs. SO ORDERED.

G.R. No. L-34937 CONCEPCION VIDAL DE ROCES and her husband, MARCOS ROCES, and ELVIRA VIDAL DE RICHARDS, plaintiffappellants, vs. JUAN POSADAS, JR., Collector of Internal Revenue, defendantappellee. Feria and La O for appellants. Attorney-General Jaranilla for appellee. Imperial, J.: The plaintiffs herein brought this action to recover from the defendant, Collector of Internal Revenue, certain sums of money paid by them under protest as inheritance tax. They appealed from the judgment rendered by the Court of First Instance of Manila dismissing the action, without costs. On March 10 and 12, 1925, Esperanza Tuazon, by means of public documents, donated certain parcels of land situated in Manila to the plaintiffs herein, who, with their respective husbands, accepted them in the same public documents, which were duly recorded in the registry of deeds. By virtue of said donations, the plaintiffs took possession of the said lands, received the fruits thereof and obtained the corresponding transfer certificates of title. On January 5, 1926, the donor died in the City of Manila without leaving any forced heir and her will which was admitted to probate, she bequeathed to each of the donees the sum of P5,000. After the estate had been distributed among the instituted legatees and before delivery of their respective shares, the appellee herein, as Collector of Internal Revenue, ruled that the appellants, as donees and legatees, should pay as inheritance tax the sums of P16,673 and P13,951.45, respectively. Of these sums P15,191.48 was levied as tax on the donation to Concepcion Vidal de Roces and P1,481.52 on her legacy, and, likewise, P12,388.95 was imposed upon the donation made to Elvira Vidal de Richards and P1,462.50 on her legacy. At first the appellants refused to pay the aforementioned taxes but, at the insistence of the appellee and in order not to delay the adjudication of the legacies, they agreed at last, to pay them under protest. The appellee filed a demurrer to the complaint on the ground that the facts alleged therein were not sufficient to constitute a cause of action. After the legal questions raised therein had been discussed, the court sustained the demurrer and ordered the amendment of the complaint which the appellants failed to do, whereupon the trial court dismissed the action on the ground that the afore- mentioned appellants did not really have a right of action JxCeq. In their brief, the appellants assign only one alleged error, to wit: that the demurrer interposed by the appellee was sustained without sufficient ground jldm8KEjy. The judgment appealed from was based on the provisions of section 1540 Administrative Code which reads as follows: SEC. 1540. 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 advances made by

the predecessor to any those who, after his death, shall prove to be his heirs, devisees, legatees, or donees mortis causa z5ie8lrWA. The appellants contend that the above-mentioned legal provision does not include donations inter vivos and if it does, it is unconstitutional, null and void for the following reasons: first, because it violates section 3 of the Jones Law which provides that no law should embrace more than one subject, and that subject should be expressed in the title thereof; second that the Legislature has no authority to impose inheritance tax on donations inter vivos; and third, because a legal provision of this character contravenes the fundamental rule of uniformity of taxation. The appellee, in turn, contends that the words "all gifts" refer clearly to donations inter vivos and, in support of his theory, cites the doctrine laid in the case of Tuason and Tuason vs. Posadas (54 Phil. 289). After a careful study of the law and the authorities applicable thereto, we are the opinion that neither theory reflects the true spirit of the aforementioned provision. The gifts referred to in section 1540 of the Revised Administration Code are, obviously, those donations inter vivos that take effect immediately or during the lifetime of the donor but are made in consideration or in contemplation of death. Gifts inter vivos, the transmission of which is not made in contemplation of the donor's death should not be understood as included within the said legal provision for the reason that it would amount to imposing a direct tax on property and not on the transmission thereof, which act does not come within the scope of the provisions contained in Article XI of Chapter 40 of the Administrative Code which deals expressly with the tax on inheritances, legacies and other acquisitions mortis causa O85tA. Our interpretation of the law is not in conflict with the rule laid down in the case of Tuason and Tuason vs. Posadas, supra. We said therein, as we say now, that the expression "all gifts" refers to gifts inter vivos inasmuch as the law considers them as advances on inheritance, in the sense that they are gifts inter vivos made in contemplation or in consideration of death. In that case, it was not held that that kind of gifts consisted in those made completely independent of death or without regard to it. Said legal provision is not null and void on the alleged ground that the subject matter thereof is not embraced in the title of the section under which it is enumerated. On the contrary, its provisions are perfectly summarized in the heading, "Tax on Inheritance, etc." which is the title of Article XI. Furthermore, the constitutional provision cited should not be strictly construed as to make it necessary that the title contain a full index to all the contents of the law. It is sufficient if the language used therein is expressed in such a way that in case of doubt it would afford a means of determining the legislators intention. (Lewis' Sutherland Statutory Construction, Vol. II, p. 651.) Lastly, the circumstance that the Administrative Code was prepared and compiled strictly in accordance with the provisions of the Jones Law on that matter should not be overlooked and that, in a compilation of laws such as the Administrative Code, it is but natural and proper that provisions referring to diverse matters should be found. (Ayson and Ignacio vs. Provincial Board of Rizal and Municipal Council of Navotas, 39 Phil. 931.) The appellants question the power of the Legislature to impose taxes on the transmission of real estate that takes effect immediately and during the lifetime of the donor, and allege as

their reason that such tax partakes of the nature of the land tax which the law has already created in another part of the Administrative Code. Without making express pronouncement on this question, for it is unnecessary, we wish to state that such is not the case in these instance. The tax collected by the appellee on the properties donated in 1925 really constitutes an inheritance tax imposed on the transmission of said properties in contemplation or in consideration of the donor's death and under the circumstance that the donees were later instituted as the former's legatees. For this reason, the law considers such transmissions in the form of gifts inter vivos, as advances on inheritance and nothing therein violates any constitutional provision, inasmuch as said legislation is within the power of the Legislature. Property Subject to Inheritance Tax. The inheritance tax ordinarily applies to all property within the power of the state to reach passing by will or the laws regulating intestate succession or by gift inter vivos in the manner designated by statute, whether such property be real or personal, tangible or intangible, corporeal or incorporeal. (26 R.C.L., p. 208, par. 177.) In the case of Tuason and Tuason vs. Posadas, supra, it was also held that section 1540 of the Administrative Code did not violate the constitutional provision regarding uniformity of taxation. It cannot be null and void on this ground because it equally subjects to the same tax all of those donees who later become heirs, legatees or donees mortis causa by the will of the donor. There would be a repugnant and arbitrary exception if the provisions of the law were not applicable to all donees of the same kind. In the case cited above, it was said: "At any rate the argument adduced against its constitutionality, which is the lack of Uniformity, does not seem to be well founded. It was said that under such an interpretation, while a donee inter vivos who, after the predecessor's death proved to be an heir, a legatee, or a donee mortis causa, would have to pay the tax, another donee inter vivos who did not prove to he an heir, a legatee, or a donee mortis causa of the predecessor, would be exempt from such a tax. But as these are two different cases, the principle of uniformity is inapplicable to them." The last question of a procedural nature arising from the case at bar, which should be passed upon, is whether the case, as it now stands, can be decided on the merits or should be remanded to the court a quo for further proceedings. According to our view of the case, it follows that, if the gifts received by the appellants would have the right to recover the sums of money claimed by them. Hence the necessity of ascertaining whether the complaint contains an allegation to that effect. We have examined said complaint and found nothing of that nature. On the contrary, it be may be inferred from the allegations contained in paragraphs 2 and 7 thereof that said donations inter vivos were made in consideration of the donor's death. We refer to the allegations that such transmissions were effected in the month of March, 1925, that the donor died in January, 1926, and that the donees were instituted legatees in the donor's will which was admitted to probate. It is from these allegations, especially the last, that we infer a presumption juris tantum that said donations were made mortis causa and, as such, are subject to the payment of inheritance tax. Wherefore, the demurrer interposed by the appellee was wellfounded because it appears that the complaint did not allege fact

sufficient to constitute a cause of action. When the appellants refused to amend the same, spite of the court's order to that effect, they voluntarily waived the opportunity offered them and they are not now entitled to have the case remanded for further proceedings, which would serve no purpose altogether in view of the insufficiency of the complaint. Wherefore, the judgment appealed from is hereby affirmed, with costs of this instance against the appellants. So ordered XBcJdGgF. Avancea, C.J., Villamor, Ostrand, Abad Santos, Hull, Vickers and Buttes, JJ., concur. Separate Opinions VILLA-REAL, J., dissenting: I sustain my concurrence in Justice Street's dissenting opinion in the case of Tuason and Tuason vs. Posadas (54 Phil. 289) ZTNxuwuc. The majority opinion to distinguish the present case from abovementioned case of Tuason and Tuason vs. Posadas, by interpreting section 1540 of the Administrative Code in the sense that it establishes the legal presumption juris tantum that all gifts inter vivos made to persons who are not forced heirs but who are instituted legatees in the donor's will, have been made in contemplation of the donor's death. Presumptions are of two kinds: One determined by law which is also called presumption of law or of right; and another which is formed by the judge from circumstances antecedent to, coincident with or subsequent to the principal fact under investigation, which is also called presumption of man (presuncion de hombre). (Escriche, Vol. IV, p. 662.) The Civil Code as well as the code of Civil Procedure establishes presumptions juris et de jure and juris tantum which the courts should take into account in deciding questions of law submitted to them for decision. The presumption which majority opinion wishes to draw from said section 1540 of the Administrative Code can neither be found in this Code nor in any of the aforementioned Civil Code and Code of Civil Procedure. Therefore, said presumption cannot be called legal or of law. Neither can it be called a presumption of man (presuncion de hombre) inasmuch as the majority opinion did not infer it from circumstances antecedent to, coincident with or subsequent to the principal fact with is the donation itself. In view of the nature, mode of making and effects of donations inter vivos, the contrary presumption would be more reasonable and logical; in other words, donations inter vivos made to persons who are not forced heirs, but who are instituted legatees in the donor's will, should be presumed as not made mortis causa, unless the contrary is proven. In the case under consideration, the burden of the proof rests with the person who contends that the donation inter vivos has been made mortis causa. It is therefore, the undersigned's humble opinion that the order appealed from should be reversed and the demurrer overruled, and the defendant ordered to file his answer to the complaint. Street, J., concurs. .

G.R. No. L-13250

October 29, 1971

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

FERNANDO, J.: The basic issue posed by petitioner Collector of Internal Revenue in this appeal from a decision of the Court of Tax Appeals as to whether or not the requisites of statehood, or at least so much thereof as may be necessary for the acquisition of an international personality, must be satisfied for a "foreign country" to fall within the exemption of Section 122 of the National Internal Revenue Code 1 is now ripe for adjudication. The Court of Tax Appeals answered the question in the negative, and thus reversed the action taken by petitioner Collector, who would hold respondent Antonio Campos Rueda, as administrator of the estate of the late Estrella Soriano Vda. de Cerdeira, liable for the sum of P161,874.95 as deficiency estate and inheritance taxes for the transfer of intangible personal properties in the Philippines, the deceased, a Spanish national having been a resident of Tangier, Morocco from 1931 up to the time of her death in 1955. In an earlier resolution promulgated May 30, 1962, this Court on the assumption that the need for resolving the principal question would be obviated, referred the matter back to the Court of Tax Appeals to determine whether the alleged law of Tangier did grant the reciprocal tax exemption required by the aforesaid Section 122. Then came an order from the Court of Tax Appeals submitting copies of legislation of Tangier that would manifest that the element of reciprocity was not lacking. It was not until July 29, 1969 that the case was deemed submitted for decision. When the petition for review was filed on January 2, 1958, the basic issue raised was impressed with an element of novelty. Four days thereafter, however, on January 6, 1958, it was held by this Court that the aforesaid provision does not require that the "foreign country" possess an international personality to come within its terms. 2 Accordingly, we have to affirm. The decision of the Court of Tax Appeals, now under review, sets forth the background facts as follows: "This is an appeal interposed by petitioner Antonio Campos Rueda as administrator of the estate of the deceased Doa Maria de la Estrella Soriano Vda. de Cerdeira, from the decision of the respondent Collector of Internal Revenue, assessing against and demanding from the former the sum P161,874.95 as deficiency estate and inheritance taxes, including interest and penalties, on the transfer of intangible personal properties situated in the Philippines and belonging to said Maria de la Estrella Soriano Vda. de Cerdeira. Maria de la Estrella Soriano Vda. de Cerdeira (Maria Cerdeira for short) is a Spanish national, by reason of her marriage to a Spanish citizen and was a resident of Tangier, Morocco from 1931 up to her death on January 2, 1955. At the time of her demise she left, among others, intangible personal properties in the Philippines." 3 Then

came this portion: "On September 29, 1955, petitioner filed a provisional estate and inheritance tax return on all the properties of the late Maria Cerdeira. On the same date, respondent, pending investigation, issued an assessment for state and inheritance taxes in the respective amounts of P111,592.48 and P157,791.48, or a total of P369,383.96 which tax liabilities were paid by petitioner ... . On November 17, 1955, an amended return was filed ... wherein intangible personal properties with the value of P396,308.90 were claimed as exempted from taxes. On November 23, 1955, respondent, pending investigation, issued another assessment for estate and inheritance taxes in the amounts of P202,262.40 and P267,402.84, respectively, or a total of P469,665.24 ... . In a letter dated January 11, 1956, respondent denied the request for exemption on the ground that the law of Tangier is not reciprocal to Section 122 of the National Internal Revenue Code. Hence, respondent demanded the payment of the sums of P239,439.49 representing deficiency estate and inheritance taxes including ad valorem penalties, surcharges, interests and compromise penalties ... . In a letter dated February 8, 1956, and received by respondent on the following day, petitioner requested for the reconsideration of the decision denying the claim for tax exemption of the intangible personal properties and the imposition of the 25% and 5% ad valorem penalties ... . However, respondent denied request, in his letter dated May 5, 1956 ... and received by petitioner on May 21, 1956. Respondent premised the denial on the grounds that there was no reciprocity [with Tangier, which was moreover] a mere principality, not a foreign country. Consequently, respondent demanded the payment of the sums of P73,851.21 and P88,023.74 respectively, or a total of P161,874.95 as deficiency estate and inheritance taxes including surcharges, interests and compromise penalties." 4 The matter was then elevated to the Court of Tax Appeals. As there was no dispute between the parties regarding the values of the properties and the mathematical correctness of the deficiency assessments, the principal question as noted dealt with the reciprocity aspect as well as the insisting by the Collector of Internal Revenue that Tangier was not a foreign country within the meaning of Section 122. In ruling against the contention of the Collector of Internal Revenue, the appealed decision states: "In fine, we believe, and so hold, that the expression "foreign country", used in the last proviso of Section 122 of the National Internal Revenue Code, refers to a government of that foreign power which, although not an international person in the sense of international law, does not impose transfer or death upon intangible person properties of our citizens not residing therein, or whose law allows a similar exemption from such taxes. It is, therefore, not necessary that Tangier should have been recognized by our Government order to entitle the petitioner to the exemption benefits of the proviso of Section 122 of our Tax. Code." 5 Hence appeal to this court by petitioner. The respective briefs of the parties duly submitted, but as above indicated, instead of ruling definitely on the question, this Court, on May 30, 1962, resolve to inquire further into the question of reciprocity and sent back the case to the Court of Tax Appeals for the motion of evidence thereon. The dispositive portion of such resolution reads as follows: "While section 122 of the Philippine Tax Code aforequoted speaks of 'intangible personal property' in both subdivisions (a) and (b); the alleged laws of Tangier refer to 'bienes muebles situados en Tanger', 'bienes muebles radicantes en

Tanger', 'movables' and 'movable property'. In order that this Court may be able to determine whether the alleged laws of Tangier grant the reciprocal tax exemptions required by Section 122 of the Tax Code, and without, for the time being, going into the merits of the issues raised by the petitioner-appellant, the case is [remanded] to the Court of Tax Appeals for the reception of evidence or proof on whether or not the words `bienes muebles', 'movables' and 'movable properties as used in the Tangier laws, include or embrace 'intangible person property', as used in the Tax Code." 6 In line with the above resolution, the Court of Tax Appeals admitted evidence submitted by the administrator petitioner Antonio Campos Rueda, consisting of exhibits of laws of Tangier to the effect that "the transfers by reason of death of movable properties, corporeal or incorporeal, including furniture and personal effects as well as of securities, bonds, shares, ..., were not subject, on that date and in said zone, to the payment of any death tax, whatever might have been the nationality of the deceased or his heirs and legatees." It was further noted in an order of such Court referring the matter back to us that such were duly admitted in evidence during the hearing of the case on September 9, 1963. Respondent presented no evidence." 7 The controlling legal provision as noted is a proviso in Section 122 of the National Internal Revenue Code. It reads thus: "That no tax shall be collected under this Title in respect of intangible personal property (a) if the decedent at the time of his death was a resident of a foreign country which at the time of his death did not impose a transfer tax or death tax of any character in respect of intangible person property of the Philippines not residing in that foreign country, or (b) if the laws of the foreign country of which the decedent was a resident at the time of his death allow a similar exemption from transfer taxes or death taxes of every character in respect of intangible personal property owned by citizens of the Philippines not residing in that foreign country." 8 The only obstacle therefore to a definitive ruling is whether or not as vigorously insisted upon by petitioner the acquisition of internal personality is a condition sine qua non to Tangier being considered a "foreign country". Deference to the De Lara ruling, as was made clear in the opening paragraph of this opinion, calls for an affirmance of the decision of the Court of Tax Appeals. It does not admit of doubt that if a foreign country is to be identified with a state, it is required in line with Pound's formulation that it be a politically organized sovereign community independent of outside control bound by penalties of nationhood, legally supreme within its territory, acting through a government functioning under a regime of law. 9 It is thus a sovereign person with the people composing it viewed as an organized corporate society under a government with the legal competence to exact obedience to its commands. 10 It has been referred to as a body-politic organized by common consent for mutual defense and mutual safety and to promote the general welfare. 11 Correctly has it been described by Esmein as "the juridical personification of the nation." 12 This is to view it in the light of its historical development. The stress is on its being a nation, its people occupying a definite territory, politically organized, exercising by means of its government its sovereign will over the individuals within it and maintaining its separate international personality. Laski could speak of it then as a territorial society divided into government and subjects, claiming within its allotted area a supremacy over all other institutions. 13

McIver similarly would point to the power entrusted to its government to maintain within its territory the conditions of a legal order and to enter into international relations. 14 With the latter requisite satisfied, international law do not exact independence as a condition of statehood. So Hyde did opine. 15 Even on the assumption then that Tangier is bereft of international personality, petitioner has not successfully made out a case. It bears repeating that four days after the filing of this petition on January 6, 1958 in Collector of Internal Revenue v. De Lara, 16 it was specifically held by us: "Considering the State of California as a foreign country in relation to section 122 of our Tax Code we believe and hold, as did the Tax Court, that the Ancilliary Administrator is entitled the exemption from the inheritance tax on the intangible personal property found in the Philippines." 17 There can be no doubt that California as a state in the American Union was in the alleged requisite of international personality. Nonetheless, it was held to be a foreign country within the meaning of Section 122 of the National Internal Revenue Code. 18 What is undeniable is that even prior to the De Lara ruling, this Court did commit itself to the doctrine that even a tiny principality, that of Liechtenstein, hardly an international personality in the sense, did fall under this exempt category. So it appears in an opinion of the Court by the then Acting Chief Justicem Bengson who thereafter assumed that position in a permanent capacity, in Kiene v. Collector of Internal Revenue. 19 As was therein noted: 'The Board found from the documents submitted to it proof of the laws of Liechtenstein that said country does not impose estate, inheritance and gift taxes on intangible property of Filipino citizens not residing in that country. Wherefore, the Board declared that pursuant to the exemption above established, no estate or inheritance taxes were collectible, Ludwig Kiene being a resident of Liechtestein when he passed away." 20 Then came this definitive ruling: "The Collector hereafter named the respondent cites decisions of the United States Supreme Court and of this Court, holding that intangible personal property in the Philippines belonging to a non-resident foreigner, who died outside of this country is subject to the estate tax, in disregard of the principle 'mobilia sequuntur personam'. Such property is admittedly taxable here. Without the proviso above quoted, the shares of stock owned here by the Ludwig Kiene would be concededly subject to estate and inheritance taxes. Nevertheless our Congress chose to make an exemption where conditions are such that demand reciprocity as in this case. And the exemption must be honored." 21 WHEREFORE, the decision of the respondent Court of Tax Appeals of October 30, 1957 is affirmed. Without pronouncement as to costs.

G.R. No. L-43082

June 18, 1937

PABLO LORENZO, as trustee of the estate of Thomas Hanley, deceased, plaintiff-appellant, vs. JUAN POSADAS, JR., Collector of Internal Revenue, defendantappellant. Pablo Lorenzo and Delfin Joven for plaintiff-appellant. Office of the Solicitor-General Hilado for defendant-appellant. LAUREL, J.: On October 4, 1932, the plaintiff Pablo Lorenzo, in his capacity as trustee of the estate of Thomas Hanley, deceased, brought this action in the Court of First Instance of Zamboanga against the defendant, Juan Posadas, Jr., then the Collector of Internal Revenue, for the refund of the amount of P2,052.74, paid by the plaintiff as inheritance tax on the estate of the deceased, and for the collection of interst thereon at the rate of 6 per cent per annum, computed from September 15, 1932, the date when the aforesaid tax was [paid under protest. The defendant set up a counterclaim for P1,191.27 alleged to be interest due on the tax in question and which was not included in the original assessment. From the decision of the Court of First Instance of Zamboanga dismissing both the plaintiff's complaint and the defendant's counterclaim, both parties appealed to this court. It appears that on May 27, 1922, one Thomas Hanley died in Zamboanga, Zamboanga, leaving a will (Exhibit 5) and considerable amount of real and personal properties. On june 14, 1922, proceedings for the probate of his will and the settlement and distribution of his estate were begun in the Court of First Instance of Zamboanga. The will was admitted to probate. Said will provides, among other things, as follows: 4. I direct that any money left by me be given to my nephew Matthew Hanley. 5. I direct that all real estate owned by me at the time of my death be not sold or otherwise disposed of for a period of ten (10) years after my death, and that the same be handled and managed by the executors, and proceeds thereof to be given to my nephew, Matthew Hanley, at Castlemore, Ballaghaderine, County of Rosecommon, Ireland, and that he be directed that the same be used only for the education of my brother's children and their descendants. 6. I direct that ten (10) years after my death my property be given to the above mentioned Matthew Hanley to be disposed of in the way he thinks most advantageous. xxx xxx xxx

Hanley ten years after the two executors named in the will, was, on March 8, 1924, appointed trustee. Moore took his oath of office and gave bond on March 10, 1924. He acted as trustee until February 29, 1932, when he resigned and the plaintiff herein was appointed in his stead. During the incumbency of the plaintiff as trustee, the defendant Collector of Internal Revenue, alleging that the estate left by the deceased at the time of his death consisted of realty valued at P27,920 and personalty valued at P1,465, and allowing a deduction of P480.81, assessed against the estate an inheritance tax in the amount of P1,434.24 which, together with the penalties for deliquency in payment consisting of a 1 per cent monthly interest from July 1, 1931 to the date of payment and a surcharge of 25 per cent on the tax, amounted to P2,052.74. On March 15, 1932, the defendant filed a motion in the testamentary proceedings pending before the Court of First Instance of Zamboanga (Special proceedings No. 302) praying that the trustee, plaintiff herein, be ordered to pay to the Government the said sum of P2,052.74. The motion was granted. On September 15, 1932, the plaintiff paid said amount under protest, notifying the defendant at the same time that unless the amount was promptly refunded suit would be brought for its recovery. The defendant overruled the plaintiff's protest and refused to refund the said amount hausted, plaintiff went to court with the result herein above indicated. In his appeal, plaintiff contends that the lower court erred: I. In holding that the real property of Thomas Hanley, deceased, passed to his instituted heir, Matthew Hanley, from the moment of the death of the former, and that from the time, the latter became the owner thereof. II. In holding, in effect, that there was deliquency in the payment of inheritance tax due on the estate of said deceased. III. In holding that the inheritance tax in question be based upon the value of the estate upon the death of the testator, and not, as it should have been held, upon the value thereof at the expiration of the period of ten years after which, according to the testator's will, the property could be and was to be delivered to the instituted heir. IV. In not allowing as lawful deductions, in the determination of the net amount of the estate subject to said tax, the amounts allowed by the court as compensation to the "trustees" and paid to them from the decedent's estate. V. In not rendering judgment in favor of the plaintiff and in denying his motion for new trial. The defendant-appellant contradicts the theories of the plaintiff and assigns the following error besides: The lower court erred in not ordering the plaintiff to pay to the defendant the sum of P1,191.27, representing part of the interest at the rate of 1 per cent per month from April 10, 1924, to June 30, 1931, which the plaintiff had failed to pay on the inheritance tax assessed by the defendant against the estate of Thomas Hanley. The following are the principal questions to be decided by this court in this appeal: (a) When does the inheritance tax accrue and

when must it be satisfied? (b) Should the inheritance tax be computed on the basis of the value of the estate at the time of the testator's death, or on its value ten years later? (c) In determining the net value of the estate subject to tax, is it proper to deduct the compensation due to trustees? (d) What law governs the case at bar? Should the provisions of Act No. 3606 favorable to the taxpayer be given retroactive effect? (e) Has there been deliquency in the payment of the inheritance tax? If so, should the additional interest claimed by the defendant in his appeal be paid by the estate? Other points of incidental importance, raised by the parties in their briefs, will be touched upon in the course of this opinion. (a) The accrual of the inheritance tax is distinct from the obligation to pay the same. Section 1536 as amended, of the Administrative Code, imposes the tax upon "every transmission by virtue of inheritance, devise, bequest, gift mortis causa, or advance in anticipation of inheritance,devise, or bequest." The tax therefore is upon transmission or the transfer or devolution of property of a decedent, made effective by his death. (61 C. J., p. 1592.) It is in reality an excise or privilege tax imposed on the right to succeed to, receive, or take property by or under a will or the intestacy law, or deed, grant, or gift to become operative at or after death. Acording to article 657 of the Civil Code, "the rights to the succession of a person are transmitted from the moment of his death." "In other words", said Arellano, C. J., ". . . the heirs succeed immediately to all of the property of the deceased ancestor. The property belongs to the heirs at the moment of the death of the ancestor as completely as if the ancestor had executed and delivered to them a deed for the same before his death." (Bondad vs. Bondad, 34 Phil., 232. See also, Mijares vs. Nery, 3 Phil., 195; Suilong & Co., vs. Chio-Taysan, 12 Phil., 13; Lubrico vs. Arbado, 12 Phil., 391; Innocencio vs. Gat-Pandan, 14 Phil., 491; Aliasas vs.Alcantara, 16 Phil., 489; Ilustre vs. Alaras Frondosa, 17 Phil., 321; Malahacan vs. Ignacio, 19 Phil., 434; Bowa vs. Briones, 38 Phil., 27; Osario vs. Osario & Yuchausti Steamship Co., 41 Phil., 531; Fule vs. Fule, 46 Phil., 317; Dais vs. Court of First Instance of Capiz, 51 Phil., 396; Baun vs. Heirs of Baun, 53 Phil., 654.) Plaintiff, however, asserts that while article 657 of the Civil Code is applicable to testate as well as intestate succession, it operates only in so far as forced heirs are concerned. But the language of article 657 of the Civil Code is broad and makes no distinction between different classes of heirs. That article does not speak of forced heirs; it does not even use the word "heir". It speaks of the rights of succession and the transmission thereof from the moment of death. The provision of section 625 of the Code of Civil Procedure regarding the authentication and probate of a will as a necessary condition to effect transmission of property does not affect the general rule laid down in article 657 of the Civil Code. The authentication of a will implies its due execution but once probated and allowed the transmission is effective as of the death of the testator in accordance with article 657 of the Civil Code. Whatever may be the time when actual transmission of the inheritance takes place, succession takes place in any event at the moment of the decedent's death. The time when the heirs legally succeed to the inheritance may differ from the time when the heirs actually receive such inheritance. "Poco importa", says Manresa commenting on article 657 of the Civil Code, "que desde el falleimiento del causante, hasta que el heredero o legatario entre en posesion de los bienes de la herencia o del legado, transcurra mucho o poco tiempo, pues la adquisicion ha de retrotraerse al momento de la muerte, y asi lo ordena el

