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G.R. No. 123206 March 22, 2000

COMMISSIONER OF INTERNAL REVENUE, petitioner,vs.COURT OF APPEALS, COURT OF TAX APPEALS an !OSEFINA P. PA!ONAR, a" A#$n$"%ra%r$& o'%h( E"%a%( o' P(ro P. Pa)onar, respondents.

R E S O L U T I O N

GON*AGA+REES, J.:

Assailed in this petition for review on certiorari is the Decemer !", "##$ Decision" of the %o&rt of Appeals! in %A'(.R. Sp. No. )*)## affirmin+ the &ne -, "##* Resol&tion of the %o&rt of Ta Appeals in%TA %ase No. *)/" +rantin+ private respondent osefina 0. 0a1onar, as administratri of the estate of 0edro0. 0a1onar, a ta ref&nd in the amo&nt of 0-2,$3!.*!, representin+ erroneo&sl4 paid estate taes for the 4ear "#//.

0edro 0a1onar, a memer of the 0hilippine Sco&t, 5ataan %ontin+ent, d&rin+ the second 6orld 6ar, was apart of the infamo&s Death 7arch 4 reason of which he s&ffered shoc8 and ecame insane. 9is sister osefina 0a1onar ecame the +&ardian over his person, while his propert4 was placed &nder the

+&ardianship of the 0hilippine National 5an8 :0N5; 4 the Re+ional Trial %o&rt of D&ma+&ete %it4, 5ranch)", in Special 0roceedin+s No. "!$*. 9e died on an&ar4 "3, "#//. 9e was s&rvived 4 his two rothersIsidro 0. 0a1onar and (re+orio 0a1onar, his sister osefina 0a1onar, nephews %oncordio ando+ and 7arioando+ and niece %onchita ando+.

On 7a4 "", "#//, the 0N5 filed an acco&ntin+ of the decedent<s propert4 &nder +&ardianship val&ed at0),3)-,2-!.3# in Special 0roceedin+s No. "!$*. 9owever, the 0N5 did not file an estate ta ret&rn, insteadit advised 0edro 0a1onar<s heirs to eec&te an etra1&dicial settlement and to pa4 the taes on his estate. On

April $, "#//, p&rs&ant to the assessment 4 the 5&rea& of Internal Reven&e :5IR;, the estate of 0edro0a1onar paid taes in the amo&nt of 0!,$$-.

On 7a4 "#, "#//, osefina 0a1onar filed a petition with the Re+ional Trial %o&rt of D&ma+&ete %it4 for theiss&ance in her favor of letters of administration of the estate of her rother. The case was doc8eted asSpecial 0roceedin+s No. !)##. On &l4 "/, "#//, the trial co&rt appointed osefina 0a1onar as the re+&lar

administratri of 0edro 0a1onar<s estate.

On Decemer "#, "#//, p&rs&ant to a second assessment 4 the 5IR for deficienc4 estate ta, the estate of 0edro 0a1onar paid estate ta in the amo&nt of 0",$!-,-#3.#/. osefina 0a1onar, in her capacit4 asadministratri and heir of 0edro 0a1onar<s estate, filed a protest on an&ar4 "", "#/# with the 5IR pra4in+that the estate ta pa4ment in the amo&nt of 0",$!-,-#3.#/, or at least some portion of it, e ret&rned to theheirs. )

9owever, on A&+&st "$, "#/#, witho&t waitin+ for her protest to e resolved 4 the 5IR, osefina 0a1onar filed a petition for review with the %o&rt of Ta Appeals :%TA;, pra4in+ for the ref&nd of 0",$!-,-#3.#/, or inthe alternative, 0/*3,!3!.32, as erroneo&sl4 paid estate ta. * The case was doc8eted as %TA %ase No.*)/".

On 7a4 2, "##), the %TA ordered the %ommissioner of Internal Reven&e to ref&nd osefina 0a1onar the

amo&nt of 0!$!,$/$.$#, representin+ erroneo&sl4 paid estate ta for the 4ear "#//. $ Amon+ the ded&ctionsfrom the +ross estate allowed 4 the %TA were the amo&nts of 023,-$) representin+ the notarial fee for theEtra1&dicial Settlement and the amo&nt of 0$3,333 as the attorne4<s fees in Special 0roceedin+s No. "!$*for +&ardianship.2

On &ne "$, "##), the %ommissioner of Internal Reven&e filed a motion for reconsideration - of the %TA<s7a4 2, "##) decision assertin+, amon+ others, that the notarial fee for the Etra1&dicial Settlement and theattorne4<s fees in the +&ardianship proceedin+s are not ded&ctile epenses.

On &ne -, "##*, the %TA iss&ed the assailed Resol&tion/ orderin+ the %ommissioner of Internal Reven&eto ref&nd osefina 0a1onar, as administratri of the estate of 0edro 0a1onar, the amo&nt of 0-2,$3!.*!

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representin+ erroneo&sl4 paid estate ta for the 4ear "#//. Also, the %TA &pheld the validit4 of the ded&ctionof the notarial fee for the Etra1&dicial Settlement and the attorne4<s fees in the +&ardianship proceedin+s.

On &l4 $, "##*, the %ommissioner of Internal Reven&e filed with the %o&rt of Appeals a petition for reviewof the %TA<s 7a4 2, "##) Decision and its &ne -, "##* Resol&tion, =&estionin+ the validit4 of theaovementioned ded&ctions. On Decemer !", "##$, the %o&rt of Appeals denied the %ommissioner<spetition.#

9ence, the present appeal 4 the %ommissioner of Internal Reven&e.

The sole iss&e in this case involves the constr&ction of section -# "3 of the National Internal Reven&e%ode "":Ta %ode; which provides for the allowale ded&ctions from the +ross estate of the decedent. 7orepartic&larl4, the =&estion is whether the notarial fee paid for the etra1&dicial settlement in the amo&nt of 023,-$) and the attorne4<s fees in the +&ardianship proceedin+s in the amo&nt of 0$3,333 ma4 e allowedas ded&ctions from the +ross estate of decedent in order to arrive at the val&e of the net estate.

6e answer this =&estion in the affirmative, there4 &pholdin+ the decisions of the appellate co&rts.

In its 7a4 2, "##) Decision, the %o&rt of Ta Appeals r&led th&s>

Respondent maintains that onl4 1&dicial epenses of the testamentar4 or intestate proceedin+s areallowed as a ded&ction to the +ross estate. The amo&nt of 023,-$).33 is =&ite etraordinar4 for amere notarial fee.

This %o&rt adopts the view &nder American 1&rispr&dence that epenses inc&rred in theetra1&dicial settlement of the estate sho&ld e allowed as a ded&ction from the +ross estate.?There is no re=&irement of formal administration. It is s&fficient that the epense e a necessar4contri&tion toward the settlement of the case.? @ )* Am. &r. !d, p. -2$ Nolledo, 5ar Reviewer inTaation, "3th Ed. :"##3;, p. */"B

The attorne4<s fees of 0$3,333.33, which were alread4 inc&rred &t not 4et paid, refers to the+&ardianship proceedin+ filed 4 0N5, as +&ardian over the ward of 0edro 0a1onar, doc8eted asSpecial 0roceedin+ No. "!$* in the RT% :5ranch CCCI; of D&ma+&ete %it4. . . .

The +&ardianship proceedin+ had een terminated &pon deliver4 of the resid&ar4 estate to theheirs entitled thereto. Thereafter, 0N5 was dischar+ed of an4 f&rther responsiilit4.

Attorne4<s fees in order to e ded&ctile from the +ross estate m&st e essential to the collection of assets, pa4ment of dets or the distribution of the property to the persons entitled to it . Theservices for which the fees are char+ed m&st relate to the proper settlement of the estate. @)* Am.&r. !d -2-.B In this case, the +&ardianship proceedin+ was necessar4 for the distri&tion of thepropert4 of the late 0edro 0a1onar to his ri+htf&l heirs.

0N5 was appointed as +&ardian over the assets of the late 0edro 0a1onar, who, even at the time of his death, was incompetent 4 reason of insanit4. The epenses inc&rred in the +&ardianshipproceedin+ was &t a necessar4 epense in the settlement of the decedent<s estate. Therefore, theattorne4<s fee inc&rred in the +&ardianship proceedin+s amo&ntin+ to 0$3,333.33 is a reasonaleand necessar4 &siness epense ded&ctile from the +ross estate of the decedent. "!

Upon a motion for reconsideration filed 4 the %ommissioner of Internal Reven&e, the %o&rt of Ta Appealsmodified its previo&s r&lin+ 4 red&cin+ the ref&ndale amo&nt to 0-2,$3!.*) since it fo&nd that a deficienc4

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interest sho&ld e imposed and the compromise penalt4 ecl&ded. ") 9owever, the ta co&rt &pheld itsprevio&s r&lin+ re+ardin+ the le+alit4 of the ded&ctions

It is si+nificant to note that the incl&sion of the estate ta law in the codification of all o&r national internalreven&e laws with the enactment of the National Internal Reven&e %ode in "#)# were copied from theederal Law of the United States. @ U7ALI, Reviewer in Taation :"#/$;, p. !/$ B The "#-- Ta %ode,prom&l+ated 4 0residential Decree No. ""$/, effective &ne ), "#--, reenacted s&stantiall4 all the

provisions of the old law on estate and +ift taes, ecept the sections relatin+ to the meanin+ of +ross estateand +ift. @ Ibid , p. !/2. B

In the United States, @aBdministrative epenses, eec&tor<s commissions and attorne4<s fees are consideredallowale ded&ctions from the (ross Estate. Administrative epenses are limited to s&ch epenses as areact&all4 and necessaril4 inc&rred in the administration of a decedent<s estate. @0RENTI%E'9ALL, ederalTaes Estate and (ift Taes :"#)2;, p. "!3, $)).B Necessar4 epenses of administration are s&ch epensesas are entailed for the preservation and prod&ctivit4 of the estate and for its mana+ement for purposes of liquidation, payment of debts and distribution of the residue among the persons entitled thereto . @LiFarra+a9ermanos vs. Aada, *3 0hil. "!*.B The4 m&st e inc&rred for the settlement of the estate as a whole. @)*

Am. &r. !d, p. -2$.B Th&s, where there were no s&stantial comm&nit4 dets and it was &nnecessar4 toconvert comm&nit4 propert4 to cash, the onl4 practical p&rpose of administration ein+ the pa4ment of estate taes, f&ll ded&ction was allowed for attorne4<s fees and miscellaneo&s epenses char+ed wholl4 todecedent<s estate. @Ibid ., citin+ Estate of 9elis, !2 T.%. "*) :A;.B

0etitioner stated in her protest filed with the 5IR that ?&pon the death of the ward, the 0N5, which was stillthe +&ardian of the estate, :Anne ?G?;, did not file an estate ta ret&rn however, it advised the heirs toexecute an extrajudicial settlement, to pay taxes and to post a ond e=&al to the val&e of the estate, for which the state paid 0$#,)*".*3 for the premi&ms. :See Anne ?H?;.? @p. "-, %TA record.B Therefore, it wo&ldappear from the records of the case that the onl4 practical p&rpose of settlin+ the estate 4 means of anetra1&dicial settlement p&rs&ant to Section " of R&le -* of the R&les of %o&rt was for the pa4ment of taesand the distri&tion of the estate to the heirs. A fortiori, since o&r estate ta laws are of American ori+in, theinterpretation adopted 4 American %o&rts has some pers&asive effect on the interpretation of o&r ownestate ta laws on the s&1ect.

Anent the contention of respondent that the attorne4<s fees of 0$3,333.33 inc&rred in the +&ardianshipproceedin+ sho&ld not e ded&cted from the (ross Estate, 6e consider the same &nmeritorio&s. Attorne4s<and +&ardians< fees inc&rred in a tr&stee<s acco&ntin+ of a taale inter vivos tr&st attri&tale to the &s&al

iss&es involved in s&ch an acco&ntin+ was held to e proper ded&ctions eca&se these are epensesinc&rred in terminatin+ an inter vivos tr&st that was incl&dile in the decedent<s estate. @0rentice 9all,ederal Taes on Estate and (ift, p. "!3, /2"B Attorne4<s fees are allowale ded&ctions if inc&rred for thesettlement of the estate. It is noteworth4 to point that 0N5 was appointed the +&ardian over the assets of thedeceased. Necessaril4 the assets of the deceased formed part of his +ross estate. Accordin+l4, all epensesinc&rred in relation to the estate of the deceased will e ded&ctile for estate ta p&rposes provided theseare necessar4 and ordinar4 epenses for administration of the settlement of the estate. "*

In &pholdin+ the &ne -, "##* Resol&tion of the %o&rt of Ta Appeals, the %o&rt of Appeals held that>

!. Altho&+h the Ta %ode specifies ?1&dicial epenses of the testamentar4 or intestate proceedin+s,? there isno reason wh4 epenses inc&rred in the administration and settlement of an estate in etra1&dicialproceedin+s sho&ld not e allowed. 9owever, ded&ction is limited to s&ch administration epenses as areact&all4 and necessaril4 inc&rred in the collection of the assets of the estate, pa4ment of the dets, and

distri&tion of the remainder amon+ those entitled thereto. S&ch epenses ma4 incl&de eec&tor<s or administrator<s fees, attorne4<s fees, co&rt fees and char+es, appraiser<s fees, cler8 hire, costs of preservin+and distri&tin+ the estate and storin+ or maintainin+ it, ro8era+e fees or commissions for sellin+ or disposin+ of the estate, and the li8e. Ded&ctile attorne4<s fees are those inc&rred 4 the eec&tor or administrator in the settlement of the estate or in defendin+ or prosec&tin+ claims a+ainst or d&e the estate.:Estate and (ift Taation in the 0hilippines, T. 0. 7atic, r., "#/" Edition, p. "-2;.

It is clear then that the etra1&dicial settlement was for the p&rpose of pa4ment of taes and the distri&tionof the estate to the heirs. The eec&tion of the etra1&dicial settlement necessitated the notariFation of the

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same. 9ence the %ontract of Le+al Services of 7arch !/, "#// entered into etween respondent osefina0a1onar and co&nsel was presented in evidence for the p&rpose of showin+ that the amo&nt of 023,-$).33was for the notariFation of the Etra1&dicial Settlement. It follows then that the notarial fee of 023,-$).33 wasinc&rred primaril4 to settle the estate of the deceased 0edro 0a1onar. Said amo&nt sho&ld then econsidered an administration epenses act&all4 and necessaril4 inc&rred in the collection of the assets of the estate, pa4ment of dets and distri&tion of the remainder amon+ those entitled thereto. Th&s, thenotarial fee of 023,-$) inc&rred for the Etra1&dicial Settlement sho&ld e allowed as a ded&ction from the

+ross estate.

