CIR vs.

Domingo de Lara, ancillary administrator of the estate Hugo Miller

Deceased and CTA respondent

Nature:
Petition for review by certiorari of the decision of the Court of Tax Appeals

Decision of Tax Court:

Ancillary Administrator was ordered to pay the amount of 2,047.22, representing his
estate tax due, together with interest and other increments.

Facts:
Hugo Miller, an America citizen, was born in Sta Cruz,California, USA in 1883. In 1905, he
came to the Phil. From 1906 to 1917, he was connected with the public school system, first
as a teacher and later as a division superintendent in schools, later retiring under Osmena
Retirement Act. After his retirement, Miller accepted an executive position on the local
branch of Ginn & Co., book publisher with principal offices in N.Y. & Boston, USA. From
1922 up to December of 1941, he was stationed in the Phil. As well as China and Japan s
Oriental representative, he lived in Manila Hotel and used to visit his wife in California. He
never lived in any residential house in the Phil. After the death of his wife in 1931, he
transferred from Manila Hotel to the Army Navy Club where he was staying during the
outbreak of Pacific war and Ginn & Co. was closed.

January 17, 1941, he executed his last will and testament in Sta Cruz, California and
declared he was of Sta. Cruz, California. He then joined the Board of Censors of the US
Navy. During the war he was taken as prisoner by the Japanese forces in Leyte. In January
1944, he was transferred in Catbalogan, Samar where he was executed by the said forces
onMarch 11, 1944 at the time of his death in 1944, Miller owned the following properties:

Real property in Sta Cruz, California valued Php 5,000

Real property in Burlingame, California valued Php 16, 200
Tangible personal property Php 2,140
Cash in Bank USA Php 21,178.20
Accts receivables from various person + notes Php 36,062.74
Stocks USA Corp + US savings bonds Php 123,637.16
Shares of stocks in Phil corp Php 51,906.45

Testate proceedings were instituted in court of California and admitted to probate on May
10, 1946, and said court order and decree of settlement of final account and distribution and
found that he is a resident of California, at the time of his death. Thereafter, ancillary
proceedings were filed by the executors of the will before the FI in Manila. On July 1949,
The Bank of America, Trust and Savings Asso. of, California, co -executor named in Millers
will, filed an estate and inheritance tax return with the collector, covering only the stock
issued by the Phil corps .reporting a liability of P269.43 for estate taxes and P230.27 for
inheritance taxes and it was protested. The collector assessment for the liability for estate
and inheritance taxes, including penalties and other increments at P77,300.92 as of January
16, 1954.

Issue:
1. whether the decedent (Miller) was a resident or non-resident of the Phil at the time of his
death.

2.Whether the decedent was exempted from estate and inheritance taxes.

Ruling CTA:
1.At the time that the national internal revenue code was promulgated in 1939, the
prevailing construction given by the courts to the term residence was synonymous with
domicile, and the two were used interchangeably.
(Velilla vs. Posadas).
The incidence of estate and succession taxes has historically been determined by the
domicile and situs and not by the fact of actual residence
. (Bowring vs. Bowers). At the time of his death, Miller had his residence or domicile in Sta
Cruz, California. During his long stay in this country,
Miller never acquired a house for residential purposes for he stayed at manila Hotel and
later on Army and Navy Club. It is clear that as a non-resident of the Phil, the only
properties of his estate and inheritance taxes are those shares of stock issued by Phil
corp,valued 51,906.45. General rule that personal property, like shares of stock in the Phil.,
is taxable at the domicile of the owner (Miller) under the doctrine of mobilia sucuuntur
persona.

2.The decedent, being a non resident of the Phil. The only property subject to estate and
inheritance taxes are those shares of stock issued by Phil. Corps. Under the Tax Code
section 122, the decedent is entitled to tax exemption granted to non0 residents under the
provision ofmultiple taxation, which otherwise subject the decedents intangible property to
the inheritance tax, on in his place of residence and domicile and the place where those
properties are found.

3. Republic Act No. 1253; When estate of decedent entitled to benefits of the act.- In as
much the decedent not only suffered deprivations of the war, but was killed by the
Japanese militaryforces, his estate is entitled to the benefits of RA 153, which passed for the
benefit of veterans, guerillas, or victims of Japanese atrocities. Consequently, the interest
and other increments imposed on the decedents estate should not be paid.

SC:
The interest and other increments provided in the appealed judgment should not be paid by
his estate. With the above modification the appealed decision of the CTA is hereby affirmed.
COLLECTOR V. LARA
(multiplicity of situs)

