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 Lorenzo’s protest and
refused to refund the said amount. Plaintiff went to court. The CFI dismissed Lorenzo’s complaint and
Posadas’ counterclaim. Both parties appealed to this court.

ISSUE:

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 decedent’s 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
wil. 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.