DIZON VS. CTA Second.

Second. Such construction finds relevance and consistency in our petitioner's contention that it is the probate court which approves
Rules on Special Proceedings wherein the term "claims" required the assessment and collection of the estate tax.
Facts: On November 7, 1987, Jose P. Fernandez died. to be presented against a decedent's estate is generally On the issue of prescription, the omission to file an estate tax
Thereafter, a petition for the probate of his will was filed. The construed to mean debts or demands of a pecuniary nature which return, and the subsequent failure to contest or appeal the
probate court then appointed retired Supreme Court Justice could have been enforced against the deceased in his lifetime, or assessment made by the BIR is fatal to the petitioner's cause, as
Arsenio P. Dizon and petitioner, Atty. Rafael Arsenio P. Dizon as liability contracted by the deceased before his death. under Sec.223 of the NIRC, in case of failure to file a return, the
Special and Assistant Special Administrator. Justice Dizon Therefore, the claims existing at the time of death are significant tax may be assessed at anytime within 10 years after the
authorized Atty. Jesus M. Gonzales (Atty. Gonzales) to sign and to, and should be made the basis of, the determination of omission, and any tax so assessed may be collected by levy upon
file on behalf of the Estate the required estate tax return and to allowable deductions. real property within 3 years (now 5 years) following the
represent the same in securing a Certificate of Tax Clearance. On assessment of the tax. Since the estate tax assessment had
April 27, 1990, BIR Regional Director issued Certification stating MARCOS II vs. CA become final and unappealable by the petitioner's default as
that the taxes due on the transfer of real and personal properties regards protesting the validity of the said assessment, there is no
of Jose had been fully paid and said properties may be Facts: Bongbong Marcos sought for the reversal of the ruling of reason why the BIR cannot continue with the collection of the said
transferred to his heirs. Petitioner requested the probate court's the Court of Appeals to grant CIR's petition to levy the properties tax.
authority to sell several properties forming part of the Estate, for of the late Pres. Marcos to cover the payment of his tax
the purpose of paying its creditors. Petitioner manifested that delinquencies during the period of his exile in the US. The Marcos CIR VS. CA
Manila Bank, a major creditor of the Estate was not included, as it family was assessed by the BIR after it failed to file estate tax
did not file a claim with the probate court since it had security over returns. However the assessment were not protested Facts: Pedro Pajonar, a member of the Philippine Scout, Bataan
several real estate properties forming part of the Estate. However, administratively by Mrs. Marcos and the heirs of the late president Contingent, during the second World War, was a part of the
on November 26, 1991, the Assistant Commissioner for Collection so that they became final and unappealable after the period for infamous Death March by reason of which he suffered shock and
of the BIR, issued Estate Tax Assessment Notice demanding the filing of opposition has prescribed. Marcos contends that the became insane. His sister Josefina Pajonar became the guardian
payment of P66,973,985.40 as deficiency estate tax. properties could not be levied to cover the tax dues because they over his person, while his property was placed under the
are still pending probate with the court, and settlement of tax guardianship of PNB. He died on January 10, 1988. He was
Issue: Whether the actual claims of the creditors may be fully deficiencies could not be had, unless there is an order by the survived by his two brothers Isidro P. Pajonar and Gregorio
allowed as deductions from the gross estate of Jose despite the probate court or until the probate proceedings are terminated. Pajonar, his sister Josefina Pajonar, nephews Concordio Jandog
fact that the said claims were reduced or condoned through Petitioner also pointed out that applying Memorandum Circular and Mario Jandog and niece Conchita Jandog. PNB filed an
compromise agreements entered into by the Estate with its No. 38-68, the BIR's Notices of Levy on the Marcos properties accounting of the decedent's property under guardianship valued
creditors were issued beyond the allowed period, and are therefore null at P3,037,672.09. However, the PNB did not file an estate tax
and void. return, instead it advised Pedro Pajonar's heirs to execute an
Ruling: It is admitted that the claims of the Estate's extrajudicial settlement and to pay the taxes on his estate.