). Attorne4<s fees, on the other hand, in order to e ded&ctile from the +ross estate m&st e essential to thesettlement of the estate.

The amo&nt of 0$3,333.33 was inc&rred as attorne4<s fees in the +&ardianship proceedin+s in Spec. 0roc.No. "!$*. 0etitioner contends that said amo&nt are not epenses of the testamentar4 or intestateproceedin+s as the +&ardianship proceedin+ was instit&ted d&rin+ the lifetime of the decedent when therewas 4et no estate to e settled.

A+ain, this contention m&st fail.

The +&ardianship proceedin+ in this case was necessar4 for the distri&tion of the propert4 of the deceased0edro 0a1onar. As correctl4 pointed o&t 4 respondent %TA, the 0N5 was appointed +&ardian over theassets of the deceased, and that necessaril4 the assets of the deceased formed part of his +ross estate. . . .

It is clear therefore that the attorne4<s fees inc&rred in the +&ardianship proceedin+ in Spec. 0roc. No. "!$*were essential to the distri&tion of the propert4 to the persons entitled thereto. 9ence, the attorne4<s feesinc&rred in the +&ardianship proceedin+s in the amo&nt of 0$3,333.33 sho&ld e allowed as a ded&ctionfrom the +ross estate of the decedent. "$

The ded&ctions from the +ross estate permitted &nder section -# of the Ta %ode asicall4 reprod&ced theded&ctions allowed &nder %ommonwealth Act No. *22 :%A *22;, otherwise 8nown as the National InternalReven&e %ode of "#)#, "2 and which was the first codification of 0hilippine ta laws. Section /# :a; :"; :5; of %A *22 also provided for the ded&ction of the ?1&dicial epenses of the testamentar4 or intestate

proceedin+s? for p&rposes of determinin+ the val&e of the net estate. 0hilippine ta laws were, in t&rn, asedon the federal ta laws of the United States. "- In accord with estalished r&les of stat&tor4 constr&ction, thedecisions of American co&rts constr&in+ the federal ta code are entitled to +reat wei+ht in the interpretationof o&r own ta laws. "/

&dicial epenses are epenses of administration. "# Administration epenses, as an allowale ded&ctionfrom the +ross estate of the decedent for p&rposes of arrivin+ at the val&e of the net estate, have eenconstr&ed 4 the federal and state co&rts of the United States to incl&de all epenses ?essential to thecollection of the assets, pa4ment of dets or the distri&tion of the propert4 to the persons entitled to it.? !3 Inother words, the epenses m&st e essential to the proper settlement of the estate. Ependit&res inc&rredfor the individ&al enefit of the heirs, devisees or le+atees are not ded&ctile. !" This distinction has eencarried over to o&r 1&risdiction. Th&s, in Lorenzo v . Posadas !! the %o&rt constr&ed the phrase ?1&dicialepenses of the testamentar4 or intestate proceedin+s? as not incl&din+ the compensation paid to a tr&steeof the decedent<s estate when it appeared that s&ch tr&stee was appointed for the p&rpose of mana+in+ thedecedent<s real estate for the enefit of the testamentar4 heir. In another case, the %o&rt disallowed the

premi&ms paid on the ond filed 4 the administrator as an epense of administration since the +ivin+ of aond is in the nat&re of a =&alification for the office, and not necessar4 in the settlement of theestate. !) Neither ma4 attorne4<s fees incident to liti+ation inc&rred 4 the heirs in assertin+ their respectiveri+hts e claimed as a ded&ction from the +ross estate. !*1!phi1

%omin+ to the case at ar, the notarial fee paid for the etra1&dicial settlement is clearl4 a ded&ctileepense since s&ch settlement effected a distri&tion of 0edro 0a1onar<s estate to his lawf&l heirs. Similarl4,the attorne4<s fees paid to 0N5 for actin+ as the +&ardian of 0edro 0a1onar<s propert4 d&rin+ his lifetimesho&ld also e considered as a ded&ctile administration epense. 0N5 provided a detailed acco&ntin+ of decedent<s propert4 and +ave advice as to the proper settlement of the latter<s estate, acts which contri&tedtowards the collection of decedent<s assets and the s&se=&ent settlement of the estate.

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6e find that the %o&rt of Appeals did not commit reversile error in affirmin+ the =&estioned resol&tion of the%o&rt of Ta Appeals.

69EREORE, the Decemer !", "##$ Decision of the %o&rt of Appeals is AIR7ED. The notarial fee for the etra1&dicial settlement and the attorne4<s fees in the +&ardianship proceedin+s are allowale ded&ctionsfrom the +ross estate of 0edro 0a1onar.1!phi1"n#t

SO ORDERED.

REPU-LIC ACT No. /1

AN ACT PROVIING TAT RETIREMENT -ENEFITS OF EMPLOEES OF PRIVATE FIRMS SALLNOT -E SU-!ECT TO ATTACMENT, LEV, EXECUTION, OR AN TAX ATSOEVER.

S(c%$on 1. An4 provision of law to the contrar4 notwithstandin+, the retirement enefits received 4 officialsand emplo4ees of private firms, whether individ&al or corporate, in accordance with a reasonale privateenefit plan maintained 4 the emplo4er shall e eempt from all taes and shall not e liale to attachment,+arnishment, lev4 or seiF&re 4 or &nder an4 le+al or e=&itale process whatsoever ecept to pa4 a det of the official or emplo4ee concerned to the private enefit plan or that arisin+ from liailit4 imposed in acriminal action> Provided, That the retirin+ official or emplo4ee has een in the service of the same emplo4er

for at least ten :"3; 4ears and is not less than fift4 4ears of a+e at the time of his retirement> Provided,further, That the enefits +ranted &nder this Act shall e availed of 4 an official or emplo4ee onl4once> Provided, finally, That in case of separation of an official or emplo4ee from the service of the emplo4er d&e to death, sic8ness or other ph4sical disailit4 or for an4 ca&se e4ond the control of the said official or emplo4ee, an4 amo&nt received 4 him or 4 his heirs from the emplo4er as a conse=&ence of s&chseparation shall li8ewise e eempt as hereinaove provided.

As &sed in this Act, the term ?reasonale private enefit plan? means a pension, +rat&it4, stoc8 on&s or profit sharin+ plan maintained 4 an emplo4er for the enefit of some or all of his officials and emplo4ees,wherein contri&tions are made 4 s&ch emplo4er or officials and emplo4ees, or oth, for the p&rpose of distri&tin+ to s&ch officials and emplo4ees the earnin+s and principal of the f&nd th&s acc&m&lated, andwherein it is provided in said plan that at no time shall an4 part of the corp&s or income of the f&nd e &sedfor, or e diverted to, an4 p&rpose other than for the ecl&sive enefit of the said officials and emplo4ees.

S(c%$on 2. This Act shall ta8e effect &pon its approval.

Approved> &ne "-, "#2-

G.R. No. 120440 !5n( , 1//

FERINAN R. MARCOS II, petitioner,vs.COURT OF APPEALS, TE COMMISSIONER OF TE -UREAU OF INTERNAL REVENUE anERMINIA . E GU*MAN, respondents.

TORRES, !R., J.:

In this 0etition for Review on $ertiorari , (overnment action is once a+ain assailed as precipitate and &nfair,s&fferin+ the asic and oftl4 implored re=&isites of d&e process of law. Specificall4, the petition assails theDecision1 of the %o&rt of Appeals dated Novemer !#, "##* in %A'(.R. S0 No. )")2), where the said co&rtheld>

In view of all the fore+oin+, we r&le that the deficienc4 income ta assessments and estateta assessment, are alread4 final and :&;nappealale'and'the s&se=&ent lev4 of real

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properties is a ta remed4 resorted to 4 the +overnment, sanctioned 4 Section !") and!"/ of the National Internal Reven&e %ode. This s&mmar4 ta remed4 is distinct andseparate from the other ta remedies :s&ch as &dicial %ivil actions and %riminal actions;,and is not affected or precl&ded 4 the pendenc4 of an4 other ta remedies instit&ted 4the +overnment.

69EREORE, premises considered, 1&d+ment is here4 rendered DIS7ISSIN( the

petition for certiorari with pra4er for Restrainin+ Order and In1&nction.

No prono&ncements as to costs.

SO ORDERED.

7ore than seven 4ears since the demise of the late erdinand E. 7arcos, the former 0resident of theRep&lic of the 0hilippines, the matter of the settlement of his estate, and its d&es to the +overnment inestate taes, are still &nresolved, the latter iss&e ein+ now efore this %o&rt for resol&tion. Specificall4,petitioner erdinand R. 7arcos II, the eldest son of the decedent, =&estions the act&ations of the respondent%ommissioner of Internal Reven&e in assessin+, and collectin+ thro&+h the s&mmar4 remed4 of Lev4 onReal 0roperties, estate and income ta delin=&encies &pon the estate and properties of his father, despitethe pendenc4 of the proceedin+s on proate of the will of the late president, which is doc8eted as Sp. 0roc.No. "3!-# in the Re+ional Trial %o&rt of 0asi+, 5ranch "$2.

0etitioner had filed with the respondent %o&rt of Appeals a 0etition for $ertiorari and 0rohiition with anapplication for writ of preliminar4 in1&nction andor temporar4 restrainin+ order on &ne !/, "##), see8in+ to

I. Ann&l and set aside the Notices of Lev4 on real propert4 dated er&ar4 !!, "##) and7a4 !3, "##), iss&ed 4 respondent %ommissioner of Internal Reven&e

II. Ann&l and set aside the Notices of Sale dated 7a4 !2, "##)

III. En1oin the 9ead Reven&e Eec&tive Assistant Director II :%ollection Service;, fromproceedin+ with the A&ction of the real properties covered 4 Notices of Sale.

After the parties had pleaded their case, the %o&rt of Appeals rendered its Decision 2 on Novemer !#,"##*, r&lin+ that the deficienc4 assessments for estate and income ta made &pon the petitioner and theestate of the deceased 0resident 7arcos have alread4 ecome final and &nappealale, and ma4 th&s eenforced 4 the s&mmar4 remed4 of lev4in+ &pon the properties of the late 0resident, as was done 4 therespondent %ommissioner of Internal Reven&e.

69EREORE, premises considered 1&d+ment is here4 rendered DIS7ISSIN( thepetition for $ertiorari with pra4er for Restrainin+ Order and In1&nction.

No prono&ncements as to cost.

SO ORDERED.

Unpert&red, petitioner is now efore &s assailin+ the validit4 of the appellate co&rt<s decision, assi+nin+ thefollowin+ as errors>

A. RES0ONDENT %OURT 7ANIESTLJ ERRED IN RULIN( T9AT T9E SU77ARJTAC RE7EDIES RESORTED TO 5J T9E (OKERN7ENT ARE NOT AE%TED AND0RE%LUDED 5J T9E 0ENDEN%J O T9E S0E%IAL 0RO%EEDIN( OR T9E

ALLO6AN%E O T9E LATE 0RESIDENT<S ALLE(ED 6ILL. TO T9E %ONTRARJ, T9IS0RO5ATE 0RO%EEDIN( 0RE%ISELJ 0LA%ED ALL 0RO0ERTIES 69I%9 OR70ART O T9E LATE 0RESIDENT<S ESTATE IN %USTODIA LE(IS O T9E 0RO5ATE%OURT TO T9E EC%LUSION O ALL OT9ER %OURTS AND AD7INISTRATIKE

A(EN%IES.

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5. RES0ONDENT %OURT AR5ITRARILJ ERRED IN S6EE0IN(LJ DE%IDIN( T9ATSIN%E T9E TAC ASSESS7ENTS O 0ETITIONER AND 9IS 0ARENTS 9AD ALREADJ5E%O7E INAL AND UNA00EALA5LE, T9ERE 6AS NO NEED TO (O INTO T9E7ERITS O T9E (ROUNDS %ITED IN T9E 0ETITION. INDE0ENDENT O 69ET9ERT9E TAC ASSESS7ENTS 9AD ALREADJ 5E%O7E INAL, 9O6EKER, 0ETITIONER9AS T9E RI(9T TO UESTION T9E UNLA6UL 7ANNER AND 7ET9OD IN 69I%9TAC %OLLE%TION IS SOU(9T TO 5E ENOR%ED 5J RES0ONDENTS

%O77ISSIONER AND DE (UG7AN. T9US, RES0ONDENT %OURT S9OULD 9AKEAKORA5LJ %ONSIDERED T9E 7ERITS O T9E OLLO6IN( (ROUNDS IN T9E0ETITION>

:"; The Notices of Lev4 on Real 0ropert4 were iss&ed e4ond theperiod provided in the Reven&e 7emorand&m %irc&lar No. )/'2/.

:!; @aB The n&mero&s pendin+ co&rt cases =&estionin+ the late0resident<s ownership or interests in several properties :oth personaland real; ma8e the total val&e of his estate, and the conse=&ent estateta d&e, incapale of eact pec&niar4 determination at this time. Th&s,respondents< assessment of the estate ta and their iss&ance of theNotices of Lev4 and Sale are premat&re, confiscator4 and oppressive.

@B 0etitioner, as one of the late 0resident<s comp&lsor4 heirs, was never notified, m&ch less served with copies of the Notices of Lev4, contrar4 tothe mandate of Section !") of the NIR%. As s&ch, petitioner was never +iven an opport&nit4 to contest the Notices in violation of his ri+ht to d&eprocess of law.

%. ON A%%OUNT O T9E %LEAR 7ERIT O T9E 0ETITION, RES0ONDENT %OURT7ANIESTLJ ERRED IN RULIN( T9AT IT 9AD NO 0O6ER TO (RANT INUN%TIKERELIE TO 0ETITIONER. SE%TION !"# O T9E NIR% NOT6IT9STANDIN(, %OURTS0OSSESS T9E 0O6ER TO ISSUE A 6RIT O 0RELI7INARJ INUN%TION TORESTRAIN RES0ONDENTS %O77ISSIONER<S AND DE (UG7AN<S AR5ITRARJ7ET9OD O %OLLE%TIN( T9E ALLE(ED DEI%IEN%J ESTATE AND IN%O7ETACES 5J 7EANS O LEKJ.

The facts as fo&nd 4 the appellate co&rt are &ndisp&ted, and are here4 adopted>

On Septemer !#, "#/#, former 0resident erdinand 7arcos died in 9onol&l&, 9awaii,USA.

On &ne !-, "##3, a Special Ta A&dit Team was created to cond&ct investi+ations andeaminations of the ta liailities and oli+ations of the late president, as well as that of hisfamil4, associates and ?cronies?. Said a&dit team concl&ded its investi+ation with a7emorand&m dated &l4 !2, "##". The investi+ation disclosed that the 7arcoses failed tofile a written notice of the death of the decedent, an estate ta ret&rns @ sic B, as well asseveral income ta ret&rns coverin+ the 4ears "#/! to "#/2, all in violation of theNational Internal Reven&e %ode :NIR%;.