8. I state at this time I have one brother living, named Malachi Hanley, and that my nephew, Matthew Hanley, is a son of my said brother, Malachi Hanley. The Court of First Instance of Zamboanga considered it proper for the best interests of ther estate to appoint a trustee to administer the real properties which, under the will, were to pass to Matthew

articulo 989, que debe considerarse como complemento del presente." (5 Manresa, 305; see also, art. 440, par. 1, Civil Code.) Thomas Hanley having died on May 27, 1922, the inheritance tax accrued as of the date. From the fact, however, that Thomas Hanley died on May 27, 1922, it does not follow that the obligation to pay the tax arose as of the date. The time for the payment on inheritance tax is clearly fixed by section 1544 of the Revised Administrative Code as amended by Act No. 3031, in relation to section 1543 of the same Code. The two sections follow: SEC. 1543. Exemption of certain acquisitions and transmissions. The following shall not be taxed: (a) The merger of the usufruct in the owner of the naked title. (b) The transmission or delivery of the inheritance or legacy by the fiduciary heir or legatee to the trustees. (c) The transmission from the first heir, legatee, or donee in favor of another beneficiary, in accordance with the desire of the predecessor. In the last two cases, if the scale of taxation appropriate to the new beneficiary is greater than that paid by the first, the former must pay the difference. SEC. 1544. When tax to be paid. The tax fixed in this article shall be paid: (a) In the second and third cases of the next preceding section, before entrance into possession of the property. (b) In other cases, within the six months subsequent to the death of the predecessor; but if judicial testamentary or intestate proceedings shall be instituted prior to the expiration of said period, the payment shall be made by the executor or administrator before delivering to each beneficiary his share. If the tax is not paid within the time hereinbefore prescribed, interest at the rate of twelve per centum per annum shall be added as part of the tax; and to the tax and interest due and unpaid within ten days after the date of notice and demand thereof by the collector, there shall be further added a surcharge of twenty-five per centum. A certified of all letters testamentary or of admisitration shall be furnished the Collector of Internal Revenue by the Clerk of Court within thirty days after their issuance. It should be observed in passing that the word "trustee", appearing in subsection (b) of section 1543, should read "fideicommissary" or "cestui que trust". There was an obvious mistake in translation from the Spanish to the English version. The instant case does fall under subsection (a), but under subsection (b), of section 1544 above-quoted, as there is here no fiduciary heirs, first heirs, legatee or donee. Under the subsection, the tax should have been paid before the delivery of the properties in question to P. J. M. Moore as trustee on March 10, 1924.

(b) The plaintiff contends that the estate of Thomas Hanley, in so far as the real properties are concerned, did not and could not legally pass to the instituted heir, Matthew Hanley, until after the expiration of ten years from the death of the testator on May 27, 1922 and, that the inheritance tax should be based on the value of the estate in 1932, or ten years after the testator's death. The plaintiff introduced evidence tending to show that in 1932 the real properties in question had a reasonable value of only P5,787. This amount added to the value of the personal property left by the deceased, which the plaintiff admits is P1,465, would generate an inheritance tax which, excluding deductions, interest and surcharge, would amount only to about P169.52. If death is the generating source from which the power of the estate to impose inheritance taxes takes its being and if, upon the death of the decedent, succession takes place and the right of the estate to tax vests instantly, the tax should be measured by the vlaue of the estate as it stood at the time of the decedent's death, regardless of any subsequent contingency value of any subsequent increase or decrease in value. (61 C. J., pp. 1692, 1693; 26 R. C. L., p. 232; Blakemore and Bancroft, Inheritance Taxes, p. 137. See also Knowlton vs. Moore, 178 U.S., 41; 20 Sup. Ct. Rep., 747; 44 Law. ed., 969.) "The right of the state to an inheritance tax accrues at the moment of death, and hence is ordinarily measured as to any beneficiary by the value at that time of such property as passes to him. Subsequent appreciation or depriciation is immaterial." (Ross, Inheritance Taxation, p. 72.) Our attention is directed to the statement of the rule in Cyclopedia of Law of and Procedure (vol. 37, pp. 1574, 1575) that, in the case of contingent remainders, taxation is postponed until the estate vests in possession or the contingency is settled. This rule was formerly followed in New York and has been adopted in Illinois, Minnesota, Massachusetts, Ohio, Pennsylvania and Wisconsin. This rule, horever, is by no means entirely satisfactory either to the estate or to those interested in the property (26 R. C. L., p. 231.). Realizing, perhaps, the defects of its anterior system, we find upon examination of cases and authorities that New York has varied and now requires the immediate appraisal of the postponed estate at its clear market value and the payment forthwith of the tax on its out of the corpus of the estate transferred. (In re Vanderbilt, 172 N. Y., 69; 69 N. E., 782; In re Huber, 86 N. Y. App. Div., 458; 83 N. Y. Supp., 769; Estate of Tracy, 179 N. Y., 501; 72 N. Y., 519; Estate of Brez, 172 N. Y., 609; 64 N. E., 958; Estate of Post, 85 App. Div., 611; 82 N. Y. Supp., 1079. Vide also, Saltoun vs. Lord Advocate, 1 Peter. Sc. App., 970; 3 Macq. H. L., 659; 23 Eng. Rul. Cas., 888.) California adheres to this new rule (Stats. 1905, sec. 5, p. 343). But whatever may be the rule in other jurisdictions, we hold that a transmission by inheritance is taxable at the time of the predecessor's death, notwithstanding the postponement of the actual possession or enjoyment of the estate by the beneficiary, and the tax measured by the value of the property transmitted at that time regardless of its appreciation or depreciation. (c) Certain items are required by law to be deducted from the appraised gross in arriving at the net value of the estate on which the inheritance tax is to be computed (sec. 1539, Revised Administrative Code). In the case at bar, the defendant and the trial

court allowed a deduction of only P480.81. This sum represents the expenses and disbursements of the executors until March 10, 1924, among which were their fees and the proven debts of the deceased. The plaintiff contends that the compensation and fees of the trustees, which aggregate P1,187.28 (Exhibits C, AA, EE, PP, HH, JJ, LL, NN, OO), should also be deducted under section 1539 of the Revised Administrative Code which provides, in part, as follows: "In order to determine the net sum which must bear the tax, when an inheritance is concerned, there shall be deducted, in case of a resident, . . . the judicial expenses of the testamentary or intestate proceedings, . . . ." A trustee, no doubt, is entitled to receive a fair compensation for his services (Barney vs. Saunders, 16 How., 535; 14 Law. ed., 1047). But from this it does not follow that the compensation due him may lawfully be deducted in arriving at the net value of the estate subject to tax. There is no statute in the Philippines which requires trustees' commissions to be deducted in determining the net value of the estate subject to inheritance tax (61 C. J., p. 1705). Furthermore, though a testamentary trust has been created, it does not appear that the testator intended that the duties of his executors and trustees should be separated. (Ibid.; In re Vanneck's Estate, 161 N. Y. Supp., 893; 175 App. Div., 363; In re Collard's Estate, 161 N. Y. Supp., 455.) On the contrary, in paragraph 5 of his will, the testator expressed the desire that his real estate be handled and managed by his executors until the expiration of the period of ten years therein provided. Judicial expenses are expenses of administration (61 C. J., p. 1705) but, in State vs. Hennepin County Probate Court (112 N. W., 878; 101 Minn., 485), it was said: ". . . The compensation of a trustee, earned, not in the administration of the estate, but in the management thereof for the benefit of the legatees or devises, does not come properly within the class or reason for exempting administration expenses. . . . Service rendered in that behalf have no reference to closing the estate for the purpose of a distribution thereof to those entitled to it, and are not required or essential to the perfection of the rights of the heirs or legatees. . . . Trusts . . . of the character of that here before the court, are created for the the benefit of those to whom the property ultimately passes, are of voluntary creation, and intended for the preservation of the estate. No sound reason is given to support the contention that such expenses should be taken into consideration in fixing the value of the estate for the purpose of this tax." (d) The defendant levied and assessed the inheritance tax due from the estate of Thomas Hanley under the provisions of section 1544 of the Revised Administrative Code, as amended by section 3 of Act No. 3606. But Act No. 3606 went into effect on January 1, 1930. It, therefore, was not the law in force when the testator died on May 27, 1922. The law at the time was section 1544 abovementioned, as amended by Act No. 3031, which took effect on March 9, 1922. It is well-settled that inheritance taxation is governed by the statute in force at the time of the death of the decedent (26 R. C. L., p. 206; 4 Cooley on Taxation, 4th ed., p. 3461). The taxpayer can not foresee and ought not to be required to guess the outcome of pending measures. Of course, a tax statute may be made retroactive in its operation. Liability for taxes under retroactive legislation has been "one of the incidents of social life." (Seattle vs. Kelleher, 195 U. S., 360; 49 Law. ed., 232 Sup. Ct. Rep., 44.) But legislative

intent that a tax statute should operate retroactively should be perfectly clear. (Scwab vs. Doyle, 42 Sup. Ct. Rep., 491; Smietanka vs. First Trust & Savings Bank, 257 U. S., 602; Stockdale vs. Insurance Co., 20 Wall., 323; Lunch vs. Turrish, 247 U. S., 221.) "A statute should be considered as prospective in its operation, whether it enacts, amends, or repeals an inheritance tax, unless the language of the statute clearly demands or expresses that it shall have a retroactive effect, . . . ." (61 C. J., P. 1602.) Though the last paragraph of section 5 of Regulations No. 65 of the Department of Finance makes section 3 of Act No. 3606, amending section 1544 of the Revised Administrative Code, applicable to all estates the inheritance taxes due from which have not been paid, Act No. 3606 itself contains no provisions indicating legislative intent to give it retroactive effect. No such effect can begiven the statute by this court. The defendant Collector of Internal Revenue maintains, however, that certain provisions of Act No. 3606 are more favorable to the taxpayer than those of Act No. 3031, that said provisions are penal in nature and, therefore, should operate retroactively in conformity with the provisions of article 22 of the Revised Penal Code. This is the reason why he applied Act No. 3606 instead of Act No. 3031. Indeed, under Act No. 3606, (1) the surcharge of 25 per cent is based on the tax only, instead of on both the tax and the interest, as provided for in Act No. 3031, and (2) the taxpayer is allowed twenty days from notice and demand by rthe Collector of Internal Revenue within which to pay the tax, instead of ten days only as required by the old law. Properly speaking, a statute is penal when it imposes punishment for an offense committed against the state which, under the Constitution, the Executive has the power to pardon. In common use, however, this sense has been enlarged to include within the term "penal statutes" all status which command or prohibit certain acts, and establish penalties for their violation, and even those which, without expressly prohibiting certain acts, impose a penalty upon their commission (59 C. J., p. 1110). Revenue laws, generally, which impose taxes collected by the means ordinarily resorted to for the collection of taxes are not classed as penal laws, although there are authorities to the contrary. (See Sutherland, Statutory Construction, 361; Twine Co. vs. Worthington, 141 U. S., 468; 12 Sup. Ct., 55; Rice vs. U. S., 4 C. C. A., 104; 53 Fed., 910; Com. vs. Standard Oil Co., 101 Pa. St., 150; State vs. Wheeler, 44 P., 430; 25 Nev. 143.) Article 22 of the Revised Penal Code is not applicable to the case at bar, and in the absence of clear legislative intent, we cannot give Act No. 3606 a retroactive effect. (e) The plaintiff correctly states that the liability to pay a tax may arise at a certain time and the tax may be paid within another given time. As stated by this court, "the mere failure to pay one's tax does not render one delinqent until and unless the entire period has eplased within which the taxpayer is authorized by law to make such payment without being subjected to the payment of penalties for fasilure to pay his taxes within the prescribed period." (U. S. vs. Labadan, 26 Phil., 239.) The defendant maintains that it was the duty of the executor to pay the inheritance tax before the delivery of the decedent's property to the trustee. Stated otherwise, the defendant contends that delivery to the trustee was delivery to the cestui que trust, the beneficiery in

this case, within the meaning of the first paragraph of subsection (b) of section 1544 of the Revised Administrative Code. This contention is well taken and is sustained. The appointment of P. J. M. Moore as trustee was made by the trial court in conformity with the wishes of the testator as expressed in his will. It is true that the word "trust" is not mentioned or used in the will but the intention to create one is clear. No particular or technical words are required to create a testamentary trust (69 C. J., p. 711). The words "trust" and "trustee", though apt for the purpose, are not necessary. In fact, the use of these two words is not conclusive on the question that a trust is created (69 C. J., p. 714). "To create a trust by will the testator must indicate in the will his intention so to do by using language sufficient to separate the legal from the equitable estate, and with sufficient certainty designate the beneficiaries, their interest in the ttrust, the purpose or object of the trust, and the property or subject matter thereof. Stated otherwise, to constitute a valid testamentary trust there must be a concurrence of three circumstances: (1) Sufficient words to raise a trust; (2) a definite subject; (3) a certain or ascertain object; statutes in some jurisdictions expressly or in effect so providing." (69 C. J., pp. 705,706.) There is no doubt that the testator intended to create a trust. He ordered in his will that certain of his properties be kept together undisposed during a fixed period, for a stated purpose. The probate court certainly exercised sound judgment in appointment a trustee to carry into effect the provisions of the will (see sec. 582, Code of Civil Procedure). P. J. M. Moore became trustee on March 10, 1924. On that date trust estate vested in him (sec. 582 in relation to sec. 590, Code of Civil Procedure). The mere fact that the estate of the deceased was placed in trust did not remove it from the operation of our inheritance tax laws or exempt it from the payment of the inheritance tax. The corresponding inheritance tax should have been paid on or before March 10, 1924, to escape the penalties of the laws. This is so for the reason already stated that the delivery of the estate to the trustee was in esse delivery of the same estate to the cestui que trust, the beneficiary in this case. A trustee is but an instrument or agent for the cestui que trust (Shelton vs. King, 299 U. S., 90; 33 Sup. Ct. Rep., 689; 57 Law. ed., 1086). When Moore accepted the trust and took possesson of the trust estate he thereby admitted that the estate belonged not to him but to his cestui que trust (Tolentino vs. Vitug, 39 Phil.,126, cited in 65 C. J., p. 692, n. 63). He did not acquire any beneficial interest in the estate. He took such legal estate only as the proper execution of the trust required (65 C. J., p. 528) and, his estate ceased upon the fulfillment of the testator's wishes. The estate then vested absolutely in the beneficiary (65 C. J., p. 542). The highest considerations of public policy also justify the conclusion we have reached. Were we to hold that the payment of the tax could be postponed or delayed by the creation of a trust of the type at hand, the result would be plainly disastrous. Testators may provide, as Thomas Hanley has provided, that their estates be not delivered to their beneficiaries until after the lapse of a certain period of time. In the case at bar, the period is ten years. In other cases, the trust may last for fifty years, or for a longer period which does not offend the rule against petuities. The collection of the tax would then be left to the will of a private individual. The mere suggestion of this result is a sufficient warning against the accpetance of the essential to the very exeistence of government. (Dobbins vs. Erie Country, 16 Pet., 435; 10 Law. ed., 1022;

Kirkland vs. Hotchkiss, 100 U. S., 491; 25 Law. ed., 558; Lane County vs. Oregon, 7 Wall., 71; 19 Law. ed., 101; Union Refrigerator Transit Co. vs. Kentucky, 199 U. S., 194; 26 Sup. Ct. Rep., 36; 50 Law. ed., 150; Charles River Bridge vs. Warren Bridge, 11 Pet., 420; 9 Law. ed., 773.) The obligation to pay taxes rests not upon the privileges enjoyed by, or the protection afforded to, a citizen by the government but upon the necessity of money for the support of the state (Dobbins vs. Erie Country, supra). For this reason, no one is allowed to object to or resist the payment of taxes solely because no personal benefit to him can be pointed out. (Thomas vs. Gay, 169 U. S., 264; 18 Sup. Ct. Rep., 340; 43 Law. ed., 740.) While courts will not enlarge, by construction, the government's power of taxation (Bromley vs. McCaughn, 280 U. S., 124; 74 Law. ed., 226; 50 Sup. Ct. Rep., 46) they also will not place upon tax laws so loose a construction as to permit evasions on merely fanciful and insubstantial distictions. (U. S. vs. Watts, 1 Bond., 580; Fed. Cas. No. 16,653; U. S. vs. Wigglesirth, 2 Story, 369; Fed. Cas. No. 16,690, followed in Froelich & Kuttner vs. Collector of Customs, 18 Phil., 461, 481; Castle Bros., Wolf & Sons vs. McCoy, 21 Phil., 300; Muoz & Co. vs. Hord, 12 Phil., 624; Hongkong & Shanghai Banking Corporation vs. Rafferty, 39 Phil., 145; Luzon Stevedoring Co. vs. Trinidad, 43 Phil., 803.) When proper, a tax statute should be construed to avoid the possibilities of tax evasion. Construed this way, the statute, without resulting in injustice to the taxpayer, becomes fair to the government. That taxes must be collected promptly is a policy deeply intrenched in our tax system. Thus, no court is allowed to grant injunction to restrain the collection of any internal revenue tax ( sec. 1578, Revised Administrative Code; Sarasola vs. Trinidad, 40 Phil., 252). In the case of Lim Co Chui vs. Posadas (47 Phil., 461), this court had occassion to demonstrate trenchment adherence to this policy of the law. It held that "the fact that on account of riots directed against the Chinese on October 18, 19, and 20, 1924, they were prevented from praying their internal revenue taxes on time and by mutual agreement closed their homes and stores and remained therein, does not authorize the Collector of Internal Revenue to extend the time prescribed for the payment of the taxes or to accept them without the additional penalty of twenty five per cent." (Syllabus, No. 3.) ". . . It is of the utmost importance," said the Supreme Court of the United States, ". . . that the modes adopted to enforce the taxes levied should be interfered with as little as possible. Any delay in the proceedings of the officers, upon whom the duty is developed of collecting the taxes, may derange the operations of government, and thereby, cause serious detriment to the public." (Dows vs. Chicago, 11 Wall., 108; 20 Law. ed., 65, 66; Churchill and Tait vs. Rafferty, 32 Phil., 580.) It results that the estate which plaintiff represents has been delinquent in the payment of inheritance tax and, therefore, liable for the payment of interest and surcharge provided by law in such cases. The delinquency in payment occurred on March 10, 1924, the date when Moore became trustee. The interest due should be computed from that date and it is error on the part of the defendant to compute it one month later. The provisions cases is mandatory (see and cf. Lim Co Chui vs. Posadas, supra), and neither the Collector

of Internal Revenuen or this court may remit or decrease such interest, no matter how heavily it may burden the taxpayer. To the tax and interest due and unpaid within ten days after the date of notice and demand thereof by the Collector of Internal Revenue, a surcharge of twenty-five per centum should be added (sec. 1544, subsec. (b), par. 2, Revised Administrative Code). Demand was made by the Deputy Collector of Internal Revenue upon Moore in a communiction dated October 16, 1931 (Exhibit 29). The date fixed for the payment of the tax and interest was November 30, 1931. November 30 being an official holiday, the tenth day fell on December 1, 1931. As the tax and interest due were not paid on that date, the estate became liable for the payment of the surcharge. In view of the foregoing, it becomes unnecessary for us to discuss the fifth error assigned by the plaintiff in his brief. We shall now compute the tax, together with the interest and surcharge due from the estate of Thomas Hanley inaccordance with the conclusions we have reached. At the time of his death, the deceased left real properties valued at P27,920 and personal properties worth P1,465, or a total of P29,385. Deducting from this amount the sum of P480.81, representing allowable deductions under secftion 1539 of the Revised Administrative Code, we have P28,904.19 as the net value of the estate subject to inheritance tax. The primary tax, according to section 1536, subsection (c), of the Revised Administrative Code, should be imposed at the rate of one per centum upon the first ten thousand pesos and two per centum upon the amount by which the share exceed thirty thousand pesos, plus an additional two hundred per centum. One per centum of ten thousand pesos is P100. Two per centum of P18,904.19 is P378.08. Adding to these two sums an additional two hundred per centum, or P965.16, we have as primary tax, correctly computed by the defendant, the sum of P1,434.24. To the primary tax thus computed should be added the sums collectible under section 1544 of the Revised Administrative Code. First should be added P1,465.31 which stands for interest at the rate of twelve per centum per annum from March 10, 1924, the date of delinquency, to September 15, 1932, the date of payment under protest, a period covering 8 years, 6 months and 5 days. To the tax and interest thus computed should be added the sum of P724.88, representing a surhcarge of 25 per cent on both the tax and interest, and also P10, the compromise sum fixed by the defendant (Exh. 29), giving a grand total of P3,634.43. As the plaintiff has already paid the sum of P2,052.74, only the sums of P1,581.69 is legally due from the estate. This last sum is P390.42 more than the amount demanded by the defendant in his counterclaim. But, as we cannot give the defendant more than what he claims, we must hold that the plaintiff is liable only in the sum of P1,191.27 the amount stated in the counterclaim. The judgment of the lower court is accordingly modified, with costs against the plaintiff in both instances. So ordered.

G.R. No. L-27745

October 18, 1977 In a letter, dated June 3, 1966, Judge Tan informed the Commissioner that the testate estate was worth about ten million (P10 million) pesos and that the estate and inheritance taxes due thereon were about P9.5 million. On June 11, 1966, the herein respondent Atty. Delia P. Medina (hereinafter referred to as "Atty. Medina"), representing herself as the attorney-in-fact of the herein respondents Camilo Eribal and Magdalena Abanto, filed with the probate court a motion praying that the executor of the estate be authority to give a monthly allowance to the voluntary heirs Abanto and Eribal from the month of May, 1966 until "the receipt of the recommended advance of inheritance of P100,000.00 each recommended by the Executor in his motion of June 6, 1966 and/or final distribution has been made to said heirs of their respective shares in the estate." This prayer was granted by the probate court in an order dated June 25, 1966 (subsequently clarified in an order dated August 11, 1966). On July 9, 1966, the Commissioner filed with the probate court a proof of claim for the sum "of P192,364.00 as income tax for 1965 and 1% monthly interest due from the d Elsie M. Gaches." On July 19, 1966, Judge Tan filed with the probate court a motion praying for authority to make the following additional advance payments (1) To Abanto and Eribal, P150,000.00; (2) To Bess Lauer, $75,000.00; (3) To Judge Tan as advance executor's fees, P50,000.00; and (4) To Attys. Medina and Bienvenido Tan, Jr., P75,000.00 each as advance attomey's fees. In this motion, Judge Tan claimed that the estate was very liquid and that "any claims whatsoever against the Estate and the Government shall be amply protected since over P7,000,000.00 worth of shares shall still remain to answer therefor (Sec. 1, Rule 90, Rules of Court)." The respondent Judge granted Judge Tan's prayer in an order dated July 23, 1966, In a letter, dated November 4, 1966, the Commissioner advised Judge Tan to Pay to the Bureau of Internal Revenue the sum of P1,398,436.30 as estate tax and P7,140,060.69 as inheritance tax, the investigation of his office having allegedly disclosed that the next value of the testate estate was P10,212,899.20. 1 Judge Tan disputed the correctness of the assessment in a letter sent to the Commissioner. On November 26, 1966, the Commissioner filed with the probate court a proof of claim for the death taxes stated in the assessment notice sent to Judge Tan. On the same date, the Commissioner also submitted to the probate court for its resolution a motion praying: (1) for the revocation of the court's orders dated June 25, July 6, July 23 and August 11, 1966 and all other orders granting the payment of advance inheritance, allowances and fees; (2) for the appointment of a co-administrator of the estate to represent the Government; and (3) for the non-disbursement of funds of the estate without prior notice to the Commissioner. Although the records do not disclose that the probate court specifically disposed of this motion, the said court, from its subsequent actuations, may be considered to have impliedly denied the Commissioner's prayers for the appointment of a co-administrator and the nonpayment of advance allowances and fees.