aforementioned creditors have been condoned - mode of Issue: Whether or not the contentions of Bongbong Marcos are Pursuant to the assessment by the BIR, the estate of Pedro
extinguishing an obligation. The U.S. court ruled that the correct Pajonar paid taxes in the amount of P2,557. The trial court
appropriate deduction is the value that the claim had at the date appointed Josefina as the regular administratrix of Pedro
of the decedent's death. Also, as held in Propstra v. U.S., where a Ruling: No. The deficiency income tax assessments and estate Pajonar's estate. Pursuant to a second assessment by the BIR for
lien claimed against the estate was certain and enforceable on tax assessment are already final and unappealable -and-the deficiency estate tax, the estate of Pedro Pajonar paid estate tax
the date of the decedent's death, the fact that the claimant subsequent levy of real properties is a tax remedy resorted to by in the amount of P1,527,790.98. Josefina, in her capacity as
subsequently settled for lesser amount did not preclude the estate the government, sanctioned by Section 213 and 218 of the administratrix and heir of Pedro Pajonar's estate, filed a protest
from deducting the entire amount of the claim for estate tax National Internal Revenue Code. This summary tax remedy is with the BIR praying that the estate tax payment in the amount of
purposes. These pronouncements essentially confirm the general distinct and separate from the other tax remedies (such as P1,527,790.98, or at least some portion of it, be returned to the
principle that post-death developments are not material in Judicial Civil actions and Criminal actions), and is not affected or heirs. However, without waiting for her protest to be resolved by
determining the amount of the deduction. The court expresses its precluded by the pendency of any other tax remedies instituted by the BIR, Josefina filed a petition for review with the Court of Tax
agreement with the date-of-death valuation rule. the government. Appeals praying for the refund of P1,527,790.98, or in the
First. There is no law, nor do we discern any legislative intent in The approval of the court, sitting in probate, or as a settlement alternative, P840,202.06, as erroneously paid estate tax. CTA
our tax laws, which disregard the date-of-death valuation principle tribunal over the deceased's estate is not a mandatory ordered the CIR to refund Josefina the amount of P252,585.59,
and particularly provide that post-death developments must be requirement in the collection of estate taxes. On the contrary, representing erroneously paid estate tax for the year 1988.
considered in determining the net value of the estate. It bears under Section 87 of the NIRC, it is the probate or settlement court Among the deductions from the gross estate allowed by the CTA
emphasis that tax burdens are not to be imposed, nor presumed which is bidden not to authorize the executor or judicial were the amounts of P60,753 representing the notarial fee for the
to be imposed, beyond what the statute expressly and clearly administrator of the decedent's estate to deliver any distributive Extrajudicial Settlement and the amount of P50,000 as the
imports, tax statutes being construed strictissimi juris against the share to any party interested in the estate, unless it is shown a attorney's fees in Special Proceedings No. 1254 for guardianship
government. Any doubt on whether a person, article or activity is Certification by the Commissioner of Internal Revenue that the Commissioner of Internal Revenue filed a motion for
taxable is generally resolved against taxation. estate taxes have been paid. This provision disproves the reconsideration of the CTA's decision asserting, among others,
that the notarial fee for the Extrajudicial Settlement and the
attorney's fees in the guardianship proceedings are not deductible proceedings," there is no reason why expenses incurred in the assessed against the estate an inheritance tax, together with the
expenses. administration and settlement of an estate in extrajudicial penalties for deliquency in payment. Lorenzo paid said amount
proceedings should not be allowed. However, deduction is limited under protest, notifying Posadas at the same time that unless the
CTA issued the assailed Resolution ordering the Commissioner of to such administration expenses as are actually and necessarily amount was promptly refunded suit would be brought for its
Internal Revenue to refund Josefina, as administratrix of the incurred in the collection of the assets of the estate, payment of recovery. Posadas overruled Lorenzo’s protest and refused to
estate of Pedro Pajonar, the amount of P76,502.42 representing the debts, and distribution of the remainder among those entitled refund the said amount. Plaintiff went to court. The CFI dismissed
erroneously paid estate tax for the year 1988. Also, the CTA thereto. It is clear then that the extrajudicial settlement was for the Lorenzo’s complaint and Posadas’ counterclaim. Both parties
upheld the validity of the deduction of the notarial fee for the purpose of payment of taxes and the distribution of the estate to appealed to this court.
Extrajudicial Settlement and the attorney's fees in the the heirs. The execution of the extrajudicial settlement
guardianship proceedings necessitated the notarization of the same. Hence the Contract of ISSUE: (e) Has there been delinquency in the payment of the
Commissioner of Internal Revenue filed with the Court of Appeals Legal Services of March 28, 1988 entered into between inheritance tax?
a petition for review questioning the validity of the respondent Josefina Pajonar and counsel was presented in
abovementioned deductions. evidence for the purpose of showing that the amount of HELD: The judgment of the lower court is accordingly modified,
P60,753.00 was for the notarization of the Extrajudicial with costs against the plaintiff in both instances
Issue: whether the notarial fee paid for the extrajudicial settlement Settlement. It follows then that the notarial fee of P60,753.00 was
in the amount of P60,753 and the attorney's fees in the incurred primarily to settle the estate of the deceased Pedro YES. The defendant maintains that it was the duty of the executor
guardianship proceedings in the amount of P50,000 may be Pajonar. Said amount should then be considered an to pay the inheritance tax before the delivery of the decedent’s
allowed as deductions from the gross estate of decedent in order administration expenses actually and necessarily incurred in the property to the trustee. Stated otherwise, the defendant contends
to arrive at the value of the net estate. collection of the assets of the estate, payment of debts and that delivery to the trustee was delivery to the cestui que trust, the
distribution of the remainder among those entitled thereto. Thus, beneficiary in this case, within the meaning of the first paragraph
Ruling: YES. Respondent maintains that only judicial expenses of the notarial fee of P60,753 incurred for the Extrajudicial of subsection (b) of section 1544 of the Revised Administrative
the testamentary or intestate proceedings are allowed as a Settlement should be allowed as a deduction from the gross Code. This contention is well taken and is sustained. A trustee is
deduction to the gross estate. The amount of P60,753.00 is quite estate. Thus, in Lorenzo v. Posadas the Court construed the but an instrument or agent for the cestui que trust. The
extraordinary for a mere notarial fee. This Court adopts the view phrase "judicial expenses of the testamentary or intestate appointment of Moore as trustee was made by the trial court in
under American jurisprudence that expenses incurred in the proceedings" as not including the compensation paid to a trustee conformity with the wishes of the testator as expressed in his will.