FACTS:
Hugo H. Miller, an American citizen, was born in Santa Cruz, California, U.S.A., in 1883. In
1905, he came to the Philippines. From 1906 to 1917, he was connected with the public
school system, first as a teacher and later as a division superintendent of schools. After his
retirement, Miller accepted an executive position in the local branch of Ginn & Co., book
publishers with principal offices in New York and Boston, U.S.A., up to the outbreak of the
Pacific War. Miller lived at the Manila Hotel. He never lived in any residential house in the
Philippines. After the death of his wife in 1931, he transferred from the Manila Hotel to the
Army and Navy Club, where he was staying at the outbreak of the Pacific War. On January
17,1941, Miller executed his last will and testament in Santa Cruz, California, in which he
declared that he was "of Santa Cruz, California". On December 7, 1941, because of the
Pacific War ,the office of Ginn & Co. was closed, and Miller joined the Board of Censors of
the United States Navy. During the war, he was taken prisoner by the Japanese forces in
Leyte, and in January, 1944, he was transferred to Catbalogan, Samar, where he was
reported to have been executed by said force son March 11, 1944.Testate proceedings were
instituted before the Court of California in Santa Cruz County, which subsequently issued
an order and decree of settlement of final account and final distribution. The Bank of
America, National Trust and Savings Association of San Francisco California, co-executor
named in Miller's will, filed an estate and inheritance tax return with the Collector, covering
only the shares of stock issued by Philippine corporations. After due investigation, the
Collector assessed estate and inheritance taxes, which was received by the said executor.
The estate of Miller protested said assessment. This assessment was appealed by De Lara as
Ancilliary Administrator before the Board of Tax Appeals, which appeal was later heard and
decided by the Court of Tax Appeals .In determining the "gross estate" of a decedent,
under Section 122 in relation to section 88 of our Tax Code, it is fir t necessary to decide
whether the decedent was a resident or anon-resident of the Philippines at the time of his
death. The Collector maintains that under the tax laws, residence and domicile have
different meanings; that tax laws on estate and inheritance taxes only mention resident and
non-resident, and no reference whatsoever is made to domicile except in Section93 (d) of
the Tax Code; that Miller during his long stay in the Philippines had required a "residence"
in this country, and wasa resident thereof at the time of his death, and consequently, his
intangible personal properties situated here as well as in the United States were subject to
said taxes. The Ancilliary Administrator, however, equally maintains that for estate and
inheritance tax purposes, the term "residence" is synonymous with the term domicile.

ISSUE:
W/N the estate is liable to file an estate and inheritance tax return besides those covering
shares of stocks issued by Philippine corporations.

HELD: No
. The Court agrees with the Court of Tax Appeals that at the time that The National Internal
Revenue Code was promulgated in 1939, the prevailing construction given by the courts to
the "residence" was synonymous with domicile. And that the two were used
intercnangeably. Moreover, there is reason to believe that the Legislature adopted the
American(Federal and State) estate and inheritance tax system (see e.g. Report to the Tax
Commision of the Philippines, Vol. II, pages122-124, cited in I Dalupan, National Internal
Revenue Code Annotated, p. 469-470). In the United States, for estate taxpurposes, a
resident is considered one who at the time of his death had his domicile in the United
States, and in American jurisprudence, for purposes of estate and taxation, "residence" is
interpreted as synonymous with domicile, and that

The incidence of estate and succession has historically been determined by

domicile and situs and not by the fact of actual residence.
(Bowring vs. Bowers)At the time of his death, Miller had his residence or domicile in Santa
Cruz, California. During his stay in the country, Miller never acquired a house for
residential purposes for he stayed at the Manila Hotel and later on at the Army and Navy
Club. The bulk of his savings and properties were in th eUnited States. To his home in
California, he had been sending souvenirs. In November, 1940, Miller took out a property
insurance policy and indicated therein his address as Santa Cruz, California, this aside from
the fact that Miller, as already stated, executed his will in Santa Cruz, California, wherein he
stated that he was "of Santa Cruz, California".*** As to the shares of stocks issued by
Philippine corporations, an exemption was granted to the estate by virtue of Section 122 of
the Tax Code, which provides as follows:. . ."And Provided, however, That no tax shall be
collected under this Title in respect of intangible personal property (a) if the decedent at the
time of his death was a resident of a foreign country which at the time of his death did not
impose a transfer tax or death tax of any character in respect of intangible personal property
of citizens of the Philippines not residing in that country, or (b) if the laws of the foreign
country of which the decedent was resident at the tune of his death allow a similar
exemption from transfer taxes or death taxes of every character in respect of intangible
personal property owned by citizen, of the Philippine not residing in that foreign country.

Affirmed, with modification.

GANUELAS vs CAWED Case Digest

URSULINA GANUELAS, et al. v. HON. ROBERT T. CAWED, et al.

G. R. No. 123968, 24 April 2003, THIRD DIVISION (Carpio-Morales, J.)

Donation inter vivos differs from donation mortis causa in that in the former,
the act is immediately operative even if the actual execution may be deferred
until the death of the donor, while in the latter, nothing is conveyed to or
acquired by the donee until the death of the donor-testator.

FACTS: Celestina Ganuelas Vda. de Valin executed a Deed of Donation of Real Property in
favor of petitioner Ursulina Ganuelas. The pertinent portion of the Deed of Donation reads:
That for and in consideration of the love and affection which the DONOR has for the
DONEE, and of the faithful services the latter has rendered in the past to the former, the
said DONOR does by these presents transfer and convey, by way of DONATION, unto the
DONEE the property above, described, to become effective upon the death of the DONOR;
but in the event that the DONEE should die before the DONOR, the present donation shall
be deemed rescinded and of no further force and effect.
However, more than a month before Celestina died, she executed a document revoking such
donation. After her death, Ursulina claimed ownership over the donated properties and
refused to give private respondents Leocadia G. Flores, et al., niece of Celestina any share in
the produce of the properties despite repeated demands. Thus, prompting Flores, et al. to
file a complaint before the San Fernando, La Union Regional Trial Court (RTC), challenging
the validity of the Deed of Donation. They alleged that such donation is void for failure to
comply with the formalities of wills and testaments, which is necessary in a disposition
mortis causa.

On the other hand, Ursulina maintains that there is no need to comply with the formalities
of wills and testaments because such donation was inter vivos.

The RTC ruled that the Deed of Donation is a disposition mortis causa, thus, void for failure
to comply with the formalities of wills and testaments.

ISSUE: Whether or not the donation is inter vivos or mortis causa

HELD: Crucial in the resolution of the issue is the determination of whether the donor
intended to transfer the ownership over the properties upon the execution of the deed.
Donation inter vivos differs from donation mortis causa in that in the former, the act is
immediately operative even if the actual execution may be deferred until the death of the
donor, while in the latter, nothing is conveyed to or acquired by the donee until the death of
the donor-testator.

