PIROVANO, etc., et al., petitioners-appellants, vs.THE COMMISSIONER OF INTERNAL REVENUE, respondent-appellee. G.R. No.

L-19865, July 31,1965 FACTS: Enrico irovano !as t"e #at"er o# t"e "erein petitioners-appellants. $n 19%1, &e la Ra'a (tea's"ip )o. insured t"e li#e o# said Enrico irovano, !"o !as t"en its resident and General *ana+er until t"e ti'e o# "is deat", !it" various "ilippine and ,'erican insurance co'panies #or a total su' o# one 'illion pesos, desi+natin+ itsel# as t"e -ene#iciary o# t"e policies, o-tained -y it. $n t"e latter part o# 19%%, said Enrico irovano died. ."e /oard o# &irectors o# &e la Ra'a (tea's"ip )o. adopted a resolution dated July 10, 19%6 +rantin+ and settin+ aside, out o# t"e proceeds e1pected to -e collected on t"e insurance policies ta2en on t"e li#e o# said Enrico irovano, t"e su' o# %00,000.00 #or e3ual division a'on+ t"e #our 4%5 'inor c"ildren o# t"e deceased, said su' o# 'oney to -e converti-le into %,000 s"ares o# stoc2 o# t"e )o'pany, at par, or 1,000 s"ares #or eac" c"ild. ("ortly t"erea#ter, t"e )o'pany received t"e total su' o# 6%3,000.00 as proceeds o# t"e said li#e insurance policies o-tained #ro' ,'erican insurers. 6arious 'odi#ications !ere instituted -y t"e co'pany7s /oard o# &irectors on t"e a#oresaid resolution until #inally on June 8%, 19%9, t"e /oard o# &irectors o# t"e )o'pany providin+ t"erein t"at t"e )o'pany s"all pay t"e proceeds o# said li#e insurance policies to t"e "eirs o# t"e said Enrico irovano a#ter t"e )o'pany s"all "ave settled in #ull t"e -alance o# its present re'ainin+ -onded inde-tedness, -ut t"e annual interests accruin+ on t"e principal s"all -e paid to t"e "eirs o# t"e said Enrico irovano, or t"eir duly appointed representative, !"enever t"e )o'pany is in a position to 'eet said o-li+ation. :n (epte'-er 13, 19%9, t"e stoc2"olders o# t"e )o'pany #or'ally rati#ied t"e various resolutions "ereina-ove 'entioned !it" certain clari#yin+ 'odi#ications t"at t"e pay'ent o# t"e donation s"all not -e e##ected until suc" ti'e as t"e )o'pany s"all "ave #irst duly li3uidated its present -onded inde-tedness in t"e a'ount o# 3,860,855.99 !it" t"e National &evelop'ent )o'pany, or #ully redee'ed t"e pre#erred s"ares o# stoc2 in t"e a'ount !"ic" s"all -e issued to t"e National &evelop'ent )o'pany in lieu t"ereo#; and t"at any and all ta1es, le+al #ees, and e1penses in any !ay connected !it" t"e a-ove transaction s"all -e c"ar+ea-le and deducted #ro' t"e proceeds o# t"e li#e insurance policies 'entioned in t"e resolutions o# t"e /oard o# &irectors. :n *arc" 8, 1951, "o!ever, t"e 'a<ority stoc2"olders o# t"e )o'pany voted to revo2e t"e resolution approvin+ t"e donation in #avor o# t"e irovano c"ildren. ,s a conse3uence o# t"is revocation and re#usal o# t"e )o'pany to pay t"e -alance o# t"e donation a'ountin+ to 56%,980.90 despite de'ands t"ere#or, t"e "erein petitioners-appellants represented -y t"eir natural +uardian, *rs. Este#ania R. irovano, -rou+"t an action #or t"e recovery o# said a'ount, plus interest and da'a+es a+ainst &e la Ra'a (tea's"ip )o., in t"e )ourt o# =irst $nstance o# Ri>al, !"ic" case ulti'ately cul'inated to an appeal to t"is )ourt. :n &ece'-er 89, 195%, t"is court rendered its decision in t"e appealed case 496 "il. 3355 "oldin+ t"at t"e donation !as valid and re'unerative in nature ."e a-ove decision -eca'e #inal and e1ecutory. $n co'pliance t"ere!it", &e la Ra'a (tea's"ip )o. 'ade, on ,pril 6, 1955, a partial pay'ent on t"e a'ount o# t"e <ud+'ent and paid t"e -alance t"ereo# on *ay 18, 1955. :n *arc" 6, 1955, respondent )o''issioner o# $nternal Revenue assessed t"e a'ount o# 60,869.69 as donees? +i#t ta1, inclusive o# surc"ar+es, interests and ot"er penalties, a+ainst