S&se=&entl4, criminal char+es were filed a+ainst 7rs. Imelda R. 7arcos efore the

Re+ional Trial of &eFon %it4 for violations of Sections /!, /) and /* :has penaliFed&nder Sections !$) and !$* in relation to Section !$! a M ; of the National InternalReven&e %ode :NIR%;.

The %ommissioner of Internal Reven&e there4 ca&sed the preparation and filin+ of theEstate Ta Ret&rn for the estate of the late president, the Income Ta Ret&rns of theSpo&ses 7arcos for the 4ears "#/$ to "#/2, and the Income Ta Ret&rns of petitioner erdinand ?5on+on+? 7arcos II for the 4ears "#/! to "#/$.

7



On &l4 !2, "##", the 5IR iss&ed the followin+> :"; Deficienc4 estate ta assessment no.A%'!'/#'#"'33!*2* :a+ainst the estate of the late president erdinand 7arcos in theamo&nt of 0!),!#),23-,2)/.33 0esos; :!; Deficienc4 income ta assessment no. A%'"'/$'#"'33!*$! and Deficienc4 income ta assessment no. A%'"'/2'#"'33!*$" :a+ainstthe Spo&ses erdinand and Imelda 7arcos in the amo&nts of 0"*#,$$".-3 and0"/*,33#,-)-.*3 representin+ deficienc4 income ta for the 4ears "#/$ and "#/2; :);Deficienc4 income ta assessment nos. A%'"'/!'#"'33!*23 to A%'"'/$'#"'33!*2)

:a+ainst petitioner erdinand ?5on+on+? 7arcos II in the amo&nts of 0!$/.-3 pesos0#,)/2.*3 0esos 0*,)//.)3 0esos and 02,)-2.23 0esos representin+ his deficienc4income taes for the 4ears "#/! to "#/$;.

The %ommissioner of Internal Reven&e avers that copies of the deficienc4 estate andincome ta assessments were all personall4 and constr&ctivel4 served on A&+&st !2, "##"and Septemer "!, "##" &pon 7rs. Imelda 7arcos :thro&+h her careta8er 7r. 7artineF; ather last 8nown address at No. !3* Orte+a St., San &an, 7.7. :Annees ?D? and ?E? of the 0etition;. Li8ewise, copies of the deficienc4 ta assessments iss&ed a+ainst petitioner erdinand ?5on+on+? 7arcos II were also personall4 and constr&ctivel4 served &pon him:thro&+h his careta8er; on Septemer "!, "##", at his last 8nown address at Don 7ariano7arcos St. corner 0. (&evarra St., San &an, 7.7. :Annees ?? and ?'"? of the 0etition;.Thereafter, ormal Assessment notices were served on Octoer !3, "##!, &pon 7rs.7arcos co petitioner, at his office, 9o&se of Representatives, 5atasan 0amansa,&eFon %it4. 7oreover, a notice to Tapa4er invitin+ 7rs. 7arcos :or her d&l4 a&thoriFed

representative or co&nsel;, to a conference, was f&rnished the co&nsel of 7rs. 7arcos,Dean Antonio %oronel &t to no avail.

The deficienc4 ta assessments were not protested administrativel4, 4 7rs. 7arcos andthe other heirs of the late president, within )3 da4s from service of said assessments.

On er&ar4 !!, "##), the 5IR %ommissioner iss&ed twent4'two notices of lev4 on realpropert4 a+ainst certain parcels of land owned 4 the 7arcoses to satisf4 the alle+edestate ta and deficienc4 income taes of Spo&ses 7arcos.

On 7a4 !3, "##), fo&r more Notices of Lev4 on real propert4 were iss&ed for the p&rposeof satisf4in+ the deficienc4 income taes.

On 7a4 !2, "##), additional fo&r :*; notices of Lev4 on real propert4 were a+ain iss&ed.The fore+oin+ ta remedies were resorted to p&rs&ant to Sections !3$ and !") of theNational Internal Reven&e %ode :NIR%;.

In response to a letter dated 7arch "!, "##) sent 4 Att4. Loreto Ata :co&nsel of hereinpetitioner; callin+ the attention of the 5IR and re=&estin+ that the4 e d&l4 notified of an4action ta8en 4 the 5IR affectin+ the interest of their client erdinand ?5on+on+? 7arcosII, as well as the interest of the late president copies of the aforesaid notices were,served on April -, "##) and on &ne "3, "##), &pon 7rs. Imelda 7arcos, the petitioner,and their co&nsel of record, ?De 5or1a, 7edialdea, Ata, 5ello, (&evarra and Serapio LawOffice?.

Notices of sale at p&lic a&ction were posted on 7a4 !2, "##), at the lo4 of the %it49all of Tacloan %it4. The p&lic a&ction for the sale of the eleven :""; parcels of land too8

place on &l4 $, "##). There ein+ no idder, the lots were declared forfeited in favor of the +overnment.

On &ne !$, "##), petitioner erdinand ?5on+on+? 7arcos II filed the instant petitionfor certiorari and prohiition &nder R&le 2$ of the R&les of %o&rt, with pra4er for temporar4restrainin+ order andor writ of preliminar4 in1&nction.

It has een repeatedl4 oserved, and not witho&t merit, that the enforcement of ta laws and the collectionof taes, is of paramo&nt importance for the s&stenance of +overnment. Taes are the lifelood of the+overnment and sho&ld e collected witho&t &nnecessar4 hindrance. 9owever, s&ch collection sho&ld emade in accordance with law as an4 aritrariness will ne+ate the ver4 reason for +overnment itself. It is

8



therefore necessar4 to reconcile the apparentl4 conflictin+ interests of the a&thorities and the tapa4ers sothat the real p&rpose of taation, which is the promotion of the common +ood, ma4 e achieved. 3

6hether or not the proper aven&es of assessment and collection of the said ta oli+ations were ta8en 4the respondent 5&rea& is now the s&1ect of the %o&rt<s in=&ir4.

0etitioner posits that notices of lev4, notices of sale, and s&se=&ent sale of properties of the late 0resident7arcos effected 4 the 5IR are n&ll and void for disre+ardin+ the estalished proced&re for the enforcementof taes d&e &pon the estate of the deceased. The case of %omingo vs. &arlitos is specificall4 cited toolster the ar+&ment that ?the ordinar4 proced&re 4 which to settle claims of indetedness a+ainst theestate of a deceased, person, as in an inheritance :estate; ta, is for the claimant to present a claim eforethe proate co&rt so that said co&rt ma4 order the administrator to pa4 the amo&nt therefor.? This remed4 isalle+edl4, ecl&sive, and cannot e effected thro&+h an4 other means.

0etitioner +oes f&rther, s&mittin+ that the proate co&rt is not precl&ded from den4in+ a re=&est 4 the+overnment for the immediate pa4ment of taes, and sho&ld order the pa4ment of the same onl4 within theperiod fied 4 the proate co&rt for the pa4ment of all the dets of the decedent. In this re+ard, petitioner cites the case of $ollector of Internal 'evenue vs. (he )dministratrix of the *state of *charri :2- 0hil $3!;,where it was held that>

The case of Pineda vs. $ourt of +irst Instance of Ta4aas and %ollector of InternalReven&e :$! 0hil /3);, relied &pon 4 the petitioner'appellant is +ood a&thorit4 on theproposition that the co&rt havin+ control over the administration proceedin+s has

1&risdiction to entertain the claim presented 4 the +overnment for taes d&e and to order the administrator to pa4 the ta sho&ld it find that the assessment was proper, and that theta was le+al, d&e and collectile. And the r&le laid down in that case m&st e &nderstoodin relation to the case of $ollector of $ustoms vs. aygood , supra., as to the proced&re toe followed in a +iven case 4 the +overnment to effect&ate the collection of the ta.%ate+oricall4 stated, where d&rin+ the pendenc4 of 1&dicial administration over the estateof a deceased person a claim for taes is presented 4 the +overnment, the co&rt has thea&thorit4 to order pa4ment 4 the administrator &t, in the same wa4 that it has a&thorit4to order pa4ment or satisfaction, it also has the ne+ative a&thorit4 to den4 the same. 6hilethere are cases where co&rts are re=&ired to perform certain d&ties mandator4 andministerial in character, the f&nction of the co&rt in a case of the present character is notone of them and here, the co&rt cannot e an or+anism endowed with latit&de of

1&d+ment in one direction, and converted into a mere mechanical contrivance in another direction.

On the other hand, it is ar+&ed 4 the 5IR, that the state<s a&thorit4 to collect internal reven&e taes isparamo&nt. Th&s, the pendenc4 of proate proceedin+s over the estate of the deceased does not precl&dethe assessment and collection, thro&+h s&mmar4 remedies, of estate taes over the same. Accordin+ to therespondent, claims for pa4ment of estate and income taes d&e and assessed after the death of thedecedent need not e presented in the form of a claim a+ainst the estate. These can and sho&ld e paidimmediatel4. The proate co&rt is not the +overnment a+enc4 to decide whether an estate is liale for pa4ment of estate of income taes. 6ell'settled is the r&le that the proate co&rt is a co&rt with special andlimited 1&risdiction.

%oncededl4, the a&thorit4 of the Re+ional Trial %o&rt, sittin+, aleit with limited 1&risdiction, as a proateco&rt over estate of deceased individ&al, is not a triflin+ thin+. The co&rt<s 1&risdiction, once invo8ed, and

made effective, cannot e treated with indifference nor sho&ld it e i+nored with imp&nit4 4 the ver4 partiesinvo8in+ its a&thorit4.

In testament to this, it has een held that it is within the 1&risdiction of the proate co&rt to approve the saleof properties of a deceased person 4 his prospective heirs efore final ad1&dication to determine who arethe heirs of the decedent 6 the reco+nition of a nat&ral child the stat&s of a woman claimin+ to e the le+alwife of the decedent 4the le+alit4 of disinheritance of an heir 4 the testator / and to pass &pon the validit4of a waiver of hereditar4 ri+hts. 10

The pivotal =&estion the co&rt is tas8ed to resolve refers to the a&thorit4 of the 5&rea& of Internal Reven&eto collect 4 the s&mmar4 remed4 of lev4in+ &pon, and sale of real properties of the decedent, estate ta

9



deficiencies, witho&t the co+nition and a&thorit4 of the co&rt sittin+ in proate over the s&pposed will of thedeceased.

The nat&re of the process of estate ta collection has een descried as follows>

Strictl4 spea8in+, the assessment of an inheritance ta does not directl4 involve theadministration of a decedent<s estate, altho&+h it ma4 e viewed as an incident to thecomplete settlement of an estate, and, &nder some stat&tes, it is made the d&t4 of theproate co&rt to ma8e the amo&nt of the inheritance ta a part of the final decree of distri&tion of the estate. It is not a+ainst the propert4 of decedent, nor is it a claim a+ainstthe estate as s&ch, &t it is a+ainst the interest or propert4 ri+ht which the heir, le+atee,devisee, etc., has in the propert4 formerl4 held 4 decedent. &rther, &nder some stat&tes,it has een held that it is not a s&it or controvers4 etween the parties, nor is it anadversar4 proceedin+ etween the state and the person who owes the ta on theinheritance. 9owever, &nder other stat&tes it has een held that the hearin+ anddetermination of the cash val&e of the assets and the determination of the ta areadversar4 proceedin+s. The proceedin+ has een held to e necessaril4 a proceedin+ inrem. 11

In the 0hilippine eperience, the enforcement and collection of estate ta, is eec&tive in character, as thele+islat&re has seen it fit to ascrie this tas8 to the 5&rea& of Internal Reven&e. Section ) of the National

Internal Reven&e %ode attests to this>

Sec. ). 0owers and d&ties of the 5&rea&. The powers and d&ties of the 5&rea& of Internal Reven&e shall comprehend the assessment and collection of all national internalreven&e taes, fees, and char+es, and the enforcement of all forfeit&res, penalties, andfines connected therewith, incl&din+ the eec&tion of 1&d+ments in all cases decided in itsfavor 4 the %o&rt of Ta Appeals and the ordinar4 co&rts. Said 5&rea& shall also +iveeffect to and administer the s&pervisor4 and police power conferred to it 4 this %ode or other laws.

Th&s, it was in -era vs. +ernandez 12 that the co&rt reco+niFed the lieral treatment of claims for taeschar+ed a+ainst the estate of the decedent. S&ch taes, we said, were eempted from the application of thestat&te of non'claims, and this is 1&stified 4 the necessit4 of +overnment f&ndin+, immortaliFed in the maimthat taes are the lifelood of the +overnment.-ectigalia nervi sunt rei publicae taes are the sinews of

the state.

Taes assessed a+ainst the estate of a deceased person, after administration is opened,need not e s&mitted to the committee on claims in the ordinar4 co&rse of administration.In the eercise of its control over the administrator, the co&rt ma4 direct the pa4ment of s&ch taes &pon motion showin+ that the taes have een assessed a+ainst the estate.

S&ch lieral treatment of internal reven&e taes in the proate proceedin+s etends so far, even to allowin+the enforcement of ta oli+ations a+ainst the heirs of the decedent, even after distri&tion of the estate<sproperties.

%laims for taes, whether assessed efore or after the death of the deceased, can ecollected from the heirs even after the distri&tion of the properties of the decedent. The4are eempted from the application of the stat&te of non'claims. The heirs shall e liale

therefor, in proportion to their share in the inheritance. 13

Th&s, the (overnment has two wa4s of collectin+ the taes in =&estion. One, 4 +oin+after all the heirs and collectin+ from each one of them the amo&nt of the ta proportionateto the inheritance received. Another remed4, p&rs&ant to the lien created 4 Section )"$ of the Ta %ode &pon all propert4 and ri+hts to propert4 elon+ to the tapa4er for &npaidincome ta, is 4 s&1ectin+ said propert4 of the estate which is in the hands of an heir or transferee to the pa4ment of the ta d&e the estate. :%ommissioner of Internal Reven&evs. 0ineda, !" S%RA "3$, Septemer "$, "#2-.;

10



rom the fore+oin+, it is discernile that the approval of the co&rt, sittin+ in proate, or as a settlementtri&nal over the deceased is not a mandator4 re=&irement in the collection of estate taes. It cannottherefore e ar+&ed that the Ta 5&rea& erred in proceedin+ with the lev4in+ and sale of the propertiesalle+edl4 owned 4 the late 0resident, on the +ro&nd that it was re=&ired to see8 first the proate co&rt<ssanction. There is nothin+ in the Ta %ode, and in the pertinent remedial laws that implies the necessit4 of the proate or estate settlement co&rt<s approval of the state<s claim for estate taes, efore the same cane enforced and collected.