If the donation is made in contemplation of the donors death, meaning that the full or
naked ownership of the donated properties will pass to the donee only because of the
donors death, then it is at that time that the donation takes effect, and it is a donation
mortis causa which should be embodied in a last will and testament.

But if the donation takes effect during the donors lifetime or independently of the donors
death, meaning that the full or naked ownership (nuda proprietas) of the donated
properties passes to the donee during the donors lifetime, not by reason of his death but
because of the deed of donation, then the donation is inter vivos.

The distinction between a transfer inter vivos and mortis causa is important as the validity
or revocation of the donation depends upon its nature. If the donation is inter vivos, it must
be executed and accepted with the formalities prescribed by Articles 748 and 749 of the
Civil Code, except when it is onerous in which case the rules on contracts will apply. If it is
mortis causa, the donation must be in the form of a will, with all the formalities for the
validity of wills, otherwise it is void and cannot transfer ownership.

The distinguishing characteristics of a donation mortis causa are the following:

1. It conveys no title or ownership to the transferee before the death of the transferor; or,
what amounts to the same thing, that the transferor should retain the ownership (full or
naked) and control of the property while alive;

2. That before his death, the transfer should be revocable by the transferor at will, ad
nutum; but revocability may be provided for indirectly by means of a reserved power in the
donor to dispose of the properties conveyed;

3. That the transfer should be void if the transferor should survive the transferee.

In the donation subject of the present case, there is nothing therein which indicates that any
right, title or interest in the donated properties was to be transferred to Ursulina prior to
the death of Celestina. The phrase to become effective upon the death of the DONOR
admits of no other interpretation but that Celestina intended to transfer the ownership of
the properties to Ursulina on her death, not during her lifetime.

More importantly, the provision in the deed stating that if the donee should die before the
donor, the donation shall be deemed rescinded and of no further force and effect shows that
the donation is a postmortem disposition.

As stated in a long line of cases, one of the decisive characteristics of a donation mortis
causa is that the transfer should be considered void if the donor should survive the donee.
More. The deed contains an attestation clause expressly confirming the donation as mortis
causa: To classify the donation as inter vivos simply because it is founded on considerations
of love and affection is erroneous. That the donation was prompted by the affection of the
donor for the donee and the services rendered by the latter is of no particular significance in
determining whether the deed constitutes a transfer inter vivos or not, because a legacy may
have an identical motivation. In other words, love and affection may also underline
transfers mortis causa.

As the subject deed then is in the nature of a mortis causa disposition, the formalities of a
will under Article 728 of the Civil Code should have been complied with, failing which the
donation is void and produces no effect.
 LORENZO vs. POSADAS JR.

G.R. No. L-43082

June 18, 1937

FACTS: Thomas Hanley died, leaving a will and a considerable amount of real and
personal properties. Proceedings for the probate of his will and the settlement and
distribution of his estate were begun in the CFI of Zamboanga. The will was admitted to
probate.

The CFI considered it proper for the best interests of the estate to appoint a trustee to
administer the real properties which, under the will, were to pass to nephew Matthew ten
years after the two executors named in the will was appointed trustee. Moore acted as
trustee until he resigned and the plaintiff Lorenzo herein was appointed in his stead.

During the incumbency of the plaintiff as trustee, the defendant Collector of Internal
Revenue (Posadas) assessed against the estate an inheritance tax, together with the
penalties for deliquency in payment. Lorenzo paid said amount under protest, notifying
Posadas at the same time that unless the amount was promptly refunded suit would be
brought for its recovery. Posadas overruled Lorenzos protest and refused to refund the said
amount. Plaintiff went to court. The CFI dismissed Lorenzos complaint and Posadas
counterclaim. Both parties appealed to this court.

ISSUE:

(e) Has there been delinquency in the payment of the inheritance tax?
HELD: The judgment of the lower court is accordingly modified, with costs against the
plaintiff in both instances

YES

The defendant maintains that it was the duty of the executor to pay the inheritance tax
before the delivery of the decedents property to the trustee. Stated otherwise, the defendant
contends that delivery to the trustee was delivery to the cestui que trust, the beneficiary in
this case, within the meaning of the first paragraph of subsection (b) of section 1544 of the
Revised Administrative Code. This contention is well taken and is sustained. A trustee is but
an instrument or agent for the cestui que trust

The appointment of Moore as trustee was made by the trial court in conformity with the
wishes of the testator as expressed in his will. It is true that the word trust is not
mentioned or used in the will but the intention to create one is clear. No particular or
technical words are required to create a testamentary trust. The words trust and trustee,
though apt for the purpose, are not necessary. In fact, the use of these two words is not
conclusive on the question that a trust is created. To constitute a valid testamentary
trust there must be a concurrence of three circumstances:

(1) Sufficient words to raise a trust;

(2) a definite subject;

(3) a certain or ascertain object; statutes in some jurisdictions expressly or in effect so

providing.

There is no doubt that the testator intended to create a trust. He ordered in his will that
certain of his properties be kept together undisposed during a fixed period, for a stated
purpose. The probate court certainly exercised sound judgment in appointmening a trustee
to carry into effect the provisions of the will

As the existence of the trust was already proven, it results that the estate which plaintiff
represents has been delinquent in the payment of inheritance tax and, therefore, liable for
the payment of interest and surcharge provided by law in such cases.

The delinquency in payment occurred on March 10, 1924, the date when Moore became
trustee. On that date trust estate vested in him. The interest due should be computed from
that date.

NOTES: Other issues:

(a) When does the inheritance tax accrue and when must it be satisfied?
The accrual of the inheritance tax is distinct from the obligation to pay the same.