MISAEL P. VERA, as Commissioner of Internal Revenue, petitioner, vs. Hon. Judge PEDRO C. NAVARRO, in his capacity as Judge of the Court of First Instance of Pasig, Rizal (Branch V MAGDALENA ABANTO and CAMILO ERIBAL, as voluntary residual heirs of the Estate of the deceased ELSIE M. GACHES; DELIA P. MEDINA, as attorney-in-fact of said heirs; BIENVENIDO A. TAN, SR., as Executor of the Estate of ELSIE M. GACHES; PHILIPPINE NATIONAL BANK; PHILIPPINE BANKING CORPORATION; THE OVERSEAS BANK OF MANILA; and BANCO FILIPINO SAVINGS AND MORTGAGE BANK, respondents. CASTRO, C.J.:t.hqw This is a petition for certiorari, mandamus, prohibition and injunction filed by the herein petitioner Misael P. Vera, in his capacity as Commissioner of Internal Revenue (hereinafter referred to as "Commissioner"), against the Honorable Judge Pedro C. Navarro, in his capacity as Judge of the Court of First Instance of Pasig, Rizal (hereinafter referred to as "respondent Judge"), on account of three orders dated June 5, 8 and 9, 1967, which the latter issued in Special Proceedings No. 5249 entitled "In the Matter of the Testate Estate of Elsie M. Gaches Bienvenido Tan, Executor," which the Commissioner maintains were issued without or in excess of jurisdiction or with grave abuse of discretion. It appears that one Elsie M. Gaches died on March 9, 1966 without a child. The deceased, however, left a last will and testament in which she made the following relevant disposition of her estate, to wit: +.wph!1 3. After payment of my just debts and funeral expenses I intact that the balance of my property, both real and personal in the Philippines, he distributed as follows: +.wph!1 'a) to my driver, PACITO TROCIO Ten Thousand Pesos (P10,000.00); b) to my lavandero, VICENTE JERODIAS One Thousand Pesos (P1,000.00); c) to my gardener, CRISANTO SALIPOT, JR. Five Hundred Pesos (P500.00); d) the balance of my estate in the Philippines shall then be divided in half; One-half (1/2) to be given to CAMILO ERIBAL and the other half to MISS MAGDALENA ABANTO; e) to MISS CONSUELO L. TAN My office table and chair now in the library of my house, and one of the carpets in my house to be selected by her;' 4. All my property in the United States consisting of furs, jewelry and stocks I leave to my sister BESS LAUER widow, and at present a resident of San Francisco, California. On March 11, 1966, the herein respondent Judge Bienvenido Tan, Sr. (hereinafter referred to as "Judge Tan") filed with the Court of First instance of Pasig, Rizal a petition for the probate of the aforesaid will On Aped 21, Judge Tan was appointed as executor of the testate estate of Elsie M. Gaches without a bond.

On January 19, 1967, the probate court authorized the conversion of the amount of P75,000.00 previously ruled to be paid to Atty. Medina as advance attomey's fees in its order of July 23, 1966 into allowances for Eribal and Abanto. On April 14, 1967, with the Probate court's approval, Judge Tan paid to the Bureau of Internal Revenue the amount of ?185,286.93 as estate tax and, on April 24, 1967, the amount of P1,055,776.00 as inheritance tax. These payments were based on a tax return filed by Atty. Medina on March 8, 1967 with the Bureau of Internal Revenue. On June 3, 1967, Judge Tan submitted to the probate court for approval a final accounting and project of partition of the testate estate. Acting thereon, the respondent Judge issued an order, dated June 5, 1967, for the partial distribution of the estate as follows: +.wph!1 Submitted for resolution of this Court is the Amended Final Accounting and Project of Partition dated May 27, 1967, presented by The executor. Atty. Paredes manifested that he has no objection to the approval thereof provided that certain items enumerated therein be corrected or modified, as follows: the amount of shares in the Lepanto consolidated Mining Co. should be 6,105,429 instead of 6,015,429, as reported; the amount of P11,537.60 reported as expenses made on January 30, 1967 should be cancelled or excluded . . . and that the time appearing as expenses made on May 10, 1967 payable to Apolonio manifastation illegal should be only P114,000.00 instead of P135,000.00 . . . which manifestations were also adopted by Atty. Virgilio Saldajeno of the Bureau of Internal Revenue, and in addition, he objected in principle to the Executor Fees and to the Attorney's Fees as excessive but left the matter to the discretion of the Court. Considering, further, the manifestations of Atty. Saidajeno that him has no objection to the partial distribution of the estate as long as it an he shown that the rights and interests of the government can be full protected, and it appearing from the subsequent manifestation of Atty. Paredes, counsel for the heirs, that sufficient assets with a nutrient market value of at least P8,000,000.00 will be left to the estate even if a partial distribution in the amount of P3,000,000.00 is made for which reason the rights of the government to collect whatever deficiency, taxes, if any may be asses it may be assessed in the future the heirs have already paid in good faith even ahead of its due dates transfer taxes in the total amount of P1,241,062.93, the Amended Final Accounting and Project of Partition dated May 27, 1967 may be approved, subject Lo this following, terms and conditions: 1. The Executor is hereby discharged from any and all responsibilities that lie has pertaining to the estate; 2. The voluntary heirs Magdalena Abanto and Camilo Eribal shill be responsible for all taxes of any nature whatsoever which may be due the government arising out of the transaction of the properties ol' the estate and the environment can, if it so desires, register its tax lien in the remaining assets after a partial distribution of the estate; 3. Bess Lauer, sister and heir of the deceased shall be fully for, all United States taxes pertaining to her share in the estate.

WHEREFORE, subject to the above terms and conditions, entitled Final Accounting and Project of Partition dated May 27, 1967 submitted by the Executor. as modified in the, manifestation of Atty. Paredes and Saidajeno, is hereby approved. 1. Pacita Trocio P10,000.00 2. To Vicente Jerodias 1,000.00 3. To Vicente Crisanto salipot, Jr. 500.00 4. To Magdalena Abanto and Camilo Eribal, share and share alike thru their attorney-in-fact Delia P. Medina, cash in the amont of 2,330.00 5. To Judge Bienvenido A. Tan, Sr. 120,000.00 6. To Atty. Bienvenido A. Tan, Jr. 150,000.00 The aforesaid amount is hereby ordered to be taken from the funds of the estate deposited with the Philippine National bank. As to the other properties remaining after this partial distribution, consisting of the following: A. BANK DEPOSITS: 1. Philippine Banking Corporation 559,147.41 2. Philippine National Bank 238,5000.00 3. Overseas Bank of Manila 700,000.00 4. Banco Filipino Savings & Mortgage Bank 581.00 5. Refund from expenses 32,537.60 B. HOUSE AND LOT LOCATED AT NO. TAMARIND ROAD, FORBES PARK, MAKATI, RIZAL; C. SHARES OF STOCK IN THE FOLLOWING: 1. Lepanto Consolidated Mining Co. 1,105,429 shares 2. San Miguel Corp. 16,692 shares (common) 3. San Miguel Corp. 500 shares (preferred) 4. Central Azucarera del Pilar 17,755 shares 5. Manufacturas Textile Industriales de Filipinas, Inc. 10,368 shares 6. Consolidated Mines, Inc. 85,858 shares 7. Mayon Metal Corporation 50

5,000 shares 8. Soliangco & Co Inc. 25 shares 9. San Juan Heights 5 shares 10. Metropolitan Insurance Co. 443 shares 11. Realty Investment Inc. 652 shares (10 shares, management & 642 common) The same shall be turned over and delivered to the attorney-in-fact of the voluntary heirs. Atty. Delia P. Medina, to be held by her to answer for whatever deficiency estate and inheritance taxes may still be due from the estate and the heirs in favor of the government. SO ORDERED. Pasig, Rizal, June 5,1967.+.wph!1 (Sgd.) PEDRO C. NAVARRO+.wph!1 Judge On the same day (that is, June 5, 1967), the Commissioner, having been informed in advance about the foregoing order by certain undisclosed sources, issued warrants of garnishment against the funds of the estate deposited with the Philippine National Manial, the overseas Bank of Manila, and the Philippine Banking Corporation, on the strength of sections 315-330 of the National Internal Revenue Code. On June 7, 1967, Atty. Medina filed in the probate court a petition for the discharge of the writs of punishment issued by the commissioner. On June 8, 1967, the respondent Judge issued an order lifting the wants in question. On June 9, 1967, the Philippine National Bank filed a motion in the probate court praying that it be authority to deposit with the said court the money in its hands in view of the conflicting claims of the parties over the funds in dispute. On the same day (that is, June 9, 1967), the respondent Judge issued an order denying the said motion and threatening the bank officials who refuse to implement its orders of June 5 and 8, 1967 with contempt. Atty. Medina was consequently able to withdraw the sum of P2,330,000.00 from the PNB. A copy of this order of June 9, 1967 as well as the orders of June 5 and 8, 1967 were received by the Commissioner on June 13, 1967. On June 16, 1967, the Commissioner filed a motion for reconsideration (supplemented on June 22, 1967) of the orders of the probate court dated June 5, 8 and 9, 1967. On July 6, 1967, however, the Commissioner, on the belief that the probate court's resolution on its motion was not legally necessary, filed with this Court the instant petition for certiorari, mandamus, prohibition and injunction against the aforesaid orders of the respondent Judge. The petition at bar is based on the following propositions: (1) That the distributive shares of an heir can only be paid after full payment of the death taxes. As this case subsequently progressed before this Court, the position of the Commissioner would seem to be that the deficiency income taxes due and payable during the lifetime of the deceased should also be paid first.

(2) While partial distribution of the estate of a deceased may allowed, a bond must be filed by the distributees to secure the payment of the transfer taxes. Subsequently, however, the Commissioner changed his position, stating that such distribute may be made so long as the payment of the taxes due the government is "provided for," citing section 1, rule go of the Rules of Court in relation to sections 95 (c), 97, 103, 106 and 107 (c) the National lnternal Revenue Code. (3) That the executor of an estate cannot be discharged without the payment of estate and inheritance taxes. The Commissioner later modified his stand on this ProPosition in line with the view that it is sufficient if the payment of the said taxes is "Provided for.,, (4) That the delivery of properties of the estate to a stranger [that is, to the voluntary heirs herein] is not sanctioned by law. Later, as the case at bar Progressed, and in view of a compromise offer made by the respondents Abanto and Eribal to pay the taxes being claimed by the Bureau of Internal Revenue, the Commissioner advanced the view that this proposition is already moot and academic. (5) That the respondent Judge has no authority to quash or dissolve writs of garnishment issued by the Commissioner. Subsequently, however, the Commissioner reversed his stand on this point and stated that the probate court may so dissolve said writs of punishment as the assets in question were then in custodia legis, citing Collector vs. Vda. de Codeniera L-9675, Sept. 28, 1957. Taking stock of the Commissioner's complaint that the disputed orders Were issued without or in excess of jurisdiction or with grave abuse of discretion, the herein respondents Atty. Medina and Judge Tan put up a number of factual and legal arguments, the material ones of which may be stated, in sum, as follows: (1) The Commissioner's notice of assessment, dated November 10, 966, was based on wrong premises and valuation of the assets in question; in fact, the Commissioner had agreed during the pretrial conference in the probate court to reconsider certain items therein; (2) The allowance granted to Abanto and Eribal were taken solely from the income of the estate, a fact admitted by Atty. Saldajeno of the Bureau of Internal Revenue; it is claimed that in 1965 the estate had an income of P41 1,000.00 and over P750,000.00 in 1966, which could more than cover the questioned allowances; (3) Eribal and Abanto are willing and bound themselves to assume the responsibility for the payment of the taxes due against the estate except for the properties located in the United States which should be charged against Bess Lauer; (4) The Commissioner does not object to the partition of the estate in question provided that enough assets are left to pay the taxes against the estate; (5) The estate has sufficient assets with which to pay the taxes being claimed by the government; (6) There was nothing unusual in the institution of Abanto and Eribal as residual heirs of the deceased; Abanto was the testator's special nurse, companion, secretary and cook from 1945 until Elsie M. Gaches death in March, 1966; Eribal, on the other hand, was the deceased's cook, caretaker, companion and driver since 1929;

(7) The grant of allowances was never contested below and cannot now be raised in the-instant proceedings; (8) Adequate safeguards were specified in the probate court's order of June 5, 1967 to cover the tax claims; and (9) There had been no full distribution of the estate in question without payment of the transfer taxes since the said taxes are being disputed by the heirs. In a reply filed on September 7, 1967, the Commissioner stated that he had issued a revised assessment dated August 24, 1967 and that, furthermore, there were due from the estate deficiency income taxes for the years 1961 to 1965 in the total sum of P1,182,296.16, for which reason the estate should not be ordered distributed until the same is fully satisfied. In a rejoinder, Judge Tan claimed that the August 24, 1967 assessment could still be reduced considerably. The contents of the mentioned revised assessment which was addressed to Atty. Medina are, inter alia, as follows: +.wph!1 Madam: ... I have the honor to advise that in a reinvestigation conducted by this Office, for transfer tax purposes, it was ascertained that she left real and personal properties in the sums of P377,912.50 and P5,963,822.31 respectively, or a gross estate of P9,341,734.81. The amounts of P193,892.38, P462,022.83 and Pl,226,783.53, representing accrued household and medical expenses, funeral expenses and income taxes (1961-1965) payable, respectively, or a total of P1,882,198.74, were allowed as deductions resulting in a net taxable estate in,the sum of P7,459.536.07 subject to estate and inheritance taxes. In view thereof, there are hereby further assessed the sums of P891,673.68 and P4,353,972.87 as deficiency estate and inheritance taxes and penalty still due on the transmission of the decedent's estate, after, crediting the sums of P185,286.73 and P1,055,776.00, which were paid on April 4, 1967 and April 24, 1967, details of which are shown hereunder: Estate tax Pl,076.960.41 Less: Amount Paid 185,286.7 Total P891,673.69 Inheritance tax 5,448.87 Corporation CPA Certificate 300.00 Total P5,409,748.87 Less Amount Paid 1,055,776.00 Deficiency Inheritance Tax & Penalty P4,353,972.87 xxx xxx xxx

The deadlines for the payment of the aforementioned transfer taxes without penalty were December 9, 1967 for the estate tax and March 9, 1968 for the inherit tax. On Sepember 9, 1967, Atty. Medina riled with this Court a pleading captioned "Compliance and Offer of Compromise to Terminate this Case" in which she stated the following:+.wph!1 xxx xxx xxx 4. Although respondents voluntary heirs intend to assail and question the correctness of said assessment only insofar as the same has disallowed the deductions claimed by them for personal services rendered by various persons in the total sum of P366,800.00, foregoing thereby other possible objections to the other items just so this case can be earlier disposed of, said repondents, nevertheless, are willing to pay even before these due dates the entire amount-specified in said assessment, but under protest insofar as the same has disallowance is concerned, in order to already terminate and dispose of this case before this Honorable Court. To pay the taxes in question, Atty. Medina prayed in her offer of that she and Abanto and Eribal be authorize to make use of the funds of the estate on deposit with the Philippine National (P238,500.00), the Banking Corporation (P559,147.41), the Banco Filipino savings and Mortgage Bank (P581.00), and the Bank of Manila (P700,000.00), and to gradually dispose of and sell the shares of stock representing of the delegate with an estimated market value of P2,154,026.36. Also included among the assets for which authority to sell was being procured in the said offer of were 2,442,000 Lepanto Consolidated Co. which Abanto and Eribal with the probate court niether this Court issued a pre injunction in the case at bar on july 10, 1967 ordering, among others, Atty. Medina, Abanto and Eribal to restore to the court a quo the amount of P2,330,000.00 withdrawn from the Philippine National Bank pursuant to the questioned orders of the probate court, and every other money or property revived by them by of said questioned orders. The mentioned Lepanto shares had then an estimated market value of P2,588,520.00. It should bear mention, at this point, that the money withdrawn from the Philippine National Bank was not returned by Atty. Medina, Abanto or Eribal to the probate court, these respondents having prayed this Court that the deposit of the mentioned stocks be as full compliance by them with the writ of pre injunction issued by this Court. On September 19, 1967, this Court issued a resolution requiring the Commissioner to submit a memorandum on how he arrived at his original assessment of more than ?8.83 million and the revised assessment of only about ?6.48 million, showing a reduced difference of more than P2 million. The Commissioner submitted to this Court the required memorandum on May 25, 1968, the important items and figures described in which may be summed up comparatively as follows: +.wph!1 ESTATE OF ELSIER GACHES ASSETS ORIGINAL REVISED

ASSESSMENT ASSESSMENT Cash in bank Philippine Pl,172.635.62 P1,172,635.62 Foreign (US$ P3.95) 559,335.00 559,335.00 CarsLincoln Pl8,000.00 Volkswagen 7,000.00 (Vauxhalll) 25.000.00 12,000.00 Furnitures 30,000.00 30,000.00 Shares of stock 7,923,576.23 7,189,851.69 Forbes Park lot (at P144.73/sq. in.) 383,202.35 (at P97.50/sq.m.) 258,862.50 House ------- P111,850.00 Swimming Pool 5,000.00 Fence -------- 2,200.00 119,050.00 119,050.00 TOTAL ASSETS P10,212,899.20 P9,341,734.81 +.wph!1 LIABILITIES AND DEDUCTIONS Estimated Income Tax Payable (1965) P192,364.00 (1961-1965) P1,882,783.53 Aaccrued medical expenses 13,000.00) Funeral expenses 73,320.00) 193,392.38 Judicial exercises 331,026.40 462,022.83 TOTAL LIABS. & DEDUCTIONS P610,190.60 P1,882,198.74 TRANSFER TAXES PAYABLE Gross Estate P10,212,899.20 P9,341,734.81

Less: Laibs. & Deductions 610,190.60 1,882,198.74 Net Taxable Estate P9,602,708.60 P7,459,536.07 Less Estate'tax Due P 1,398,436.30 Pl,076,960.41 Estate Subj. to Inh. Tax P 8,204,272.30 P6,382,575.66 Distribution of Hereditary Estate C. Salipot, Jr. P 500.00 P 500.00 V. Jerodias 1,000.00 1,000.00 P. Trocio 10,000.00 10,000.00 Bess Lauer 672,305.00 672,305.00 M. Abanto 3,760,233.65 2,849,385.33 C. Eribal 3,760,233.65 2,849,385.33 Inheritance Tax Due C. Salipot, Jr. P10.00 P 10.00 V. Jerodias 20.00 20.00 P. Trocio 600.00 600.00 Bess Lauer 192,186.75 192,186.75 M. Abanto 3,473,621.97 2,608,316.06 C. Eribal 3,473,621.97 2,698,316.06 Total inheritance Tax due P 7,140,060.69 P5,409,448.87 Add: Estate Tax Due P 1,398,436.30 Pl,076,960.41 TOTAL TRANSFER

TAXES DUE P8,538,496.99 P6,486,409.28 On November 17, 1967, this Court authorized the herein respondents Abanto, Eribal and Atty. Medina to withdraw funds of the estate deposited with the Philippine Banking Corporation (P191,673,68) and the Overseas Bank of Manila (P700,000.00) in the form of cashier's checks payable to the Commissioner for the payment of the estate tax still unpaid under the terms of the revised assessment. On November 23, 1967, the Solicitor General filed with this court a manifestation expressing his conformity, in behalf of the Commissioner, to the offer of compromise dated September 9, 1967 made by Atty. Medina, subject to certain conditions, such as, that the cash in the banks of the estate as well as the proceeds to be realized from the sale of the shares of stock should be turned over to the Commissioner for the payment of the taxes due against the estate and the heirs thereof. This manifestation was first opposed by the Acting Commissioner of Internal Revenue on the ground that the Commissioner (who was then abroad) had actually requested the Solicitor General not to agree to the mentioned offer of compromise; however, the Solicitor General subsequently said that the Commissioner's conformity was given to him orally. On December 5, 1967, Atty. Medina filed with this Court a petition to declare the Overseas Bank of Manila in contempt for allowing the renewal, without court authority, of the time deposit of P700,000.00 with the said bank for another year. In a supplemental motion filed on December 8, 1967, Atty. Medina also prayed that the said bank and those responsible for extending the maturity date of said time deposit be held liable for the payment of whatever surcharges, interest and penalties may be imposed as a consequence of the late payment of the balance of the estate tax assessed against the estate. It appears that the time deposit in question was held by the said bank under two certificates, one for P100,000.00 to mature on May 12, 1967, and the other, for P600,000.00 to mature on June 16, 1967. Judge Tan, however, extended the maturity date of said time deposits to May 12, 1968. The certificates of time deposit covering the said funds had been endorsed in favor of the Commissioner in payment of the unpaid balance of the estate then December 7, 1967) amounted to P700,000.00. Commmoner, however. mentioned the respondents End an Abanto through their counsel that his Office - +.wph!1 ... regrets that the same cannot be accepted as payment of the deficiency estate tax in this case since they cannot, at present or on before December 9, 1967, be. converted into cash. However, we are holding said certificates of time deposit for possible application in payment of the unpaid balance of the deficiency estate tax in this case as soon as said certificates can be converted into cash. It will be understood in this connection that if the balance of the deficiency estate tax in this case is not paid on or before December 9, 1967, the same shall be subject to the interest on deficiency, 5% surcharge and 1% monthly interest for deliquency. According to Judge Tan, he caused the extension of the maturity date of the said deposit but that in doing so he acted in good faith

in that the testate estate then had ample funds and assets and the said time deposit earned a higher interest than a savings deposit; that he needed no specific court authority for the purpose; and that he had a gentleman's agreement with the officials of the bank that said deposit could be withdrawn in advance, such being the custom in banking circles. The Overseas Bank of Manila, on the other hand, in answer to Atty. Medina's mentioned petition, claimed that the deposit in question was renewed before the bank received any letter demanding its release. In view of this impasse and the fast approaching deadline for the payment of the estate tax, Atty. Medina requested the Commissioner to credit P700,000.00 to the amount previously paid as inheritance tax; but, apparently, this request was not honored by the Commissioner. On January 26, 1968, Atty. Medina filed with this Court a manifestation in which she alleged that even as the proposed joint manifestation between the parties which was supposed to describe the matters agreed upon between them and the Commissioner during a conference hearing held on January 24, 1968 had not yet been shown to her, she already wished to express her principals, conformity to pay, but under protest, the deficiency estate tax of P700,000.00 plus surcharges, interest and penalties due thereon and the inheritance tax in the amount of P4,161,986.12 appearing, to Atty. Medina, in the mentioned assessment notice dated August 24, 1967; that she was likewise agreeable to pay, under protest however, the income taxes for 1961 to 1965 against the estate in the demand letter of the Commissioner dated August 29, 1967 in the amount of P1,175,974.51 plus whatever interest, surcharges and penalties were due'thereon; and that she was also agreeable to being authority to sell such properties of the estate as may be necessary for the mentioned On the following day, however, that is, January 27, 1968, the herein respondents Eribal, Abanto and Atty. Medina, on the one hand, and the Commissioner and the Solicitor General, on the other, filed with this Court a joint manifestation which, inter alia, reads as follows:+.wph!1 l. That the respondent taxpayers will pay the estate, inheritance and deficiency income taxes covered by existing assessments; which are due and collectible from the estate of Elsie M. Gaches, including the delinquency penaltiesthereon, but without prejudice to any right of the taxpayer to contest or protest the said assessments at the proper time and in the proper court; 2. That the respondents Delia P. Medina, Magdalena Abanto and Camilo Eribal shall submit to this Honorable Court an inventory of all the properties and assets of the estate ... ; 3. That is order to generate the necessary funds for the purpose of paying the said taxes and delinquency penalties, so much of the assets of the estate ... shall be sold ... 4. That respondent Delia P. Medina, . and. Mr. Rodolfo U. Arrano Supervising Revenue Examiner of the Bureau of Internal Revenue, ... are hereby proposed to be constituted as the authorized agents of the parties herein to effect the sale ...; 5. That the said agents shall be direct to sell the assets of the estate ... ; 6. That all negotiations and transactions for the sale of the assets of the estate shall be made jointly by the authorized agents ... ; 7. That no disposition of any property or assets of the estate shall be effected except for the foregoing purpose;

8. That this case shall not be terminated until ... the above mentioned ... taxes and delinquency penalties are fully paid; and liquidated; 9. That the parties pray for the approval of the foregoing propositions. On February 6, 1968, this Court, acting on the abovement manifestation of Atty. Medina and the at manifestation of the Parties, issued a resolution authorizing Atty. Medina to pay, amt, under at, the transfer and in taxes collectible from the estate, including the accopanying delinquency penalties. A Medina was given the necessary authority to collect and receive funds payable to the estate in question and to sell such a thereof as may be necessary. On February 10, 1968, a motion to declare in contempt Lepanto Consolidated Mining Co. was filed by Atty. Medina on t ground that the said corporation refused to tum over to dividends payable to the testate estate unless the Commissioner first lifted his garnishment order on said dividends. On February 16, 1968, this Court issued a resolution suspendi the writs to preliminary junction issued by this Court on July and 17, 1967 and all warrants of garnishment issued by the Commissioner relative to the estate of Elsie M. Gaches, said suspension to be effective until such time that Atty. Medina, End and Abanto shall save fully paid the transfer and income tax including the penalties thereon, covered by existing assessment Atty. Medina thereafter submitted to this Court performance reports on her activities relative to the authority given her. On March 9, 1968, Atty. Medina filed with this Court manifestation stating that she received a demand letter dated March 9, 1968 from the Commissioner for the payment of the following 1'756 900- 00 as estate tax, including penalties; (2) P192,186.75 as inheritance tax corresponding to the share of Bess Lauer; and (3) P451.435.91 as balance of the income tax for the years 1961 to 1965 Atty. Medina claimed the said demands to be erroneous for the following reasons' (1) as to the estate tax, the time deposit in the Overseas Bank of Manila of P700,000.00 plus interest earned of P60,000.00 as of March 9, 1968 would more than cover the said tax and the certificates of time deposits were already endorsed to the Cmmissioner on December 6, 1967; (2) as to the inheritance tax, she (that is. he principals Abanto and Eribal) was not responsible therefore, as the resolution of this Court dated February 6, 1968 required her "to pay only the estate, inheritance and in income taxes, under protest covered by existing assessments, against the Estate, and against the heirs Magdalena Abanto and Camilo Eribal;" in a supplemental motion, Atty. medina further argued that Bess Lauer alone was solely responsible for the payment of the inheritance tax on her share and not the decedent's estate in the Philippines, and that the properties of the testate estate in the United States of America which consisted of shares of stock and deposits in banks, being personal properties, were to be excluded from the computation of the gross estate of the deceased in the Philippines and the computation of the Philippine estate and inheritance taxes because, under philippine law, the sites of those properties is the place where they are located, citing Article 16 of the new Civil Code which she she argued, abandoned the doctrine of mobilia sequuntur personal embodied in Article 19 of the old Civil Code; and (3) as to tile

deficiency income tax for 1961-1965, she had paid the same in the total amount of P1,182,296.16 as of March 9, 1968, which was the amount stated in the assessment letter of the Commissioner cited August 9, 1967. According to Atty. Medina, the payment of the taxes was made in the following manner: on February 27, she paid a total of ?838,518.62 as follows: the income tax (P715,619.46) in full; interest (P106,855.29) in full, compromise penalty (P5.,000.00) in full and surcharges P1,052.07) in. part only; and, on March 8, 1968. the amount of P343,773.54 as payment of the remaining surcharges, Consequently, she argued the the surcharges and interest, if any were still due, could legally, accrue only from September 29, 1967 up to February 27, 1968 and only on the tax proper. On April 16, 1968, a counter-manifestation was filed with this court by the Commissiorner to the above-metioned manifestation according to the Commissioner, (that is under existing assessments that is under the letter of demand of August 24 and 29, 1967) Estate tax (BalanceP700,000.00 (x) Inheritance tax 4,353,927.87 (xx) Total Estate and Inheritance taxes P5,053,927.87 Deficiency income taxes for 1961 to 1965 P1,175,974.51 (xxx) Delinquency penalties for late filing of income tax return and late payment of income tax for 1965 per return filed6,321.65 (xxxx) Total deficiency income taxes for 1961 to 1965 and the delinquency penalties of income tax 1965 per return P1,182,296.16 GRAND TOTAL P6,236,269.03 +.wph!1 (x) pIus 5% surcharge and 1% monthly interest thereon from December 9, 1967 until full payment thereof; (xx) plus 5% surcharge and 1%, monthly interest thereon, if the same is not paid in full on or before March 9, 1968; (xxx) plus 5% surcharge and 1% monthly interest thereon from August 29, 1967 until full payment thereof; and (xxxx) pIus additional 1% monthly interest from September 29, 1967 until full payment thereof. Further, the Commissioner alleged that after taking into consideration the payments made by Atty. Medina, the balances as of March 9, 1968 of the death and income taxes still compatible were as follows: Estate Tax Balance of the estate tax P700,000.00 5%, surcharge