extrajudicial settlement of the estate should be allowed as a of the decedent's estate when it appeared that such trustee was It is true that the word “trust” is not mentioned or used in the will
deduction from the gross estate. "There is no requirement of appointed for the purpose of managing the decedent's real estate but the intention to create one is clear. No particular or technical
formal administration. It is sufficient that the expense be a for the benefit of the testamentary heir. ‘Coming to the case at words are required to create a testamentary trust. The words
necessary contribution toward the settlement of the case." bar, the notarial fee paid for the extrajudicial settlement is clearly “trust” and “trustee”, though apt for the purpose, are not
Attorney's fees in order to be deductible from the gross estate a deductible expense since such settlement effected a distribution necessary. In fact, the use of these two words is not conclusive
must be essential to the collection of assets, payment of debts or of Pedro Pajonar's estate to his lawful heirs. Similarly, the on the question that a trust is created. ” To constitute a valid
the distribution of the property to the persons entitled to it. The attorney's fees paid to PNB for acting as the guardian of Pedro testamentary trust there must be a concurrence of three
services for which the fees are charged must relate to the proper Pajonar's property during his lifetime should also be considered circumstances:
settlement of the estate. In this case, the guardianship proceeding as a deductible administration expense. PNB provided a detailed
was necessary for the distribution of the property of the late Pedro accounting of decedent's property and gave advice as to the (1) Sufficient words to raise a trust;
Pajonar to his rightful heirs. PNB was appointed as guardian over proper settlement of the latter's estate, acts which contributed (2) a definite subject;
the assets of the late Pedro Pajonar, who, even at the time of his towards the collection of decedent's assets and the subsequent (3) a certain or ascertain object; statutes in some jurisdictions
death, was incompetent by reason of insanity. The expenses settlement of the estate. expressly or in effect so providing.”
incurred in the guardianship proceeding was but a necessary
expense in the settlement of the decedent's estate. Therefore, the LORENZO vs. POSADAS There is no doubt that the testator intended to create a trust. He
attorney's fee incurred in the guardianship proceedings ordered in his will that certain of his properties be kept together
amounting to P50,000.00 is a reasonable and necessary business FACTS: Thomas Hanley died, leaving a will and a considerable undisposed during a fixed period, for a stated purpose. The
expense deductible from the gross estate of the decedent. amount of real and personal properties. Proceedings for the probate court certainly exercised sound judgment in
Attorney's fees are allowable deductions if incurred for the probate of his will and the settlement and distribution of his estate appointmening a trustee to carry into effect the provisions of the
settlement of the estate. It is noteworthy to point that PNB was were begun in the CFI of Zamboanga. The will was admitted to will. As the existence of the trust was already proven, it results
appointed the guardian over the assets of the deceased. probate. The CFI considered it proper for the best interests of the that the estate which plaintiff represents has been delinquent in
Necessarily the assets of the deceased formed part of his gross estate to appoint a trustee to administer the real properties which, the payment of inheritance tax and, therefore, liable for the
estate. Accordingly, all expenses incurred in relation to the estate under the will, were to pass to nephew Matthew ten years after payment of interest and surcharge provided by law in such cases.
of the deceased will be deductible for estate tax purposes the two executors named in the will was appointed trustee. Moore The delinquency in payment occurred on March 10, 1924, the
provided these are necessary and ordinary expenses for acted as trustee until he resigned and the plaintiff Lorenzo herein date when Moore became trustee. On that date trust estate
administration of the settlement of the estate. Although the Tax was appointed in his stead. During the incumbency of the plaintiff vested in him. The interest due should be computed from that
Code specifies "judicial expenses of the testamentary or intestate as trustee, the defendant Collector of Internal Revenue (Posadas) date.
 (b) In other cases, within the six months subsequent to the death plaintiff. The plaintiff (herein petitioner) alleged in his complaint
NOTES: Other issues: of the predecessor; but if judicial testamentary or intestate that the tax is illegal since he received the property by a deed of
proceedings shall be instituted prior to the expiration of said gift inter vivos duly accepted and registered before the death of
(a) When does the inheritance tax accrue and when must it be period, the payment shall be made by the executor or his father. He also contended that Act 2601 being an inheritance
satisfied? administrator before delivering to each beneficiary his share. tax statute, does not tax gifts. The defendant answered in general
denial with a countermand. The court dismissed the countermand.