eac" o# t"e petitioners-appellants, or #or t"e total su' o# 8%3,%98.68; and, on ,pril 83, 1955, a donor?s +i#t ta1 in t"e total a'ount o# 3%,391.96 !as also assessed a+ainst &e la Ra'a (tea's"ip )o., !"ic" t"e latter paid. etitioners-appellants "erein contested respondent )o''issioner?s assess'ent and i'position o# t"e donees? +i#t ta1es and donor?s +i#t ta1 and also 'ade a clai' #or re#und o# t"e donor?s +i#t ta1 so collected. Respondent )o''issioner overruled petitioners? clai's; "ence, t"e latter presented t!o 485 petitions #or revie! a+ainst respondent?s rulin+s -e#ore t"e )ourt o# .a1 ,ppeals, said petitions "avin+ -een doc2eted as )., )ases Nos. 3%9 and 395. )., )ase No. 3%9 relates to t"e petition disputin+ t"e le+ality o# t"e assess'ent o# donees? +i#t ta1es and donor?s +i#t ta1 !"ile )., )ase No. 395 re#ers to t"e clai' #or re#und o# t"e donor?s +i#t ta1 already paid. ."e t!o cases, -ein+ interrelated to eac" ot"er, !ere tried <ointly and ter'inated. :n January 31, 1968, t"e )ourt o# .a1 ,ppeals rendered its decision in t"e t!o cases !"erein t"e petitioners !ere ordered to pay t"e donees? +i#t ta1es as assessed -y respondent, plus 5@ surc"ar+e and interest at t"e rate o# 1@ per 'ont" #ro' *arc" 8, 1955 to t"e date o# pay'ent o# said donees? +i#t ta1es. Respondent is ordered to apply t"e su' o# 3%,391.96 !"ic" is re#unda-le to petitioners, a+ainst t"e a'ount due #ro' petitioners. Ait" costs a+ainst petitioners in )ase No. 3%9. etitioners-appellants "erein #iled a 'otion to reconsider t"e a-ove decision, !"ic" t"e lo!er court denied. Bence, t"is appeal. ISSUE: A"et"er or not t"e lo!er court erred in orderin+ t"e petitioners-appellants to pay t"e donees? +i#t ta1es as assessed -y respondent as !ell as t"e i'position o# surc"ar+e and interest on t"e a'ount o# donees? +i#t ta1es. HELD: Love and a##ection are not considerations o# value t"ey are not esti'a-le in ter's o# value. Nor are senti'ents o# +ratitude #or +ratuitous part #avors or 2indnesses; nor are o-li+ations !"ic" are 'erely 'oral. $t "as -een !ell said t"at i# a 'oral o-li+ation !ere alone su##icient it !ould re'ove t"e necessity #or any consideration at all, since t"e #act o# 'a2in+ a pro'ise i'pose, t"e 'oral o-li+ation to per#or' it.C $t is o# course per#ectly possi-le t"at a donation or +i#t s"ould at t"e sa'e ti'e i'pose a -urden or condition on t"e donee involvin+ so'e econo'ic lia-ility #or "i'. ,rt. 986 o# t"e .a1 )ode provides t"at t"ere is also a donation C!"en t"e +i#t i'poses upon t"e donee a -urden !"ic" is less t"an t"e value o# t"e t"in+ +iven.C (ection 111 o# t"e .a1 )ode "as in vie! situations o# t"is 2ind, since it also prescri-es t"at Ct"e a'ount -y !"ic" t"e value o# t"e property e1ceeded t"e value o# t"e considerationC s"all -e dee'ed a +i#t #or t"e purpose o# t"e ta1. . etitioners #inally contend t"at, even assu'in+ t"at t"e donation in 3uestion is su-<ect to donees? +i#t ta1es, t"e i'position o# t"e surc"ar+e o# 5@ and interest o# 1@ per 'ont" #ro' *arc" 8, 1955 !as not <usti#ied -ecause t"e proceeds o# t"e li#e insurance policies !ere actually received on ,pril 6, 1955 and *ay 18, 1955 only and in accordance !it" (ection 1154c5 o# t"e .a1 )ode; t"e #ilin+ o# t"e returns o# suc" ta1 -eca'e due on *arc" 1, 1956 and t"e ta1 -eca'e paya-le on *ay 15, 1956, as provided #or in (ection 1164a5 o# t"e sa'e )ode. $n ot"er !ords, petitioners 'aintain t"at t"e assess'ent and de'and #or donees? +i#t ta1es !as pre'aturely 'ade and o# no le+al e##ect; "ence, t"ey s"ould not -e "eld lia-le #or suc" surc"ar+e and interest.