Acording to article 657 of the Civil Code, the rights to the succession of a person are
transmitted from the moment of his death. In other words, said Arellano, C. J., . . . the
heirs succeed immediately to all of the property of the deceased ancestor. The property
belongs to the heirs at the moment of the death of the ancestor as completely as if the
ancestor had executed and delivered to them a deed for the same before his death.

Whatever may be the time when actual transmission of the inheritance takes place,
succession takes place in any event at the moment of the decedents death. The time when
the heirs legally succeed to the inheritance may differ from the time when the heirs actually
receive such inheritance. Thomas Hanley having died on May 27, 1922, the inheritance tax
accrued as of the date.

From the fact, however, that Thomas Hanley died on May 27, 1922, it does not follow that
the obligation to pay the tax arose as of the date. The time for the payment on inheritance
tax is clearly fixed by section 1544 of the Revised Administrative Code as amended by Act
No. 3031, in relation to section 1543 of the same Code. The two sections follow:

SEC. 1543. Exemption of certain acquisitions and transmissions. The following shall not
be taxed:

(a) The merger of the usufruct in the owner of the naked title.

(b) The transmission or delivery of the inheritance or legacy by the fiduciary heir or legatee
to the trustees.

(c) The transmission from the first heir, legatee, or donee in favor of another beneficiary, in
accordance with the desire of the predecessor. xx

SEC. 1544. When tax to be paid. The tax fixed in this article shall be paid:

(a) In the second and third cases of the next preceding section, before entrance into
possession of the property.

(b) In other cases, within the six months subsequent to the death of the predecessor; but if
judicial testamentary or intestate proceedings shall be instituted prior to the expiration of
said period, the payment shall be made by the executor or administrator before delivering
to each beneficiary his share.

The instant case does[not] fall under subsection (a), but under subsection (b), of section
1544 above-quoted, as there is here no fiduciary heirs, first heirs, legatee or donee. Under
the subsection, the tax should have been paid before the delivery of the properties in
question to Moore as trustee.

(b) Should the inheritance tax be computed on the basis of the value of the estate at the time
of the testators death, or on its value ten years later?

If death is the generating source from which the power of the estate to impose inheritance
taxes takes its being and if, upon the death of the decedent, succession takes place and the
right of the estate to tax vests instantly, the tax should be measured by the value of the
estate as it stood at the time of the decedents death, regardless of any subsequent
contingency value of any subsequent increase or decrease in value

(c) In determining the net value of the estate subject to tax, is it proper to deduct the
compensation due to trustees?

A trustee, no doubt, is entitled to receive a fair compensation for his services. But from this
it does not follow that the compensation due him may lawfully be deducted in arriving at
the net value of the estate subject to tax. There is no statute in the Philippines which
requires trustees commissions to be deducted in determining the net value of the estate
subject to inheritance tax

(d) What law governs the case at bar? Should the provisions of Act No. 3606 favorable to
the tax-payer be given retroactive effect?

A statute should be considered as prospective in its operation, whether it enacts, amends, or

repeals an inheritance tax, unless the language of the statute clearly demands or expresses
that it shall have a retroactive effect, . . . . Act No. 3606 itself contains no provisions
indicating legislative intent to give it retroactive effect. No such effect can be given the
statute by this court.

GONZALO VILLANUEVA
(represented by his heirs), petitioner,
vs.
SPOUSES FROILAN and LEONILA BRANOCO,
respondents.G.R. No. 172804 January 24, 2011 Second Division Carpio,
J.

FACTS :Gonzalo Villanueva, represented by his heirs, sued Spouses Branoco to recover a parcel of
land. The former claimed ownership over the property thru purchase from Vere, who in turn, bought the
property from Rodrigo. Gonzalo declared the property in his name for tax purposes soon after acquiring
it. In their answer, the Spouses Baranoco similarly claimed ownership over the property thru purchase
from Rodriguez, who in turn, acquired the property from Rodrigo byway of donation. The Spouses
entered the property and paid taxes afterwards. The trial court ruled in favor of Gonzalo and declared
him owner of the property, and ordered the Spouses Branoco to surrender possession to Gonzalo. The
trial court rejectedSpouses Branocos claim of ownership after treating the Deed as a donationmortis
causa
Which Rodrigo effectively cancelled by selling the Property to Vere. Thus, by the time Rodriguez soldthe
property to the Spouses, she had no title to transfer. On appeal, the CA granted the Spouses appeal and
set aside the trial court's ruling. it held that the deed of donation is one of inter vivos. In his petition,
Gonzalo seeks the reinstatement of the trial court's
ruling. Alternatively, petitioner claims ownership over the Property through acquisitive pres
cription, having allegedly occupied it for more than 10 years.

ISSUE: Whether or not the contract between Rodrigo and Rodriguez is a donation or a devise?

RULING; It is immediately apparent that Rodrigo passed naked title to Rodriguez under a perfected
donation inter vivos.

First.
Rodrigo stipulated that "if the herein Donee predeceases me, the [Property] will not be reverted to the
Donor, but will be inherited by the heirs of x x x Rodriguez," signaling their revocability of the passage of
title to Rodriguez's estate, waiving Rodrigo's right to reclaim title. This transfer of title was perfected the
moment Rodrigo learned of Rodriguez's acceptance of the disposition
which, being reflected in the Deed, took place on the day of its execution on 3May 1965. Rodrigo's
acceptance of the transfer underscores its essence as a giftin presenti ,notin futuro
, as only donations inter vivos need acceptance by the recipient.