The accrual of the inheritance tax is distinct from the obligation to The instant case does[not] fall under subsection (a), but under Both sides appealed, but the CIR appeal was dismissed.
pay the same. subsection (b), of section 1544 above-quoted, as there is here no
fiduciary heirs, first heirs, legatee or donee. Under the subsection, Issue: Whether or not the gifts inter vivos are taxable (inheritance
Acording to article 657 of the Civil Code, “the rights to the the tax should have been paid before the delivery of the tax)
succession of a person are transmitted from the moment of his properties in question to Moore as trustee.
death.” “In other words”, said Arellano, C. J., “. . . the heirs
succeed immediately to all of the property of the deceased (b) Should the inheritance tax be computed on the basis of the YES. Inheritance tax is imposed upon the gift inter vivos that
ancestor. The property belongs to the heirs at the moment of the value of the estate at the time of the testator’s death, or on its plaintiff received from his father as this was really an
death of the ancestor as completely as if the ancestor had value ten years later? advancement upon the inheritance to which he would be entitled
executed and delivered to them a deed for the same before his upon the death of the latter. Sec. 1540 of the Administrative Code
death.” If death is the generating source from which the power of the did not tax gifts per se but only those which are made to those
estate to impose inheritance taxes takes its being and if, upon the who shall prove to be heirs, devisees, legatees and donees mortis
Whatever may be the time when actual transmission of the death of the decedent, succession takes place and the right of the causa of the donor. The term 'heirs' include those given the status
inheritance takes place, succession takes place in any event at estate to tax vests instantly, the tax should be measured by the of heirs irrespective of the quantity of property they may receive
the moment of the decedent’s death. The time when the heirs value of the estate as it stood at the time of the decedent’s death, as such.
legally succeed to the inheritance may differ from the time when regardless of any subsequent contingency value of any
the heirs actually receive such inheritance. ” Thomas Hanley subsequent increase or decrease in value VILLA DE ROCES vs. POSADAS
having died on May 27, 1922, the inheritance tax accrued as of
the date. (c) In determining the net value of the estate subject to tax, is it Facts: Sometime in 1925, plaintiffs Concepcion Vidal de Roces
proper to deduct the compensation due to trustees? and her husband, as well as one Elvira Richards, received as
From the fact, however, that Thomas Hanley died on May 27, donation several parcels of land from Esperanza Tuazon. They
1922, it does not follow that the obligation to pay the tax arose as A trustee, no doubt, is entitled to receive a fair compensation for took possession of the lands thereafter and likewise obtained the
of the date. The time for the payment on inheritance tax is clearly his services. But from this it does not follow that the compensation respective transfer certificates. The donor died a year after
fixed by section 1544 of the Revised Administrative Code as due him may lawfully be deducted in arriving at the net value of without leaving any forced heir. In her will, which was admitted to
amended by Act No. 3031, in relation to section 1543 of the same the estate subject to tax. There is no statute in the Philippines probate, she bequeathed to each of the donees the sum of
Code. The two sections follow: which requires trustees’ commissions to be deducted in P5,000. After the distribution of the estate but before the delivery
determining the net value of the estate subject to inheritance tax of their shares, the CIR (appellee) ruled that plaintiffs as donees
SEC. 1543. Exemption of certain acquisitions and transmissions. and legatees should pay inheritance taxes. The plaintiffs paid the
— The following shall not be taxed: (d) What law governs the case at bar? Should the provisions of taxes under protest. CIR filed a demurrer on ground that the facts
Act No. 3606 favorable to the tax-payer be given retroactive alleged were not sufficient to constitute a cause of action. The
(a) The merger of the usufruct in the owner of the naked title. effect? court sustained the demurrer and ordered the amendment of the
complaint but the appellants failed to do so. Hence, the trial court
(b) The transmission or delivery of the inheritance or legacy by A statute should be considered as prospective in its operation, dismissed the action on ground that plaintiffs, herein appellants,
the fiduciary heir or legatee to the trustees. whether it enacts, amends, or repeals an inheritance tax, unless did not really have a right of action. Plaintiffs (appellant) contend
the language of the statute clearly demands or expresses that it that Sec. 1540 of the Administrative Code does not include
(c) The transmission from the first heir, legatee, or donee in favor shall have a retroactive effect, . . . .” Act No. 3606 itself contains donation inter vivos and if it does, it is unconstitutional, null and
of another beneficiary, in accordance with the desire of the no provisions indicating legislative intent to give it retroactive void for violating SEC. 3 of the Jones Law (providing that no law
predecessor. xx effect. No such effect can be given the statute by this court. shall embrace more than one subject and that the subject should
be expressed in its titles ; that the Legislature has no authority to
SEC. 1544. When tax to be paid. — The tax fixed in this article DIZON VS. POSADAS tax donation inter vivos; finally, that said provision violates the rule
shall be paid: on uniformity of taxation. CIR however contends that the word 'all
Facts: Plaintiff Luis Dison filed a suit against CIR to recover gifts' refer clearly to donation inter vivos and cited the doctrine in
(a) In the second and third cases of the next preceding section, inheritance tax paid under protest amounting to P2,808.73. Felix Tuason v. Posadas.