On the contrar4, &nder Section /- of the NIR%, it is the proate or settlement co&rt which is idden not toa&thoriFe the eec&tor or 1&dicial administrator of the decedent<s estate to deliver an4 distri&tive share toan4 part4 interested in the estate, &nless it is shown a %ertification 4 the %ommissioner of Internal Reven&ethat the estate taes have een paid. This provision disproves the petitioner<s contention that it is theproate co&rt which approves the assessment and collection of the estate ta.

If there is an4 iss&e as to the validit4 of the 5IR<s decision to assess the estate taes, this sho&ld have eenp&rs&ed thro&+h the proper administrative and 1&dicial aven&es provided for 4 law.

Section !!# of the NIR% tells &s how>

Sec. !!#. 0rotestin+ of assessment. 6hen the %ommissioner of Internal Reven&e or his d&l4 a&thoriFed representative finds that proper taes sho&ld e assessed, he shallfirst notif4 the tapa4er of his findin+s. 6ithin a period to e prescried 4 implementin+re+&lations, the tapa4er shall e re=&ired to respond to said notice. If the tapa4er fails torespond, the %ommissioner shall iss&e an assessment ased on his findin+s.

S&ch assessment ma4 e protested administrativel4 4 filin+ a re=&est for reconsiderationor reinvesti+ation in s&ch form and manner as ma4 e prescried 4 implementin+re+&lations within :)3; da4s from receipt of the assessment otherwise, the assessmentshall ecome final and &nappealale.

If the protest is denied in whole or in part, the individ&al, association or corporationadversel4 affected 4 the decision on the protest ma4 appeal to the %o&rt of Ta Appealswithin thirt4 :)3; da4s from receipt of said decision otherwise, the decision shall ecomefinal, eec&tor4 and demandale. :As inserted 4 0.D. "--);

Apart from failin+ to file the re=&ired estate ta ret&rn within the time re=&ired for the filin+ of the same,petitioner, and the other heirs never =&estioned the assessments served &pon them, allowin+ the same tolapse into finalit4, and promptin+ the 5IR to collect the said taes 4 lev4in+ &pon the properties left 40resident 7arcos.

0etitioner s&mits, however, that ?while the assessment of taes ma4 have een validl4 &nderta8en 4 the(overnment, collection thereof ma4 have een done in violation of the law. Th&s, the manner and method inwhich the latter is enforced ma4 e =&estioned separatel4, and irrespective of the finalit4 of the former,eca&se the (overnment does not have the &nridled discretion to enforce collection witho&t re+ard to theclear provision of law.? 1

0etitioner specificall4 points o&t that appl4in+ 7emorand&m %irc&lar No. )/'2/, implementin+ Sections )"/and )!* of the old ta code :Rep&lic Act $!3);, the 5IR<s Notices of Lev4 on the 7arcos properties, were

iss&ed e4ond the allowed period, and are therefore n&ll and void>

. . . the Notices of Lev4 on Real 0ropert4 :Annees O to NN of Anne % of this 0etition; insatisfaction of said assessments were still iss&ed 4 respondents well e4ond the periodmandated in Reven&e 7emorand&m %irc&lar No. )/'2/. These Notices of Lev4 wereiss&ed onl4 on !! er&ar4 "##) and !3 7a4 "##) when at least seventeen :"-; monthshad alread4 lapsed from the last service of ta assessment on "! Septemer "##". As nonotices of distraint of personal propert4 were first iss&ed 4 respondents, the latter sho&ldhave complied with Reven&e 7emorand&m %irc&lar No. )/'2/ and iss&ed these Noticesof Lev4 not earlier than three :); months nor later than si :2; months from "! Septemer "##". In accordance with the %irc&lar, respondents onl4 had &ntil "! 7arch "##! :the last

11



da4 of the sith month; within which to iss&e these Notices of Lev4. The Notices of Lev4,havin+ een iss&ed e4ond the period allowed 4 law, are th&s void and of no effect. 1

6e hold otherwise. The Notices of Lev4 &pon real propert4 were iss&ed within the prescriptive period and inaccordance with the provisions of the present Ta %ode. The deficienc4 ta assessment, havin+ alread4ecome final, eec&tor4, and demandale, the same can now e collected thro&+h the s&mmar4 remed4 of distraint or lev4 p&rs&ant to Section !3$ of the NIR%.

The applicale provision in re+ard to the prescriptive period for the assessment and collection of tadeficienc4 in this instance is Article !!) of the NIR%, which pertinentl4 provides>

Sec. !!). Eceptions as to a period of limitation of assessment and collection of taes. :a; In the case of a false or fra&d&lent ret&rn with intent to evade ta or of a fail&re to file aret&rn, the ta ma4 e assessed, or a proceedin+ in co&rt for the collection of s&ch tama4 e e+&n witho&t assessment, at an4 time within ten :"3; 4ears after the discover4 of the falsit4, fra&d, or omission>Provided , That, in a fra&d assessment which has ecomefinal and eec&tor4, the fact of fra&d shall e 1&diciall4 ta8en co+niFance of in the civil or criminal action for the collection thereof.

:c; An4 internal reven&e ta which has een assessed within the period of limitation aoveprescried, ma4 e collected 4 distraint or lev4 or 4 a proceedin+ in co&rt within three4ears followin+ the assessment of the ta.

The omission to file an estate ta ret&rn, and the s&se=&ent fail&re to contest or appeal the assessmentmade 4 the 5IR is fatal to the petitioner<s ca&se, as &nder the aove'cited provision, in case of fail&re to filea ret&rn, the ta ma4 e assessed at an4 time within ten 4ears after the omission, and an4 ta so assessedma4 e collected 4 lev4 &pon real propert4 within three 4ears followin+ the assessment of the ta. Since theestate ta assessment had ecome final and &nappealale 4 the petitioner<s defa&lt as re+ards protestin+the validit4 of the said assessment, there is now no reason wh4 the 5IR cannot contin&e with the collectionof the said ta. An4 o1ection a+ainst the assessment sho&ld have een p&rs&ed followin+ the aven&e paved

in Section !!# of the NIR% on protests on assessments of internal reven&e taes.

0etitioner f&rther ar+&es that ?the n&mero&s pendin+ co&rt cases =&estionin+ the late president<s ownershipor interests in several properties :oth real and personal; ma8e the total val&e of his estate, and theconse=&ent estate ta d&e, incapale of eact pec&niar4 determination at this time. Th&s, respondents<assessment of the estate ta and their iss&ance of the Notices of Lev4 and sale are premat&re andoppressive.? 9e points o&t the pendenc4 of Sandi+ana4an %ivil %ase Nos. 333"'33)* and 3"*", whichwere filed 4 the +overnment to =&estion the ownership and interests of the late 0resident in real andpersonal properties located within and o&tside the 0hilippines. 0etitioner, however, omits to alle+e whether the properties levied &pon 4 the 5IR in the collection of estate taes &pon the decedent<s estate wereamon+ those involved in the said cases pendin+ in the Sandi+ana4an. Indeed, the co&rt is at a loss as tohow these cases are relevant to the matter at iss&e. The mere fact that the decedent has pendin+ casesinvolvin+ ill'+otten wealth does not affect the enforcement of ta assessments over the properties ind&ital4incl&ded in his estate.

0etitioner also epresses his reservation as to the propriet4 of the 5IR<s total assessment of 0!),!#!,23-,2)/.33, statin+ that this amo&nt deviates from the findin+s of the Department of &stice<s 0anelof 0rosec&tors as per its resol&tion of !3 Septemer "##". Alle+edl4, this is clear evidence of the &ncertaint4on the part of the (overnment as to the total val&e of the estate of the late 0resident.

This is, to o&r mind, the petitioner<s last ditch effort to assail the assessment of estate ta which had alread4ecome final and &nappealale.

It is not the Department of &stice which is the +overnment a+enc4 tas8ed to determine the amo&nt of taesd&e &pon the s&1ect estate, &t the 5&rea& of Internal Reven&e, 16 whose determinations and assessments

12



are pres&med correct and made in +ood faith. 1 The tapa4er has the d&t4 of provin+ otherwise. In theasence of proof of an4 irre+&larities in the performance of official d&ties, an assessment will not edist&red. Even an assessment ased on estimates is prima facie valid and lawf&l where it does not appear to have een arrived at aritraril4 or capricio&sl4. The &rden of proof is &pon the complainin+ part4 to showclearl4 that the assessment is erroneo&s. ail&re to present proof of error in the assessment will 1&stif4 the

1&dicial affirmance of said assessment. 14 In this instance, petitioner has not pointed o&t one sin+le provisionin the 7emorand&m of the Special A&dit Team which +ave rise to the =&estioned assessment, which ears a

trace of falsit4. Indeed, the petitioner<s attac8 on the assessment ears mainl4 on the alle+ed improaleand &nconscionale amo&nt of the taes char+ed. 5&t mere rhetoric cannot s&ppl4 the asis for the char+eof impropriet4 of the assessments made.

7oreover, these o1ections to the assessments sho&ld have een raised, considerin+ the ample remediesafforded the tapa4er 4 the Ta %ode, with the 5&rea& of Internal Reven&e and the %o&rt of Ta Appeals,as descried earlier, and cannot e raised now via 0etition for $ertiorari , &nder the pretet of +rave a&se of discretion. The co&rse of action ta8en 4 the petitioner reflects his disre+ard or even rep&+nance of theestalished instit&tions for +overnance in the scheme of a well'ordered societ4. The s&1ect taassessments havin+ ecome final, eec&tor4 and enforceale, the same can no lon+er e contested 4means of a dis+&ised protest. In the main, $ertiorari ma4 not e &sed as a s&stit&te for a lost appeal or remed4. 1/ This 1&dicial polic4 ecomes more prono&nced in view of the asence of s&fficient attac8 a+ainstthe act&ations of +overnment.

On the matter of s&fficienc4 of service of Notices of Assessment to the petitioner, we find the respondentappellate co&rt<s prono&ncements so&nd and resilient to petitioner<s attac8s.

Anent +ro&nds ):; and :5; oth alle+in+claimin+ lac8 of notice 6e find, after considerin+ the facts and circ&mstances, as well as evidences, that there was s&fficient,constr&ctive andor act&al notice of assessments, lev4 and sale, sent to herein petitioner erdinand ?5on+on+? 7arcos as well as to his mother 7rs. Imelda 7arcos.

Even if we are to r&le o&t the notices of assessments personall4 +iven to the careta8er of 7rs. 7arcos at the latter<s last 8nown address, on A&+&st !2, "##" and Septemer "!,"##", as well as the notices of assessment personall4 +iven to the careta8er of petitioner also at his last 8nown address on Septemer "!, "##" the s&se=&ent notices +iventhereafter co&ld no lon+er e i+nored as the4 were sent at a time when petitioner wasalread4 here in the 0hilippines, and at a place where said notices wo&ld s&rel4 e called

to petitioner<s attention, and received 4 responsile persons of s&fficient a+e anddiscretion.

Th&s, on Octoer !3, "##!, formal assessment notices were served &pon 7rs. 7arcos cothe petitioner, at his office, 9o&se of Representatives, 5atasan 0amansa, .%. :Annees?A?, ?A'"?, ?A'!?, ?A')? pp. !3-'!"3, %omment7emorand&m of OS(;. 7oreover, a noticeto tapa4er dated Octoer /, "##! invitin+ 7rs. 7arcos to a conference relative to her taliailities, was f&rnished the co&nsel of 7rs. 7arcos Dean Antonio %oronel :Anne ?5?,p. !"", ibid ;. Thereafter, copies of Notices were also served &pon 7rs. Imelda 7arcos, thepetitioner and their co&nsel ?De 5or1a, 7edialdea, Ata, 5ello, (&evarra and Serapio LawOffice?, on April -, "##) and &ne "3, "##). Despite all of these Notices, petitioner never lifted a fin+er to protest the assessments, :&pon which the Lev4 and sale of propertieswere ased;, nor appealed the same to the %o&rt of Ta Appeals.

There ein+ s&fficient service of Notices to herein petitioner :and his mother; and itappearin+ that petitioner contin&o&sl4 i+nored said Notices despite several opport&nities+iven him to file a protest and to thereafter appeal to the %o&rt of Ta Appeals, the taassessments s&1ect of this case, &pon which the lev4 and sale of properties were ased,co&ld no lon+er e contested :directl4 or indirectl4; via this instant petition for certiorari . 20

0etitioner ar+&es that all the =&estioned Notices of Lev4, however, m&st e n&llified for havin+ een iss&edwitho&t validl4 servin+ copies thereof to the petitioner. As a mandator4 heir of the decedent, petitioner aversthat he has an interest in the s&1ect estate, and notices of lev4 &pon its properties sho&ld have een served&pon him.

13



6e do not a+ree. In the case of notices of lev4 iss&ed to satisf4 the delin=&ent estate ta, the delin=&enttapa4er is the Estate of the decedent, and not necessaril4, and ecl&sivel4, the petitioner as heir of thedeceased. In the same vein, in the matter of income ta delin=&enc4 of the late president and his spo&se,petitioner is not the tapa4er liale. Th&s, it follows that service of notices of lev4 in satisfaction of these tadelin=&encies &pon the petitioner is not re=&ired 4 law, as &nder Section !") of the NIR%, which pertinentl4states>

. . . Lev4 shall e effected 4 writin+ &pon said certificate a description of the propert4&pon which lev4 is made. At the same time, written notice of the lev4 shall e mailed to or served &pon the Re+ister of Deeds of the province or cit4 where the propert4 is locatedand &pon the delin=&ent tapa4er, or if he e asent from the 0hilippines, to his a+ent or the mana+er of the &siness in respect to which the liailit4 arose, or if there e none, tothe occ&pant of the propert4 in =&estion.

The fore+oin+ notwithstandin+, the record shows that notices of warrants of distraint and lev4 of sale weref&rnished the co&nsel of petitioner on April -, "##), and &ne "3, "##), and the petitioner himself on April"!, "##) at his office at the 5atasan+ 0amansa. 21 6e cannot therefore, co&ntenance petitioner<sinsistence that he was denied d&e process. 6here there was an opport&nit4 to raise o1ections to+overnment action, and s&ch opport&nit4 was disre+arded, for no 1&stifiale reason, the part4 claimin+oppression then ecomes the oppressor of the orderl4 f&nctions of +overnment. 9e who comes to co&rtm&st come with clean hands. Otherwise, he not onl4 taints his name, &t ridic&les the ver4 str&ct&re of estalished a&thorit4.

IN KIE6 69EREO, the %o&rt RESOLKED to DENJ the present petition. The Decision of the %o&rt of Appeals dated Novemer !#, "##* is here4 AIR7ED in all respects.

SO ORDERED.