Indeed, had Rodrigo wished to retain full title over the Property, she could have easily stipulated, as the
testator did in another case, that "the donor, may transfer, sell, or encumber to any person or entity the
properties here donated x x x" or used words to that effect. Instead, Rodrigo expressly waived title over
the Property in case Rodriguez predeceases her.

Second
. What Rodrigo reserved for herself was only the beneficial title to the Property, evident from Rodriguez's
undertaking to "give one [half] x x x of the produce of the land to Apoy Alve during her lifetime."

Thus, the Deed's stipulation that "the ownership shall be vested on [Rodriguez] upon my demise," taking
into account the non-reversion clause, could only refer to Rodrigo's beneficial title. Indeed, if Rodrigo still
retained full ownership over the Property, it was unnecessary for her to reserve partial usufructuary right
over it.

Third
. The existence of consideration other than the donor's death, such as the donor's love and affection to the
donee and the services the latter rendered, while also true of devises, nevertheless "corroborates the
express irrevocability of x x x [inter vivos ] transfers."

Thus, the CA committed no error in giving weight to Rodrigo's statement of "love and affection"
for Rodriguez, her niece, as consideration for the gift, to underscore its finding.

Nor can petitioner capitalize on Rodrigo's post-donation transfer of the Property to Vere as proof of her
retention of ownership. If such were the barometer in interpreting deeds of donation, not only will great
legal uncertainty be visited on gratuitous dispositions, this will give license to rogue property owners to set
at naught perfected transfers of titles, which, while founded on liberality, is a valid mode of passing
ownership. The interest of settled property dispositions counsels against licensing such
practice. Accordingly, having irrevocably transferred naked title over the Property to
Rodriguez in1965, Rodrigo "cannot afterwards revoke the donation nor dispose of the said property in
favor of another."

Thus, Rodrigo's post-donation sale of the Property vested no title to Vere. As Vere's successor-in-interest,
petitioner acquired no better right than him. On the other hand, respondents bought the Property from
Rodriguez, thus acquiring the latter's title which they may invoke against all adverse claimants, including
petitioner.

VITUG vs CA
188 SCRA 755

FACTS: This case is a chapter in an earlier suit decided by this Court involving the probate
of the two wills of the late Dolores Luchangco Vitug, who died in New York, U. S.A. naming
private respondent Rowena Faustino-Corona executrix. In said decision, the court upheld
the appointment of Nenita Alonte as co-special administrator of Mrs. Vitugs estate with her
(Mrs. Vitugs) widower, petitioner Romarico G. Vitug, pending probate.

Romarico G. Vitug filed a motion asking for authority from the probate court to sell certain
shares of stock and real properties belonging to the estate to cover allegedly his advances to
the estate, plus interests, which he claimed were personal funds. As found by the CA the
alleged advances were spent for the payment of estate tax, deficiency estate tax, and
increment thereto.

Rowena Corona opposed the motion to sell on the ground that the same funds withdrawn
were conjugal partnership properties and part of the estate, and hence, there was allegedly
no ground for reimbursement. She also sought his ouster for failure to include the sums in
question for inventory and for concealment of funds belonging to the estate.

Vitug insists that the said funds are his exclusive property having acquired the same
through a survivorship agreement executed with his late wife and the bank.

The trial courts upheld the validity of such agreement.

On the other hand, the CA held that the survivorship agreement constitutes a conveyance
mortis causa which did not comply with the formalities of a valid will as prescribed by
Article 805 of the Civil Code, and secondly, assuming that it is a mere donation inter vivos,
it is a prohibited donation under the provisions of Article 133 of the Civil Code.

ISSUE: W/N the survivorship agreement between the spouses Vitug constitutes a
donation?

HELD: NO. The conveyance in question is not, first of all, one of mortis causa, which
should be embodied in a will. A will has been defined as a personal, solemn, revocable and
free act by which a capacitated person disposes of his property and rights and declares or
complies with duties to take effect after his death. In other words, the bequest or device
must pertain to the testator. In this case, the monies subject of savings account No. 35342-
038 were in the nature of conjugal funds In the case relied on, Rivera v. Peoples Bank and
Trust Co., we rejected claims that a survivorship agreement purports to deliver one partys
separate properties in favor of the other, but simply, their joint holdings.

There is no showing that the funds exclusively belonged to one party, and hence it must be
presumed to be conjugal, having been acquired during the existence of the marital relations.

Neither is the survivorship agreement a donation inter vivos, for obvious reasons, because it
was to take effect after the death of one party. Secondly, it is not a donation between the
spouses because it involved no conveyance of a spouses own properties to the other.

It is also our opinion that the agreement involves no modification petition of the conjugal
partnership, as held by the Court of Appeals, by mere stipulation and that it is no cloak
to circumvent the law on conjugal property relations. Certainly, the spouses are not
prohibited by law to invest conjugal property, say, by way of a joint and several bank
account, more commonly denominated in banking parlance as an and/or account. In the
case at bar, when the spouses Vitug opened savings account No. 35342-038, they merely
put what rightfully belonged to them in a money-making venture. They did not dispose of it
in favor of the other, which would have arguably been sanctionable as a prohibited
donation.

The conclusion is accordingly unavoidable that Mrs. Vitug having predeceased her husband,
the latter has acquired upon her death a vested right over the amounts under savings
account No. 35342-038 of the Bank of America. Insofar as the respondent court ordered
their inclusion in the inventory of assets left by Mrs. Vitug, we hold that the court was in
error. Being the separate property of petitioner, it forms no more part of the estate of the
deceased

Vitug vs. CA Digest

Vitug v. Court of Appeals

Facts:
1. The case is a chapter in an earlier suit involving the issue on two (2) wills of the late
Dolores Vitug who died in New York, USA in Nov 1980. She named therein private
respondent Rowena Corona (Executrix) while Nenita Alonte was co-special administrator
together with petitioner Romarico pending probate.