before entrance into possession of the property. Dison, plaintiff's father executed a deed of gift which transferred
22 tracts of land, reserving to himself during his lifetime the Issue: Whether or not the donations should be subjected to
usufruct of 3 tracts. The donation was formally accepted by inheritance tax
YES. Sec. 1540 of the Administrative Code clearly refers to those
donation inter vivos that take effect immediately or during the
lifetime of the donor, but made in consideration of the death of the
decedent. Those donations not made in contemplation of the
decedent's death are not included as it would be equivalent to
imposing a direct tax on property and not on its transmission.

The phrase 'all gifts' as held in Tuason v. Posadas refers to gifts

inter vivos as they are considered as advances in anticipation of
inheritance since they are made in consideration of death.
 WELLS FARGO vs. COLLECTOR similar conditions. On August 3, 1974, lessee Construction and lift said garnishment or levy on execution invoking Rule 39,
Components International, Inc. assigned its rights and obligations section 12, subdivision (k) of the Rules of Court but it was denied.
FACTS: Birdie Lillian Eye died on September 16, 1932 at Los under the contract of lease in favor of Hydro Pipes Philippines, All moneys, benefits, privileges, or annuities accruing or in any
Angeles, California, the place of her alleged last residence and Inc. with the signed conformity and consent of lessors Delfin manner growing out of any life insurance, if the annual premiums
domicile. Among the properties she left was her 1⁄2 conjugal Pacheco and Pelagia Pacheco. On January 3, 1976, a deed of paid do not exceed five hundred pesos, and if they exceed that
shares of stock in the Benguet Consolidated Mining Co., an exchange was executed between lessors Delfin and Pelagia sum a like exemption shall exist which shall bear the same
anonymous partnership, organized under the laws of the Pacheco and defendant Delpher Trades Corporation whereby the proportion to the moneys, benefits, privileges, and annuities so
Philippines. She left a will duly admitted to probate in California former conveyed to the latter the leased property together with accruing or growing out of such insurance that said five hundred
where her estate was administered and settled. Wells Fargo was another parcel of land also located in Malinta Estate, Valenzuela, pesos bears to the whole annual premiums paid. Morales
the duly appointed trustee. The Federal and California State’s Metro Manila for 2,500 shares of stock of defendant corporation appealed maintaining that it was a life insurance for it insured her
inheritance taxes due thereon have been duly paid. The Collector with a total value of P1,500,000.00 husband for injuries and/or death as a result of murder or assault
of Internal Revenue in the Philippines, however, sought to subject or attempt thereat
the shares of stock to inheritance tax, to which Wells Fargo Issue: Whether or not the “Deed of Exchange” of the properties
objected. executed by the Pachecos on the one hand and the Delpher ISSUE: W/N the insurance is a life insurance and not an accident
Trades Corporation on the other was meant to be a contract of insurance
ISSUE: Whether the shares of stock are subject to Philippine sale.
inheritance tax HELD: NO. order appealed from is reversed, and the garnishment
Held: We rule for the petitioners. In the case at bar, in exchange in dispute hereby set aside and quashed the annual premium was
RULING: Yes. Originally, the settled law in the United States is for their properties, the Pachecos acquired 2,500 original for P15. If it were an ordinary life insurance policy, taking into
that intangibles have only one situs for the purpose of inheritance unissued no par value shares of stocks of the Delpher Trades account that the insured, Luis G. Morales, was 38 years of age
tax, and such situs is in the domicile of the decedent at the time of Corporation. Consequently, the Pachecos became stockholders and the amount of the policy was for P50,000.00 the annual
his or her death. But the rule has been relaxed. of the corporation by subscription. “The essence of the stock premium would have been around P1,206 the period for the policy
The maxim “mobilia sequuntur personam” up which the rule rests, subscription is an agreement to take and pay for original unissued was stipulated for one year, and considerations as to age, health,
has been decried as a mere fiction of law having its origin in shares of a corporation, formed or to be formed.” occupation and other personal circumstances were not taken into
considerations of general convenience and public policy and account in an accident insurance policy. Annex "1" of the
cannot be applied to limit or control the right of the state to tax The records do not point to anything wrong or objectionable about opposition, shows that the Capital Insurance and Surety
properly within its jurisdiction and must yield to established fact of this “estate planning” scheme resorted to by the Pachecos. “The Company Inc. is a non-life insurance company and that the only
legal ownership, actual presence and control elsewhere, and legal right of a taxpayer to decrease the amount of what otherwise authority granted to it to transact business covers fire, marine,