G.R. No. L+223 S(7%(#8(r 1, 1/6

COMMISSIONER OF INTERNAL REVENUE, petitioner,vs.MANUEL -. PINEA, a" on( o' %h( h($r" o' (c(a"( ATANASIO PINEA, respondent.

.ffice of the Solicitor &eneral for petitioner"/anuel 0" Pineda for and in his o!n behalf as respondent"

-ENG*ON, !.P., J.:

On 7a4 !), "#*$ Atanasio 0ineda died, s&rvived 4 his wife, elicisima 5a+tas, and "$ children, the eldestof whom is 7an&el 5. 0ineda, a law4er. Estate proceedin+s were had in the %o&rt of irst Instance of 7anila:%ase No. -""!#; wherein the s&rvivin+ widow was appointed administratri. The estate was divided amon+and awarded to the heirs and the proceedin+s terminated on &ne /, "#*/. 7an&el 5. 0ineda<s shareamo&nted to ao&t 0!,$33.33.

After the estate proceedin+s were closed, the 5&rea& of Internal Reven&e investi+ated the income taliailit4 of the estate for the 4ears "#*$, "#*2, "#*- and "#*/ and it fo&nd that the correspondin+ income taret&rns were not filed. There&pon, the representative of the %ollector of Internal Reven&e filed said ret&rns

14



for the estate on the asis of information and data otained from the aforesaid estate proceedin+s andiss&ed an assessment for the followin+>

". Deficienc4 income ta

"#*$ 0")$./)

"#*2 *)2.#$

"#*- ",!32.#" 0",--#.2# Add> $ s&rchar+e //.#/

" monthl4 interest fromNovemer )3, "#$) to April "$,"#$- -!3.--

%ompromise for late filin+ /3.33

%ompromise for late pa4ment *3.33

Total amo&nt d&e 0!,-3-.**

!. Additional residence ta for "#*$0"*.$3

). Real Estate dealer<s ta for the fo&rth=&arter of "#*2 and the whole 4ear of

"#*-

0!3-.$3

7an&el 5. 0ineda, who received the assessment, contested the same. S&se=&entl4, he appealed to the%o&rt of Ta Appeals alle+in+ that he was appealin+ ?onl4 that proportionate part or portion pertainin+ to himas one of the heirs.?

After hearin+ the parties, the %o&rt of Ta Appeals rendered 1&d+ment reversin+ the decision of the%ommissioner on the +ro&nd that his ri+ht to assess and collect the ta has prescried. The %ommissioner appealed and this %o&rt affirmed the findin+s of the Ta %o&rt in respect to the assessment for income tafor the 4ear "#*- &t held that the ri+ht to assess and collect the taes for "#*$ and "#*2 has notprescried. or "#*$ and "#*2 the ret&rns were filed on A&+&st !*, "#$) assessments for oth taale4ears were made within five 4ears therefrom or on Octoer "#, "#$) and the action to collect the ta wasfiled within five 4ears from the latter date, on A&+&st -, "#$-. or taale 4ear "#*-, however, the ret&rn wasfiled on 7arch ", "#*/ the assessment was made on Octoer "#, "#$), more than five 4ears from the date

the ret&rn was filed hence, the ri+ht to assess income ta for "#*- had prescried. Accordin+l4, 6eremanded the case to the Ta %o&rt for f&rther appropriate proceedin+s."

In the Ta %o&rt, the parties s&mitted the case for decision witho&t additional evidence.

On Novemer !#, "#2) the %o&rt of Ta Appeals rendered 1&d+ment holdin+ 7an&el 5. 0ineda liale for thepa4ment correspondin+ to his share of the followin+ taes>

Deficienc4 income ta

"#*$ 0")$./)

"#*2 *)2.#$

Real estate dealer<s fied

ta *th =&arter of "#*2and whole 4ear of "#*- 0"/-.$3

The %ommissioner of Internal Reven&e has appealed to Us and has proposed to hold 7an&el 5. 0inedaliale for the pa4ment of all the taes fo&nd 4 the Ta %o&rt to e d&e from the estate in the total amo&nt of 0-23.!/ instead of onl4 for the amo&nt of taes correspondin+ to his share in the estate.1a!phl"n2t

7an&el 5. 0ineda opposes the proposition on the +ro&nd that as an heir he is liale for &npaid income tad&e the estate onl4 &p to the etent of and in proportion to an4 share he received. 9e relies on &overnment of the Philippine Islands v" Pamintuan! where 6e held that ?after the partition of an estate, heirs and

15



distri&tees are liale individ&all4 for the pa4ment of all lawf&l o&tstandin+ claims a+ainst the estate inproportion to the amo&nt or val&e of the propert4 the4 have respectivel4 received from the estate.?

6e hold that the (overnment can re=&ire 7an&el 5. 0ineda to pa4 the f&ll amo&nt of the taes assessed.

0ineda is liale for the assessment as an heir and as a holder'transferee of propert4 elon+in+ to theestatetapa4er. As an heir he is individ&all4 answerale for the part of the ta proportionate to the share hereceived from the inheritance.) 9is liailit4, however, cannot eceed the amo&nt of his share.*

As a holder of propert4 elon+in+ to the estate, 0ineda is liale for he ta &p to the amo&nt of the propert4 inhis possession. The reason is that the (overnment has a lien on the 0!,$33.33 received 4 him from theestate as his share in the inheritance, for &npaid income taes *a for which said estate is liale, p&rs&ant tothe last para+raph of Section )"$ of the Ta %ode, which we =&ote here&nder>

If an4 person, corporation, partnership, 1oint'acco&nt :cuenta en participacion;, association, or ins&rance compan4 liale to pa4 the income ta, ne+lects or ref&ses to pa4 the same after demand,the amo&nt shall e a lien in favor of the (overnment of the 0hilippines from the time when theassessment was made 4 the %ommissioner of Internal Reven&e &ntil paid with interest, penalties,and costs that ma4 accr&e in addition thereto &pon all propert4 and ri+hts to propert4 elon+in+ tothe tapa4er> . . .

54 virt&e of s&ch lien, the (overnment has the ri+ht to s&1ect the propert4 in 0ineda<s possession, i.e., the0!,$33.33, to satisf4 the income ta assessment in the s&m of 0-23.!/. After s&ch pa4ment, 0ineda willhave a ri+ht of contri&tion from his co'heirs,$ to achieve an ad1&stment of the proper share of each heir inthe distri&tale estate.

All told, the (overnment has two wa4s of collectin+ the ta in =&estion. One, 4 +oin+ after all the heirs andcollectin+ from each one of them the amo&nt of the ta proportionate to the inheritance received. Thisremed4 was adopted in &overnment of the Philippine Islands v" Pamintuan, supra. In said case, the(overnment filed an action a+ainst all the heirs for the collection of the ta. This action rests on the conceptthat hereditar4 propert4 consists onl4 of that part which remains after the settlement of all lawf&l claimsa+ainst the estate, for the settlement of which the entire estate is first liale.2 The reason wh4 in case s&it isfiled a+ainst all the heirs the ta d&e from the estate is levied proportionatel4 a+ainst them is to achievethere4 two res&lts> first, pa4ment of the ta and second, ad1&stment of the shares of each heir in thedistri&ted estate as lessened by the tax .

Another remed4, p&rs&ant to the lien created 4 Section )"$ of the Ta %ode &pon all propert4 and ri+hts topropert4 elon+in+ to the tapa4er for &npaid income ta, is 4 s&1ectin+ said propert4 of the estate whichis in the hands of an heir or transferee to the pa4ment of the ta d&e, the estate. This second remed4 is thever4 aven&e the (overnment too8 in this case to collect the ta. The 5&rea& of Internal Reven&e sho&ld e+iven, in instances li8e the case at ar, the necessar4 discretion to avail itself of the most epeditio&s wa4 tocollect the ta as ma4 e envisioned in the partic&lar provision of the Ta %ode aove =&oted, eca&setaes are the lifelood of +overnment and their prompt and certain availailit4 is an imperio&s need. - And asafore'stated in this case the s&it see8s to achieve onl4 one o1ective> pa4ment of the ta. The ad1&stment of the respective shares d&e to the heirs from the inheritance, as lessened 4 the ta, is left to await the s&it for contri&tion 4 the heir from whom the (overnment recovered said ta.

69EREORE, the decision appealed from is modified. 7an&el 5. 0ineda is here4 ordered to pa4 to the%ommissioner of Internal Reven&e the s&m of 0-23.!/ as deficienc4 income ta for "#*$ and "#*2, and

real estate dealer<s fied ta for the fo&rth =&arter of "#*2 and for the whole 4ear "#*-, witho&t pre1&dice tohis ri+ht of contri&tion for his co'heirs. No costs. So ordered.

G.R. No. L+3042 !5n( 14, 1/3

PA-LO LOREN*O, a" %r5"%(( o' %h( ("%a%( o' Tho#a" an9(:, (c(a"(, plaintiff'appellant,vs.!UAN POSAAS, !R., Co99(c%or o' In%(rna9 R(;(n5(, defendant'appellant.

16



Pablo Lorenzo and %elfin 3oven for plaintiff4appellant".ffice of the Solicitor4&eneral ilado for defendant4appellant"

LAUREL, J.:

On Octoer *, "#)!, the plaintiff 0alo LorenFo, in his capacit4 as tr&stee of the estate of Thomas 9anle4,deceased, ro&+ht this action in the %o&rt of irst Instance of Gamoan+a a+ainst the defendant, &an0osadas, r., then the %ollector of Internal Reven&e, for the ref&nd of the amo&nt of 0!,3$!.-*, paid 4 theplaintiff as inheritance ta on the estate of the deceased, and for the collection of interst thereon at the rateof 2 per cent per ann&m, comp&ted from Septemer "$, "#)!, the date when the aforesaid ta was @paid&nder protest. The defendant set &p a co&nterclaim for 0","#".!- alle+ed to e interest d&e on the ta in=&estion and which was not incl&ded in the ori+inal assessment. rom the decision of the %o&rt of irstInstance of Gamoan+a dismissin+ oth the plaintiff<s complaint and the defendant<s co&nterclaim, othparties appealed to this co&rt.

It appears that on 7a4 !-, "#!!, one Thomas 9anle4 died in Gamoan+a, Gamoan+a, leavin+ a will:Ehiit $; and considerale amo&nt of real and personal properties. On 1&ne "*, "#!!, proceedin+s for theproate of his will and the settlement and distri&tion of his estate were e+&n in the %o&rt of irst Instanceof Gamoan+a. The will was admitted to proate. Said will provides, amon+ other thin+s, as follows>

*. I direct that an4 mone4 left 4 me e +iven to m4 nephew 7atthew 9anle4.

$. I direct that all real estate owned 4 me at the time of m4 death e not sold or otherwisedisposed of for a period of ten :"3; 4ears after m4 death, and that the same e handled andmana+ed 4 the eec&tors, and proceeds thereof to e +iven to m4 nephew, 7atthew 9anle4, at%astlemore, 5alla+haderine, %o&nt4 of Rosecommon, Ireland, and that he e directed that thesame e &sed onl4 for the ed&cation of m4 rother<s children and their descendants.

2. I direct that ten :"3; 4ears after m4 death m4 propert4 e +iven to the aove mentioned 7atthew9anle4 to e disposed of in the wa4 he thin8s most advanta+eo&s.

/. I state at this time I have one rother livin+, named 7alachi 9anle4, and that m4 nephew,

7atthew 9anle4, is a son of m4 said rother, 7alachi 9anle4.

The %o&rt of irst Instance of Gamoan+a considered it proper for the est interests of ther estate to appointa tr&stee to administer the real properties which, &nder the will, were to pass to 7atthew 9anle4 ten 4earsafter the two eec&tors named in the will, was, on 7arch /, "#!*, appointed tr&stee. 7oore too8 his oath of office and +ave ond on 7arch "3, "#!*. 9e acted as tr&stee &ntil er&ar4 !#, "#)!, when he resi+nedand the plaintiff herein was appointed in his stead.

D&rin+ the inc&menc4 of the plaintiff as tr&stee, the defendant %ollector of Internal Reven&e, alle+in+ thatthe estate left 4 the deceased at the time of his death consisted of realt4 val&ed at 0!-,#!3 and personalt4val&ed at 0",*2$, and allowin+ a ded&ction of 0*/3./", assessed a+ainst the estate an inheritance ta inthe amo&nt of 0",*)*.!* which, to+ether with the penalties for deli=&enc4 in pa4ment consistin+ of a " per cent monthl4 interest from &l4 ", "#)" to the date of pa4ment and a s&rchar+e of !$ per cent on the ta,amo&nted to 0!,3$!.-*. On 7arch "$, "#)!, the defendant filed a motion in the testamentar4 proceedin+s

pendin+ efore the %o&rt of irst Instance of Gamoan+a :Special proceedin+s No. )3!; pra4in+ that thetr&stee, plaintiff herein, e ordered to pa4 to the (overnment the said s&m of 0!,3$!.-*. The motion was+ranted. On Septemer "$, "#)!, the plaintiff paid said amo&nt &nder protest, notif4in+ the defendant at thesame time that &nless the amo&nt was promptl4 ref&nded s&it wo&ld e ro&+ht for its recover4. Thedefendant overr&led the plaintiff<s protest and ref&sed to ref&nd the said amo&nt ha&sted, plaintiff went toco&rt with the res&lt herein aove indicated.

In his appeal, plaintiff contends that the lower co&rt erred>

17



when the heirs act&all4 receive s&ch inheritance. ?Poco importa?, sa4s 7anresa commentin+ on article 2$-of the %ivil %ode, ?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 hade retrotraerse al momento de la muerte, y asi lo ordena el articulo 565, que debe considerarse comocomplemento del presente.? :$ 7anresa, )3$ see also, art. **3, par. ", %ivil %ode.; Thomas 9anle4 havin+died on 7a4 !-, "#!!, the inheritance ta accr&ed as of the date.

rom the fact, however, that Thomas 9anle4 died on 7a4 !-, "#!!, it does not follow that the oli+ation topa4 the ta arose as of the date. The time for the pa4ment on inheritance ta is clearl4 fied 4 section "$**of the Revised Administrative %ode as amended 4 Act No. )3)", in relation to section "$*) of the same%ode. The two sections follow>

SE%. "$*). *xemption of certain acquisitions and transmissions. The followin+ shall not etaed>

:a; The mer+er of the &s&fr&ct in the owner of the na8ed title.

:b; The transmission or deliver4 of the inheritance or le+ac4 4 the fid&ciar4 heir or le+ateeto the tr&stees.

:c ; The transmission from the first heir, le+atee, or donee in favor of another eneficiar4, inaccordance with the desire of the predecessor.

In the last two cases, if the scale of taation appropriate to the new eneficiar4 is +reater than thatpaid 4 the first, the former m&st pa4 the difference.

