VIDAL DE ROCES vs.

POSADAS
G.R. No. 34937 | March 13, 1933

DOCTRINE: 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.

Plaintiffs-appellants: Concepcion Vidal de Roces & her husband, Marcos Roces, and Elvira Vidal de
Richards

Defendant-appellee: Juan Posadas, Jr. (Collector of Internal Revenue)

SUMMARY OF FACTS: Esperanza Tuazon, by means of public documents, donated certain parcels of land
situated in Manila to the plaintiffs Vidal de Roces and this was executed through a public instrument. 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.

When Esperanza died, she left no forced heir and in her will which was admitted to probate, she bequeathed
to each of the donees the sum of P5,000.

Eventually, after the estate had been distributed among the instituted legatees and before delivery of their
respective shares, the CIR ruled that the appellants, as donees and legatees, should pay the inheritance
taxes respectively.

However, the plaintiffs contended, under Section 1540 of the Administrative Code, it does not include
donations inter vivos and if it does, it is unconstitutional, null and void for the following reasons: (1) that
the Legislature has no authority to impose inheritance tax on donations inter vivos; and (2), because a legal
provision of this character contravenes the fundamental rule of uniformity of taxation.

The CIR, on the other hand, contended that the words "all gifts" refer clearly to donations inter vivos.

FACTS: 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.

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 in 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 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. The appellants paid the aforementioned
taxes under protest.
The judgment appealed from was based on the provisions of Section 1540 of the 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 of those who, after his death, shall prove to be his heirs, devisees, legatees, or
donees mortis causa."

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: (1) that the Legislature has no
authority to impose inheritance tax on donations inter vivos; and (2), 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 down in the case of Tuason and Tuason vs. Posadas.

ISSUE: W/N the tax collected by the appellee on the properties donated in 1925 constitutes an inheritance
tax imposed on the transmission of said properties in contemplation or in consideration of the donor's
death. YES.

RULING: The gifts referred to in Section 1540 of the Revised Administrative Code are 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.

Our interpretation of the law is not in conflict with the rule laid down in the case of Tuason and Tuason vs.
Posadas. We said therein 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.

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.

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."
In the case of Tuason and Tuason vs. Posadas, 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.

It 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.