cannot be applied if to do so would result in inescapable and could be his taxes or altogether avoid them, by means which the surety, fidelity, accident, motor car, and miscellaneous insurance,
patent injustice. law permits, cannot be doubted.” (Liddell & Co., Inc. v. The except life insurance
This rests on either of two fundamental considerations: Collector of Internal Revenue, 2 SCRA 632 citing Gregory v. Accident vs Life Insurance Policy
(1) Upon the recognition of the inherent power of each Halvering, 293 U.S. 465, 7 L. ed. 596) Delpher Trades Corp. vs. accident policy - merely insures the person from injury and or
government to tax persons, properties and rights within its Intermediate Appellate Court, 157 SCRA 349, No. L-69259 death resulting from murder, assault, or an attempt thereat
jurisdiction January 26, 1988 Accident insurance
and enjoying, thus, the protect of its laws; and indemnity or casualty contract
(2) Upon the principle that as to intangibles, a single location in The “Deed of Exchange” of property between the Pachecos and life insurance policy - what is insured is the life of the subject for a
space is hardly possible, considering the multiple, distinct Delpher Trades Corporation cannot be considered a contract of definite number of years
relationships which may be entered into with respect thereto. sale. There was no transfer of actual ownership interests by the life insurance
Herein, the actual situs of the shares of stock is in the Philippines, Pachecos to a third party. The Pacheco family merely changed investment contract
the corporation being domiciled therein. Accordingly the their ownership from one form to another. The ownership contract by which the insurer, for a stipulated sum, engages to
jurisdiction of the Philippine government to tax must be upheld. remained in the same hands. Hence, the private respondent has pay a certain amount of money if another dies within the time
no basis for its claim of a light of first refusal under the lease limited by the policy
DELPHER vs. IAC contract. contract for insurance for one year in consideration of an
advanced premium, with the right of assured to continue it from
Facts: In 1974, Delfin Pacheco and his sister, Pelagia Pacheco, GALLARDO vs. MORALES year to year upon payment of a premium as stipulated
were the owners of 27,169 square meters of real estate in the includes accident insurance, since life is insured under either
Municipality of Polo (now Valenzuela), Province of Bulacan (now FACTS: Hermenegilda S. Morales to pay P7,000 to a creditor contract
Metro Manila) The said co-owners leased to Construction Francisca Gallardo. Writ of execution was issued and delivered to includes all policies of insurance in which payment of insurance
Components International Inc. the same property and providing the Sheriff who garnished and levied execution on the sum of money is contingent upon loss of life
that during the existence or after the term of this lease the lessor P7,000 out of the P30,000 due from the Capital Insurance & "any life insurance"
should he decide to sell the property leased shall first offer the Surety Co. Inc., to Morales as beneficiary whose husband Luis applies to ordinary life insurance contracts, as well as to those
same to the lessee and the letter has the priority to buy under Morales died by assassination. Morales asked the sheriff to quash which, although intended primarily to indemnify for risks arising
from accident, likewise, insure against loss of life due, either to (P10 million) pesos and that the estate and inheritance taxes due Facts:
accidental causes, or to the willful and criminal act of another, thereon were about P9.5 million. After several reassessments, the 1. The CFI of Manila which had jurisdiction over the estate of
which, as such, is not strictly accidental in nature case ultimately came to the Supreme Court. Margarita David, issued an order appointing appellantCarlos
statutes of this nature seek to enable the head of the family to Moran Sison as judicial administrator without compensation after
secure his widow and children from becoming a burden upon the filing a bond. After entering into his duties as administrator, he
community and, accordingly, should merit a liberal interpretation. ISSUES: filed an accounting of his administration which included items as
(1) Should the herein respondent heirs be required to pay first the an expense of administration the premiums he paid on his bond.
BALBOA vs FARRALES inheritance tax before the probate court may authorize the
delivery of the hereditary share pertaining to each of them? 2. One of the heirs, herein appellee Narcisa Teodoro, objected to
FACTS: Sometime in the year 1913, the plaintiff Buenaventura (2) Are the respondent heirs herein who are citizens and residents the approval of the items. The court approved the report but
Balboa filled with the Bureau of Lands an application for of the Philippines liable for the payment of the Philippine disallowed the items objected to on the ground that these cannot
homestead, No. 10619, under the provisions of Act No. 926, inheritance tax corresponding to the hereditary share of another be considered as expenses of administration. Moran Sison filed a
covering a tract of land in Culis, Hermosa, Bataan. On July 1, heir who is a citizen and resident of the United States of America. motion for reconsideration but was denied hence this appeal.