SE%. "$**. 7hen tax to be paid . The ta fied in this article shall e paid>

:a; In the second and third cases of the net precedin+ section, efore entrance intopossession of the propert4.

:b; In other cases, within the si months s&se=&ent to the death of the predecessor &t if 1&dicial testamentar4 or intestate proceedin+s shall e instit&ted prior to the epiration of said period, the pa4ment shall e made 4 the eec&tor or administrator efore deliverin+to each eneficiar4 his share.

If the ta is not paid within the time hereinefore prescried, interest at the rate of twelve per cent&m per ann&m shall e added as part of the ta and to the ta and interest d&e and &npaidwithin ten da4s after the date of notice and demand thereof 4 the collector, there shall e f&rther added a s&rchar+e of twent4'five per cent&m.

A certified of all letters testamentar4 or of admisitration shall e f&rnished the %ollector of InternalReven&e 4 the %ler8 of %o&rt within thirt4 da4s after their iss&ance.

It sho&ld e oserved in passin+ that the word ?tr&stee?, appearin+ in s&section :b; of section "$*), sho&ldread ?fideicommissar4? or ?cestui que trust ?. There was an ovio&s mista8e in translation from the Spanishto the En+lish version.

The instant case does fall &nder s&section :a;, &t &nder s&section :b;, of section "$** aove'=&oted, asthere is here no fid&ciar4 heirs, first heirs, le+atee or donee. Under the s&section, the ta sho&ld have eenpaid efore the deliver4 of the properties in =&estion to 0. . 7. 7oore as tr&stee on 7arch "3, "#!*.

:b; The plaintiff contends that the estate of Thomas 9anle4, in so far as the real properties are concerned,did not and co&ld not le+all4 pass to the instit&ted heir, 7atthew 9anle4, &ntil after the epiration of ten 4earsfrom the death of the testator on 7a4 !-, "#!! and, that the inheritance ta sho&ld e ased on the val&e of the estate in "#)!, or ten 4ears after the testator<s death. The plaintiff introd&ced evidence tendin+ to showthat in "#)! the real properties in =&estion had a reasonale val&e of onl4 0$,-/-. This amo&nt added to the

19



val&e of the personal propert4 left 4 the deceased, which the plaintiff admits is 0",*2$, wo&ld +enerate aninheritance ta which, ecl&din+ ded&ctions, interest and s&rchar+e, wo&ld amo&nt onl4 to ao&t 0"2#.$!.

If death is the +eneratin+ so&rce from which the power of the estate to impose inheritance taes ta8es itsein+ and if, &pon the death of the decedent, s&ccession ta8es place and the ri+ht of the estate to ta vestsinstantl4, the ta sho&ld e meas&red 4 the vla&e of the estate as it stood at the time of the decedent<sdeath, re+ardless of an4 s&se=&ent contin+enc4 val&e of an4 s&se=&ent increase or decrease in val&e.

:2" %. ., pp. "2#!, "2#) !2 R. %. L., p. !)! 5la8emore and 5ancroft, Inheritance Taes, p. ")-. Seealso Hnowlton vs. 7oore, "-/ U.S., *" !3 S&p. %t. Rep., -*- ** Law. ed., #2#.; ?The ri+ht of the state toan inheritance ta accr&es at the moment of death, and hence is ordinaril4 meas&red as to an4 eneficiar44 the val&e at that time of s&ch propert4 as passes to him. S&se=&ent appreciation or depriciation isimmaterial.? :Ross, Inheritance Taation, p. -!.;

O&r attention is directed to the statement of the r&le in %4clopedia of Law of and 0roced&re :vol. )-, pp."$-*, "$-$; that, in the case of contin+ent remainders, taation is postponed &ntil the estate vests inpossession or the contin+enc4 is settled. This r&le was formerl4 followed in New Jor8 and has een adoptedin Illinois, 7innesota, 7assach&setts, Ohio, 0enns4lvania and 6isconsin. This r&le, horever, is 4 no meansentirel4 satisfactor4 either to the estate or to those interested in the propert4 :!2 R. %. L., p. !)".;. RealiFin+,perhaps, the defects of its anterior s4stem, we find &pon eamination of cases and a&thorities that New Jor8has varied and now re=&ires the immediate appraisal of the postponed estate at its clear mar8et val&e andthe pa4ment forthwith of the ta on its o&t of the corpus of the estate transferred. :In re Kanderilt, "-! N. J.,

2# 2# N. E., -/! In re 9&er, /2 N. J. App. Div., *$/ /) N. J. S&pp., -2# Estate of Trac4, "-# N. J., $3"-! N. J., $"# Estate of 5reF, "-! N. J., 23# 2* N. E., #$/ Estate of 0ost, /$ App. Div., 2"" /! N. J. S&pp.,"3-#. -ide also, Salto&n vs. Lord Advocate, " 0eter. Sc. App., #-3 ) 7ac=. 9. L., 2$# !) En+. R&l. %as.,///.; %alifornia adheres to this new r&le :Stats. "#3$, sec. $, p. )*);.

5&t whatever ma4 e the r&le in other 1&risdictions, we hold that a transmission 4 inheritance is taale atthe time of the predecessor<s death, notwithstandin+ the postponement of the act&al possession or en1o4ment of the estate 4 the eneficiar4, and the ta meas&red 4 the val&e of the propert4 transmitted atthat time re+ardless of its appreciation or depreciation.

:c ; %ertain items are re=&ired 4 law to e ded&cted from the appraised +ross in arrivin+ at the net val&e of the estate on which the inheritance ta is to e comp&ted :sec. "$)#, Revised Administrative %ode;. In thecase at ar, the defendant and the trial co&rt allowed a ded&ction of onl4 0*/3./". This s&m represents theepenses and dis&rsements of the eec&tors &ntil 7arch "3, "#!*, amon+ which were their fees and the

proven dets of the deceased. The plaintiff contends that the compensation and fees of the tr&stees, whicha++re+ate 0","/-.!/ :Ehiits %, AA, EE, 00, 99, , LL, NN, OO;, sho&ld also e ded&cted &nder section"$)# of the Revised Administrative %ode which provides, in part, as follows> ?In order to determine the nets&m which m&st ear the ta, when an inheritance is concerned, there shall e ded&cted, in case of aresident, . . . the 1&dicial epenses of the testamentar4 or intestate proceedin+s, . . . .?

A tr&stee, no do&t, is entitled to receive a fair compensation for his services :5arne4 vs. Sa&nders, "29ow., $)$ "* Law. ed., "3*-;. 5&t from this it does not follow that the compensation d&e him ma4 lawf&ll4e ded&cted in arrivin+ at the net val&e of the estate s&1ect to ta. There is no stat&te in the 0hilippineswhich re=&ires tr&stees< commissions to e ded&cted in determinin+ the net val&e of the estate s&1ect toinheritance ta :2" %. ., p. "-3$;. &rthermore, tho&+h a testamentar4 tr&st has een created, it does notappear that the testator intended that the d&ties of his eec&tors and tr&stees sho&ld e separated. :Ibid . Inre Kannec8<s Estate, "2" N. J. S&pp., /#) "-$ App. Div., )2) In re %ollard<s Estate, "2" N. J. S&pp., *$$.;On the contrar4, in para+raph $ of his will, the testator epressed the desire that his real estate e handledand mana+ed 4 his eec&tors &ntil the epiration of the period of ten 4ears therein provided. &dicial

epenses are epenses of administration :2" %. ., p. "-3$; &t, in State vs. 9ennepin %o&nt4 0roate%o&rt :""! N. 6., /-/ "3" 7inn., */$;, it was said> ?. . . The compensation of a tr&stee, earned, not in theadministration of the estate, &t in the mana+ement thereof for the enefit of the le+atees or devises, doesnot come properl4 within the class or reason for eemptin+ administration epenses. . . . Service rendered inthat ehalf have no reference to closin+ the estate for the p&rpose of a distri&tion thereof to those entitledto it, and are not re=&ired or essential to the perfection of the ri+hts of the heirs or le+atees. . . . Tr&sts . . . of the character of that here efore the co&rt, are created for the the enefit of those to whom the propert4&ltimatel4 passes, are of vol&ntar4 creation, and intended for the preservation of the estate. No so&ndreason is +iven to s&pport the contention that s&ch epenses sho&ld e ta8en into consideration in fiin+ theval&e of the estate for the p&rpose of this ta.?

20



:d ; The defendant levied and assessed the inheritance ta d&e from the estate of Thomas 9anle4 &nder theprovisions of section "$** of the Revised Administrative %ode, as amended 4 section ) of Act No. )232.5&t Act No. )232 went into effect on an&ar4 ", "#)3. It, therefore, was not the law in force when the testator died on 7a4 !-, "#!!. The law at the time was section "$** aove'mentioned, as amended 4 Act No.)3)", which too8 effect on 7arch #, "#!!.

It is well'settled that inheritance taation is +overned 4 the stat&te in force at the time of the death of the

decedent :!2 R. %. L., p. !32 * %oole4 on Taation, *th ed., p. )*2";. The tapa4er can not foresee ando&+ht not to e re=&ired to +&ess the o&tcome of pendin+ meas&res. Of co&rse, a ta stat&te ma4 e maderetroactive in its operation. Liailit4 for taes &nder retroactive le+islation has een ?one of the incidents of social life.? :Seattle vs. Helleher, "#$ U. S., )23 *# Law. ed., !)! S&p. %t. Rep., **.; 5&t le+islative intentthat a ta stat&te sho&ld operate retroactivel4 sho&ld e perfectl4 clear. :Scwa vs. Do4le, *! S&p. %t. Rep.,*#" Smietan8a vs. irst Tr&st M Savin+s 5an8, !$- U. S., 23! Stoc8dale vs. Ins&rance %o., !3 6all., )!)L&nch vs. T&rrish, !*- U. S., !!".; ?A stat&te sho&ld e considered as prospective in its operation, whether itenacts, amends, or repeals an inheritance ta, &nless the lan+&a+e of the stat&te clearl4 demands or epresses that it shall have a retroactive effect, . . . .? :2" %. ., 0. "23!.; Tho&+h the last para+raph of section $ of Re+&lations No. 2$ of the Department of inance ma8es section ) of Act No. )232, amendin+section "$** of the Revised Administrative %ode, applicale to all estates the inheritance taes d&e fromwhich have not een paid, Act No. )232 itself contains no provisions indicatin+ le+islative intent to +ive itretroactive effect. No s&ch effect can e+iven the stat&te 4 this co&rt.

The defendant %ollector of Internal Reven&e maintains, however, that certain provisions of Act No. )232 aremore favorale to the tapa4er than those of Act No. )3)", that said provisions are penal in nat&re and,therefore, sho&ld operate retroactivel4 in conformit4 with the provisions of article !! of the Revised 0enal%ode. This is the reason wh4 he applied Act No. )232 instead of Act No. )3)". Indeed, &nder Act No. )232,:"; the s&rchar+e of !$ per cent is ased on the ta onl4, instead of on oth the ta and the interest, asprovided for in Act No. )3)", and :!; the tapa4er is allowed twent4 da4s from notice and demand 4 rthe%ollector of Internal Reven&e within which to pa4 the ta, instead of ten da4s onl4 as re=&ired 4 the old law.

0roperl4 spea8in+, a stat&te is penal when it imposes p&nishment for an offense committed a+ainst the statewhich, &nder the %onstit&tion, the Eec&tive has the power to pardon. In common &se, however, this sensehas een enlar+ed to incl&de within the term ?penal stat&tes? all stat&s which command or prohiit certainacts, and estalish penalties for their violation, and even those which, witho&t epressl4 prohiitin+ certainacts, impose a penalt4 &pon their commission :$# %. ., p. """3;. Reven&e laws, +enerall4, which imposetaes collected 4 the means ordinaril4 resorted to for the collection of taes are not classed as penal laws,altho&+h there are a&thorities to the contrar4. :See S&therland, Stat&tor4 %onstr&ction, )2" Twine %o. vs.

6orthin+ton, "*" U. S., *2/ "! S&p. %t., $$ Rice vs. U. S., * %. %. A., "3* $) ed., #"3 %om. vs.Standard Oil %o., "3" 0a. St., "$3 State vs. 6heeler, ** 0., *)3 !$ Nev. "*).; Article !! of the Revised0enal %ode is not applicale to the case at ar, and in the asence of clear le+islative intent, we cannot +ive

Act No. )232 a retroactive effect.

:e; The plaintiff correctl4 states that the liailit4 to pa4 a ta ma4 arise at a certain time and the ta ma4 epaid within another +iven time. As stated 4 this co&rt, ?the mere fail&re to pa4 one<s ta does not render onedelin=ent &ntil and &nless the entire period has eplased within which the tapa4er is a&thoriFed 4 law toma8e s&ch pa4ment witho&t ein+ s&1ected to the pa4ment of penalties for fasil&re to pa4 his taes withinthe prescried period.? :U. S. vs. Laadan, !2 0hil., !)#.;

The defendant maintains that it was the d&t4 of the eec&tor to pa4 the inheritance ta efore the deliver4 of the decedent<s propert4 to the tr&stee. Stated otherwise, the defendant contends that deliver4 to the tr&steewas deliver4 to the cestui que trust , the eneficier4 in this case, within the meanin+ of the first para+raph of

s&section :b; of section "$** of the Revised Administrative %ode. This contention is well ta8en and iss&stained. The appointment of 0. . 7. 7oore as tr&stee was made 4 the trial co&rt in conformit4 with thewishes of the testator as epressed in his will. It is tr&e that the word ?tr&st? is not mentioned or &sed in thewill &t the intention to create one is clear. No partic&lar or technical words are re=&ired to create atestamentar4 tr&st :2# %. ., p. -"";. The words ?tr&st? and ?tr&stee?, tho&+h apt for the p&rpose, are notnecessar4. In fact, the &se of these two words is not concl&sive on the =&estion that a tr&st is created :2# %.., p. -"*;. ?To create a tr&st 4 will the testator m&st indicate in the will his intention so to do 4 &sin+lan+&a+e s&fficient to separate the le+al from the e=&itale estate, and with s&fficient certaint4 desi+nate theeneficiaries, their interest in the ttr&st, the p&rpose or o1ect of the tr&st, and the propert4 or s&1ect matter thereof. Stated otherwise, to constit&te a valid testamentar4 tr&st there m&st e a conc&rrence of threecirc&mstances> :"; S&fficient words to raise a tr&st :!; a definite s&1ect :); a certain or ascertain o1ect

21



stat&tes in some 1&risdictions epressl4 or in effect so providin+.? :2# %. ., pp. -3$,-32.; There is no do&tthat the testator intended to create a tr&st. 9e ordered in his will that certain of his properties e 8eptto+ether &ndisposed d&rin+ a fied period, for a stated p&rpose. The proate co&rt certainl4 eercised so&nd

1&d+ment in appointment a tr&stee to carr4 into effect the provisions of the will :see sec. $/!, %ode of %ivil0roced&re;.