35,000.00 1% monthly interest from 12/9/67 to 3/9/68 21,000.00 Total P 756,000.00 plus additional 1% monthly interest from March 9, 1968 until full payment thereof. Inheritance Tax Inheritance tax due and collectible per letter of demand dated August 24, 1967 (Annex "A") P4,353,972.87 Less: Payments of inheritance Tax on March 1 and March 6, 1968 per O.R. 2519938 and 2520026, respectively 4,161,986.12 Inheritance taxs due and collectible P191,986.75 plus 5% surcharge and 1% monthly interest thereon from March 8, 1968 until full payment. Deficiency Income Taxes Deficiency income taxes from 1961 to 1965 per letter of demand dated August 29, 1967 plus 5% surcharge and 1% monthly interest up to March 1968 P1,289,818.17 Less: Payments made on February 27, 1968 and March 8, 1968 under O.R. 207001 and 207002 P1,182,296.16 Deficiency income taxes still due and collectivele P107,522.01 plus additional 1% monthly interest thereon from March 8, 1968 until full payment. The Commissioner also explained that the i taxes paid by Atty. Medina in the total amount of P1,182,296.16 "included only the 1/2% monthly interest On deficiency with respect to the deficiency income taxes for 1961 to 1965 and the 1% monthly Interest for delinquency up to September 29, 1967 with respect to the income tax for 1965 which was paid per return, Out did not include the 5% surcharge and 1% monthly interest for delinquency from August 29, 1967 until full Payment with respect to the income tax for the 1965 return." The Commissioner consequently prayed that Atty. Medina be ordered to pay: +.wph!1 (1) The amount of P756,000.00 as balance of the estate tax, 5% surcharge and 1% monthly interest from December 9, 1967 to March 9, 1968, plus additional 1% monthly interest from March 9, 1968 until full payment; (2) The amount of P191,986.75 as balance of the inheritance tax, plus 5% surcharge and 1% monthly interest thereon from March 9, 1968 until full payment; and (3) The amount of P107,522.01 as balance of the deficiency income taxes, 5% surcharge and 1% monthly interest for delinquency up to M arch 8, 1968, plus additional 1% monthly interest thereon from March 8, 1968 until full payment ... ;

On August 23, 1968, Atty. Medina filed a manifestation with this Court adverting to the refusal of the Overseas Bank of Manila to permit the withdrawal of the time deposit of the testate estate in the said bank in spite of the fact that the extended maturity date of said deposit had may expired. Atty. Medina payed that the bank Ida as one boss able the deposit of the funds of is well as the who made i of the estate of Elsie M. Gaches with the said bank be declared in contempt. on September 18, 1968, the Central Bank Of the Philippines filed with this Court a comment on the urgent manifestation of Atty. Medina concerning the deposit in question. The Central Bank, which according to the Overseas Bank of Manila had restrained it from paying its time deposits to the bank's depositors, averred that this Court's resolution of November 17, 1967 merely authorized Atty. Medina to withdraw the deposit from the said bank and did not order the bank to pay the time deposit in question. Moreover, according to the Central Bank, the nonpayment of the said deposit was not wilful as the Overseas Bank of Manila was in a state of insolvency. A comment was filed on October 11 1968 by the Overseas Bank of Manila stating that the majority stockholders of the bank filed a petition against the Central Bank for certiorari. prohibition and mandamus in this Court in L-29352 entitled "Emerito M. Ramos, et at. vs. Central Bank;" 2 that the time deposit in question was an unrecorded transaction; and that the Central Bank prohibited the bank to do business due to its distressed financial condition, for which reason it could not give preference of the payment of the said deposit as it might prejudice other creditors of the bank. On November 11, 19681, Atty. Medina filed with this Court a M. motion ,- reiterating a previous one to allow the payment of the announced of P6.000.00 to Atty. Manuel M. Paredes whom she and tile other herein respondent herein Abanto and Eribal hired as counsel in collection with the settlement proceedings of Elsie M. Gaches estate. On March 29, 1969. pursuant to a resolution of this Court, Atty. Paredes ssubmitted knitted a memorandum on the nature and extent for the legal services he had rendered to tile herein respondents Atty. Medina Eribal and Abanto. On June 26, 1971, Abanto and Eribal Jointly wrote the Chief Justice, expressing willingness and agreement to pay the amount due tile government as taxes against the estate and the heirs thereof, however, the two respondents herein subsequently retracted their statement in the said letter, claiming they signed and sent the same without knowing and understanding its effect and consequences. A perusal in depth of the facts of the instant case discloses quite plainly that the respondent Judge committed a grave abuse of discretion amounting to lack of jurisdiction in issuing its orders of June 5, 8 and 9, 1967. Section 103 of the National Internal Revenue Code (hereinafter referred to as "Tax Code") unequivocally provides that "No judge shall authorize the executor or judicial administrator to deliver a distributive share to any party interested in the estate unless it shall appear that the estate tax has been paid." 3 The aforesaid orders of the respondent Judge are clearly in diametric opposition to the mentioned Section 103 of the Tax Code and, consequently, the same cannot merit approval of this Court.

While this Court thus holds that the questioned orders are not in accordance with statutory requirements, the fundamental question raised herein regarding the objectionable character of the probate court's mentioned orders has opened other issues which, not alone their importance to jurisprudence, but the indispensability of forestalling needless delays when those issues are raised anew, have, perforce, persuaded this Court that their complete and final adjudication here and now is properly called for. Said issues may be specificaly framed as follows: (1) Should the herein respondent heirs be required to pay first the inheritance tax before the probate court may authorize the delivery of the hereditary share pertaining to each of them? (2) Are the respondent heirs herein who are citizens and residents of the Philippines liable for the payment of the Philippine inheritance tax corresponding to the hereditary share of another heir who is a citizen and resident of the United States of America. said share of the latter consisting of personal (cash deposits and, shares) properties located in the mentioned court (3) Does the assignment of a certificate of time deposit to the comissioner of Internal Revenue for the purpose of paying t I hereby the estate tax constitute payment of such tax? (4) Should the herein respondent heirs be held liable for the payment of surcharge and interest on the amount (P700,000.00) representing the face value of time deposit certificates assigned to the Commissioner which could not be converted into cash? Aside from the foregoing, there are also other incidental questions which are raised in the present recourse, viz., (5) What should be the liability of the respondents herein on the contempt charges respectively lodged against them? 6) What should be a reasonable fee for the counsel of the respondents Atty. Medina, Eribal and Abanto for professional services rendered In connection with the settlement of the estate of Elsie M. Gaches? 1. On the matter of the authority of a probate court to allow distribution of an estate prior to the complete Nuidation of the inheritance tax, the Tax Code apparently lacks any provision substantially Identical to the mentioned Section 103 thereof. There are provisions of the Tax Code, e.g., Section 104, which makes it the duty of registers of deeds not to register the transfer to any new owner of a hereditary estate unless payment of the death taxes sham be shown; Section 106, which imposes a similar obligation on business establishments; and Section 107, which penalizes the executor who delivers to an heir or devise, and the officers and employees of business establishments who transfer in their books to any new owner, any property forming part of a hereditary estate without the payment of the death taxes first being shown; but those provisions by themselves do not clearly establish that the purchase and object of the statute is to make the payment of the inheritance tax a pre-condition to an order for the distribution and delivery of the decedent's estate to the lawful heirs there. The cloud of vagueness in the statute, however, is not entirely unreachable. Section 1, Rule 90 of the Rules of Court erases this hiatus in the statute by providing thus: +.wph!1 Section 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 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 beard 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. Under the provisions Of the aforequoted Rule, the distribution of a decedent's assets may only be ordered under any of the following three circumstances, namely, (1) when the inheritance tax, among others, is paid; (2) who bond a suffered bond is given to meet the payment of the tax and all the other options of the nature enumerated in the above-cited provision; or (3) when the payment of the said tax and at the other obligations mentioned in the said Rule has been provided for one of these thru camar as the satisfaction of the when tax due from the festate is were present when the question orders were issued in the case at bar. Although the respondent Judo did make a condition in its order of June 5, 1967 that the distribution of the estate of Elsie M. Gaches (except the cash deposits of more than P2 million) shall be trusted to Atty. Medina for the payment of whatever taxes may be due to the government from the estate and the heirs them to, this Court cannot subscribe to the proposition that the payment of the tax due was thereby adequately provided for. In the first place, the order of June 5, l967 was, for all intents and , a complete distribution of the estate to the heirs for, the executor who is supposed to take care of the estate was absolutely discharged the attorney's fees for the of a lawyer who presumably acted as legal counsel for the estate in the court below were ordered paid as were also the fees for the executor's the cash funds of the estate were red paid to the cash and the non-cash (real property and shares of stock) properties were likewise ordered delivered to Atty. Medina whose participation in the said proceedings was in the capacity of an attorney-in-fact of the herein respondent Eribal and Abanto. In short, the probate court virtually withdrew its custodial jurisdiction over the estate which is the subject of settlement before it. In the second place the respondent Judge, in the distribution of the properties of the estate in question, relief solely upon the mere mandestation of the counsel for the heirs Eribal and Abanto that them were affiant of the estate with which to pay the taxes due to the government. There is no evidence on record that would show that the probate court ever made a serious attempt to de what the values of the different assets the correctness of that such properties shall be preserved for the satisfaction of those case In the third place that main of pesos taxes were being called by the Bureau of Inc. Revenue, the least reasonable thing that the probate court should have done was to require the heirs to deposit the amount of inheritance tax being claimed in a suitable institution or to authorize the sale of non-cash assets under the court's control and supervision.

The record is likewise bereft of any evidence to show that sufficient bond has been filed to meet this particular outstanding obligation. 2. The liability of the herein respondents Eribal and Abanto to pay the inheritance tax corresponding to the share of Bess Lauer in the inheritance must be negated, The inheritance tax is an imposition created by law on the privilege to receive property. 4 Consequently, the scope and subjects of this tax and other related matters in which it is involved must be traced and sought in the law itself. An analysis of our tax statutes supplies no sufficient indication that the inheritance tax, as a rule, was meant to be the joint and solidary liability of the heirs of a decedent. Section 95(c) of the Tax Code, in fact, indicates that the general presumption must be otherwise. The said subsection reads thus: +.wph!1 (c) xxx xxx xxx The inheritance tax imposed by Section 86 shall, in the absence of contrary disposition by the predecessor, be charged to the account of each beneficiary, in proportion to the value of the benefit received, and in accordance with the scale fixed for the class or group to which is pertains: Provided, That in cases where the heirs divide extrajudicially the property left to them by their predecessor or otherwise convey, sell, transfer, mortgage, or encumber the same without being the estate or inheritance taxes within the period prescribed in the preceding subsections (a) and (b), they shall be solidarity liable for the payment of the said taxes to the extent of the estate they have received. The statute's enumeration of the specific cases when the heirs may be held solidarity liable for the payment of the inheritance tax is, in the opinion of this Court, a clear indication that beyond those cases, the payment of the inheritance tax should be taken as'the individual responsibility, to the extent of the benefits received, of each heir. 3. And the effect of the indorsement of the time deposit certificates to the Commissioner, the same cannot be held to have extinguished the estate's liability for the estate tax. In the first place,in accepting the indorsement and delivery of the said certificates, the Commissioner expressly gave notice that his Office +.wph!1 ... Regrets that the same cannot be accepted as payment of the deficiency estate tax in this case may they cannot, at present or on or therefore December 9, 1967, be converted into cash. However, we are holding said certificates of time deposit for possible application in payment of the unpaid balance of the deficiency estate tax in this case ,is soon as said certificates can be converted into cash. ... In the second place, a time deposit certificate is a mercantile document and is essentially a promissory note. 5 By the express terms of Article 1249 of the Civil Code of the Philippines, the use of this medium to clear an obligation will "produce the effect of payment only when they have been cashed, or when through the fault of the creditor they have been impaired." From the records of the case at bar, the Commissioner as well as the herein respondents Atty. Medina, Eribal and Abanto spared no time trying to collect the value of said certificates from the Overseas Bank of Manila but

all to no avail. Consequently, the value of the said certificates (P700,000.00) should still be considered outstanding. 4. The estate of Elsie M. Gaches is likewise liable for the payment of the interest and surcharges on the said amount of P700.000.00 imposed under Section 101 (a) (1) and (c), respectively, of the Tax Code. 6 The Interest charge for 1% per month imposed under Section 101 (a) (1) of the Tax Code is essentially a commotion to the State for delay in the payment of the tax due thereto7 As for the accountant use by the tax payer of funds that nightday shall be in the government's funds. 8 As the indorsement and delivery of the mentioned time deposit certificates to the did not result in the payment of the estate tax (for which it was in the respondents estate is fluently liable for the interest charge imposed in the Tax Code. The estate cannot likewise be exempted from the payment of the 5% surcharge imposed by Section 101 (c) of the Tax Code. While there are cases in this jurisdiction holding that a surcharge shall not be visited upon a taxpayer whose failure to pay the tax on time is in good faith, 9 this element does not appear to be present in the case at bar. The Commissioner, as aforesaid, fully informed the respondents Atty. Medina, Eribal and Abanto of the condition to this acceptance of the said time deposit certificates. The Commissioner, in fact, advised them in the same letter that "It will be understood in this connection that if the balance of the deficiency estate tax in this case is not paid on or before December 9, 1967, the name shall be subject to the interest on deficiency, 5% surcharge and 1% monthly interest for deficiency." Moreover, Judge Tan himself, as executor of the estate of Elsie M. Gaches, specifically admitted that he was the one who caused the extension (and consolidation) of the maturity dates of the two time deposit certificates in question (one for P100,000.00 to mature on May 12, 1967 and the other for P600,000.00 to mature on June 16, 1967) to May 12, 1968, It will be worthwhile to mention also, in this connection, that when Atty. Medina applied to this Court for authorize to the amount of P700,000.00 from the Overseas Bank of Manila on September 9, 1967, the resolution of this Court dated November 17, 1967, approve her request authorized her to withdraw the said amount in the form of cashier's checks payable to the Commissioner. Apparently, because the Overseas Bank of Manila refused to issue such checks or to allow her to withdraw said amount in view of the extension of the nuturity date of the deposit in question, Atty. Medina thought that by simply assigning the time deposit certificates to the Commissioner, she would be deemed to have paid the estate's obligation in its corresponding amount. However, as aforesaid the Commissioner was also unable to convert said amount to cash and he gave announce to that effect to Atty. Medina. Since the refusal of the Overseas Bank of Manila to snow the withdrawal of the said deposit was then well-known to the parties, it saw to reas that the tentatives of the estate who stand to be benefited. therefrom, such as the respondents Eribal and Abanto, should have forthwith asked for authority to pay the from other funds of the estate. Atty. Medina was, in fact, given the authority by this Court to sell assets of the estate for the payment of the taxes due to the State, but she never tried to pay the equivalent amount of P700,000.00 in question from the proceeds

of the Wm she made afterwards. Moreover, it will also be noted that the respondents EAbal and Abanto, during the pendency of this case, had in their actual ion at least P2.3 million (the amount they were able to withdraw from the Philippine National Bank on account of the questioned orders) which they could have very well used for the payment of the estate tax. They, however, opted to put the same to other uses. 5. We now consider the several petitions for contempt riled in the case at bar, namely, (a) against the Philippine National Bank on account for allowing Atty. Medina to withdraw P2,330,000.00 in contravention of the writ of punishment issued by the Commissioner; (b) against the officer of the Overseas Bank of Manila for allowing the extension of the maturity date of the mentioned time deposit of P700,000.00 and for refusing to pay the same after the extended term expired; (c) against Judge Tan who renewed the maturity date of the said time deposits; (d) against the Lepanto Consolidated Mining Co. for refusing to turn over dividends payable to the estate of Elsie M. Gaches unless the Commissioner first lifted his punishment order; and (e) against the herein respondents Atty. Medina, Eribal and Abonto for citing shares of stock with the probate court instead of the cash amount of P2,330,000.00 which they withdrew from the renewed National Bank on account of the questioned orders of the probate court, contrary to the resolutions of this Court dated July 10 and 17, 1967. (a) The contempt charge against the officials of the Philippine National Bank is without merit, it appearing to the satisfaction of this Court that they excited reasonable efforts not to disobey the writ of garnishing issued by the Commissioner. Indeed, said officials merely acted in obedience to the order of the probate court which threatened them with contempt of court after they moved to be allowed to deposit with the said probate court the money of the of Elsie Gaches deposited with the said bank. The commssioner himself, through the Solicitor General, admitted later that its writ of garnishment cannot be superior to that of the probate court,s order as the estate in Question was then in custodia legis. (b) The contempt charges against the officials of the Overseas Bank of Manila likewise merit dismissal. In the case of the renewal of the term of the time deposits in question, the said extension was made by no less than the executor of the estate himself- The renewal of said term may be considered as purely an act of administration for the enhancement (due to the higher interest rates) of the value of the estate, and the officials of the bank cannot consequently be blamed or acting favorably on the executor's application. Judge Tan himself explained that he did what he did honest the belief that it would redound to the benefit of the estate on the account of the higher interest rate on time deposits. With reference, to the refuse of the bank's officials to allow the witldrawal of time deposit in question after the extended term expired on May 12, 1968, this Court takes notice of the fact, as stated in our decision in Ramos vs. Central Bank (L-293250, Oct. 4, 1971; 41 SCRA 565), that as early as November 20, 1967 the Central Bank required the Overseas Bank of Manila, in view of its distressed financial condition, to execute a voting trust agreement in order to bail it out through a change of management and the

promise of fresh funds to replenish the bank's financial portfolio. The Overseas Bank of Manila was not able to normalize its operations in spite of the voting trust agreement for, on July 31, 1968, it was excluded by the Central Bank from inter-bank clearing; on August 1, 1968, its operations were suspended; and on August 13, 1968, it was completely forbidden by the Central Bank to do business preparatory to its forcible liquidation. Under the circumstances, this Court is satisfied with the explanation that to allow Atty. Medina to withdraw the said time deposits after the extended term would have worked an undue prejudice to the other depositors and creditors of the bank. (c) The contempt charge against Judge Tan is also not meritorious. There is no sufficient and convincing evidence to show that he renewed the maturity date of the time deposits in question maliciously or to the prejudice of the interest of the estate. (d) The Lepanto Consolidated Mining Company is likewise entitled to exoneration from the contempt charge lodged against it. It is refusing to turn over to Atty. Medina stock dividends payable to the estate of Elsie M. Gaches, it is evident that the said corporation acted in good faith in view of the writ of garnishment issued to it by the Commissioner. Moreover, on February 16, 1968, this Court passed a resolution suspending temporarily the warrants of punishment issued by the Commissioner, and it does not appear that thereafter the turnover of the stock dividends to the estate was refused. (e) With reference to the charge for contempt against the respondents Atty. Medina, Eribal and Abanto, although admittedly the resolutions of this Court dated July 10 and 17, 1967 were not strictly complied with by the said respondents, it appears clearly that they immediately deposited with the probate court shares of stock with a fairly stable liquidity value of P2,588,520.00. In any case, the main objective of the instant petition is to assure the State that the assessed tax obligations shall be paid and, from the records, more than P2 million had already been paid to the State during the pendency of the instant proceeding, in this Court. 6. With reference to the attorney's fees to be paid to Atty. Manuel M. Paredes, this court is of the opinion, after a careful study of the statement of services rendered by said counsel to the respondents Eribal and Abanto which was submitted to this Court, that the amount of Fifty Thousand Pesos (P50,000.00) is fair and reasonable. The payment of this amount, however, is the personal liability of the said respondents Eribal and Abanto. and not that of the estate of Elsie M. Gaches, as the said counsel was hired by the said respondents to give legal aid to them in connection with the settlement of the various claims preferred in the probate court and in this Court. 7. The Court's intended adjudication of the main issue has been rendered academic by supervening events which dictate that the court refrain from issuing any further order relating thereto. On July 18, 1977 a "Manifestation and Compliance" was filed by the, respondent Delia P. Medina which states that a compromise payment of P700,000 as all estate tax, evidence by an official receipt (annex A of the Manifestation), was accepted and duly approved by Acting Commissioner of Internal Revenue Efren I. Plana (annex B of the same Manifestation), and that "with the said compromise payment of P700,000, all estate, inheritance and

deficiency income taxes . . . including pertinent delinquency penalties thereof have been fully paid and liquidated, aggregating to P7,929,498.55 ..." No objection thereto was interpored by any of this parties concerned despite due notice thereof. This was further supplemented by a communication, dated July 19, 1977, of Deputy Commissioner Conrado P. Diaz, informing the Register of Deeds of Pasig, Metro Manila, that the Gaches estate has already paid all the estate and inheritance taxes assessed against it, and that, consequently, the notice of tax then inscribed on the property and property rights of the estate can now be considered cancelled. With the full settlement of the tax claims, the requirements of the law have been fully met, and it has unnecessary for the Court to issue orders relative to the main issue. ACCORDINGLY, the respondent Delia P. Medina is to deliver the remaining assets of the estate to the voluntary heirs in the proportions adjudicated in the will and to submit a report of compliance. On the incidental issues, the Court renders judgment as for: (1) The amount of FIFTY THOUSAND (P50,000.00) PESOS is hereby awarded to Manuel M. Paredes as legal fee for his services, the same to be Paid by the respondent End will the estate of Abanto, now (2) The contempt charges against the officials of the Philippine National Bank and the Overseas Bank of Manila, Judge Bienvenido Tan, Sr., and Lepanto Consolidated Co. are hereby ordered dismissed; (3) The authority given to the respondent Delia P. Medina in the resolution of the court dated February 6, 1968, to pay the death and income taxes, including delinquency penalties, claimed by the State and, for that, to withdraw all cash deposits in various banks and sell such properties of the estate as my be necessary, is hereby terminated; and (4) The writs of preliminary injunction issued by the Court pursuant to its resolutions dated July 10 and 17, 1967 are hereby dissolved.

Moran Sison vs. Teodoro G.R. No. L-9271, March 29, 1957 Administrator's bond is not a necessary expense chargeable against the estate FACTS: Carlos Moran Sison was appointed, without compensation, as judicial administrator of the estate of Margarita David. He filed a bond of P5,000, the premium of which as well as renewal fee he charged as disbursement items in his accounting. Teodoro, one of the heirs, objected on the grounds that they are not necessary expenses of administration and should not be charged against the estate. ISSUE: Whether or not a judicial administrator, serving without compensation, is entitled to charge as an expense of administration the premiums paid on his bond HELD: IN resolving the case, the Supreme Court cited the case of Sulit vs. Santos, 56 Phil 626, where the Court ruled that the expense incurred by an executor or administrator to produce a bond is not a proper charge against the estate. The Court further commented in that case that the ability to give bond is in the nature of a qualification for office. The execution and the approval of the bond constitute a condition precedent to acceptance of the responsibilities of the trust. The difference between Sulit vs. Santos, and the present case is that in the former, the administrator accepted the trust with the emolument that the law allows where in the latter, the administrator accepted the same without compensation. Still, the difference is of no merit. It is far-fetched to conclude that the giving of a bond by an administrator is a necessary expense in the care, management and settlement of the estate within the meaning of the law, because these expenses are incurred "after the executor or administrator has met the requirement of the law and has entered upon the performance of his duties."

G.R. No. L-19153

June 30, 1922

when she dies intestate, as the said Carmen Theodora Johannes did die. Fourth. This Honorable Court at a prior date on application of Mr. Alfred D' Almeida, the brother of the deceased, appointed him as administrator of the property of the deceased situated within Philippine Islands, in the absence of, and without notice, knowledge or consent of her husband, your petitioner. Fifth. Your petitioner is now within the jurisdiction of this court and has come here and established his residence at "The Manila Hotel," in the City of Manila, for the sole purpose of taking over from the said Alfred D' Almeida the administration of said estate: and To relieve the said Alfred D' Almeida as administrator of said estate within the jurisdiction of this court and appoint in his stead your petitioner, the said B. E. Johannes, and principal administrator, "the ancillary administrator" of said estate now subject to administration within the Philippine Islands. From an order denying and overruling the petition, the relator filed certiorari proceedings in this court against the respondent, as judge of the Court of First Instance, and later made Alfred D'Almeida, a brother of the deceased, ancillary administrator, defendant, in which he pray for an order of this court: (a) To substitute your petitioner, the principal administrator, the husband of the deceased and the owner of the deposit, instead of Alfred D'Almeida, as "the ancillary administrator' of said estate, in this jurisdiction; and (b) Order the said Judge to disapprove and disallow all of the amounts claimed to have been paid for attorneys' fees to Messrs. Fisher and DeWit, and cable, amounting to P2,860.05; and (c) To disapproved and disallow the amount of P1,093.75, claimed due but proven false; and (d) To cancel the appointment of the special administrator' appointed by virtue of these false claims; and (e) Order the said Judge to order the manager of the Philippine National Bank to place to credit of the said substituted ancillary administrator, Mr. B. E. Johannes, all of the funds now on deposit in said bank, the property of the deceased Carmen Theodora Johannes. The defendant claims that the petition here does not state sufficient facts, and that at the time the appointment was made, the court had jurisdiction to appoint Alfred D'Almeida as ancillary administrator of the estate of the deceased Carmen Theodora Johannes, who was then a resident of the Philippine Islands, and that his appointment is not subject to review in this court.