2. In January 1985, Romarico filed a motion asking for authorization of the probate court to
sell shares of stocks and real property of the estate as reimbursements for advances he
made to the estate. The said amount was spent for payment of estate tax from a savings
account in the Bank of America.

3. Rowena Corona opposed the motion to sell contending that from the said account are
conjugal funds, hence part of the estate. Vitug insisted saying that the said funds are his
exclusive property acquired by virtue of a survivorship agreement executed with his late
wife and the bank previously. In the said agreement, they agreed that in the event of death
of either, the funds will become the sole property of the survivor.

4. The lower court upheld the validity of the survivorship agreement and granted
Romarico's motion to sell. The Court of Appeals however held that said agreement
constituted a conveyance mortis causa which did not comply with the formalities of a valid
will. Further, assuming that it is donation inter vivos, it is a prohibited donation. Vitug
petitioned to the Court contending that the said agreement is an aleatory contract.

Issue: Whether or not the conveyance is one of mortis causa hence should
conform to the form required of wills

NO. The survivorship agreement is a contract which imposed a mere obligation with a
term--being death. Such contracts are permitted under Article 2012 on aleatory contracts.
When Dolores predeceased her husbandm the latter acquired upon her death a vested right
over the funds in the account. The conveyance is therefore not mortis causa.
 RAFAEL ARSENIO S. DIZON, in his capacity as the Judicial Administrator of the Estate
of the deceased JOSE P. FERNANDEZ- versus

COURT OF TAX APPEALS and COMMISSIONER OF INTERNALREVENUE

Facts: Jose P. Fernandez (Jose) died. A petition for the probate of his will was filed with RTC of
Manila. The probate court then appointed retired Supreme Court Justice Dizon and
petitioner, Atty. Rafael Arsenio P. Dizon (petitioner) as Special and Assistant Special
Administrator, respectively, ofthe Estate of Jose (Estate). In a letter dated October 13, 1988, Justice
Dizon informed respondent Commissioner of the BIR of the special proceedings for the
Estate. Atty. Gonzales wrote a letter addressed to the BIR Regional Director
for San Pablo City and filed the estate tax return with the same BIR Regional Office, showing
therein a NIL estate tax
liability. An estate tax return was filed later on which showed ZERO estate taxliability. BIR
thereafter issued a deficiency estate tax assessment, demanding payment of Php 66.97
million as deficiency estate tax. This was subsequently reduced by CTA to Php 37.42
million. The CA affirmed theCTAs ruling, hence, the instant petition. The petitioner claims that in
as much as the valid claims of creditors against the Estate are in excess of the gross estate, no
estate tax was due. On the other hand, respondents argue that since the claims of the
Estates Creditors have been condoned, such claims may no longer be deducted from the
gross estate of the decedent.

ISSUE: Whether or not the actual claims of creditors may be fully allowed as deductions from the
gross estate of Jose despite the fact that the said claims were reduced or condoned
through compromise agreements entered into by the Estate with its creditors

Ruling:
Claims against the estate, as allowable deductions from the gross estate under Section 79
of the Tax Code, are basically a reproduction of the deductions allowed under Section 89 (a)
(1) (C) and (E) of Commonwealth Act No. 466 (CA 466), otherwise known as the
National Internal Revenue Code of 1939, and which was the first codification of Philippine tax
laws. Philippine tax laws were, in turn, based on the federal tax laws of the United States. Thus, pursuant
to established rules of statutory construction, the decisions of American courts construing the
federal tax code are entitled to great weight in the interpretation of our own tax laws.
It is noteworthy that even in the United States, there is some dispute as to whether the deductible
amount for a claim against the estate is fixed as of the decedent's death which is the general
rule, or the same should bead justed to reflect post-death developments, such as where a
settlement between the parties results in the reduction of the amount actually paid
On one hand, the U.S. court ruled that the appropriate deduction is the value that the
claim had at the date of the decedent's death. Also, as held In Propstra v. U.S. where a lien
claimed against the estate was
certain and enforceable on the date of the decedent's death, the fact that the claimant
subsequently settled for lesser amount did not preclude the estate from deducting the entire
amount of the claim for estate tax purposes. These pronouncements essentially confirm the
general principle that post-death developments are not material in determining the amount of the
deduction. We express our agreement with the date-of-death valuation rule, made pursuant
to the ruling of the U.S. Supreme Court in
Ithaca Trust Co. v.United States
First
. There is no law, nor do we discern any legislative intent in our tax laws, which disregards
the date-of-death valuation principle and particularly provides that post-death
developments must be considered in determining the net value of the estate. It bears
emphasis that tax burdens are not to be imposed, nor presumed to be imposed, beyond
what the statute expressly and clearly imports, tax statutes being construed strictissimi juris
against the government.

Any doubt on whether a person, article or activity is taxable is generally resolved against
taxation.