0. . 7. 7oore ecame tr&stee on 7arch "3, "#!*. On that date tr&st estate vested in him :sec. $/! in

relation to sec. $#3, %ode of %ivil 0roced&re;. The mere fact that the estate of the deceased was placed intr&st did not remove it from the operation of o&r inheritance ta laws or eempt it from the pa4ment of theinheritance ta. The correspondin+ inheritance ta sho&ld have een paid on or efore 7arch "3, "#!*, toescape the penalties of the laws. This is so for the reason alread4 stated that the deliver4 of the estate to thetr&stee was in esse deliver4 of the same estate to the cestui que trust , the eneficiar4 in this case. A tr&steeis &t an instr&ment or a+ent for thecestui que trust :Shelton vs. Hin+, !## U. S., #3 )) S&p. %t. Rep., 2/#$- Law. ed., "3/2;. 6hen 7oore accepted the tr&st and too8 possesson of the tr&st estate he there4admitted that the estate elon+ed not to him &t to hiscestui que trust :Tolentino vs. Kit&+, )# 0hil.,"!2, citedin 2$ %. ., p. 2#!, n. 2);. 9e did not ac=&ire an4 eneficial interest in the estate. 9e too8 s&ch le+al estateonl4 as the proper eec&tion of the tr&st re=&ired :2$ %. ., p. $!/; and, his estate ceased &pon thef&lfillment of the testator<s wishes. The estate then vested asol&tel4 in the eneficiar4 :2$ %. ., p. $*!;.

The hi+hest considerations of p&lic polic4 also 1&stif4 the concl&sion we have reached. 6ere we to holdthat the pa4ment of the ta co&ld e postponed or dela4ed 4 the creation of a tr&st of the t4pe at hand, the

res&lt wo&ld e plainl4 disastro&s. Testators ma4 provide, as Thomas 9anle4 has provided, that their estatese not delivered to their eneficiaries &ntil after the lapse of a certain period of time. In the case at ar, theperiod is ten 4ears. In other cases, the tr&st ma4 last for fift4 4ears, or for a lon+er period which does notoffend the r&le a+ainst pet&ities. The collection of the ta wo&ld then e left to the will of a private individ&al.The mere s&++estion of this res&lt is a s&fficient warnin+ a+ainst the accpetance of the essential to the ver4eeistence of +overnment. :Doins vs. Erie %o&ntr4, "2 0et., *)$ "3 Law. ed., "3!! Hir8land vs.9otch8iss, "33 U. S., *#" !$ Law. ed., $$/ Lane %o&nt4 vs. Ore+on, - 6all., -" "# Law. ed., "3" UnionRefri+erator Transit %o. vs. Hent&c84, "## U. S., "#* !2 S&p. %t. Rep., )2 $3 Law. ed., "$3 %harles River 5rid+e vs. 6arren 5rid+e, "" 0et., *!3 # Law. ed., --).; The oli+ation to pa4 taes rests not &pon theprivile+es en1o4ed 4, or the protection afforded to, a citiFen 4 the +overnment &t &pon the necessit4 of mone4 for the s&pport of the state :Doins vs. Erie %o&ntr4, supra;. or this reason, no one is allowed too1ect to or resist the pa4ment of taes solel4 eca&se no personal enefit to him can e pointed o&t.:Thomas vs. (a4, "2# U. S., !2* "/ S&p. %t. Rep., )*3 *) Law. ed., -*3.; 6hile co&rts will not enlar+e, 4constr&ction, the +overnment<s power of taation :5romle4 vs. 7c%a&+hn, !/3 U. S., "!* -* Law. ed., !!2$3 S&p. %t. Rep., *2; the4 also will not place &pon ta laws so loose a constr&ction as to permit evasions on

merel4 fancif&l and ins&stantial distictions. :U. S. vs. 6atts, " 5ond., $/3 ed. %as. No. "2,2$) U. S. vs.6i++lesirth, ! Stor4, )2# ed. %as. No. "2,2#3, followed in roelich M H&ttner vs. %ollector of %&stoms, "/0hil., *2", */" %astle 5ros., 6olf M Sons vs. 7c%o4, !" 0hil., )33 7&QoF M %o. vs. 9ord, "! 0hil., 2!*9on+8on+ M Shan+hai 5an8in+ %orporation vs. Raffert4, )# 0hil., "*$ L&Fon Stevedorin+ %o. vs. Trinidad,*) 0hil., /3).; 6hen proper, a ta stat&te sho&ld e constr&ed to avoid the possiilities of ta evasion.%onstr&ed this wa4, the stat&te, witho&t res&ltin+ in in1&stice to the tapa4er, ecomes fair to the+overnment.

That taes m&st e collected promptl4 is a polic4 deepl4 intrenched in o&r ta s4stem. Th&s, no co&rt isallowed to +rant in1&nction to restrain the collection of an4 internal reven&e ta : sec. "$-/, Revised

Administrative %ode Sarasola vs. Trinidad, *3 0hil., !$!;. In the case of Lim %o %h&i vs. 0osadas :*- 0hil.,*2";, this co&rt had occassion to demonstrate trenchment adherence to this polic4 of the law. It held that?the fact that on acco&nt of riots directed a+ainst the %hinese on Octoer "/, "#, and !3, "#!*, the4 wereprevented from pra4in+ their internal reven&e taes on time and 4 m&t&al a+reement closed their homesand stores and remained therein, does not a&thoriFe the %ollector of Internal Reven&e to etend the timeprescried for the pa4ment of the taes or to accept them witho&t the additional penalt4 of twent4 five per cent.? :S4lla&s, No. ).;

?. . . It is of the &tmost importance,? said the S&preme %o&rt of the United States, ?. . . that the modesadopted to enforce the taes levied sho&ld e interfered with as little as possile. An4 dela4 in theproceedin+s of the officers, &pon whom the d&t4 is developed of collectin+ the taes, ma4 deran+e theoperations of +overnment, and there4, ca&se serio&s detriment to the p&lic.? :Dows vs. %hica+o, "" 6all.,"3/ !3 Law. ed., 2$, 22 %h&rchill and Tait vs. Raffert4, )! 0hil., $/3.;

22



It res&lts that the estate which plaintiff represents has een delin=&ent in the pa4ment of inheritance ta and,therefore, liale for the pa4ment of interest and s&rchar+e provided 4 law in s&ch cases.

The delin=&enc4 in pa4ment occ&rred on 7arch "3, "#!*, the date when 7oore ecame tr&stee. Theinterest d&e sho&ld e comp&ted from that date and it is error on the part of the defendant to comp&te it onemonth later. The provisions cases is mandator4 :see and cf. Lim %o %h&i vs. 0osadas, supra;, and neither the %ollector of Internal Reven&en or this co&rt ma4 remit or decrease s&ch interest, no matter how heavil4 it

ma4 &rden the tapa4er.

To the ta and interest d&e and &npaid within ten da4s after the date of notice and demand thereof 4 the%ollector of Internal Reven&e, a s&rchar+e of twent4'five per cent&m sho&ld e added :sec. "$**, s&sec.:b;, par. !, Revised Administrative %ode;. Demand was made 4 the Dep&t4 %ollector of Internal Reven&e&pon 7oore in a comm&niction dated Octoer "2, "#)" :Ehiit !#;. The date fied for the pa4ment of theta and interest was Novemer )3, "#)". Novemer )3 ein+ an official holida4, the tenth da4 fell onDecemer ", "#)". As the ta and interest d&e were not paid on that date, the estate ecame liale for thepa4ment of the s&rchar+e.

In view of the fore+oin+, it ecomes &nnecessar4 for &s to disc&ss the fifth error assi+ned 4 the plaintiff inhis rief.

6e shall now comp&te the ta, to+ether with the interest and s&rchar+e d&e from the estate of Thomas9anle4 inaccordance with the concl&sions we have reached.

At the time of his death, the deceased left real properties val&ed at 0!-,#!3 and personal properties worth0",*2$, or a total of 0!#,)/$. Ded&ctin+ from this amo&nt the s&m of 0*/3./", representin+ allowaleded&ctions &nder secftion "$)# of the Revised Administrative %ode, we have 0!/,#3*."# as the net val&e of the estate s&1ect to inheritance ta.

The primar4 ta, accordin+ to section "$)2, s&section :c ;, of the Revised Administrative %ode, sho&ld eimposed at the rate of one per cent&m &pon the first ten tho&sand pesos and two per cent&m &pon theamo&nt 4 which the share eceed thirt4 tho&sand pesos, pl&s an additional two h&ndred per cent&m. Oneper cent&m of ten tho&sand pesos is 0"33. Two per cent&m of 0"/,#3*."# is 0)-/.3/. Addin+ to these twos&ms an additional two h&ndred per cent&m, or 0#2$."2, we have as primar4 ta, correctl4 comp&ted 4 thedefendant, the s&m of 0",*)*.!*.

To the primar4 ta th&s comp&ted sho&ld e added the s&ms collectile &nder section "$** of the Revised Administrative %ode. irst sho&ld e added 0",*2$.)" which stands for interest at the rate of twelve per cent&m per ann&m from 7arch "3, "#!*, the date of delin=&enc4, to Septemer "$, "#)!, the date of pa4ment &nder protest, a period coverin+ / 4ears, 2 months and $ da4s. To the ta and interest th&scomp&ted sho&ld e added the s&m of 0-!*.//, representin+ a s&rhcar+e of !$ per cent on oth the ta andinterest, and also 0"3, the compromise s&m fied 4 the defendant :Eh. !#;, +ivin+ a +rand total of 0),2)*.*).

As the plaintiff has alread4 paid the s&m of 0!,3$!.-*, onl4 the s&ms of 0",$/".2# is le+all4 d&e from theestate. This last s&m is 0)#3.*! more than the amo&nt demanded 4 the defendant in his co&nterclaim. 5&t,as we cannot +ive the defendant more than what he claims, we m&st hold that the plaintiff is liale onl4 inthe s&m of 0","#".!- the amo&nt stated in the co&nterclaim.

The 1&d+ment of the lower co&rt is accordin+l4 modified, with costs a+ainst the plaintiff in oth instances. Soordered.

G.R. No. 12021 F(8r5ar: 23, 200

MANUEL G. A-ELLO, !OSE C. CONCEPCION, TEOORO . REGALA, AVELINO V. CRU*, petitioners,vs.COMMISSIONER OF INTERNAL REVENUE an COURT OF APPEALS, respondents.

D E % I S I O N

23



A*CUNA, J.:

This is a petition for review on certiorari &nder R&le *$ of the R&les of %ivil 0roced&re, assailin+ the decisionof the %o&rt of Appeals in %A (.R. S0 No. !-")*, entitled ?%omissioner of Internal Reven&e v. 7an&el (.

Aello, ose %. %oncepcion, Teodoro D. Re+ala, Avelino K. %r&F and %o&rt of Ta Appeals,? which reversedand set aside the decision of the %o&rt of Ta Appeals :%TA;, orderin+ the %ommissioner of InternalReven&e :%ommissioner; to withdraw his letters dated April !", "#// and A&+&st *, "#// assessin+ donors

taes and to desist from collectin+ donors taes from petitioners.

D&rin+ the "#/- national elections, petitioners, who are partners in the An+ara, Aello, %oncepcion, Re+alaand %r&F :A%%RA; law firm, contri&ted 0//!,22".)" each to the campai+n f&nds of Senator Ed+ardo

An+ara, then r&nnin+ for the Senate. In letters dated April !", "#//, the 5&rea& of Internal Reven&e :5IR;assessed each of the petitioners 0!2),3)!.22 for their contri&tions. On A&+&st !, "#//, petitioners=&estioned the assessment thro&+h a letter to the 5IR. The4 claimed that political or electoral contri&tionsare not considered +ifts &nder the National Internal Reven&e %ode :NIR%;, and that, therefore, the4 are notliale for donors ta. The claim for eemption was denied 4 the %ommissioner."18vvphi1"n9t

On Septemer "!, "#//, petitioners filed a petition for review with the %TA, which was decided on Octoer -, "##" in favor of the petitioners. As aforestated, the %TA ordered the %ommissioner to desist fromcollectin+ donors taes from the petitioners.!

On appeal, the %o&rt of Appeals reversed and set aside the %TA decision on April !3, "##* .) The appellate%o&rt ordered the petitioners to pa4 donors ta amo&ntin+ to 0!2),3)!.22 each, reasonin+ as follows>

The National Internal Reven&e %ode, as amended, provides>

Sec. #". Imposition of Ta. :a; There shall e levied, assessed, collected, and paid &pon the transfer 4 an4person, resident, or non'resident, of the propert4 4 +ift, a ta, comp&ted as provided in Section #!. :; Theta shall appl4 whether the transfer is in tr&st or otherwise, whether the +ift is direct or indirect, and whether the propert4 is real or personal, tan+ile or intan+ile.

0&rs&ant to the aove'=&oted provisions of law, the transfer of propert4 4 +ift, whether the transfer is intr&st or otherwise, whether the +ift is direct or indirect, and whether the propert4 is real or personal, tan+ileor intan+ile, is s&1ect to donors or +ift ta.

A +ift is +enerall4 defined as a vol&ntar4 transfer of propert4 4 one to another witho&t an4 consideration or compensation therefor :!/ %.. 2!3 Santos vs. Roledo, !/ 0hil. !$3;.

In the instant case, the contri&tions are vol&ntar4 transfers of propert4 in the form of mone4 from privaterespondents to Sen. An+ara, witho&t considerations therefor. 9ence, the4 s=&arel4 fall &nder the definition of donation or +ift.

As correctl4 pointed o&t 4 the Solicitor (eneral>

The fact that the contri&tions were +iven to e &sed as campai+n f&nds of Sen. An+ara does not affect thecharacter of the f&nd transfers as donation or +ift. There was there4 no retention of control over thedisposition of the contri&tions. There was simpl4 an indication of the p&rpose for which the4 were to e&sed. or as lon+ as the contri&tions were &sed for the p&rpose for which the4 were intended, Sen. An+ara

had complete and asol&te power to dispose of the contri&tions. 9e was f&ll4 entitled to the economicenefits of the contri&tions.

Section #" of the Ta %ode is ver4 clear. A donors or +ift ta is imposed on the transfer of propert4 4+ift.1a!phi1"n9t

The 5&rea& of Internal Reven&e iss&ed R&lin+ No. )** on &l4 !3, "#//, which reads>

0olitical %ontri&tions. or internal reven&e p&rposes, political contri&tions in the 0hilippines areconsidered taale +ift rather than taale income. This is so, eca&se a political contri&tion is ind&ital4

24

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not intended 4 the +iver or contri&tor as a ret&rn of val&e or made eca&se of an4 intent to repa4 another what is his d&e, &t estowed onl4 eca&se of motives of philanthrop4 or charit4. 9is p&rpose is to +ive andto olster the morals, the winnin+ chance of the candidate andor his part4, and not to emplo4 or &4. On theother hand, the recipient'donee does not re+ard himself as echan+in+ his services or his prod&ct for themone4 contri&ted. 5&t more importantl4 he receives financial advanta+es +rat&ito&sl4.