B. E. JOHANNES, as principal administrator of the estate of Carmen Theodora Johannes, relator, vs. CARLOS A. IMPERIAL, as judge of the Court of First Instance, City of Manila, respondent. Amzi B. Kelly for relator. Fisher and De Witt and William C. Brady for respondent. STATEMENT Case No 18600,1 in which B. E. Johannes, husband of Carmen Theodora Johannes, deceased as administrator, et al., were relators, and the Honorable George R. Harvey, as judge of the Court of First Instance of Manila, et al., were respondents was a petition for certiorari and a temporary injunction, in which the relators prayed for an order this court: (A) To annul the appointment of Alfred D' Almeida as administrator of said deposit in the Philippines; and all acts and a proceedings taken by him as said administrator; and, (B) To issue an order itself, or one to the said Judge George R. Harvey, directing the manager of the Philippine National Bank,' to place to the credit B. E. Johannes, as administrator of the estate of Carmen Theodora Johannes, all of the funds of said Carmen D' Almeida (Johannes), now on deposit, with said bank, subject to the order of said court. And, as the act of the said Alfred D' Almeida in having himself appointed administrator was in evident bad faith, as clearly appears from the petition asking his appointment, the court is requested to grant relators five thousand pesos (P5,000), as damages caused by delay, expensive and unnecessary litigation, and such other relief as the court may deem in equity proper. Upon a hearing, the prayer was denied, and the petition dismissed in an opinion written by Justice Malcolm and concurred in by all the other members of this court. After that opinion was rendered, B. E. Johannes, as principal administrator of the estate of Carmen Theodora Johannes, applied to his Honor Carlos A. Imperial, as judge of the Court of Instance of the City of Manila, by petition, which, among other things, alleges: That "he is the duly appointed principal administrator of the estate of his late wife at the place of her domicile, Singapore, Straits Settlements, as appears from a certified copy of his appointment now on file . . . Second. The said Carmen Theodora Johannes, at the time of her death, was a subject and citizen of Great Britain, domiciled in Singapore, Straits Settlements, and your petitioner, the said B. E. Johannes, her lawful husband, at the time of her death was a subject and citizen of Great Britain and resident of Singapore, Straits Settlements. Third. Under British Law, (22 and 23, Charles II c-10, 29 Charles II c-3, and James II c-17), the husband of a deceased wife is the sole heir, to the exclusion of all others, of the property of his wife

of her death, was a resident of Singapore, Straits Settlements, and a citizen of Great Britain; that he is also a foreigner and a citizen of Great Britain and an actual resident to Singapore; that Alfred D'Almeida is a brother of the deceased Carmen Theodora Johannes, and a bona fide resident of the City of Manila; that at the time of her death Carmen Theodora Johannes had P109,722.55 on deposit in one of the banks in the City of Manila; and that the petitioner, her surviving husband, was indebted to a bank in Manila for about P20,000. That the deceased left no will in the absence of which the petitioner claims to be her sole heir and entitled to all of her estate. That there were no debts against the estate of the deceased. Upon the death of his wife, the petitioner was duly appointed as administrator of her estate by the court at Singapore, and qualified and entered upon the discharge of his duties. After the decision was rendered by this court in case No. 18600, supra, the petitioner came to Manila and claims to have established a temporary residence at the Manila Hotel, based upon which, in legal effect, he asked for an order of court that Alfred D'Almeida be removed as ancillary administrator, and that he be appointed. From an order of the lower court denying that petition, an original petition was filed here to review the proceedings of the lower court. There is a marked legal distinction between the authority of a court to appoint and the authority to remove an administrator after he is appointed. Here, the appointment was made and the administrator had qualified and entered upon the discharge of his duties. There was no contest over the appointment, and the court had jurisdiction of the petition and of the subject-matter. It was not a case of where two or more petitions were filed, in which each was claiming the right to appointed, or in which the court decided which one of the petitioners should be appointed. It was a case in which only one petition was presented to the court, and to which no objections were file and in which it appeared the petitioner was a brother of the deceased, and that the estate was the owner of property in the City of Manila. The court, having jurisdiction and the appointment having been made, the only question here presented is whether Alfred D'Almeida should be removed and the petitioner substituted as ancillary administrator. As this court said case No 18600 (Johannes vs. Harvey, supra): The ancillary administration is proper, whenever a person dies, leaving in a country other than that of his last domicile, property to be administered in the nature of assets of the decedent, liable for his individual debts or to be distributed among his heirs. It is almost a universal rule to give the surviving spouse a preference when and administrator is to be appointed, unless for strong reason it is deemed advisable to name someone else. This preference has particular force under Spanish Law precedents. However, the Code of Civil Procedure, in section 642, while naming the surviving spouse is unsuitable for the responsibility. . . . Undoubtedly, if the husband should come into this jurisdiction, the court give consideration to his petition that he be named the ancillary administrator for local purposes. Ancillary letters should ordinarily be granted to the domiciliary representative, if he applies therefor, or to his nominee, or attorney; but in the absence of

JOHNS, J.: The legal questions presented are well stated in the former opinion court in case No. 18600. It appears that the petitioner is the husband of Carmen Theodora Johannes, deceased, who, at the time

express statutory requirement the court may in its discretion appoint some other person. The real contention of the petitioner is that, because he had the legal right to apply for and be appointed in the first instance, such right is continuous, and that he could be appointed any time on his own application. That is not the law. Although it is true that in the first instance everything else being equal and upon the grounds of comity, in ordinary case, the court would appoint the petitioner or his nominee as ancillary administrator, but even then, as stated in the above opinion the appointment is one of more or less legal discretion. But that is not this case. Here, in legal effect, it is sought to oust an administrator who was appointed without protest or objection where the court had jurisdiction of the petitioner and of the subject matter. Again, it appears that Carmen Theodora Johannes died August 21, 1921, and on September 19, 1921, the petitioner was appointed administrator of her estate by Supreme Court of Straits Settlements on his own petition, and on October 1, 1921, based upon his petition, Alfred D'Almeida, the brother of the deceased, was appointed administrator of her estate in Manila. The initial proceeding against the appointment of Alfred D'Almeida, as administrator, was filed in this court on January 21, 1922. At time of the appointment here, the court had primary and original jurisdiction, and no objections were then made. The question as to who should have been appointed ancillary administrator, if presented at the proper time and in the proper way, is not before this court. Here, the appointment was made on the 1st day of October, 1921, and no formal objections were made until 21st day of January, 1922. The petition is denied, the injunction dissolved and the case dismissed. It appears that the debts of the state, if any, are nominal, and that the only asset here is the money on deposit in the bank. Hence, the administration of the estate itself is matter of form only and should be very simple and inexpensive. Even though it is foreign money, it is the duty of the court to protect it from any illegal, unjust, or unreasonable charges. All claims against the estate should be for just debts only, or for the actual expenses of administration, and those should be reasonable. No other claims should be allowed. If, as claimed, the real dispute here is whether the brothers and sisters of the deceased are entitled to share in her estate, or whether the petitioner only, as the surviving husband, is entitle to all of it, that question is not one of administration, and any expense and attorneys' fees incurred by either party for the settlement of that question is a personal matter to them, and should not be allowed as claims against the estate. Claims against the estate should only be for just debts or expense for administration of the estate itself. Costs in favor of the respondent. So ordered.

G.R. No. L-44038 May 18, 1938 Estate of the deceased Claude E. Haygood. THE COLLECTOR OF INTERNAL REVENUE, claimant-appellee, vs. ANNIE LAURIE HAYGOOD, administratrix-appellant. Gibbs, McDonough and Ozaeta for appellant. Office of the Solicitor-General Hilado for appellee. VILLA-REAL, J.: Annie Laurie Haygood appeals to this court from an order of the Court of First Instance of Rizal, dated May 27, 1935, in which appellant, as administratrix of the estate of her deceased spouses Claude E. Haygood, was ordered to pay to the Collector of Internal Revenue, within ten days from receipt of said order, the sum of P6,295.79, failing which, said amount would be declared preferred claim against the estate of the deceased. The parties admit, without discussion, the following facts: On October 9, 1934, Claude E. Haygood, resident of the municipality of Paraaque, Province of Rizal, died in Rochester, Minnesota, United States of America, leaving a will which duly probated by the Court of First Instance of Rizal. On December 15, 1934, the provincial fiscal of Rizal, in behalf of the appellee, Collector of Internal Revenue, filed in the testamentary proceedings of the said deceased, a sworn motion claiming the amount of P3,087.99 which represent the merchant's sale tax of one and a half per cent, unpaid by the deceased, plus a surcharge of 125 per cent on undeclared sales, making a total of P91,496.16. On December 17, 1934, the Court of First Instance of Rizal appointed Annie Laurie Haygood administratrix of the estate of the deceased Claude E. Haygood. In an order dated January 4, 1935 the same court denied the abovementioned motion of the provincial fiscal of Rizal, on the ground that the same should be presented to the committed on claims and appraisals, which, at the time, had not yet been appointed. On January 14, 1935, the said provincial fiscal filed a motion with supporting reasons asking for the reconsideration of the said order. On January 17, 1935, the administratrix, Annie Laurie Haygood, filed an opposition to this motion in which, for the reason therein stated, she insisted that the claim falls within the competence of the committee on claims and appraisals 3RQy. On January 23, 1935, the provincial fiscal of Rizal filed under oath another motion amending the original, accompanied by a sworn statement of the Collector of Internal Revenue (Exh. A), in which, aside from the amount of P3,087.909 claimed as merchant's sales tax, an additional amount of P3,207.80 was also claimed as income tax unpaid by the deceased Claude E. Haygood, including a surcharge of 100 per cent for the years 1930 and 1933, making a total claim of P6,295.79 DvqL8NW. On March 14, 1935, the Court of First Instance of Rizal, presided over by Judge Pedro Tuason, entered an order setting aside its own order of January 4, 1935, and requiring the administratrix to

answer, within fifteen days, the amended motion of January 23, 1935, and to state her reasons why the same should not be granted SfDNf9LToW. On March 29, 1935, the administratrix, Annie Laurie Haygood, in compliance with the above order of the court, filed her answer to the amended motion insisting, for the reasons stated therein, that the claim of the Collector of Internal Revenue should be presented the committee on claims and appraisals and should therefore not be allowed in the testamentary proceedings of the deceased Claude E. Haygood. On May 11, 1935, the provincial fiscal of Rizal, in a reply to the answer of the administratrix, insisted that the case of Pineda vs. Court of First Instance of Tayabas and Collector of Internal Revenue (52 Phil. 803) is applicable to the instant case and therefore his claim should be approved. On may 27, 1935, after considering the answer of the administratrix dated March 29, 1935, and the reply thereto of the provincial fiscal dated May 11, 1935, the Court of First Instance of Rizal, then presided over by Judge Fernando Jugo, rendered the order now subject of the present appeal. It is alleged by the appellant and admitted by the appellee on page 7 of his brief that the tax in question was discovered after three years from the date it should have been declared. The first question to be decided in the present appeal, in the light of the evidence before us, is whether or not the lower court erred in entering the order appealed from without any other evidence than the sworn statement (Exh. A) of the appellee, Collector of Internal Revenue, notwithstanding the opposition of the administratrix and without requiring both parties to present evidence. The administratrix and appellant, Annie Laurie Haygood, sustains the affirmative and relies on the case of Knowles vs. Government of the Philippines Islands (60 Phil. 461) in which this court said the following: The second point is decisive and resolves the appeal in favor of the administrator. We are of the opinion that it was incumbent upon the Collector of Internal Revenue to prove the certainly of the items constituting his claim, particularly the alleged net income said to have been committed in the return filed by the deceased and subsequently discovered, according to the affirmative of the Collector of Internal Revenue, upon investigation by an official of his bureau. This allegedly omitted net income, for the same reason that it did not appear in any book or documents forming part of the files of the Bureau of Internal Revenue, necessarily had to be proved by means of the testimony of said official. Inasmuch as the latter was not presented or did not testify at the trial, it is clear that the administrator was deprived of his substantial right to crossexamine him. The foregoing conclusion of course, is based upon the premise that the affidavit presented in support of the claim is competent evidence, a quality which we doubt in view of the opposition originally filed by the administrator. When the administrator filed his opposition to the claim and generally and specifically denied its allegations, the character of prima facie evidence of the affidavit attached to the claim was destroyed and it became upon the claimant to prove his claim means of material

and competent evidence. This duty has not been complied with in view of the fact that no other evidence has been presented and the claim was based solely on said affidavit. On his part, the appellee, Collector of Internal Revenue sustains the negative and relies on what this court held in the case of Pineda vs. First Instance of Tayabas ad Collector of Internal Revenue (52 Phil. 803, 806), as follows: As it is the duty of an administrator to pay taxes assessed against the estate of the decedent, where funds are available for that purpose, the court, in the exercise of its administrative control over the administrator, undoubtedly has authority to direct the payment of assessed taxes. Moreover, it is evident that the act of the court in directing the petitioner to pay this tax not to have the effect of depriving the petitioners of the remedy, open to every taxpayer, of paying the tax under protest and bringing an action to recover the money; and assuming that leave of the court might properly be required for the institution of such action, it is to be assumed that such leave would be granted if the petitioners should be able to shows to the court any plausible ground for concluding that tax had been improperly collected. It will be seen that while the two decision above quoted are in accord in holding that the assessment made by the Collector of Internal Revenue, contained in his sworn declaration, constitutes prima facie evidence of the existence of the unpaid taxes, they, nevertheless, differ in this respect: that in the case of Knowles this evidence is said to be destroyed by the mere objection to the allegations contained in the claim and by the general and specific denial of the alleged facts, the burden of proof falling on the Collector of Internal Revenue, who must substantiate his claim by material and competent evidence; and in the case of Pineda it is held the duty of the administrator of the estate of the deceased to prove that the claim for taxes due the government, made under oath is unjustified. The discrepancy, if any, is more apparent than real, considering the fact that in the case of Knowles the failure to declare the income tax was discovered after three years following the expiration of the term within which to file such declaration; while in the case of Pineda the error in the declaration was discovered within three from the date the declaration was made. In accordance with section 9, paragraph (a) of Act No. 2833, the assessment made by the Collector of Internal Revenue within three years after the discovery of an erroneous declaration shall be paid by the maker of the return immediately upon being of the assessment. The procedure prescribed by law is, thereof, summary, and collection must be made from the person liable for the tax. Since this cannot be done when the person liable is already dead, collection must necessarily be mad from the estate of the deceased, either in a testate or intestate proceedings instituted before a competent court, by motion together with a sworn statement of the taxes due filed with said court, so that it may require the administrator to pay the claim if the latter has funds available therefor, that is, following the order of preference in section 735 of the Code of Civil Procedure in case the said estate should be insolvent. If the testate or intestate estate is solvent, the court may order the payment of the claim without necessity of its being substantiate by evidence since the sworn statement constitutes prima facie evidence of the existence of the unpaid taxes, and the administrator is under obligations to pay such claim, under protest

if he is not agreeable, without prejudice to his right later to recover the taxes so paid, in the manner by law. (Act No. 2711, sec 1579, as amended by Act No. 3685). This procedure is sanctioned by the court in the case of Pineda cited above. In the case of Knowles, supra, the discovery of the error in the return of the taxpayer took place after three years from the date the return was filed. The probate court acted correctly in requiring the judicial administrator to answer the claim presented by the Collector of Internal Revenue for taxes due and unpaid by the deceased, during his lifetime, considering the fact that the motion presented by said Collector of Internal Revenue was tantamount to a judicial action, in accordance with the ruling of this court in the case of Collector of Internal Revenue vs. Villegas (56 Phil. 554, 559), and as such, it should have proceeded substantially like an ordinary civil suit through the filing of a written answer and the presentation of evidence. The fact in the case of Pineda, supra, differ from those in the case of Knowles and since the law provides a different procedure in each case, there is no conflict in the decision rendered in two cases. In the case before us the facts as to the date of the discovery of the so in the return, which was after the lapse of three years from the date the erroneous return was filed, are identical with those in the case of Knowles; therefore, the rule established in the latter case should be followed with respect to the procedure in collecting a claim for taxes due and unpaid presented by the Collector of Internal Revenue in a testate or intestate proceedings. The appealed order is, therefore, erroneous. In view of the foregoing, we are of the opinion and so hold that: first, when the discovery of erroneous tax returns is made within three years after the date such returns should have been filed, and the declarant dies, the claim for payment of the tax assessed by the Collector of Internal Revenue must be made in the testate or intestate proceedings by filing a motion accompanied by a statement of the taxes duly sworn to by the Collector of Internal Revenue, and a competent court may summarily order, without previous trial, the judicial administrator to pay the claim if funds are available, taking into consideration the order of payment established in section 753 of the Code of Civil Procedure, and the administrator may pay the claim under protest in order to recover in a separate suit what he may have erroneously paid; and, secondly, when the discovery of erroneous return take place after three years from the date the return are filed, the Collector of Internal Revenue shall present the claim by filing a motion accompanied by a statement under oath of the unpaid taxes, said motion being in the nature of a civil suit should be prosecuted through the filing of a written answer and the presentation of evidence. Wherefore, the appealed order is revoked and the record is remanded to the court of origin so that the same may proceed to hear the evidence in support of the claim of the Collector of Internal Revenue and the opposition thereto of the administratrix and appellant, Annie Laurie Haygood, respectively, and render judgement accordingly without special pronouncement as to costs. So ordered vhySpomBi. Abad Santos, Imperial, Diaz, Laurel and Concepcion, JJ., concur. .

G.R. No. L-33139 THE GOVERNMENT OF THE PHILIPPINE ISLANDS, plaintiff-appellants, vs. JOSE MA. PAMINTUAN, ET AL., defendants-appellees. Attorney-General Jaranilla for appellant. Jose Ma.Cavanna for appellees. VILLA-REAL, J.: This is an appeal taken by the Government of the Philippine Islands from the judgment of the Court of First Instance of Manila dismissing its complaint and absolving the defendants, without costs. In support of the appeal the following alleged errors have been assigned to the court below in its judgment: 1. The lower court erred in holding that the failure of the plaintiff to file its claim with the committee on claims and appraisals barred it from collecting the tax in questions in this action. 2. The lower court erred in holding that this case is governed by the principle laid down in the case of the Government of the Philippine Islands vs. Inchausti & Co. (24 Phil. 315). 3. The lower court erred in absolving the defendants from the complaint and in denying the plaintiff's motion for new trial. The present case was submitted to the court below upon the following agreed statement of facts: I. That on February 27, 1920, Florentino Pamintuan, represented by J. V. Ramirez or his attorney-in-fact charged with the administration of his property, filed income-tax return for the year 1919, paying the amount of P 672.99 on the basis of said return, and the additional sum of P151.01 as a result of a subsequent assessment received from the Collector of Internal Revenue. II. That on April 24, 1925, Florentino Pamintuan died in Washington, D. C., U. S. A., leaving the defendants herein as his heirs. III. That on April 24, 1925, intestate proceedings were instituted in the Court of First Instance of Manila in civil case No. 27948, intestate of the late Florentino Pamintuan. IV. That on April 28,1925, the Court of First Instance of Manila appointed Maximo de la Paz and Candido Ilagan commissioners of appraisal of the property left by the deceased Pamintuan, the said appointees taking their oaths of office on May 4 and May 9, 1925, respectively, and letters of appointment to the committee on claims and appraisals were made on May 9,1925. V. That the said committee on claims and appraisals after the publications of the notices required by law held the necessary sessions in accordance with said notices for the presentation and determination of all claims and credits against the estate of the deceased Pamintuan. VI. That on December 1, 1925, the above-mentioned committee rendered its report which was duly approved by the court, and in

which report it appears that he only claims presented and that were approved were those of Tomasa Centeno, Jose, Paz, Caridad, and Natividad Pamintuan and Cavanna, Aboitiz and Agan. VII. That on June 12, 1926, Jose V. Ramirez, the duly appointed judicial administrator of the estate of the deceased Florentino Pamintuan presented a proposed partition of the decedent's estate which proposed partition was approved by the court on July 6,1926, the court ordering the delivery to the heirs, the defendants herein, of their respective shares of the inheritance after paying the corresponding inheritance taxes which were duly paid on September 2, 1926, in the amount of P25,047.19 as appears on the official receipt No. 4421361. VIII. That the defendants herein inherited from the deceased Florentino Pamintuan in the following proportions: Tomasa Pamintuan inherited 0.0571 per cent of the decedent's estate and the other defendants 0.0784 per cent each according to the partition approved by the court in civil case No. 27948. IX. That during the pendency of the intestate proceedings, the administrator filed income-tax returns for the estate of the deceased corresponding to the years 1925 and 1926. X. That the intestate proceedings in civil case No. 27948 were definitely closed on October 27, 1926, by order of the court of the same date. XI. That subsequent to the distribution of the decedent's estate to the defendants herein, that is, on February 16, 1927, the plaintiff discovered the fact that the deceased Florentino Pamintuan has not paid the amount of four hundred and sixty-two pesos (P462) as additional income tax and surcharge for the calendar year 1919, on account of the sale made by him on November 14, 1919, of his house and lot located at 922 M. H. del Pilar, Manila, from which sale he realized a net profit or income of P11,000, which was not included in his income-tax return filed for said year 1919 C8JMUQaTc. XII. That the defendants cannot disprove that the deceased Florentino Pamintuan made a profit of P11,000 in the sale of the house referred to in paragraph Xl hereof because they have destroyed the voluminous records and evidences regarding the sale in question and other similar transactions which might show repairs on the house, commissions, and other expenses tending to reduce the profit obtained as mentioned above. XIII. That demand for the payment of the income tax referred to herein was made on February 24, 1927, on the defendants but they refused and still refuse to pay the same either in full or in part. With regard to the first assignment of error, this court held in Pineda vs. Court of First Instance of Tayabas and Collector of Internal Revenue (52 Phil. 803): To reply to these contentions in turn , we observe that, while there are a few courts that have expressed themselves to the effect that a claim for taxes due to the Government should be presented like other claims to the committee appointed for the purpose of passing upon claims, the clear weight of judicial authority is to the effect that claims for taxes and assessments, whether assessed before or

after the death of the decedent, are not required to be presented to the committee. (24 C.J. 325; People vs. Olvera, 43 Cal., 492; Hancock vs.Whittemore, 50 Cal., 522; Findley vs. Taylor, 97 Iowa, 420; Bogue vs.Laughlin,149 Wis., 271; 40 L. R. A. [N.S.], 927; Ann. Cas.1913 C.,p.1367.) See also In re Estate of Frank H.Goulette (G. R. No. 32361, 1 decided on September 22,1930.) The administration proceedings of the late Florentino Pamintuan having been closed, and his estate distributed among his heirs, the defendants herein, the latter are responsible for the payment of the income tax here in question in proportion to the share of each in said estate, in accordance with section 731 of the Code of Civil Procedure, and the doctrine of this court laid down in Lopez vs. Enriquez (16 Phil.336) as follows: ESTATE; LIABILITY OF HEIRS AND DISTRIBUTEES. ? Heirs are not required to respond with their own property for the debts of their deceased ancestors. But even after the partition of an estate, heirs and distributees are liable individually for the payment of all lawful outstanding claims against the estate in proportion to the amount or value of the property they have respectively received from the estate. The hereditary property consists only of that part which remains after the settlement of all lawful claims against the estate, for the settlement of which the entire estate is first liable. The heirs cannot, by any act of their own or by agreement among themselves, reduce the creditors' security for the payment of their claims. (Pavia vs. De la Rosa, 8 Phil.70; secs. 731, 749, Code of Civil Procedure; art,1257, Civil Code.) For the reasons stated, we are of opinion and so hold that claims for income taxes need not be filed with the committee on claims and appraisals appointed in the course of testate proceedings and may be collected even after the distribution of the decedent's estate among his heirs, who shall be liable therefor in proportion to their share in the inheritance. Wherefore, let the defendants pay the plaintiff the sum of P462, with 1 per centum monthly interest from August 19, 1927 until fully paid, as follows: Tomasa Centeno 0.0571 per cent, and each one of the other defendants 0.0784 per cent, with costs against the appellees. So ordered. Avancea, C.J., Street, Malcolm, Ostrand, Ostrand, Johns and Romualdez, JJ., concur.

G.R. No. L-29276 May 18, 1978 Testate Estate of the Late Felix J. de Guzman. VICTORINO G. DE GUZMAN, administrator-appellee, vs. CRISPINA DE GUZMAN-CARILLO, ARSENIO DE GUZMAN and HONORATA DE GUZMAN-MENDIOLA, oppositorsappellants. Emiliano Samson & R. Balderama-Samson for appellants. Cezar Paralejo for appellee. AQUINO, J.: This case is about the propriety of allowing as administration expenses certain disbursements made by the administrator of the testate estate of the late Felix J. de Guzman of Gapan, Nueva Ecija. The deceased testator was survived by eight children named Victorino, Librada, Severino, Margarita, Josefina, Honorata, Arsenio and Crispina. His will was duly probated. Letters of administration were issued to his son, Doctor Victorino G. de Guzman, pursuant to the order dated September 17, 1964 of the Court of First Instance of Nueva Ecija in Special Proceeding No. 1431. One of the properties left by the dent was a residential house located in the poblacion. In conformity with his last will, that house and the lot on which it stands were adjudicated to his eight children, each being given a one-eighth proindiviso share in the project of partition dated March 19, 1966, which was signed by the eight heirs and which was approved in the lower court's order of April 14, 1967 but without prejudice to the final outcome of the accounting. The administrator submitted four accounting reports for the period from June 16, 1964 to September, 1967. Three heirs Crispina de Guzmans-Carillo Honorata de Guzman-Mendiola and Arsenio de Guzman interposed objections to the administrator's disbursements in the total sum of P13,610.48, broken down as follows: I. Expense for the improvement and renovation of the decedent's residential house. 1. Construction of fence P3,082.07 2. Renovation of bathroom P1,389.52 3. Repair of terrace and interior of house P5,928.00 P10,399.59 II. Living expenses of Librada de Guzman while occupying the family home without paying rent: 1. For house helper P1,170.00 2. Light bills 227.41 3. Water bills 150.80 4. Gas oil, floor wax and switch nail 54.90 P 1,603.11 III. 1. 2. Other expenses: Lawyer's subsistence P 19.30 Gratuity pay in lieu

3. For stenographic notes 100.00 4. For food served on decedent's first death anniversary 166.65 5. Cost of publication of death anniversary of decedent 102.00 6. Representation expenses 26.25 P558.20 IV. Irrigation fee P1.049.58

present proofs to rebut the ad. administrator's evidence in support of his accounts. I. Expenses for the renovation and improvement of the family residence P10,399.59. As already shown above, these expenses consisted of disbursements for the repair of the terrace and interior of the family home, the renovation of the bathroom, and the construction of a fence. The probate court allowed those expenses because an administrator has the duty to "maintain in tenantable repair the houses and other structures and fences belonging to the estate, and deliver the same in such repair to the heirs or devises" when directed to do so by the court (Sec. 2, Rule 84, Rules of Court). On the other hand, the oppositors-appellants contend that the trial court erred in allowing those expenses because the same did not come within the category of necessary expenses of administration which are understood to be the reasonable and necessary expenses of caring for the property and managing it until the debts are paid and the estate is partitioned and distributed among the heirs (Lizarraga Hermanos vs. Abada, 40 Phil. 124). As clarified in the Lizarraga case, administration expenses should be those which are necessary for the management of the estate, for protecting it against destruction or deterioration, and, possibly, for the production of fruits. They are expenses entailed for the preservation and productivity of the estate and its management for purposes of liquidation, payment of debts, and distribution of the residue among the persons entitled thereto. It should be noted that the family residence was partitioned proindiviso among the decedent's eight children. Each one of them was given a one-eighth share in conformity with the testator's will. Five of the eight co-owners consented to the use of the funds of the estate for repair and improvement of the family home. It is obvious that the expenses in question were incurred to preserve the family home and to maintain the family's social standing in the community. Obviously, those expenses redounded to the benefit of an the coowners. They were necessary for the preservation and use of the family residence. As a result of those expenses, the co-owners, including the three oppositors, would be able to use the family home in comfort, convenience and security. We hold that the probate court did not err in approving the use of the income of the estate to defray those ex II. Expenses incurred by Librada de Guzman as occupant of the family residence without paying rent P1 603.11 The probate court allowed the income of the estate to be used for those expenses on the theory that the occupancy of the house by one heir did not deprive the other seven heirs from living in it. Those expenses consist of the salaries of the house helper, light and water bills, and the cost of gas, oil floor wax and switch nail We are of the opinion that those expenses were personal expenses of Librada de Guzman, inuring y to her benefit. Those expenses, not being reasonable administration expenses incurred by the administrator, should not be charged against the income of the estate.