1919, said Act No. 926 was repealed by Act No. 2874. On August said share of the latter consisting of personal (cash deposits and,
11, 1924, said Buenaventura Balboa, for and in consideration of shares) properties located in the mentioned court Issue: Whether or not an executor or judicial administrator can
the sum of P950, sold said land to the defendant Cecilio L. (3) Does the assignment of a certificate of time deposit to the validly charge the premiums on his bond as an expense of
Farrales. comissioner of Internal Revenue for the purpose of paying t I administration against the estate
On March 6, 1926, the plaintiff commenced the present action for hereby the estate tax constitute payment of such tax?
the purpose of having said sale declared null and void on the (4) Should the herein respondent heirs be held liable for the NO.
ground of lack of consent on his part and fraud on the part of the payment of surcharge and interest on the amount (P700,000.00)
defendant, and on the further ground that said sale was contrary representing the face value of time deposit certificates assigned The premiums paid by an executor or administrator serving
to, and in violation of the provisions of section 116 of Act No. to the Commissioner which could not be converted into cash? without a compensation for his bond cannot be charged against
2874. the estate. Further Sec. 7 of Rule 86 of the Rules of Court does
trial judge rendered a judgment in favor of the plaintiff and against RULING: not authorize the executor or administrator to charge to the estate
the defendant, ordering the latter to return to the plaintiff the land (1) No. the distribution of a decedent's assets may only be the money spent for the bond. As held in the case of Sulit v.
ordered under any of the following three circumstances, namely, Santos (56 Phil 626), the position of an executor or administrator
ISSUE: which of the two Acts — 926 and 2874 — shall be applied (1) when the inheritance tax, among others, is paid; (2) who bond is one of trust. The law safeguards the estates of deceased
in determining whether the sale in question is valid or not? a suffered bond is given to meet the payment of the tax and all persons by making as a requirement for qualification the ability to
the other options of the nature enumerated in the above-cited give a suitable bond. The execution of said bond is therefore a
RULING: provision; etc. This was not complied with condition precedent to acceptance of the responsibilities of the
Act 926 applies and the sale is valid. (2) No. An analysis of our tax statutes supplies no sufficient trust.
indication that the inheritance tax, as a rule, was meant to be the
The moment the plaintiff had received a certificate from the joint and solidary liability of the heirs of a decedent. the payment Further, the giving of the bond is not a necessary expense in the
Government and had done all that was necessary under the law of the inheritance tax should be taken as'the individual care, management, and settlement of the estate within the
to secure his patent, his right had become vested before the responsibility, to the extent of the benefits received, of each heir. meaning of Sec. 680 of the Civil Code of Procedure, since such
patent was issued. His right had already vested prior to the 3. No. a time deposit certificate is a mercantile document and is are the requirements after the executor or administrator has
issuance of the patent, and his rights to the land cannot be essentially a promissory note. 5 By the express terms of Article already qualified for the office and has entered the performance of
affected by a subsequent law or by a subsequent grant by the 1249 of the Civil Code of the Philippines, the use of this medium his duties.
Government to any other person. It follows, therefore that the sale to clear an obligation will "produce the effect of payment only
of the land in question by the plaintiff Buenventura Balboa to the when they have been cashed, or when through the fault of the VERA vs. FERNANDEZ
defendant Cecilio L. Farrales does not infringe said prohibition, creditor they have been impaired." Consequently, the value of the
and consequently said sale is valid and binding, and should be said certificates (P700,000.00) should still be considered FACTS: Petitioner CIR and BIR Regional Director filed an
given full force and effect. outstanding. Allowance of Claim and for an Order of Payment of Taxes in the
4. Yes. The Interest charge for 1% per month imposed under Special Proceedings for the settlement of intestate estate of Luis
VERA vs. NAVARRO Section 101 (a) (1) of the Tax Code is essentially a commotion to Tongoy. The claim represents the indebtedness of the deceased
the State for delay in the payment of the tax due thereto to the government for the deficiency income taxes for the years
FACTS: Elsie M. Gaches died on March 9, 1966 without a child. 1963 and 1964. The petitioners filed the motions after the
The deceased, however, left a last will and testament giving The estate cannot likewise be exempted from the payment of the expiration of the time limited in the notice but before an order of
properties to several persons. Judge Tan was appointed as 5% surcharge imposed by Section 101 (c) of the Tax Code the distribution is entered. Respondent Judge Fernandez granted
executor of the testate estate of Elsie M. Gaches without a bond. the opposition by the Administrator on the ground that the claim
In a letter, dated June 3, 1966, Judge Tan informed the SISON vs. TEODORO has already prescribed.
Commissioner that the testate estate was worth about ten million
ISSUE: May the claim for taxes against the estate of a deceased obligatiobns have been paid; or (2) only if the distributees or any RULING: Yes. As a holder of property belonging to the estate,
person be still collected? of them gives a bond in a sum fixed by the court conditioned upon Pineda is liable for the tax up to the amount of the property in his
the payment of said obligations. possession. The BIR is given the discretion to avail of the most
RULING: Yes. The claim for taxes against a decedent’s estate is SC: As executor, he cannot unilaterally assign to himself and expeditious way to collect the tax. This is, of course, without
exempted from the application of the statute of non-claims as possess all his parents’ properties and the fruits thereof. The right prejudice to Pineda’s right of contribution for his co-heirs. Put
taxes are the lifeblood of the government and their prompt and of an executor or administrator to the possession and simply, the Supreme Court held that the rule on solidarity applies
certain availability are imperious need. management of the real and personal properties of the deceased to taxes because it is not an ordinary contract. Two persons liable
is not absolute and can only be exercised “so long as it is for payment of estate tax:
This is not a case of prescription. Claims for taxes may be necessary for the payment of the debts and expenses of 1. Executor or administrator;
collected even after the distribution of the decedent’s estate administration.” 2. Heirs up to the extent of their inheritance.