Second
. Such construction finds relevance and consistency in our Rules on Special Proceedings wherein
the term "claims" required to be presented against a decedent's estate is generally construed
to mean debts or demands of a pecuniary nature which could have been enforced against
the deceased in his lifetime, or liability contracted by the deceased before his
death Therefore, the claims existing at the time of death are significant to, and should be made the basis
of, the determination of allowable deductions.
April 30, 2008 G.R. No. 140944
RAFAEL ARSENIO S. DIZON, IN HIS CAPACITY AS THE JUDICIAL ADMINISTRATOR
OF THE ESTATE OF THEDECEASED JOSE P. FERNANDEZ
v.
COURT OF TAXAPPEALS AND COMMISSIONER OF INTERNAL REVENUE
Ponente
Justice Nachura

Subject Estate Taxation Allowable Deductions, Date-of-DeathValuation Principle

Facts
Jose P. Fernandez died in November 7, 1987. Thereafter, a petition for the probate of
his will
was filed. Theprobatec o u r t a p p o i n t e d A t t y . R a f a e l A r s e n i o P . D i z o
n a s adminis trator of the Estate of Jose Fernandez .An estate tax return was filed later on which
showed ZERO estate tax liability. BIR thereafter issued a deficiency estate tax assessment,
demanding payment of Php 66.97 million as deficiency estate tax. This was subsequently
reduced byCTA to Php 37.42 million. The CA affirmed the CTAs ruling, hence, the instant
petition. The petitioner claims that in as much as the valid claims
of c r e d i t o r s a g a i n s t t h e E s t a t e a r e i n e x c e s s o f t h e g r o s s e s t a t e , n o
e s t a t e t a x w a s d u e . O n t h e o t h e r h a n d , respondents argue that since the
claims of the Estates creditors have been condoned, such claims may no longer be
deducted from the gross estate of the decedent.

Issue Whether the actual claims of creditors may be fully allowed as deductions from the
gross estate of Jose despite the fact that the said claims were reduced or condoned
through hcompromise agreements entered into by the Estate with its creditors

Decision YES.

Ratio
Following the US Supreme Courts ruling in Ithaca Trust Co.v . U n i t e d S t a t e s
, t h e C o u r t h e l d t h a t p o s t - d e a t h developments are not material in
determining the amount of deduction. This is because estate tax is a tax imposed on the
act of transferring property by will or intestacy and, b e c a u s e t h e a c t o n w h i c h
t h e t a x i s l e v i e d o c c u r s a t a discrete time, i.e., the instance of death, the net value of
theproperty transferred should be ascertained, as nearly aspossible, as of the that
time. This is the date-of-death valuation rule. The Court, in adopting the date-of-death
valuation principle, explained that:

First.
T h e r e i s n o l a w , n o r d o w e d i s c e r n a n y legislative intent in our tax laws,
which disregards the date-of-death valuation principle
and particularlyprovides that post-death developments must bec o n s i d e r e d i n
d e t e r m i n i n g t h e n e t v a l u e o f t h e estate. It bears emphasis that tax burdens are
not to be imposed, nor presumed to be imposed, beyond what the statute expressly
and clearly imports, tax statutes being construed
strictissimi juris against the government.

Second
. S u c h c o n s t r u c t i o n f i n d s r e l e v a n c e a n d consistency in our Rules on Special P
roceedingswhere in the term "claims" required to be presented against a decedent's estate
is generally construed to mean debts or demands of a pecuniary nature which could have
been enforced against the deceased in his lifetime, or liability contracted by the
deceased before his death. Therefore, the claims existing at the time of death are significant to, and
should be made t h e b a s i s o f , t h e d e t e r m i n a t i o n o f a l l o w a b l e deductions.

GESTOPA VS. CA FACTS- Acceptance in Donation

Acceptance is a mark that the donation is inter vivos. Donations mortis causa, being in the
form of a will, are not required to be accepted by the donee during the donors lifetime.

FACTS:

Spouses Danlag own six parcels of land. To four parcels of land, they executed a donation
mortis causa in favor of respondent Mercedes Danlag-Pilapil, reserving donor's rights to
amend, cancel, or revoke the donation and to sell or encumber such properties. Years later,
they executed another donation, this time inter vivos, to six parcels of land in favor of
respondents, reserving their rights to the fruits of the land during their lifetime and for
prohibiting the donee to sell or dispose the properties donated. Subsequently, the spouses
sold 2 parcels to herein petitioners, spouses Gestopa, and eventually revoking the donation.
Respondent filed a petition to quiet title, stating that she had already become the owner of
the parcels of land. Trial Court ruled in favor of petitioners, but CA reversed.

ISSUE:

Whether the (second) donation was inter vivos or mortis causa

RULING:

It was donation inter vivos. The spouses were aware of the difference between the two
donations, and that they needed to execute another deed of donation inter vivos, since it has
a different application to a donation mortis causa. Also, the court stated four reasons to the
matter: (1) that the spouses donated the parcels of land out of love and affection, a clear
indication of a donation inter vivos; (2) the reservation of a lifetime usufruct; (3)
reservation of sufficient properties for maintenance that shows the intention to part with
their six lot; and (4) respondent's acceptance, contained in the deed of donation. Once a
deed of donation has been accepted, it cannot be revoked, except for officiousness or
ingratitude, which the spouses failed to invoke.
DE LUNA VS. JUDGE ABRIGO- Onerous Donation

FACTS:

De Luna donated a portion of a 75 sq. m. lot to the Luzonian University Foundation. The
donation was embodied in a Deed of Donation Intervivos and was subject to certain terms
and conditions. In case of violation or non-compliance, the property would automatically
revert to the donor. When the Foundation failed to comply with the conditions, de Luna
revived the said donation by executing a Revival of Donation Intervivos with the following
terms and conditions:

1) The Donee shall construct on the land and at its expense a Chapel, Nursery, and
Kindergarten School to be named after St. Veronica
2) Construction shall start immediately and must be at least 70% completed three years
from the date of the Deed unless the Donor grants extensions
3) Automatic reversion in case of violation

The Foundation accepted and the donation was registered and annotated in the TCT. By a
Deed of Segregation, the foundation was issued a TCT for area the lot donated while the
remaining area was retained by the De Luna.

The children and only heirs of the late De Luna (died after the donation) filed a complaint
with the RTC for the cancellation of the donation on the ground that the terms were
violated. The Foundation defended itself by saying that it had partially and substantially
complied with the conditions and that the donor granted it an indefinite extension of time
to complete construction.