TOTAL P13,610.48 It should be noted that the probate court in its order of August 29, 1966 directed the administrator "to refrain from spending the assets of the estate for reconstructing and remodeling the house of the deceased and to stop spending (sic) any asset of the estate without first during authority of the court to do so" (pp. 26-27, Record on Appeal). The lower court in its order of April 29, 1968 allowed the d items as legitimate expenses of administration. From that order, the three oppositors appealed to this Court. Their contention is that the probate court erred in approving the utilization of the income of the estate (from rice harvests) to defray those expenditures which allegedly are not allowable under the Rules of Court. An executor or administrator is allowed the necessary expenses in the care, management, and settlement of the estate. He is entitled to possess and manage the decedent's real and personal estate as long as it is necessary for the payment of the debts and the expenses of administration. He is accountable for the whole decedent's estate which has come into his possession, with all the interest, profit, and income thereof, and with the proceeds of so much of such estate as is sold by him, at the price at which it was sold (Sec. 3, Rule 84; Secs. 1 and 7, Rule 85, Rules of Court). One of the Conditions of the administrator's bond is that he should render a true and just account of his administration to the court. The court may examine him upon oath With respect to every matter relating to his accounting 't and shall so examine him as to the correctness of his account before the same is allowed, except when no objection is made to the allowance of the account and its correctness is satisfactorily established by competent proof. The heirs, legatees, distributes, and creditors of the estate shall have the same privilege as the executor or administrator of being examined on oath on any matter relating to an administration account." (Sec. 1[c] Rule 81 and secs. 8 and 9, Rule 85, Rules of Court). A hearing is usually held before an administrator's account is approved, especially if an interested Party raises objections to certain items in the accounting report (Sec. 10, Rule 85). At that hearing, the practice is for the administrator to take the witness stand, testify under oath on his accounts and Identify the receipts, vouchers and documents evidencing his disbursements which are offered as exhibits. He may be interrogated by the court and crossed by the oppositors's counsel. The oppositors may

of medical fee 144.00

Librada de Guzman, as an heir, is entitled to share in the net income of the estate. She occupied the house without paying rent. She should use her income for her living expenses while occupying the family residence. The trial court erred in approving those expenses in the administrator's accounts. They should be, as they are hereby, disallowed (See 33 C.J.S 1239-40). III. Other expenses P558.20. Among these expenses is the sum of P100 for stenographic notes which, as admitted by the administrator on page 24 of his brief, should be disallowed. Another item, "representation expenses" in the sum of P26.25 (2nd accounting), was not explained. it should likewise be disallowed. The probate court erred in allowing as expenses of ad. administration the sum of P268.65 which was incurred during the celebration of the first death anniversary of the deceased. Those expenses are disallowed because they have no connection with the care, management and settlement of the decedent's estate (Nicolas vs. Nicolas 63 Phil 332). The other expenses, namely, P19.30 for the lawyer's subsistence and P144 as the cost of the gift to the physician who attended to the testator during his last s are allowable expenses. IV. Irrigation fee P1,049.58. The appellants question the deductibility of that expense on the ground that it seems to be a duplication of the item of P1,320 as irrigation fee for the same 1966-67 crop-year. The administrator in his comment filed on February 28, 1978 explained that the item of P1,320 represented the "allotments" for irrigation fees to eight tenants who cultivated the Intan crop, which allotments were treated as "assumed expenses" deducted as farming expenses from the value of the net harvests. The explanation is not quite clear but it was not disputed by the appellants. The fact is that the said sum of P1,049.58 was paid by the administrator to the Penaranda Irrigation System as shown in Official Receipt No. 3596378 dated April 28, 1967. It was included in his accounting as part of the farming expenses. The amount was properly allowed as a legitimate expense of administration. WHEREFORE, the lower court's order of April 29, 1968 is affirmed with the modifications that the sum of (a) P1,603.11 as the living expenses of Librada de Guzman. (b) P100 for stenographic notes, (c) P26.25 as representation expenses, and (d) P268.65 as expenses for the celebration of the first anniversary of the decedent's death are disallowed in the administrator's accounts. No costs. SO ORDERED.

G.R. No. L-19495 November 24, 1966 COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. LILIA YUSAY GONZALES and THE COURT OF TAX APPEALS, respondents. Office of the Solicitor General for the petitioner. Ramon A. Gonzales for respondent Lilia Yusay Gonzales. BENGZON, J.P., J.: Matias Yusay, a resident of Pototan, Iloilo, died intestate on May 13, 1948, leaving two heirs, namely, Jose S. Yusay, a legitimate child, and Lilia Yusay Gonzales, an acknowledged natural child. Intestate proceedings for the settlement of his estate were instituted in the Court of First Instance of Iloilo (Special Proceedings No. 459). Jose S. Yusay was therein appointed administrator. On May 11, 1949 Jose S. Yusay filed with the Bureau of Internal Revenue an estate and inheritance tax return declaring therein the following properties: Personal properties Palay Carabaos P6,444.00 1,000.00 P7,444.00 Real properties: Capital, 74 parcels ) Conjugal 19 parcels) assessed at P179,760.00 Total gross estate P187,204.00 The return mentioned no heir. Upon investigation however the Bureau of Internal Revenue found the following properties: Personal properties: Palay Carabaos Packard Automobile 2 Aparadors P6,444.00 1,500.00 2,000.00 500.00 P10,444.00 Real properties: Capital, 25 parcels assessed at P87,715.32 1/2 of Conjugal, 130 parcels assessed at P121,425.00 P209,140.32 Total P219,584.32 The fair market value of the real properties was computed by increasing the assessed value by forty percent.

Based on the above findings, the Bureau of Internal Revenue assessed on October 29, 1953 estate and inheritance taxes in the sums of P6,849.78 and P16,970.63, respectively. On January 25, 1955 the Bureau of Internal Revenue increased the assessment to P8,225.89 as estate tax and P22,117.10 as inheritance tax plus delinquency interest and demanded payment thereof on or before February 28, 1955. Meanwhile, on February 16, 1955, the Court of First Instance of Iloilo required Jose S. Yusay to show proof of payment of said estate and inheritance taxes. On March 3, 1955 Jose S. Yusay requested an extension of time within which to pay the tax. He posted a surety bond to guarantee payment of the taxes in question within one year. The Commissioner of Internal Revenue however denied the request. Then he issued a warrant of distraint and levy which he transmitted to the Municipal Treasurer of Pototan for execution. This warrant was not enforced because all the personal properties subject to distraint were located in Iloilo City. On May 20, 1955 the Provincial Treasurer of Iloilo requested the BIR Provincial Revenue Officer to furnish him copies of the assessment notices to support a motion for payment of taxes which the Provincial Fiscal would file in Special Proceedings No. 459 before the Court of First Instance of Iloilo. The papers requested were sent by the Commissioner of Internal Revenue to the Provincial Revenue Officer of Iloilo to be transmitted to the Provincial Treasurer. The records do not however show whether the Provincial Fiscal filed a claim with the Court of First Instance for the taxes due. On May 30, 1956 the commissioner appointed by the Court of First Instance for the purpose, submitted a reamended project of partition which listed the following properties: Personal properties: Buick Sedan Packard car Aparadors Cash in Bank (PNB) Palay Carabaos P8,100.00 2,000.00 500.00 8,858.46 6,444.00 1,500.00 P27,402.46 Real properties: Land, 174 parcels assessed at Buildings P324,797.21 4,500.00 P329,297.21 Total P356,699.67

More than a year later, particularly on July 12, 1957, an agent of the Bureau of Internal Revenue apprised the Commissioner of Internal Revenue of the existence of said reamended project of partition. Whereupon, the Internal Revenue Commissioner caused the estate of Matias Yusay to be reinvestigated for estate and inheritance tax liability. Accordingly, on February 13, 1958 he issued the following assessment: Estate tax P16,246.04 5% surcharge 411.29 Delinquency interest 11,868.90 Compromise No notice of death Late payment P15.00 40.00 55.00 Total P28,581.23 Inheritance Tax P38,178.12 5% surcharge 1,105.86 Delinquency interest 28,808.75 Compromise for late payment 50.00 Total P69,142.73 Total estate and inheritance taxes P97,723.96 Like in previous assessments, the fair market value of the real properties was arrived at by adding 40% to the assessed value. In view of the demise of Jose S. Yusay, said assessment was sent to his widow, Mrs. Florencia Piccio Vda. de Yusay, who succeeded him in the administration of the estate of Matias Yusay. No payment having been made despite repeated demands, the Commissioner of Internal Revenue filed a proof of claim for the estate and inheritance taxes due and a motion for its allowance with the settlement court in voting priority of lien pursuant to Section 315 of the Tax Code. On June 1, 1959, Lilia Yusay, through her counsel, Ramon Gonzales, filed an answer to the proof of claim alleging nonreceipt of the assessment of February 13, 1958, the existence of two administrators, namely Florencia Piccio Vda. de Yusay who administered two-thirds of the estate, and Lilia Yusay, who administered the remaining one-third, and her willingness to pay the taxes corresponding to her share, and praying for deferment of

the resolution on the motion for the payment of taxes until after a new assessment corresponding to her share was issued. On November 17, 1959 Lilia Yusay disputed the legality of the assessment dated February 13, 1958. She claimed that the right to make the same had prescribed inasmuch as more than five years had elapsed since the filing of the estate and inheritance tax return on May 11, 1949. She therefore requested that the assessment be declared invalid and without force and effect. This request was rejected by the Commissioner in his letter dates January 20, 1960, received by Lilia Yusay on March 14, 1960, for the reasons, namely, (1) that the right to assess the taxes in question has not been lost by prescription since the return which did not name the heirs cannot be considered a true and complete return sufficient to start the running of the period of limitations of five years under Section 331 of the Tax Code and pursuant to Section 332 of the same Code he has ten years within which to make the assessment counted from the discovery on September 24, 1953 of the identity of the heirs; and (2) that the estate's administrator waived the defense of prescription when he filed a surety bond on March 3, 1955 to guarantee payment of the taxes in question and when he requested postponement of the payment of the taxes pending determination of who the heirs are by the settlement court. On April 13, 1960 Lilia Yusay filed a petition for review in the Court of Tax Appeals assailing the legality of the assessment dated February 13, 1958. After hearing the parties, said Court declared the right of the Commissioner of Internal Revenue to assess the estate and inheritance taxes in question to have prescribed and rendered the following judgment: WHEREFORE, the decision of respondent assessing against the estate of the late Matias Yusay estate and inheritance taxes is hereby reversed. No costs. The Commissioner of Internal Revenue appealed to this Court and raises the following issues: 1. Was the petition for review in the Court of Tax Appeals within the 30-day period provided for in Section 11 of Republic Act 1125? 2. Could the Court of Tax Appeals take cognizance of Lilia Yusay's appeal despite the pendency of the "Proof of Claim" and "Motion for Allowance of Claim and for an Order of Payment of Taxes" filed by the Commissioner of Internal Revenue in Special Proceedings No. 459 before the Court of First Instance of Iloilo? 3. Has the right of the Commissioner of Internal Revenue to assess the estate and inheritance taxes in question prescribed? On November 17, 1959 Lilia Yusay disputed the legality of the assessment of February 13, 1958. On March 14, 1960 she received the decision of the Commissioner of Internal Revenue on the disputed assessment. On April 13, 1960 she filed her petition for review in the Court of Tax Appeals. Said Court correctly held that the appeal was seasonably interposed pursuant to Section 11 of Republic Act 1125. We already ruled in St. Stephen's Association v. Collector of Internal Revenue,1 that the counting of the thirty days within which to institute an appeal in the Court of Tax Appeals should commence from the date of receipt of the decision of the Commissioner on the disputed assessment, not from the date the assessment was issued.

Accordingly, the thirty-day period should begin running from March 14, 1960, the date Lilia Yusay received the appealable decision. From said date to April 13, 1960, when she filed her appeal in the Court of Tax Appeals, is exactly thirty days. Hence, the appeal was timely. Next, the Commissioner attacks the jurisdiction of the Court of Tax Appeals to take cognizance of Lilia Yusay's appeal on the ground of lis pendens. He maintains that the pendency of his motion for allowance of claim and for order of payment of taxes in the Court of First Instance of Iloilo would preclude the Court of Tax Appeals from acquiring jurisdiction over Lilia Yusay's appeal. This contention lacks merit. Lilia Yusay's cause seeks to resist the legality of the assessment in question. Should she maintain it in the settlement court or should she elevate her cause to the Court of Tax Appeals? We say, she acted correctly by appealing to the latter court. An action involving a disputed assessment for internal revenue taxes falls within the exclusive jurisdiction of the Court of Tax Appeals.2 It is in that forum, to the exclusion of the Court of First Instance,3 where she could ventilate her defenses against the assessment. Moreover, the settlement court, where the Commissioner would wish Lilia Yusay to contest the assessment, is of limited jurisdiction. And under the Rules,4 its authority relates only to matters having to do with the settlement of estates and probate of wills of deceased persons.5 Said court has no jurisdiction to adjudicate the contentions in question, which assuming they do not come exclusively under the Tax Court's cognizance must be submitted to the Court of First Instance in the exercise of its general jurisdiction.6 We now come to the issue of prescription. Lilia Yusay claims that since the latest assessment was issued only on February 13, 1958 or eight years, nine months and two days from the filing of the estate and inheritance tax return, the Commissioner's right to make it has expired. She would rest her stand on Section 331 of the Tax Code which limits the right of the Commissioner to assess the tax within five years from the filing of the return. The Commissioner claims that fraud attended the filing of the return; that this being so, Section 332(a) of the Tax Code would apply.7 It may be well to note that the assessment letter itself (Exhibit 22) did not impute fraud in the return with intent to evade payment of tax. Precisely, no surcharge for fraud was imposed. In his answer to the petition for review filed by Lilia Yusay in the Court of Tax Appeals, the Commissioner alleged no fraud. Instead, he broached the insufficiency of the return as barring the commencement of the running of the statute of limitations. He raised the point of fraud for the first time in the proceedings, only in his memorandum filed with the Tax Court subsequent to resting his case. Said Court rejected the plea of fraud for lack of allegation and proof, and ruled that the return, although not accurate, was sufficient to start the period of prescription. Fraud is a question of fact.8 The circumstances constituting it must be alleged and proved in the court below.9 And the finding of said court as to its existence and non-existence is final unless clearly shown to be erroneous.10 As the court a quo found that no fraud

was alleged and proved therein, We see no reason to entertain the Commissioner's assertion that the return was fraudulent. The conclusion, however, that the return filed by Jose S. Yusay was sufficient to commence the running of the prescriptive period under Section 331 of the Tax Code rests on no solid ground. Paragraph (a) of Section 93 of the Tax Code lists the requirements of a valid return. It states: (a) Requirements.In all cases of inheritance or transfers subject to either the estate tax or the inheritance tax, or both, or where, though exempt from both taxes, the gross value of the estate exceeds three thousand pesos, the executor, administrator, or anyone of the heirs, as the case may be, shall file a return under oath in duplicate, setting forth (1) the value of the gross estate of the decedent at the time of his death, or, in case of a nonresident not a citizen of the Philippines ; (2) the deductions allowed from gross estate in determining net estate as defined in section eightynine; (3) such part of such information as may at the time be ascertainable and such supplemental data as may be necessary to establish the correct taxes. A return need not be complete in all particulars. It is sufficient if it complies substantially with the law. There is substantial compliance (1) when the return is made in good faith and is not false or fraudulent; (2) when it covers the entire period involved; and (3) when it contains information as to the various items of income, deduction and credit with such definiteness as to permit the computation and assessment of the tax.11 There is no question that the state and inheritance tax return filed by Jose S. Yusay was substantially defective. First, it was incomplete. It declared only ninety-three parcels of land representing about 400 hectares and left out ninety-two parcels covering 503 hectares. Said huge under declaration could not have been the result of an over-sight or mistake. As found in L11378, supra note 7, Jose S. Yusay very well knew of the existence of the ommited properties. Perhaps his motive in under declaring the inventory of properties attached to the return was to deprive Lilia Yusay from inheriting her legal share in the hereditary estate, but certainly not because he honestly believed that they did not form part of the gross estate. Second, the return mentioned no heir. Thus, no inheritance tax could be assessed. As a matter of law, on the basis of the return, there would be no occasion for the imposition of estate and inheritance taxes. When there is no heir - the return showed none the intestate estate is escheated to the State.12 The State taxes not itself. In a case where the return was made on the wrong form, the Supreme Court of the United States held that the filing thereof did not start the running of the period of limitations.13 The reason is that the return submitted did not contain the necessary information required in the correct form. In this jurisdiction, however, the Supreme Court refrained from applying the said ruling of the United States Supreme Court in Collector of Internal Revenue v. Central Azucarera de Tarlac, L-11760-61, July 31, 1958, on the ground that the return was complete in itself although inaccurate.

To our mind, it would not make much difference where a return is made on the correct form prescribed by the Bureau of Internal Revenue if the data therein required are not supplied by the taxpayer. Just the same, the necessary information for the assessment of the tax would be missing. The return filed in this case was so deficient that it prevented the Commissioner from computing the taxes due on the estate. It was as though no return was made. The Commissioner had to determine and assess the taxes on data obtained, not from the return, but from other sources. We therefore hold the view that the return in question was no return at all as required in Section 93 of the Tax Code. The law imposes upon the taxpayer the burden of supplying by the return the information upon which an assessment would be based.14 His duty complied with, the taxpayer is not bound to do anything more than to wait for the Commissioner to assess the tax. However, he is not required to wait forever. Section 331 of the Tax Code gives the Commissioner five years within which to make his assessment.15 Except, of course, if the taxpayer failed to observe the law, in which case Section 332 of the same Code grants the Commissioner a longer period. Non-observance consists in filing a false or fraudulent return with intent to evade the tax or in filing no return at all. Accordingly, for purposes of determining whether or not the Commissioner's assessment of February 13, 1958 is barred by prescription, Section 332(a) which is an exception to Section 331 of the Tax Code finds application.16 We quote Section 332(a): SEC. 332. Exceptions as to period of limitation of assessment and collection of taxes. (a) In the case of a false or fraudulent return with intent to evade tax or of a failure to file a return, the tax may be assessed, or a proceeding in court for the collection of such tax may be begun without assessment, at any time within ten years after the discovery of the falsity, fraud or omission. As stated, the Commissioner came to know of the identity of the heirs on September 24, 1953 and the huge underdeclaration in the gross estate on July 12, 1957. From the latter date, Section 94 of the Tax Code obligated him to make a return or amend one already filed based on his own knowledge and information obtained through testimony or otherwise, and subsequently to assess thereon the taxes due. The running of the period of limitations under Section 332(a) of the Tax Code should therefore be reckoned from said date for, as aforesaid, it is from that time that the Commissioner was expected by law to make his return and assess the tax due thereon. From July 12, 1957 to February 13, 1958, the date of the assessment now in dispute, less than ten years have elapsed. Hence, prescription did not abate the Commissioner's right to issue said assessment. Anent the Commissioner's contention that Lilia Yusay is estopped from raising the defense of prescription because she failed to raise the same in her answer to the motion for allowance of claim and for the payment of taxes filed in the settlement court (Court of First Instance of Iloilo), suffice it to state that it would be unjust to the taxpayer if We were to sustain such a view. The Court of First Instance acting as a settlement court is not the proper tribunal to pass upon such defense, therefore it would be but futile to raise it

therein. Moreover, the Tax Code does not bar the right to contest the legality of the tax after a taxpayer pays it. Under Section 306 thereof, he can pay the tax and claim a refund therefor. A fortiori his willingness to pay the tax is no waiver to raise defenses against the tax's legality. WHEREFORE, the judgment appealed from is set aside and another entered affirming the assessment of the Commissioner of Internal Revenue dated February 13, 1958. Lilia Yusay Gonzales, as administratrix of the intestate estate of Matias Yusay, is hereby ordered to pay the sums of P16,246.04 and P39,178.12 as estate and inheritance taxes, respectively, plus interest and surcharge for delinquency in accordance with Section 101 of the National Internal Revenue Code, without prejudice to reimbursement from her co-administratrix, Florencia Piccio Vda. de Yusay for the latter's corresponding tax liability. No costs. So ordered. Concepcion, C.J., Reyes, J.B.L., Barrera, Dizon, Regala, Makalintal, Sanchez and Castro, JJ., concur. Zaldivar, J., took no part.

the net estate was found to be worth P410,518.38 (p. 105, B.I.R. records) or about more than twice the original amount declared in the return. In the subsequent investigation of this case, it was also determined that the heirs of the deceased were Jose S. Yusay, a legitimate son, and Lilia Yusay, an acknowledged natural child, (petitioner herein). Under the circumstances, we believe the return filed on May 11, 1949 was false or fraudulent in the sense that the value of the properties were underdeclared and that the said return was also incomplete as the heirs to the estate were not specified. Inasmuch as the respondent was not furnished adequate data upon which to base an assessment, the said return cannot be considered a true and complete return sufficient to start the running of the period of limitations of five (5) years prescribed in Section 331 of the Tax Code. In the lower court the defense of the Commissioner of Internal Revenue against Lilia Yusay Gonzales' plea of prescription, centered on the insufficiency and fraudulence or falsity of the return filed by Jose Yusay. The Court of Tax Appeals overruled the Commissioner of Internal Revenue. Said the Tax Code: The provision of Section 332(a) of the Tax Code cannot be invoked in this case as it was neither alleged in respondent's answer, nor proved during the hearing that the return was false or fraudulent with intent to evade the payment of tax. Moreover, the failure of respondent to charge fraud and impose the penalty thereof in the assessments made in 1953, 1955 and 1956 is an eloquent demonstration that the filing of petitioner's transfer tax return was not attended by falsity or fraud with intent to evade tax. xxx xxx xxx

RESOLUTION April 24, 1967 BENGZON, J.P., J.: Respondent Lilia Yusay Gonzales seeks reconsideration of our decision holding her liable for the payment of P97,723.96 as estate and inheritance taxes plus delinquency penalties as administratrix of the intestate estate of Matias Yusay. The grounds raised by her deserve this extended resolution. Firstly, movant maintains that the issue of whether or not the estate and inheritance tax return filed by Jose Yusay on May 13, 1949 was sufficient to start the running of the statute of limitations on assessment, was neither raised in the Court of Tax Appeals nor assigned as error before this Court. The records in the Court of Tax Appeals however show the contrary. Paragraph 2 of the answer filed by the Commissioner of Internal Revenue states: 2. That he likewise admits, as alleged in paragraph 1 thereof having received the letter of the petitioner dated November 27, 1959 (Annex "A" of the Petition for Review), contesting the assessment of estate and inheritance taxes levied against the Intestate Estate of the late Matias Yusay, Special Proceedings No. 459, Court of First Instance of Iloilo, on the ground that the said assessment has already prescribed, but specifically denies the allegation that the assessment have already prescribed, the truth of the matter being that the returns filed on May 11, 1949 cannot be considered as a true, and complete return sufficient to start the running of the period of five (5) years prescribed in Sec. 331 of the Tax Code; This point was discussed in the memorandum of the Commissioner of Internal Revenue, thus: In the estate and inheritance tax return filed by Jose S. Yusay (Exhibits B & 1, pp. 14-20, B.I.R. records) the net value of the estate of the deceased was claimed to be P203,354.00 and no inheritance tax was shown as the heirs were not indicated. In the final computation of the estate by an examiner of the respondent,

But respondent urges upon us that the filing of the return did not start the running of the five (5) year period for the reason that the return did not disclose the heirs of the deceased Matias Yusay, and contained inadequate data regarding the value of the estate. We believe that these mere omissions do not require additional returns for the same. Altho incomplete for being deficient on these matters, the return cannot be regarded as a case of failure to file a return where want of good faith and intent to evade the tax on the part of petitioner are not charged. It served as a sufficient notice to the Commissioner of Internal Revenue to make his assessment and start the running, of the period of limitation. In this connection, it must be borne in mind that the Commissioner is not confined to the taxpayer's return in making assessment of the tax, and for this purpose he may secure additional information from other sources. As was done in the case at bar, he sends investigators to examine the taxpayer's records and other pertinent data. His assessment is based upon the facts uncovered by the investigation (Collector vs. Central Azucarera de Tarlac, G.R. Nos. L-11760 and L-11761, July 31, 1958). Furthermore, the failure to state the heirs in the return can be attributed to the then unsettled conflict raging before the probate court as to who are the heirs of the estate. Such failure could not have been a deliberate attempt to mislead the government in the assessment of the correct taxes.