among his heirs who shall be liable therefore in proportion of their GONZALES vs. CTA
share. ELEGADO vs. CTA
FACTS: Both petitioners Jose and Juana Gonzales are co-heirs
Tax obligations of decedent which are created by law are different FACTS: Petitioner is designated executor of the decedents will and co-owners, (one-sixth each) of a tract of land of 871, [982.]
from money claims against decedent arising from contract (Warren Taylor Graham) who is an American national who square meters which they, along with four other co-heirs, inherited
provided by Section 5 Rule 85 of the Rules of Court. Taxes are formerly resides in the Philippines, but died in Oregon, USA. He from their mother. So on November 15, 1956, Jose Leon
entirely of different character from the claims expressly left certain stocks in the Philippines. His son Ward Graham, filed Gonzales and Juana F. Gonzales submitted to the Court of Tax
enumerated in this provision, such as: all claims for money an state tax return with the Philippine Revenue Representative in Appeals a joint petition seeking a refund, this time of the amount
against the decedent arising from contract, express or implied, USA. CIR assessed the estate in the amount of Php 96, 509.00. of P86,166.00 for each of the two petitioners.
whether the same be due, not due or contingent, all claims for The assessment was protested by the American law firm but
funeral expenses and expenses for the last sickness of the denied by the Commissioner. No further action was taken. ISSUES:
decedent and judgment for money against the decedent. Petitioner filed a second estate tax return and was assessed in (1) Whether or not petitioners' claim for refund of the total of
the amount of Php 72, 948.00 but was cancelled by the P86,166.00 may be properly entertained; and
ESTATE OF HILARIO RUIZ vs. CA Commissioner with the contention of that the first assessment is (2) Whether or not the sum of P89,309.61 which each of the
final executor. petitioners received as interest on the value of the land
Issue: Whether the probate court, after admitting the will to expropriated is taxable as ordinary income, and not as capital
probate but before payment of the estate’s debts and obligations, ISSUE: Whether or not the first assessment is not valid because it gain.
has the authority: was based on a return filed by foreign lawyer who had no
knowledge of our tax laws. RULING:
(1) to grant an allowance from the funds of the estate for the 1. No. the requirement of prior timely claim for refund of the sum
support of the testator’s grandchildren? RULING: The first assessment even filed by a foreign lawyers is of P86,166.00 had not been met in this case. The demand for
already final and executor. Thus, it is valid. Wherefore , the refund must precede the suit, and this requirement is mandatory;
(2) to order the release of the titles to certain heirs? petition is denied for it being no longer controversial or so much so that non-compliance therewith bars the action
reviewable. 2. It is ordinary income."the acquisition by the Government of
(3) Petitioner claims that the assailed order deprived him of his private properties through the exercise of the power of eminent
right to take possession of all the real and personal properties of COMMISSIONER vs. PINEDA domain, said properties being justly compensated, is embraced
the estate? within the meaning of the term 'sale' or 'disposition of property'"
FACTS: BIR investigated the income tax liability of Anastacio and the definition of gross income laid down by Section 29 of the
Held: 1. Grandchildren are not entitled to provisional support from Pineda’s estate for the years 1945, 1946, 1947, and 1948 and it Tax Code of the Philippines. We also adhered to the view that the
the funds of the decedent’s estate. found that the corresponding income tax return were not filed. transfer of property through condemnation proceedings is a sale
This resulted to a P760.28 deficiency income tax for 1945 and or exchange and that profit from the transaction constitutes capital
The law clearly limits the allowance to “widow and 1946 and real estate dealer’s fixed tax for the 4th quarter of 1946 gain.
children” and does not extend it to the deceased’s and for the whole year 1947. Manuel Pineda, eldest son of
grandchildren, regardless of their minority or incapacity. It was Anastacio, received the assessment. He contested the same In fact, the authorities support the conclusion that for income tax
error, therefore, for the appellate court to sustain the probate alleging that only a proportionate part should be his liability. CTA purposes, interest does not form part of the price paid by the
court’s order granting an allowance to the grandchildren of the ruled that Pineda is liable only for taxes corresponding to his Government in condemnation proceedings; and may not be
testator pending settlement of his estate. share in the estate. Hence, the present petition. treated as part of the capital gain.

Respondent courts also erred when they ordered the release of ISSUE: Whether the Government can require Manuel Pineda to
the titles of the bequeathed properties to private respondents. In pay the full amount of the tax assessed
settlement of estate proceedings, the distribution of the estate
properties can only be made: (1) after all the debts and