The RTC dismissed the petition on the ground of prescription (for being filed after 4 years).
The heirs did not file an MR and went straight to the SC.

ISSUE:

Whether the action prescribes in 4 years (based on art. 764 NCC-judicial decree of
revocation of the donation) or in 10 years (based on art. 1144 enforcement of a written
contract)

RULING: 10 years

The donation subject of this case is one with an onerous cause.

Under the old Civil Code, it is a settled rule that donations with an onerous cause are
governed not by the law on donations but by the rules on contract. On the matter of
prescription of actions for the revocation of onerous donation, it was held that the general
rules on prescription apply. The same rules apply under the New Civil Code as provided in
Article 733 thereof which provides:

Donations with an onerous cause shall be governed by the rules on contracts, and
remuneratory donations by the provisions of the present Title as regards that portion which
exceeds the value of the burden imposed.

It is true that under Article 764 of the New Civil Code, actions for the revocation of a
donation must be brought within four (4) years from the non-compliance of the conditions
of the donation. However, said article does not apply to onerous donations in view of the
specific provision of Article 733 providing that onerous donations are governed by the rules
on contracts. The rules on prescription and not the rules on donation applies in the case at
bar.

PhilAm LIFE vs. Secretary of Finance, G.R. No. 210987, Case Digest
Philam Life sold its shares in Philam Care Health Systems to STI Investments Inc., the
highest bidder. After the sale was completed, Philam life applied for a tax clearance and
was informed by BIR that there is a need to secure a BIR Ruling due to a potential donors
tax liability on the sold shares.

ISSUE on DONORS TAX:

W/N the sales of shares sold for less than an adequate consideration be subject to donors
tax?

PETITIONERS CONTENTION:
The transaction cannot attract donors tax liability since there was no donative intent and,
ergo, no taxable donation, citing BIR Ruling [DA-(DT-065) 715-09] dated November 27,
2009; that the shares were sold at their actual fair market value and at arms length; that as
long as the transaction conducted is at arms lengthsuch that a bonafide business
arrangement of the dealings is done in the ordinary course of businessa sale for less than
an adequate consideration is not subject to donors tax; and that donors tax does not apply
to sale of shares sold in an open bidding process.
CIR DENYING THE REQUEST:
Through BIR Ruling No. 015-12. As determined by the Commissioner, the selling price of
the shares thus sold was lower than their book value based on the financial statements of
Philam Care as of the end of 2008. The Commissioner held donors tax became imposable
on the price difference pursuant to Sec. 100 of the National Internal Revenue Code (NIRC):

SEC. 100. Transfer for Less Than Adequate and full Consideration. - Where
property, other than real property referred to in Section 24(D), is transferred for less than
an adequate and full consideration in money or moneys worth, then the amount by which
the fair market value of the property exceeded the value of the consideration shall, for the
purpose of the tax imposed by this Chapter, be deemed a gift, and shall be included in
computing the amount of gifts made during the calendar year.

RULING:
The price difference is subject to donors tax.

Petitioners substantive arguments are unavailing. The absence of donative intent, if that be
the case, does not exempt the sales of stock transaction from donors tax since Sec. 100 of
the NIRC categorically states that the amount by which the fair market value of the property
exceeded the value of the consideration shall be deemed a gift. Thus, even if there is no
actual donation, the difference in price is considered a donation by fiction of law.

Moreover, Sec. 7(c.2.2) of RR 06-08 does not alter Sec. 100 of the NIRC but merely sets the
parameters for determining the fair market value of a sale of stocks. Such issuance was
made pursuant to the Commissioners power to interpret tax laws and to promulgate rules
and regulations for their implementation.

Lastly, petitioner is mistaken in stating that RMC 25-11, having been issued after the sale,
was being applied retroactively in contravention to Sec. 246 of the NIRC.26 Instead, it
merely called for the strict application of Sec. 100, which was already in force the moment
the NIRC was enacted.

ISSUE on TAX REMEDIES:

The issue that now arises is thiswhere does one seek immediate recourse from the
adverse ruling of the Secretary of Finance in its exercise of its power of review under Sec. 4?

Petitioner essentially questions the CIRs ruling that Petitioners sale of shares is a taxable
donation under Sec. 100 of the NIRC. The validity of Sec. 100 of the NIRC, Sec. 7 (C.2.2)
and RMC 25-11 is merely questioned incidentally since it was used by the CIR as bases for
its unfavourable opinion. Clearly, the Petition involves an issue on the taxability of the
transaction rather than a direct attack on the constitutionality of Sec. 100, Sec.7 (c.2.2.) of
RR 06-08 and RMC 25-11. Thus, the instant Petition properly pertains to the CTA under
Sec. 7 of RA 9282.
As a result of the seemingly conflicting pronouncements, petitioner submits that taxpayers
are now at a quandary on what mode of appeal should be taken, to which court or agency it
should be filed, and which case law should be followed.

Petitioners above submission is specious (erroneous).

CTA, through its power of certiorari, to rule on the validity of a particular administrative
rule or regulation so long as it is within its appellate jurisdiction. Hence, it can now rule not
only on the propriety of an assessment or tax treatment of a certain transaction, but also on
the validity of the revenue regulation or revenue memorandum circular on which the said
assessment is based.

Guided by the doctrinal teaching in resolving the case at bar, the fact that the CA petition
not only contested the applicability of Sec. 100 of the NIRC over the sales transaction but
likewise questioned the validity of Sec. 7(c.2.2) of RR 06-08 and RMC 25-11 does not divest
the CTA of its jurisdiction over the controversy, contrary to petitioners arguments.