In his appeal, the Commissioner of Internal Revenue assigned as third error of the Court of Tax Appeals the finding that the assessment in question was "made beyond the five-year statutory period provided in Section 332 (a) of the Tax Code," and that the right of the Commissioner of Internal Revenue to assess the estate and inheritance taxes has already prescribed. To sustain his side, the Commissioner ventilated in his brief, fraud in the filing of the return, absence of certain data from the return which prevented him from assessing thereon the tax due and the pendency in this Court of L-11374 entitled "Intestate Estate of the late Matias Yusay, Jose C. Yusay, Administrator vs. Lilia Yusay Gonzales" which allegedly had the effect of suspending the running of the period of limitations on assessment. Clearly, therefore, it would be incorrect to say that the question of whether or not the return filed by Jose Yusay was sufficient to start the running of the statute of limitations to assess the corresponding tax, was not raised by the Commissioner in the Court of Tax Appeals and in this Court. Second. Movant contend that contrary to Our ruling, the return filed by Jose Yusay was sufficient to start the statute of limitations on assessment. Inasmuch as this question was amply discussed in Our decision sought to be reconsidered, and no new argument was advanced, We deem it unnecessary to pass upon the same. There is no reason for any change on Our stand on this point. Third. Movant insists that since she administers only one-third of the estate of Matias Yusay, she should not be liable for the whole tax. And she suggests that We hold the intestate estate of Matias Yusay liable for said taxes, one-third to be paid by Lilia Yusay Gonzales and two-thirds to be paid by Florencia P. Vda. de Yusay. The foregoing suggestion to require payment of two-thirds of the total taxes by Florencia P. Vda. de Yusay is not acceptable, for she (Florencia P. Vda. de Yusay) is not a party in this case. It should be pointed out that Lilia Yusay Gonzales appealed the whole assessment to the Court of Tax Appeals. Thereupon, the Commissioner of Internal Revenue questioned her legal capacity to institute the appeal on the ground that she administered only onethird of the estate of Matias Yusay. In opposition, she espoused the view, which was sustained by the Tax Court, that in coadministration, the administratrices are regarded as one person and the acts of one of them in relation to the regular administration of the estate are deemed to be the acts of all; hence, each administratrix can represent the whole estate. In advancing such proposition, Lilia Yusay Gonzales represented the whole estate and hoped to benefit from the favorable outcome of the case. For the same reason that she represented her co-administratrix and the whole estate of Matias Yusay, she risked being ordered to pay the whole assessment, should the assessment be sustained. Her change of stand adopted in the motion for reconsideration to the effect that she should be made liable for only one-third of the total tax, would negate her aforesaid proposition before the Court of Tax Appeals. She is now estopped from denying liability for the whole tax. At any rate, estate and inheritance taxes are satisfied from the estate and are to be paid by the executor or administrator.1 Where

there are two or more executors, all of them are severally liable for the payment of the estate tax.2 The inheritance tax, although charged against the account of each beneficiary, should be paid by the executor or administrator.3 Failure to pay the estate and inheritance taxes before distribution of the estate would subject the executor or administrator to criminal liability under Section 107(c) of the Tax Code. It is immaterial therefore that Lilia Yusay Gonzales administers only one-third of the estate and will receive as her share only said portion, for her right to the estate comes after taxes.4 As an administratrix, she is liable for the entire estate tax. As an heir, she is liable for the entire inheritance tax although her liability would not exceed the amount of her share in the estate.5 The entire inheritance tax which amounts to P39,178.12 excluding penalties is obviously much less than her distributive share. Motion for reconsideration denied.

G.R. No. L-56340

June 24, 1983

November 1, 1977 and remanded the same to the PROBATE COURT after denying reconsideration on January 11, 1978. For two years after remand of the case to the PROBATE COURT, QUEMADA filed pleading after pleading asking for payment of his legacy and seizure of the properties subject of said legacy. PASTOR, JR. and SOFIA opposed these pleadings on the ground of pendency of the reconveyance suit with another branch of the Cebu Court of First Instance. All pleadings remained unacted upon by the PROBATE COURT. On March 5, 1980, the PROBATE COURT set the hearing on the intrinsic validity of the will for March 25, 1980, but upon objection of PASTOR, JR. and SOFIA on the e ground of pendency of the reconveyance suit, no hearing was held on March 25. Instead, the PROBATE COURT required the parties to submit their respective position papers as to how much inheritance QUEMADA was entitled to receive under the wig. Pursuant thereto, PASTOR. JR. and SOFIA submitted their Memorandum of authorities dated April 10, which in effect showed that determination of how much QUEMADA should receive was still premature. QUEMADA submitted his Position paper dated April 20, 1980. ATLAS, upon order of the Court, submitted a sworn statement of royalties paid to the Pastor Group of tsn from June 1966 (when Pastor, Sr. died) to February 1980. The statement revealed that of the mining claims being operated by ATLAS, 60% pertained to the Pastor Group 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

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 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

reconsideration thereof on the same date primarily on the ground that the PROBATE COURT gravely abused its discretion when it resolved the question of ownership of the royalties and ordered the payment of QUEMADA's legacy after prematurely passing upon the intrinsic validity of the will. In the meantime, the PROBATE COURT ordered suspension of payment of all royalties due PASTOR, JR. and/or his assignees until after resolution of oppositors' motion for reconsideration. Before the Motion for Reconsideration could be resolved, however, PASTOR, JR., this time joined by his wife Ma. ELENA ACHAVAL DE PASTOR, filed with the Court of Appeals a Petition for certiorari and Prohibition with a prayer for writ of preliminary injunction (CA-G.R. No. SP- 11373-R). They assailed the Order dated August 20, 1980 and the writ of execution and garnishment issued pursuant thereto. The petition was denied on November 18, 1980 on the grounds (1) that its filing was premature because the Motion for Reconsideration of the questioned Order was still pending determination by the PROBATE COURT; and (2) that although "the rule that a motion for reconsideration is prerequisite for an action for certiorari is never an absolute rule," the Order assailed is "legally valid. " On December 9, 1980, PASTOR, JR. and his wife moved for reconsideration of the Court of Appeal's decision of November 18, 1980, calling the attention of the appellate court to another order of the Probate Court dated November 11, 1980 (i.e., while their petition for certiorari was pending decision in the appellate court), by which the oppositors' motion for reconsideration of the Probate Court's Order of August 20, 1980 was denied. [The November 11 Order declared that the questions of intrinsic validity of the will and of ownership over the mining claims (not the royalties alone) had been finally adjudicated by the final and executory Order of December 5, 1972, as affirmed by the Court of Appeals and the Supreme Court, thereby rendering moot and academic the suit for reconveyance then pending in the Court of First Instance of Cebu, Branch IX. It clarified that only the 33% share of PASTOR, JR. in the royalties (less than 7.5% share which he had assigned to QUEMADA before PASTOR, SR. died) was to be garnished and that as regards PASTOR, SR.'s 42% share, what was ordered was just the transfer of its possession to the custody of the PROBATE COURT through the special administrator. Further, the Order granted QUEMADA 6% interest on his unpaid legacy from August 1980 until fully paid.] Nonetheless, the Court of Appeals denied reconsideration. Hence, this Petition for Review by certiorari with prayer for a writ of pre y injunction, assailing the decision of the Court of Appeals dated November 18, 1980 as well as the orders of the Probate Court dated August 20, 1980, November 11, 1980 and December 17, 1980, Med by petitioners on March 26, 1981, followed by a Supplemental Petition with Urgent Prayer for Restraining Order. In April 1981, the Court (First Division) issued a writ of preliminary injunction, the lifting of which was denied in the Resolution of the same Division dated October 18, 1982, although the bond of petitioners was increased from P50,000.00 to P100,000.00. Between December 21, 1981 and October 12, 1982, private respondent filed seven successive motions for early resolution.

Five of these motions expressly prayed for the resolution of the question as to whether or not the petition should be given due course. On October 18, 1982, the Court (First Division) adopted a resolution stating that "the petition in fact and in effect was given due course when this case was heard on the merits on September 7, (should be October 21, 1981) and concise memoranda in amplification of their oral arguments on the merits of the case were filed by the parties pursuant to the resolution of October 21, 1981 . . . " and denied in a resolution dated December 13, 1982, private respondent's "Omnibus motion to set aside resolution dated October 18, 1982 and to submit the matter of due course to the present membership of the Division; and to reassign the case to another ponente." Upon Motion for Reconsideration of the October 18, 1982 and December 13, 1982 Resolutions, the Court en banc resolved to CONFIRM the questioned resolutions insofar as hey resolved that the petition in fact and in effect had been given due course. II. ISSUES:

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. 1. DISCUSSION: Issue of Ownership

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. 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;

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

(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. (PhilippineAmerican 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?

(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 farfetched. (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 -

(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

(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 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.

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. 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.

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.: In this Petition for Review on Certiorari, Government action is once again assailed as precipitate and unfair, suffering the basic and oftly implored requisites of due process of law. Specifically, the petition assails the Decision[1] of the Court of Appeals dated November 29, 1994 in CA-G.R. SP No. 31363, where the said court held: "In view of all the foregoing, we rule that the deficiency income tax assessments and estate tax assessment, are already final and (u)nappealable -and- the subsequent levy of real properties is a tax remedy resorted to by the government, sanctioned by Section 213 and 218 of the National Internal Revenue Code. This summary tax remedy is distinct and separate from the other tax remedies (such as Judicial Civil actions and Criminal actions), and is not affected or precluded by the pendency of any other tax remedies instituted by the government. WHEREFORE, premises considered, judgment is hereby rendered DISMISSING the petition for certiorari with prayer for Restraining Order and Injunction. No pronouncements as to costs. SO ORDERED." More than seven years since the demise of the late Ferdinand E. Marcos, the former President of the Republic of the Philippines, the matter of the settlement of his estate, and its dues to the government in estate taxes, are still unresolved, the latter issue being now before this Court for resolution. Specifically, petitioner Ferdinand R. Marcos II, the eldest son of the decedent, questions the actuations of the respondent Commissioner of Internal Revenue in assessing, and collecting through the summary remedy of Levy on Real Properties, estate and income tax delinquencies upon the estate and properties of his father, despite the pendency of the proceedings on probate of the will of the late president, which is docketed as Sp. Proc. No. 10279 in the Regional Trial Court of Pasig, Branch 156. Petitioner had filed with the respondent Court of Appeals a Petition for Certiorari and Prohibition with an application for writ of preliminary injunction and/or temporary restraining order on June 28, 1993, seeking to I. Annul and set aside the Notices of Levy on real property dated February 22, 1993 and May 20, 1993, issued by respondent Commissioner of Internal Revenue; II. Annul and set aside the Notices of Sale dated May 26, 1993; III. Enjoin the Head Revenue Executive Assistant Director II (Collection Service), from proceeding with the Auction of the real properties covered by Notices of Sale.

After the parties had pleaded their case, the Court of Appeals rendered its Decision[2] on November 29, 1994, ruling that the deficiency assessments for estate and income tax made upon the petitioner and the estate of the deceased President Marcos have already become final and unappealable, and may thus be enforced by the summary remedy of levying upon the properties of the late President, as was done by the respondent Commissioner of Internal Revenue. "WHEREFORE, premises considered judgment is hereby rendered DISMISSING the petition for Certiorari with prayer for Restraining Order and Injunction. No pronouncements as to cost. SO ORDERED." Unperturbed, petitioner is now before us assailing the validity of the appellate court's decision, assigning the following as errors: A. RESPONDENT COURT MANIFESTLY ERRED IN RULING THAT THE SUMMARY TAX REMEDIES RESORTED TO BY THE GOVERNMENT ARE NOT AFFECTED AND PRECLUDED BY THE PENDENCY OF THE SPECIAL PROCEEDING FOR THE ALLOWANCE OF THE LATE PRESIDENT'S ALLEGED WILL. TO THE CONTRARY, THIS PROBATE PROCEEDING PRECISELY PLACED ALL PROPERTIES WHICH FORM PART OF THE LATE PRESIDENT'S ESTATE IN CUSTODIA LEGIS OF THE PROBATE COURT TO THE EXCLUSION OF ALL OTHER COURTS AND ADMINISTRATIVE AGENCIES. B. RESPONDENT COURT ARBITRARILY ERRED IN SWEEPINGLY DECIDING THAT SINCE THE TAX ASSESSMENTS OF PETITIONER AND HIS PARENTS HAD ALREADY BECOME FINAL AND UNAPPEALABLE, THERE WAS NO NEED TO GO INTO THE MERITS OF THE GROUNDS CITED IN THE PETITION. INDEPENDENT OF WHETHER THE TAX ASSESSMENTS HAD ALREADY BECOME FINAL, HOWEVER, PETITIONER HAS THE RIGHT TO QUESTION THE UNLAWFUL MANNER AND METHOD IN WHICH TAX COLLECTION IS SOUGHT TO BE ENFORCED BY RESPONDENTS COMMISSIONER AND DE GUZMAN. THUS, RESPONDENT COURT SHOULD HAVE FAVORABLY CONSIDERED THE MERITS OF THE FOLLOWING GROUNDS IN THE PETITION: (1) The Notices of Levy on Real Property were issued beyond the period provided in the Revenue Memorandum Circular No. 38-68. (2) [a] The numerous pending court cases questioning the late President's ownership or interests in several properties (both personal and real) make the total value of his estate, and the consequent estate tax due, incapable of exact pecuniary determination at this time. Thus, respondents assessment of the estate tax and their issuance of the Notices of Levy and Sale are premature, confiscatory and oppressive. [b] Petitioner, as one of the late President's compulsory heirs, was never notified, much less served with copies of the Notices of

Levy, contrary to the mandate of Section 213 of the NIRC. As such, petitioner was never given an opportunity to contest the Notices in violation of his right to due process of law. C. ON ACCOUNT OF THE CLEAR MERIT OF THE PETITION, RESPONDENT COURT MANIFESTLY ERRED IN RULING THAT IT HAD NO POWER TO GRANT INJUNCTIVE RELIEF TO PETITIONER. SECTION 219 OF THE NIRC NOTWITHSTANDING, COURTS POSSESS THE POWER TO ISSUE A WRIT OF PRELIMINARY INJUNCTION TO RESTRAIN RESPONDENTS COMMISSIONER'S AND DE GUZMAN'S ARBITRARY METHOD OF COLLECTING THE ALLEGED DEFICIENCY ESTATE AND INCOME TAXES BY MEANS OF LEVY. The facts as found by the appellate court are undisputed, and are hereby adopted: "On September 29, 1989, former President Ferdinand Marcos died in Honolulu, Hawaii, USA. On June 27, 1990, a Special Tax Audit Team was created to conduct investigations and examinations of the tax liabilities and obligations of the late president, as well as that of his family, associates and "cronies". Said audit team concluded its investigation with a Memorandum dated July 26, 1991. The investigation disclosed that the Marcoses failed to file a written notice of the death of the decedent, an estate tax returns [sic], as well as several income tax returns covering the years 1982 to 1986, -all in violation of the National Internal Revenue Code (NIRC). Subsequently, criminal charges were filed against Mrs. Imelda R. Marcos before the Regional Trial of Quezon City for violations of Sections 82, 83 and 84 (has penalized under Sections 253 and 254 in relation to Section 252- a & b) of the National Internal Revenue Code (NIRC). The Commissioner of Internal Revenue thereby caused the preparation and filing of the Estate Tax Return for the estate of the late president, the Income Tax Returns of the Spouses Marcos for the years 1985 to 1986, and the Income Tax Returns of petitioner Ferdinand 'Bongbong' Marcos II for the years 1982 to 1985. On July 26, 1991, the BIR issued the following: (1) Deficiency estate tax assessment no. FAC-2-89-91-002464 (against the estate of the late president Ferdinand Marcos in the amount of P23,293,607,638.00 Pesos); (2) Deficiency income tax assessment no. FAC-1-85-91-002452 and Deficiency income tax assessment no. FAC-1-86-91-002451 (against the Spouses Ferdinand and Imelda Marcos in the amounts of P149,551.70 and P184,009,737.40 representing deficiency income tax for the years 1985 and 1986); (3) Deficiency income tax assessment nos. FAC1-82-91-002460 to FAC-1-85-91-002463 (against petitioner Ferdinand 'Bongbong' Marcos II in the amounts of P258.70 pesos; P9,386.40 Pesos; P4,388.30 Pesos; and P6,376.60 Pesos representing his deficiency income taxes for the years 1982 to 1985). The Commissioner of Internal Revenue avers that copies of the deficiency estate and income tax assessments were all personally and constructively served on August 26, 1991 and September 12,

1991 upon Mrs. Imelda Marcos (through her caretaker Mr. Martinez) at her last known address at No. 204 Ortega St., San Juan, M.M. (Annexes 'D' and 'E' of the Petition). Likewise, copies of the deficiency tax assessments issued against petitioner Ferdinand 'Bongbong' Marcos II were also personally and constructively served upon him (through his caretaker) on September 12, 1991, at his last known address at Don Mariano Marcos St. corner P. Guevarra St., San Juan, M.M. (Annexes 'J' and 'J-1' of the Petition). Thereafter, Formal Assessment notices were served on October 20, 1992, upon Mrs. Marcos c/o petitioner, at his office, House of Representatives, Batasan Pambansa, Quezon City. Moreover, a notice to Taxpayer inviting Mrs. Marcos (or her duly authorized representative or counsel), to a conference, was furnished the counsel of Mrs. Marcos, Dean Antonio Coronel - but to no avail. The deficiency tax assessments were not protested administratively, by Mrs. Marcos and the other heirs of the late president, within 30 days from service of said assessments. On February 22, 1993, the BIR Commissioner issued twenty-two notices of levy on real property against certain parcels of land owned by the Marcoses - to satisfy the alleged estate tax and deficiency income taxes of Spouses Marcos. On May 20, 1993, four more Notices of Levy on real property were issued for the purpose of satisfying the deficiency income taxes. On May 26, 1993, additional four (4) notices of Levy on real property were again issued. The foregoing tax remedies were resorted to pursuant to Sections 205 and 213 of the National Internal Revenue Code (NIRC). In response to a letter dated March 12, 1993 sent by Atty. Loreto Ata (counsel of herein petitioner) calling the attention of the BIR and requesting that they be duly notified of any action taken by the BIR affecting the interest of their client Ferdinand 'Bongbong Marcos II, as well as the interest of the late president - copies of the aforesaid notices were served on April 7, 1993 and on June 10, 1993, upon Mrs. Imelda Marcos, the petitioner, and their counsel of record, 'De Borja, Medialdea, Ata, Bello, Guevarra and Serapio Law Office'. Notices of sale at public auction were posted on May 26, 1993, at the lobby of the City Hall of Tacloban City. The public auction for the sale of the eleven (11) parcels of land took place on July 5, 1993. There being no bidder, the lots were declared forfeited in favor of the government. On June 25, 1993, petitioner Ferdinand 'Bongbong' Marcos II filed the instant petition for certiorari and prohibition under Rule 65 of the Rules of Court, with prayer for temporary restraining order and/or writ of preliminary injunction." It has been repeatedly observed, and not without merit, that the enforcement of tax laws and the collection of taxes, is of paramount importance for the sustenance of government. Taxes are the lifeblood of the government and should be collected without unnecessary hindrance. However, such collection should be made in accordance with law as any arbitrariness will negate the

very reason for government itself. It is therefore necessary to reconcile the apparently conflicting interests of the authorities and the taxpayers so that the real purpose of taxation, which is the promotion of the common good, may be achieved."[3] Whether or not the proper avenues of assessment and collection of the said tax obligations were taken by the respondent Bureau is now the subject of the Court's inquiry. Petitioner posits that notices of levy, notices of sale, and subsequent sale of properties of the late President Marcos effected by the BIR are null and void for disregarding the established procedure for the enforcement of taxes due upon the estate of the deceased. The case of Domingo vs. Garlitos[4] is specifically cited to bolster the argument that "the ordinary procedure by which to settle claims of indebtedness against the estate of a deceased, person, as in an inheritance (estate) tax, is for the claimant to present a claim before the probate court so that said court may order the administrator to pay the amount therefor." This remedy is allegedly, exclusive, and cannot be effected through any other means. Petitioner goes further, submitting that the probate court is not precluded from denying a request by the government for the immediate payment of taxes, and should order the payment of the same only within the period fixed by the probate court for the payment of all the debts of the decedent. In this regard, petitioner cites the case of Collector of Internal Revenue vs. The Administratrix of the Estate of Echarri (67 Phil 502), where it was held that: "The case of Pineda vs. Court of First Instance of Tayabas and Collector of Internal Revenue (52 Phil 803), relied upon by the petitioner-appellant is good authority on the proposition that the court having control over the administration proceedings has jurisdiction to entertain the claim presented by the government for taxes due and to order the administrator to pay the tax should it find that the assessment was proper, and that the tax was legal, due and collectible. And the rule laid down in that case must be understood in relation to the case of Collector of Customs vs. Haygood, supra., as to the procedure to be followed in a given case by the government to effectuate the collection of the tax. Categorically stated, where during the pendency of judicial administration over the estate of a deceased person a claim for taxes is presented by the government, the court has the authority to order payment by the administrator; but, in the same way that it has authority to order payment or satisfaction, it also has the negative authority to deny the same. While there are cases where courts are required to perform certain duties mandatory and ministerial in character, the function of the court in a case of the present character is not one of them; and here, the court cannot be an organism endowed with latitude of judgment in one direction, and converted into a mere mechanical contrivance in another direction." On the other hand, it is argued by the BIR, that the state's authority to collect internal revenue taxes is paramount. Thus, the pendency of probate proceedings over the estate of the deceased does not preclude the assessment and collection, through summary remedies, of estate taxes over the same. According to the respondent, claims for payment of estate and income taxes due and

assessed after the death of the decedent need not be presented in the form of a claim against the estate. These can and should be paid immediately. The probate court is not the government agency to decide whether an estate is liable for payment of estate of income taxes. Well-settled is the rule that the probate court is a court with special and limited jurisdiction. Concededly, the authority of the Regional Trial Court, sitting, albeit with limited jurisdiction, as a probate court over estate of deceased individual, is not a trifling thing. The court's jurisdiction, once invoked, and made effective, cannot be treated with indifference nor should it be ignored with impunity by the very parties invoking its authority. In testament to this, it has been held that it is within the jurisdiction of the probate court to approve the sale of properties of a deceased person by his prospective heirs before final adjudication;[5] to determine who are the heirs of the decedent;[6] the recognition of a natural child;[7] the status of a woman claiming to be the legal wife of the decedent;[8] the legality of disinheritance of an heir by the testator;[9] and to pass upon the validity of a waiver of hereditary rights.[10] The pivotal question the court is tasked to resolve refers to the authority of the Bureau of Internal Revenue to collect by the summary remedy of levying upon, and sale of real properties of the decedent, estate tax deficiencies, without the cognition and authority of the court sitting in probate over the supposed will of the deceased. The nature of the process of estate tax collection has been described as follows: "Strictly speaking, the assessment of an inheritance tax does not directly involve the administration of a decedent's estate, although it may be viewed as an incident to the complete settlement of an estate, and, under some statutes, it is made the duty of the probate court to make the amount of the inheritance tax a part of the final decree of distribution of the estate. It is not against the property of decedent, nor is it a claim against the estate as such, but it is against the interest or property right which the heir, legatee, devisee, etc., has in the property formerly held by decedent. Further, under some statutes, it has been held that it is not a suit or controversy between the parties, nor is it an adversary proceeding between the state and the person who owes the tax on the inheritance. However, under other statutes it has been held that the hearing and determination of the cash value of the assets and the determination of the tax are adversary proceedings. The proceeding has been held to be necessarily a proceeding in rem.[11] In the Philippine experience, the enforcement and collection of estate tax, is executive in character, as the legislature has seen it fit to ascribe this task to the Bureau of Internal Revenue. Section 3 of the National Internal Revenue Code attests to this: "Sec. 3. Powers and duties of the Bureau.-The powers and duties of the Bureau of Internal Revenue shall comprehend the assessment and collection of all national internal revenue taxes, fees, and charges, and the enforcement of all forfeitures, penalties, and fines connected therewith, including the execution of

judgments in all cases decided in its favor by the Court of Tax Appeals and the ordinary courts. Said Bureau shall also give effect to and administer the supervisory and police power conferred to it by this Code or other laws." Thus, it was in Vera vs. Fernandez[12] that the court recognized the liberal treatment of claims for taxes charged against the estate of the decedent. Such taxes, we said, were exempted from the application of the statute of non-claims, and this is justified by the necessity of government funding, immortalized in the maxim that taxes are the lifeblood of the government. Vectigalia nervi sunt rei publicae - taxes are the sinews of the state. "Taxes assessed against the estate of a deceased person, after administration is opened, need not be submitted to the committee on claims in the ordinary course of administration. In the exercise of its control over the administrator, the court may direct the payment of such taxes upon motion showing that the taxes have been assessed against the estate." Such liberal treatment of internal revenue taxes in the probate proceedings extends so far, even to allowing the enforcement of tax obligations against the heirs of the decedent, even after distribution of the estate's properties. "Claims for taxes, whether assessed before or after the death of the deceased, can be collected from the heirs even after the distribution of the properties of the decedent. They are exempted from the application of the statute of non-claims. The heirs shall be liable therefor, in proportion to their share in the inheritance."[13] "Thus, the Government has two ways of collecting the taxes in question. One, by going after all the heirs and collecting from each one of them the amount of the tax proportionate to the inheritance received. Another remedy, pursuant to the lien created by Section 315 of the Tax Code upon all property and rights to property belong to the taxpayer for unpaid income tax, is by subjecting said property of the estate which is in the hands of an heir or transferee to the payment of the tax due the estate. (Commissioner of Internal Revenue vs. Pineda, 21 SCRA 105, September 15, 1967.) From the foregoing, it is discernible that the approval of the court, sitting in probate, or as a settlement tribunal over the deceased is not a mandatory requirement in the collection of estate taxes. It cannot therefore be argued that the Tax Bureau erred in proceeding with the levying and sale of the properties allegedly owned by the late President, on the ground that it was required to seek first the probate court's sanction. There is nothing in the Tax Code, and in the pertinent remedial laws that implies the necessity of the probate or estate settlement court's approval of the state's claim for estate taxes, before the same can be enforced and collected. On the contrary, under Section 87 of the NIRC, it is the probate or settlement court which is bidden not to authorize the executor or judicial administrator of the decedent's estate to deliver any distributive share to any party interested in the estate, unless it is shown a Certification by the Commissioner of Internal Revenue that the estate taxes have been paid. This provision disproves the petitioner's contention that it is the probate court which approves the assessment and collection of the estate tax.