6hen the U.S. +ift ta law was adopted in the 0hilippines :efore 7a4 -, "#-*;, the taailit4 of political

contri&tions was, admittedl4, an &nsettled iss&e hence, it cannot e pres&med that the 0hilippine %on+ressthen had intended to consider or treat political contri&tions as non'taale +ifts when it adopted the said +iftta law. 7oreover, well'settled is the r&le that the 0hilippines need not necessaril4 adopt the present r&le or constr&ction in the United States on the matter. (enerall4, stat&tes of different states relatin+ to the sameclass of persons or thin+s or havin+ the same p&rposes are not considered to e in pari materia eca&se itcannot e 1&stifial4 pres&med that the le+islat&re had them in mind when enactin+ the provision ein+constr&ed. :$!32, S&therland, Stat&tor4 %onstr&ction, p. $*2.; Accordin+l4, in the asence of an epresseemptin+ provision of law, political contri&tions in the 0hilippines are s&1ect to the donors +ift ta. :citedin National Internal Reven&e %ode Annotated 4 9ector S. de Leon, "##" ed., p. !#3;.

In the li+ht of the aove 5IR R&lin+, it is clear that the political contri&tions of the private respondents toSen. Ed+ardo An+ara are taale +ifts. The va+&eness of the law as to what comprise the +ift s&1ect to tawas made concrete 4 the aove'=&oted 5IR r&lin+. 9ence, there is no do&t that political contri&tions aretaale +ifts.*

0etitioners filed a motion for reconsideration, which the %o&rt of Appeals denied in its resol&tion of &ne "2,"##$.$

0etitioners there&pon filed the instant petition on &l4 !2, "##$. Raised are the followin+ iss&es>

". DID T9E 9ONORA5LE %OURT O A00EALS ERR 69EN IT AILED TO %ONSIDER IN ITSDE%ISION T9E 0UR0OSE 5E9IND T9E ENA%T7ENT O OUR (IT TAC LA6P

!. DID T9E 9ONORA5LE %OURT O A00EALS ERR IN NOT %ONSIDERIN( T9E INTENTIONO T9E (IKERS IN DETER7ININ( 69ET9ER OR NOT T9E 0ETITIONERS 0OLITI%AL%ONTRI5UTIONS 6ERE (ITS SU5E%T TO DONORS TACP

). DID T9E 9ONORA5LE %OURT O A00EALS ERR 69EN IT AILED TO %ONSIDER T9EDEINITION O AN ?ELE%TORAL %ONTRI5UTION? UNDER T9E O7NI5US ELE%TION %ODEIN DETER7ININ( 69ET9ER OR NOT 0OLITI%AL %ONTRI5UTIONS ARE TACA5LEP

*. DID T9E 9ONORA5LE %OURT O A00EALS ERR IN NOT %ONSIDERIN( T9E AD7INISTRATIKE 0RA%TI%E O %LOSE TO 9AL A %ENTURJ O NOT SU5E%TIN(0OLITI%AL %ONTRI5UTIONS TO DONORS TACP

$. DID T9E 9ONORA5LE %OURT O A00EALS ERR IN NOT %ONSIDERIN( T9E A7ERI%ANURIS0RUDEN%E RELIED U0ON 5J T9E %OURT O TAC A00EALS AND 5J T9E0ETITIONERS TO T9E EE%T T9AT 0OLITI%AL %ONTRI5UTIONS ARE NOT TACA5LE(ITSP

2. DID T9E 9ONORA5LE %OURT O A00EALS ERR IN NOT A00LJIN( A7ERI%AN

URIS0RUDEN%E ON T9E (ROUND T9AT T9IS 6AS NOT HNO6N AT T9E TI7E T9E09ILI00INES (IT TAC LA6 6AS ADO0TED IN "#)#P

-. DID T9E 9ONORA5LE %OURT O A00EALS ERR IN RESOLKIN( T9E %ASE 7AINLJ ONT9E 5ASIS O A RULIN( ISSUED 5J T9E RES0ONDENT ONLJ ATER T9E ASSESS7ENTS9AD ALREADJ 5EEN 7ADEP

/. DID T9E 9ONORA5LE %OURT O A00EALS ERR 69EN IT DID NOT %ONSTRUE T9E (ITTAC LA6 LI5ERALLJ IN AKOR O T9E TAC0AJER AND STRI%LTJ A(AINST T9E(OKERN7ENT IN A%%ORDAN%E 6IT9 A00LI%A5LE 0RIN%I0LES O STATUTORJ%ONSTRU%TIONP2

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irst, ifth and Sith Iss&es

Section #" of the National Internal Reven&e %ode :NIR%; reads>

:A; There shall e levied, assessed, collected and paid &pon the transfer 4 an4 person, resident or nonresident, of the propert4 4 +ift, a ta, comp&ted as provided in Section #!

:5; The ta shall appl4 whether the transfer is in tr&st or otherwise, whether the +ift is direct or indirect, and whether the propert4 is real or personal, tan+ile or intan+ile.

The NIR% does not define transfer of propert4 4 +ift. 9owever, Article "/ of the %ivil %ode, states>

In matters which are +overned 4 the %ode of %ommerce and special laws, their deficienc4 shall e s&pplied4 the provisions of this %ode.

Th&s, reference ma4 e made to the definition of a donation in the %ivil %ode. Article -!$ of said %odedefines donation as>

. . . an act of lieralit4 where4 a person disposes +rat&ito&sl4 of a thin+ or ri+ht in favor of another, whoaccepts it.

Donation has the followin+ elements> :a; the red&ction of the patrimon4 of the donor :; the increase in thepatrimon4 of the donee and, :c; the intent to do an act of lieralit4 or animus donandi .-

The present case falls s=&arel4 within the definition of a donation. 0etitioners, the late 7an&el (. Aello / ,ose %. %oncepcion, Teodoro D. Re+ala and Avelino K. %r&F, each +ave 0//!,22".)" to the campai+nf&nds of Senator Ed+ardo An+ara, witho&t an4 material consideration. All three elements of a donation arepresent. The patrimon4 of the fo&r petitioners were red&ced 4 0//!,22".)" each. Senator Ed+ardo

An+aras patrimon4 correspondin+l4 increased 4 0),$)3,2*$.!*# . There was intent to do an act of lieralit4or animus donandi was present since each of the petitioners +ave their contri&tions witho&t an4consideration.

Ta8en to+ether with the %ivil %ode definition of donation, Section #" of the NIR% is clear and &nami+&o&s,

there4 leavin+ no room for constr&ction. In 'izal $ommercial 0an:ing $orporation v" Intermediate )ppellate $ourt "3 the %o&rt en&nciated>

It ears stressin+ that the first and f&ndamental d&t4 of the %o&rt is to appl4 the law. 6hen the law is clear and free from an4 do&t or ami+&it4, there is no room for constr&ction or interpretation. As has een o&r consistent r&lin+, where the law spea8s in clear and cate+orical lan+&a+e, there is no occasion for interpretation there is onl4 room for application :$ebu Portland $ement $o" v" /unicipality of ;aga, !*S%RA -3/ @"#2/B;

6here the law is clear and &nami+&o&s, it m&st e ta8en to mean eactl4 what it sa4s and the co&rt has nochoice &t to see to it that its mandate is oe4ed :$hartered 0an: *mployees )ssociation v" .ple, ")/S%RA !-) @"#/$B Luzon Surety $o", Inc" v" %e &arcia, )3 S%RA """ @"#2#B <uijano v" %evelopment 0an: of the Philippines,)$ S%RA !-3 @"#-3B;.

Onl4 when the law is ami+&o&s or of do&tf&l meanin+ ma4 the co&rt interpret or constr&e its tr&eintent.l=vvphi1"net Ami+&it4 is a condition of admittin+ two or more meanin+s, of ein+ &nderstood in morethan one wa4, or of referrin+ to two or more thin+s at the same time. A stat&te is ami+&o&s if it is admissileof two or more possile meanin+s, in which case, the %o&rt is called &pon to eercise one of its 1&dicialf&nctions, which is to interpret the law accordin+ to its tr&e intent.

Second Iss&e

Since animus donandi or the intention to do an act of lieralit4 is an essential element of a donation,petitioners ar+&e that it is important to loo8 into the intention of the +iver to determine if a politicalcontri&tion is a +ift. 0etitioners ar+&ment is not tenale. irst of all, donative intent is a creat&re of the

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http://www.lawphil.net/judjuris/juri2005/feb2005/fnt10



mind. It cannot e perceived ecept 4 the material and tan+ile acts which manifest its presence. Thisein+ the case, donative intent is pres&med present when one +ives a part of ones patrimon4 to another witho&t consideration. Second, donative intent is not ne+ated when the person donatin+ has other intentions, motives or p&rposes which do not contradict donative intent. This %o&rt is not convinced thatsince the p&rpose of the contri&tion was to help elect a candidate, there was no donative intent. 0etitionerscontri&tion of mone4 witho&t an4 material consideration evinces animus donandi . The fact that their p&rpose for donatin+ was to aid in the election of the donee does not ne+ate the presence of donative intent.

Third Iss&e

0etitioners maintain that the definition of an ?electoral contri&tion? &nder the Omni&s Election %ode isessential to appreciate how a political contri&tion differs from a taale +ift."" Section #*:a; of the said %odedefines electoral contri&tion as follows>

The term ?contri&tion? incl&des a +ift, donation, s&scription, loan, advance or deposit of mone4 or an4thin+of val&e, or a contract, promise or a+reement to contri&te, whether or not le+all4 enforceale, made for thep&rpose of infl&encin+ the res&lts of the elections &t shall not incl&de services rendered witho&tcompensation 4 individ&als vol&nteerin+ a portion or all of their time in ehalf of a candidate or politicalpart4. It shall also incl&de the &se of facilities vol&ntaril4 donated 4 other persons, the mone4 val&e of whichcan e assessed ased on the rates prevailin+ in the area.

Since the p&rpose of an electoral contri&tion is to infl&ence the res&lts of the election, petitioners a+ainclaim that donative intent is not present. 0etitioners attempt to place the arrier of m&t&al ecl&sivit4etween donative intent and the p&rpose of political contri&tions. This %o&rt reiterates that donative intentis not ne+ated 4 the presence of other intentions, motives or p&rposes which do not contradict donativeintent.

0etitioners wo&ld distin+&ish a +ift from a political donation 4 sa4in+ that the consideration for a +ift is thelieralit4 of the donor, while the consideration for a political contri&tion is the desire of the +iver to infl&encethe res&lt of an election 4 s&pportin+ candidates who, in the perception of the +iver, wo&ld infl&ence theshapin+ of +overnment policies that wo&ld promote the +eneral welfare and economic well'ein+ of theelectorate, incl&din+ the +iver himself.

0etitioners attempt is strained. The fact that petitioners will somehow in the f&t&re enefit from the electionof the candidate to whom the4 contri&te, in no wa4 amo&nts to a val&ale material consideration so as to

remove political contri&tions from the p&rview of a donation. Senator An+ara was &nder no oli+ation toenefit the petitioners. The proper performance of his d&ties as a le+islator is his oli+ation as an electedp&lic servant of the ilipino people and not a consideration for the political contri&tions he received. Infact, as a p&lic servant, he ma4 even e called to enact laws that are contrar4 to the interests of hisenefactors, for the enefit of the +reater +ood.

In fine, the p&rpose for which the s&ms of mone4 were +iven, which was to f&nd the campai+n of Senator An+ara in his id for a senatorial seat, cannot e considered as a material consideration so as to ne+ate adonation.

o&rth Iss&e

0etitioners raise the fact that since "#)# when the first Ta %ode was enacted, &p to "#// the 5IR never

attempted to s&1ect political contri&tions to donors ta. The4 ar+&e that>

. . . It is a familiar principle of law that prolon+ed practice 4 the +overnment a+enc4 char+ed with theeec&tion of a stat&te, ac=&iesced in and relied &pon 4 all concerned over an appreciale period of time, isan a&thoritative interpretation thereof, entitled to +reat wei+ht and the hi+hest respect. . . ."!

This %o&rt holds that the 5IR is not precl&ded from ma8in+ a new interpretation of the law, especiall4 whenthe old interpretation was flawed. It is a well'entrenched r&le that

. . . erroneo&s application and enforcement of the law 4 p&lic officers do not loc8 s&se=&ent correctapplication of the stat&te :0LDT v. %ollector of Internal Reven&e, #3 0hil. 2-2;, and that the (overnment is

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never estopped 4 mista8e or error on the part of its a+ents :0ineda v. %o&rt of irst Instance of Ta4aas, $!0hil. /3), /3- 5en+&et %onsolidated 7inin+ %o. v. 0ineda, #/ 0hil. -"", -!*;.")

Seventh Iss&e

0etitioners =&estion the fact that the %o&rt of Appeals decision is ased on a 5IR r&lin+, namel4 5IR R&lin+No. //')**, which was iss&ed after the petitioners were assessed for donors ta. This %o&rt does not needto delve into this iss&e. It is immaterial whether or not the %o&rt of Appeals ased its decision on the 5IRr&lin+ eca&se it is not pivotal in decidin+ this case. As disc&ssed aove, Section #" :now Section #/; of theNIR% as s&pplemented 4 the definition of a donation fo&nd in Article -!$ of the %ivil %ode, is clear and&nami+&o&s, and needs no f&rther el&cidation.

Ei+hth Iss&e

0etitioners net contend that ta laws are constr&ed lierall4 in favor of the tapa4er and strictl4 a+ainst the+overnment. This r&le of constr&ction, however, does not enefit petitioners eca&se, as stated, there ishere no room for constr&ction since the law is clear and &nami+&o&s.

inall4, this %o&rt ta8es note of the fact that s&se=&ent to the donations involved in this case, %on+ressapproved Rep&lic Act No. -"22 on Novemer !$, "##", providin+ in Section ") thereof that

politicalelectoral contri&tions, d&l4 reported to the %ommission on Elections, are not s&1ect to thepa4ment of an4 +ift ta. This all the more shows that the political contri&tions herein made are s&1ect tothe pa4ment of +ift taes, since the same were made prior to the eemptin+ le+islation, and Rep&lic Act No.-"22 provides no retroactive effect on this point.

EREFORE, the petition is DENIED and the assailed Decision and Resol&tion of the %o&rt of Appeals are AIR7ED.

No costs.

SO ORDERED.

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