If there is any issue as to the validity of the BIR's decision to assess the estate taxes, this should have been pursued through the proper administrative and judicial avenues provided for by law. Section 229 of the NIRC tells us how: "Sec. 229. Protesting of assessment.-When the Commissioner of Internal Revenue or his duly authorized representative finds that proper taxes should be assessed, he shall first notify the taxpayer of his findings. Within a period to be prescribed by implementing regulations, the taxpayer shall be required to respond to said notice. If the taxpayer fails to respond, the Commissioner shall issue an assessment based on his findings. Such assessment may be protested administratively by filing a request for reconsideration or reinvestigation in such form and manner as may be prescribed by implementing regulations within (30) days from receipt of the assessment; otherwise, the assessment shall become final and unappealable. If the protest is denied in whole or in part, the individual, association or corporation adversely affected by the decision on the protest may appeal to the Court of Tax Appeals within thirty (30) days from receipt of said decision; otherwise, the decision shall become final, executory and demandable. (As inserted by P.D. 1773)" Apart from failing to file the required estate tax return within the time required for the filing of the same, petitioner, and the other heirs never questioned the assessments served upon them, allowing the same to lapse into finality, and prompting the BIR to collect the said taxes by levying upon the properties left by President Marcos. Petitioner submits, however, that "while the assessment of taxes may have been validly undertaken by the Government, collection thereof may have been done in violation of the law. Thus, the manner and method in which the latter is enforced may be questioned separately, and irrespective of the finality of the former, because the Government does not have the unbridled discretion to enforce collection without regard to the clear provision of law."[14] 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 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. SO ORDERED.

G.R. No. L-26651 June 18, 1976 COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. THE LATE LINO GUTIERREZ, SUBSTITUTED BY ANDREA C. VDA. DE GUTIERREZ, ANTONIO D. GUTIERREZ, GUILLERMO. D. GUTIERREZ, SANTIAGO D. GUTIERREZ, TOMAS D. GUTIERREZ and the COURT OF TAX APPEALS, respondents. Solicitor General Antonio P. Barredo, Assistant Solicitor General Felicisimo R. Rosete, Solicitor Lolita O. Gal-lang and special Attorney Michaella R. Balasbas for petitioner. Rosendo J. Tansinsin & Rosendo G. Tansinsin for respondents. ESGUERRA, J:

The only issue before Us is the proper interpretation for purposes of execution of the dispositive portion of Our decision in G.R. No. L-19537, entitled "The Late Lino Gutierrez, substituted by Andrea C. Vda. de Gutierrez, Antonio D. Gutierrez, Guillermo D. Gutierrez, Santiago D. Gutierrez, and Tomas D. Gutierrez, petitioners, vs. Commissioner of Internal Revenue", promulgated May 20, 1965, which reads: Wherefore, the decision appealed from is modified and Lino Gutierrez and/or his heirs, namely Andrea C. Vda. de Gutierrez, Antonio D. Gutierrez, Santiago D. Gutierrez, Guillermo D. Gutierrez and Tomas D. Gutierrez, are ordered to pay the sums of P1,687.00, P848.00, P5,374.00, and P4,020.00, as deficiency income tax for the years 1951, 1952, 1953 and 1954, respectively or a total of P11,929.00, plus the statutory penalties in case of delinquency. No costs. (Emphasis for emphasis). which was amended by Our Resolution of June 11, 1965, as follows: Wherefore, the decision appealed from is modified and ... are ordered to pay the sums of P1,132.00, P845.00, P5,341.00, and P4,020.00, as deficiency income tax for the years 1951, 1952, 1953 and 1954, respectively, or a total of P11.338.00, plus the statutory penalties in case of delinquency. No costs. (Emphasis supplied). When the foregoing decision became final and executory the petitioner Commissioner of Internal Revenue filed a motion with respondent Court of Tax Appeals on April 20, 1966, requesting issuance of a writ of execution against the private respondents Gutierrez "for the satisfaction of the sum of P11,338 plus the statutory penalties due to delinquency (5% surcharge and 1% monthly interest from August 15, 1956, until full payment)". To this motion respondents Gutierrez filed an opposition on two grounds, namely "(1) that the prayer for execution of the 5% surcharge and 1% monthly interest from August 15, 1956, until full payment thereof is contrary to the decision of the Supreme Court; and (2) that the claim of respondent (commissioner) for the sum of P11,338.00 not having been presented in the intestate estate of the deceased Lino Gutierrez within the time prescribed by law, has prescribed and the same cannot be enforced." Respondent Court of Tax Appeals in its resolution of June 30, 1966, ruled that Our decision can be enforced against the heirs of Lino Gutierrez without filing the claim in the intestate proceedings, inasmuch as the heirs have been substituted for the deceased in G.R. No. L-19537 and this Court expressly ordered "Lino Gutierrez and/or his heirs" to pay. This portion of respondent Court of Tax Appeals' ruling is undoubtedly correct and is not in question here, otherwise the effect of Our decision in G.R. No. L-19537 would be completely nullified and the respondent Gutierrez would be enabled to evade payment of deficiency income tax by resorting to sheer technicality. Besides, this Court acquired jurisdiction over them as individuals when they were substituted as parties after the death of Lino Gutierrez and Our decision expressly ordered "Lino

Gutierrez and/or his heirs" (naming them individually) to pay the tax deficiency. What is questioned here by petitioner Commissioner of Internal Revenue is the ruling of the respondent Court of Tax Appeals that "there is nothing" in Our decision "which would justify the interpretation that the statutory penalties of 5% surcharge and 1% monthly interest should be charged from August 15, 1956, until full payment", since "if that was the Intention of the Supreme Court, it should have been so stated in the dispositive portion of its decision," hence "petitioners (Gutierrez) are liable for delinquency interest at the rate of one per centum (1%) a month from July 23, 1965, when the decision of the Supreme Court in G.R. No. L19537 became final and executory, until the deficiency income tax is paid". It added: "However, they are not liable for the 5% surcharge, which is imposable only if the deficiency income tax in question is not paid within 30 days from and after date of notice and demand from the Commissioner for such payment (See Sec. 51(c) (3) Revised Internal Revenue Code)." Its order was "to issue the corresponding writ of execution against the petitioners (Gutierrez.) for the satisfaction of the sum of P11,338.00, plus interest at the rate of one per centum (1%) a month from July 23, 1965 until paid." Both parties asked for a reconsideration of the aforementioned resolution of June 30, 1966, but the respondent Court of Tax Appeals denied both motions. But only petitioner Commissioner appealed through the present petition. The crucial point that will resolve the related issues raised by both parties is what We meant when We stated in the dispositive portion of the decision in G.R. No. L-19537, by "a total of P11,338.00, plus the statutory penalties in case of delinquency". Respondent tax court resolved the crucial point, as follows: As regards the claim of respondent with respect to the statutory penalties, it should be noted that, in the dispositive part of the decision, the petitioners are ordered to pay the total sum of P11,338.00, "plus the statutory penalties in case of delinquency." There is nothing in the said decision which would justify the interpretation that the statutory penalties of 5% surcharge and 1% monthly interest should be charged from August 15, 1956 until full payment. If that was the intention of the Supreme Court, it should have been so stated in the dispositive portion of its decision. In our opinion, considering that our decision in this case has been modified by the Supreme Court, petitioners are liable for delinquency interest at the rate of one per centum (1%) a month from July 23, 1965, when the decision of the Supreme Court in G.R. No. L-19537 became final and executory, until the deficiency income tax is paid. However, they are not liable for the 5% surcharge, which is imposable only if the deficiency income tax in question is not paid within 30 days from and after the date of notice and demand from the Commissioner for such payment. (See Sec. 51(c) (3), Rev. Code) (Emphasis supplied). The tax court's ruling that the one (1%) per cent monthly delinquency interest is payable only from the date of finality of Our decision on July 23, 1965 (not from August 15, 1956 as first contended by petitioner) is now final, since petitioner conceded the correctness of the ruling and did not raise the same as an issue in his motion for reconsideration, as follows: Considering previous decisions of this Honorable Court and the Supreme Court wherein modified assessments of the Commissioner of Internal Revenue earn interest only if not paid within 30 days from the date the decision becomes final and executory, that part of the resolution finding the petitioners liable

for delinquency interest at the rate of 1% a month from July 23, 1965 may be conceded. We request reconsideration, however, of that part of the resolution finding petitioners not liable for the 5% surcharge. (Annex F, petition) Petitioner's assignment of error on the question of the starting date of delinquency interest may be summarily dismissed. Suffice it to state that the ruling is fully justified by existing jurisprudence based on the text of Section 51 of the Tax Code, as amended by section 8 of Republic Act 2343 approved on June 20, 1959 and providing expressly that ... (e) Additions to tax in case of non payment-(1). . . (2) DeficiencyWhen a deficiency or any interest assessed in connection therewith under paragraph (d) of this section, or any addition to the taxes provided for in section seventy-two of this Code is not paid in full within 30 days from the date of notice and demand from the Commissioner of Internal Revenue, there shall be collected upon the unpaid amount, as part of the tax, interest at the rate of one per centum a month from the date of such notice and demand until it is paid; Provided, That the maximum amount that may be collected as interest on deficiency shall in no case exceed the amount corresponding to a period of three years, the present provisions regarding prescription to the contrary notwithstanding. (3) Surcharge If any amount of tax included in the notice and demand from the Commissioner of Internal Revenue is not paid in full within 30 days after such notice and demand, there shall be collected in addition to the interest prescribed herein and in paragraph (d) above and as part of the tax a surcharge of five per centum of the amount of tax unpaid. As to the only remaining issue herein raised by petitioner that respondents should be held liable for the 5% surcharge as delinquency, penalty on the deficiency income tax of P11,338.00 or the amount of P566.90, We find that the same is justly due and collectible if respondents failed, as appears to be the case, to pay in full the amount of the deficiency tax within 30 days counted from date of finality of Our basic decision of May 20, 1965 and not "from date of notice and demand from the Commissioner for such payment" as ruled by the tax court. The tax court's ruling in this aspect would run counter to the consistent line of decision of this court (as well as of the tax court) that in cases when the assessments of the Commissioner of Internal Revenue are modified and/or reduced by the said courts, the taxpayers are ordered to pay the 5% surcharge and 1% monthly interest from the date the decision becomes final and executory, if the tax is not paid within 30 days from the date the decision becomes final and executory, without the necessity of notice and demand from the Commissioner of Internal Revenue for such payment. (Please see Kuenzle and Streiff, Inc. vs. Commissioner of Internal Revenue, C.T.A. Case No. 551, April 28, 1961; Talisay-Silay Mining Co., Inc. vs. Commissioner of Internal Revenue, C.T.A. Case Nos. 1399 and 1406, Dec. 29, 1965, amended March 1, 1966 C.M. Hoskins & Co., Inc. vs. Commissioner of Internal Revenue, C.T.A. Case No. 1383, Nov. 8, 1964; Connell Bros. Company (Phil) vs. Commissioner of Internal Revenue, C.T.A. Case Nos. 411 & 610, April 30, 1966; The Phil. Guaranty Co., Inc. vs. Commissioner of Internal Revenue, G.R. No. L-22074, April 30, 1965).
WHEREFORE, the appealed resolutions of respondent Court of Tax Appeals dated June 30, 1966 and October 4, 1966 are accordingly modified as above indicated. Without costs. SO ORDERED.

G.R. No. L-9197 October 22, 1914 HERMOGENA SANTOS, plaintiff-appellant, vs. MIGUEL ROBLEDO, ET AL., defendants-appellees. Jose Santiago for appellant. Leodegario Azarraga for appellees. TORRES, J.: In this action to recover possession of a parcel of land with three light-material warehouses and the collection of unpaid rents, together with the recovery of damages to the amount of P1,200, the plaintiff appealed by a bill of exceptions from the judgment rendered on May 6, 1913, by the Honorable Charles S. Lobingier, judge, wherein he held that the plaintiff had not established any right to the relief sought and therefore adjudged that she take nothing by her complaint and that the first two defendants recover their costs. On March 5, 1913, counsel for Hermogena Santos filed a complaint in the Court of First Instance of this city and alleged therein that on March 1, 1905, Santiago Herrera and his wife Basilia Tolentino, in an instrument ratified before a notary, deed to the plaintiff a building lot with three warehouses, the boundaries and area of the said land being described in the complaint; that the plaintiff entered into possession of this property on the date above mentioned and the same without opposition or interruption of any sort and collected the rents therefrom until January 28, 1913; that on this date, Miguel Robledo, who was found to be a creditor of the said Santiago Herrera, prayed for the execution of the said judgment; that at the instigation of Robledo, the sheriff proceeded to seize the said lot and, after the publication of notice, sold the same at public auction on the 17th of the following month of February; that, although the plaintiff had intervened and prayed for the recall of the writ for the reason that the lot levied upon was her property, the sheriff, under security of the bond furnished by the creditor Robledo, sold the said lot and Robledo himself purchased it; that the plaintiff was thus deprived of her property and of the rents accruing therefrom from the said 28th day of January up to the date of the complaint, and that she had suffered considerable damage because she had missed the opportunity to sell the property for P1,200, the price she had been offered for it. Counsel therefore prayed that judgment be rendered for the plaintiff ordering the defendant immediately to return and deliver to her the said lot, together with the uncollected rents therefrom, and to pay an indemnity of P1,200 and the costs. Counsel for the deputy sheriff of Manila alleged that his client had no personal interest in the subject matter of the complaint nor in the remedies sought; that he only took part in the action brought by Robledo against Herrera for the purpose of executing the orders of the court; that consequently he levied on the said lot and its three warehouses belonging to Santiago Herrera and subsequently, on February 17, 1913, sold them; that the lot was awarded to Robledo, the only bidder, for the sum of P1,000, and that the plaintiff, by an affidavit dated February 5, claimed the said property as the owner thereof, but, by reason of the bond furnished by Robledo, he, the deputy sheriff, proceeded to sell the property, since, it was recorded in the property registry in the name of Santiago Herrera in August, 1901, as being free of all encumbrance and that on January 28, 1913, a record was made of

the levy thereon. Said counsel therefore prayed that the defendant be absolved from the complaint, with the costs against the plaintiff. The other defendants, Robledo and Azarraga, alleged, among other things, that the plaintiff had no legal capacity to sue and that her action was improper; that, by a judgment rendered in case No. 9874, Santiago Herrera was ordered to pay to his creditor, Miguel Robledo, the sum of P1,170, with legal interest thereon at the rate of six per cent per annum from September 24, 1912, and the costs of the suit, and that, in executing the said judgment, the deputy sheriff of Manila, on January 28, 1913, levied upon the said lot, which was exclusively owned by the debtor Herrera, and upon all its improvements; that the first inscription of the aforementioned property was recorded in the property registry in August, 1901, in the name of Santiago Herrera, wherein it appears as being free of all charge and encumbrance; that on the 28th of the said month of January, 1913, the writ of execution on the aforementioned land which, together with the three warehouses thereon, was sold at public auction and knocked down to the said Robledo on February 17, 1913, for the sum of P1,000 Philippine currency, was recorded in the registry and the proper certificate of sale was issued to him by the sheriff; that the new owner, Robledo, then took possession of the property in good faith and was now peaceably holding the same; that the conveyance made to the plaintiff by Herrera and his wife Tolentino was effected by them with intent to defraud their creditors and could in no wise prevail as against the creditor Robledo, and that for this reason, the latter had suffered losses and damages to the amount of P200. These defendants therefore prayed be absolved from the complaint and that the said Hermogena Santos be ordered to pay them P200 as losses and damages, and to pay the costs. Counsel for Miguel Robledo, in a supplementary answer dated April 21, 1913, set forth that, subsequently to his original answer, Santiago Herrera sold and conveyed to him on March 24 of the same year, through a public instrument and for the sum of P85, Herrera's right to redeem the property in litigation within the period of one year counting from the 17th of February, 1913, the date of the sale of the lot at public auction; and prayed that his supplementary answer be admitted in accordance with section 105 of the Code of Civil Procedure. After a hearing of the case and the evidence submitted by both parties, the court rendered the judgment aforementioned. The question raised in the claim made by the plaintiff, Hermogena Santos, is whether or not the levy and sale of the lot and improvements in dispute, effected on petition of the creditor, Miguel Robledo, can prevail against the right of ownership she acquired by virtue of the gift made in her favor by the spouses Santiago Herrera and Basilia Tolentino. If the said lot and its improvements actually belonged to Hermogena Santos, and not to the debtor, Santiago Herrera, then it is unquestionable that the land could not be levied upon for the payment of a debt of the latter that in no wise concerned Hermogena Santos, as the latter was not a debtor of Miguel Robledo on February 17, 1913, for the sum of P1,000 Philippine currency, was recorded in the registry and the proper certificate of sale was issued to him by the sheriff; that the new owner, Robledo, then took possession of the property in good faith and was now

peaceably holding the same; that the conveyance made to the plaintiff by Herrera and his wife Tolentino was effected by them with intent to defraud their creditors and could in no wise prevail as against the creditor Robledo, and that for this reason, the latter had suffered losses and damages to the amount of P200. These defendants therefore prayed that the plaintiff's petition be denied; that the said Hermogena Santos be ordered to pay them P200 as losses and damages, and to pay the costs. Counsel for Miguel Robledo, in a supplementary answer dated April 21, 1913, set forth that, subsequently to his original answer, Santiago Herrera sold and conveyed to him on March 24 of the same year, through a public instrument and for the sum of P85, Herrera's right to redeem the property in litigation within the period of one year counting from the 17th of February, 1913, the date of the sale of the lot at public auction; and prayed that his supplementary answer be admitted in accordance with section 105 of the Code of Civil Procedure. After a hearing of the case and the evidence submitted by both parties, the court rendered the judgment aforementioned. The question raised in the claim made by the plaintiff Hermogena Santos, is whether or not levy and sale of the lot and improvements in dispute, effected on petition of the creditor, Miguel Robledo, can prevail against the right of ownership she acquired by virtue of the gift made in her favor by the spouses Santiago Herrera and Basilia Tolentino. If the said lot and its improvements actually belonged to Hermogena Santos, and not to the debtor, Santiago Herrera, then it is unquestionable that the land could not be levied upon for the payment of a debt of the latter that in no wise concerned Hermogena Santos, as the latter was not a debtor of Miguel Robledo. The property acquired by the plaintiff in the said land is derived from the gift made to her by Santiago Herrera and his wife Basilia Tolentino in an instrument ratified before the notary Eugenio de Lara on March 1, 1905 (Exhibit A). In this instrument, after reciting that the contracting parties had mutually agreed to live separately and to divide the conjugal partnership property therein inventoried and appraised at P2,494, the said spouses state, in paragraph 3, that they convey to the girl Hermogena Santos the said lot with its warehouse, item No. 4 of the inventory, with the express condition that the proceeds or rents derived from the lot and warehouse so conveyed should be collected by the wife Basilia Tolentino as long as she lived. It was also provided therein, among other things, that the value of the lot and its warehouse should be deducted from the total value of the conjugal property which was to be divided between the two spouses and which amounted to P2,200, a sum that divided equally, would amount to P1,100 each. According to article 618 of the Civil Code, a gift is an act of liberality by which a person disposes gratuitously of a thing in favor of another, who accepts it. Herrera and his wife Tolentino freely and gratuitously disposed of the said lot and its improvements in favor of the plaintiff; but it does not appear, however, that the latter accepted the gift in the manner provided by law.

Article 633 of the same code prescribes: In order that a gift of real property may be valid it shall be made in a public instrument, stating therein in detail the property bestowed as a gift and the amount of the charges, which the donee must satisfy. The acceptance may be made in the same instrument bestowing the gift or in a different one; but it shall produce no effect if no made during the life of the donor. If made in a different instrument the acceptance shall be communicated to the donor in an authentic manner, and this proceeding shall be recorded in both instruments. The said instrument (p. 21 of the record) sets out the conveyance of the lot by th the donor to the donee, but the acceptance of that gift by the plaintiff Santos does not appear therein and the record reveals no other instrument that evidences such acceptance and notifies the donors thereof in an authentic manner. Therefore, the provisions of the law not having been complied with, the gift was invalid and could have no effect whatever, for the Civil Code prescribes, in article 629, that a gift does not bind the donor nor produce any effect until it has been formally accepted by the donee in accordance with law. Because of this essential defect, the gift was not perfected and the donee could not acquire any real and positive right in the warehouse (land) and its improvements. So important is the donee's acceptance with the notice to the donors of his acceptance in order that the latter may have full force and effect, that when the instrument which has been drawn up is recorded in the registry of property, the document that evidences the acceptance if this has not been made in the deed of gift should also be recorded. And in one or both documents, as the case may be, the notification of the acceptance as formally made the donor or donors should be duly set forth. These requisites, definitely prescribed at law, have not been complied with, and no proof that they have appears in the record.1awphi1.net Neither does it appear that Exhibit A, the instrument conveying the gift, was recorded in the property registry, an essential requisite of article 23 in connection with article 2 of the Mortgage Law to make it effective against third persons, but still supposing it were there recorded, even improperly, it could not produce any legal effect, inasmuch as it does not show the donee's acceptance and the proper notification thereof to the donors. Therefore, with these defects, even if the said instrument of gift had been recorded, it could not in any way legally affect Robledo's rights. So, the gift in question, as specified in Exhibit A an instrument that was executed for other purposes, to wit, conjugal separation and division of conjugal property between the parties, could not transmit to the donee any positive and effective right in the lot in litigation, to the prejudice of the donors' creditor. Furthermore, on March 1, 1905, when the said instrument was executed, Santiago Herrera had owed Miguel Robledo, from March 12, 1903, the sum of P1,170, with interest at the rate of 6 per cent per annum. For the collection of this debt the creditor had

to bring suit against the debtor. As the record does not show that the donors had reserved sufficient funds or property to satisfy the debt, nor that they possessed property other than the lot given away by them, we must conclude that the conveyance or gift made to the plaintiff by the spouses Herrera and Tolentino was for the purpose of defrauding the creditor, Miguel Robledo, by preventing him from collecting his credit. Article 643 of the Civil Code prescribes: Should there be no stipulation as to the payment of debts, the donee shall be liable for them only if the gift has been made to defraud creditors. The gift shall always be presumed as having been made to defraud creditors when, at the time of bestowing it, the donor has not reserved to himself property sufficient to pay the debts contracted prior thereto. Although some boats, a fishing device with nets, a lightmaterial warehouse erected on another's land, and the lot in litigation, are listed in the inventory contained in the said instrument, the fact is that when demand was made upon the debtor for the payment of his debt to Robledo, he was unable to pay it, and the said lot was levied upon and afterwards sold at public auction in satisfaction thereof. The indebtedness was contracted by Santiago Herrera in 1903, during his marriage and before he and his wife gave the said lot away; consequently, its payment is a charge against the conjugal partnership. (Civil Code, art. 1408.) Santiago Herrera was the lawful and absolute owner of the lot in litigation and his ownership is shown to have been recorded in the property registry of Manila, Tondo section, first inscription, No. 1340, in August, 1901. The entry discloses that the property was then free of all charge and encumbrance and that, on January 28, 1913, a note was therein made of the writ of execution issued against the said lot and warehouses, issued in the proceeding instituted by the creditor Robledo against the debtor Herrera, the unquestionable owner of the property levied upon. Moreover, the right of the judgment debtor to redeem the lot in litigation was purchased by the creditor Robledo for P85 on February 17, 1913, the date of the sale of the land at public auction. The appellant alleges that as she was a minor, her mother, Gregoria Tolentino, appeared before the notary to accept the said gift in the name of the appellant, and that since the execution of the instrument making such bestowal her mother has been in possession of the donated land and has been collecting the rents from the tenants occupying it. This allegation is unfounded and cannot be sustained. The instrument Exhibit A does not show that the plaintiff's mother appeared or that she accepted the said gift in the name of the plaintiff. Her verbal acceptance, if made, would not be sufficient, since the law requires that the acceptance shall be in writing either in a separate public instrument or in the instrument whereby the gift is made, requirement which do not appear to have been fulfilled in the present case. Neither is it true that the plaintiff was

in possession and collected the rents of the lot in question from the tenants who were occupying it. The strangest and most peculiar feature of this case is the testimony given by Santiago Herrera himself, the husband of Basilia Tolentino, these two being the donors. This witness stated under oath of the instrument Exhibit A, although he had not read this document, because he did not know how to read and was only able to write his own name thereon; that at the time the instrument was executed, the notary Lara merely told him that the paper he was about to sign referred to the conjugal separation, and that Lara did not tell him that a gift of the lot was therein made to Hermogena Santos; that, according to the terms of the separation agreed upon between himself and his wife, he conveyed to the latter his fishing tackle and was to keep the real estate for himself; that the said tackle was then worth P300 and the lot P500; that, upon his separating from his wife on account of her infidelity, he received no money from her, and denied having received any sum whatever from the hands of Eugenio de Lara; that he did not remember having signed the instrument relative to the appointment of the property, the payment to him of P500 and the gift of the lot; that he identified his signature at page 24 of the record, but not that on page 25; that a daughter of his had by his wife was still living and that it was the latter who collected the rents of the said lot. The certificate of baptism of the girl Catalina, the daughter of the said spouses, was exhibited at the trial (Exhibit 3, p. 40 of the record). This testimony and the contents of the said instrument, if we except from this latter the agreements relating to the conjugal separation and the division of the partnership property, give rise to the presumption that this instrument with regard to all else therein contained was framed by the direction of the woman Basilia Tolentino without the knowledge or consent of her husband, Santiago Herrera, especially with respect to the gift of the lot, the subject matter of the claim presented by the donee.lawphil.net However, leaving aside these circumstantial details which cast doubt upon a large part of the said instrument, and restricting ourselves to the matter of the gift of the lot in litigation, it is unquestionable that this gift is null and void in itself and can produce no effect whatever, since it fails to comply with the requirements of article 633 of the Civil Code, and because the said gift was made without proper consideration and for the purpose of defrauding the defendant creditor, whom it is to be presumed the donors intended seriously to prejudice when bestowing the property upon the plaintiff (arts. 643 and 1297, Civil Code). This intended injury to the defendant would be iniquitously consummated, should the plaintiff obtain a decision contrary to the judgment appealed from, which, moreover, is in accordance with the law and the merits of the case. Therefore, in consideration of the foregoing reasons whereby the errors assigned to the lower court have been refuted, the said judgment should be and is hereby affirmed, and the defendants are absolved from the plaintiff, with the costs against the appellant.