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Lorenzo vs.

G.R. No. L-43082 June 18, 1937


 On May 27, 1922, Thomas Hanley died, leaving a will and considerable amount of real and
personal properties.
 On June 14, 1922, proceedings for the probate of his will and the settlement and distribution of
his estate were begun in the Court of First Instance of Zamboanga. The will was admitted to
 The Court of First Instance of Zamboanga 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
Matthew Hanley ten years after the two executors named in the will, was, on March 8, 1924,
appointed trustee. Moore took his oath of office and gave bond on March 10, 1924.
 He acted as trustee until he resigned on February 29, 1932, and Pablo Lorenzo was appointed in
his stead.
 During Lorenzo’s incumbency, Juan Posadas, Collector of Internal Revenue, alleged that the
estate left by the deceased at the time of his death consisted of realty and personalty, and assessed
against the estate an inheritance tax in the amount of P1,434.24 which, together with the penalties
for delinquency in payment consisting of a 1 per cent monthly interest from July 1, 1931 to the
date of payment and a surcharge of 25 per cent on the tax, amounted to P2,052.74. Posadas filed a
motion in the testamentary proceedings pending before the Court of First Instance of Zamboanga
praying that the trustee, Lorenzo, be ordered to pay to the Government the said amount.
 On September 15, 1932, 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 the Lorenzo's protest and refused to refund the said amount.
 Plaintiff Lorenzo brought this action in the Court of First Instance of Zamboanga against
defendant Posadas. From the decision of the CFI dismissing both the plaintiff's complaint and the
defendant's counterclaim, both parties appealed to this court.

ISSUE: Has there been delinquency in the payment of the inheritance tax?

HELD: Yes.
 The delinquency in payment occurred on March 10, 1924, the date when Moore became trustee.
The interest due should be computed from that date and it is error on the part of the defendant to
compute it one month later. The mere fact that the estate of the deceased was placed in trust did
not remove it from the operation of our inheritance tax laws or exempt it from the payment of the
inheritance tax. The corresponding inheritance tax should have been paid on or before March 10,
1924, to escape the penalties of the laws.
 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. The appointment of P. J. M. 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. To constitute a valid
testamentary trust there must be: (1) sufficient words to raise a trust; (2) a definite subject; (3) a
certain or ascertain object. There is no doubt that the testator, Hanley, 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.

Marcos II vs. CA
G.R. No. 120880 June 5, 1997

 When former President Ferdinand Marcos died in Honolulu, Hawaii, USA on September 29,
1989, a Special Tax Audit Team was created to conduct investigations and examinations of the
tax liabilities and obligations of the late president.
 The investigation disclosed that the Marcoses failed to file a written notice of the death of the
decedent, estate tax returns, and several income tax returns covering the years 1982 to 1986, -all
in violation of the National Internal Revenue Code (NIRC). Criminal charges were filed against
Mrs. Imelda R. Marcos before the Regional Trial of Quezon City for violations of Sections 82, 83
and 84 of the National Internal Revenue Code (NIRC).
 The Commissioner of Internal Revenue thereby caused the preparation and filing of the Estate
Tax Return for the estate of the late president, the Income Tax Returns of the Spouses Marcos for
the years 1985 to 1986, and the Income Tax Returns of petitioner Ferdinand 'Bongbong' Marcos
II for the years 1982 to 1985, and served copies of the deficiency estate and income tax
assessments. Likewise, copies of the deficiency tax assessments issued against petitioner
Ferdinand 'Bongbong' Marcos II were personally and constructively served upon him. Formal
Assessment notices were also served upon Mrs. Marcos. A notice to Taxpayer inviting Mrs.
Marcos (or her duly authorized representative or counsel), to a conference, was furnished the
counsel of Mrs. Marcos, Dean Antonio Coronel - but to no avail.
 The deficiency tax assessments were not protested administratively, by Mrs. Marcos and the other
heirs of the late president, within 30 days from service of said assessments. Notices of levy on
real property against certain parcels of land were issued by the BIR Commissioner and notices of
sale at public auction were posted on May 26, 1993, at the lobby of the City Hall of Tacloban
City. The public auction for the sale of the eleven (11) parcels of land took place on July 5,
1993. There being no bidder, the lots were declared forfeited in favor of the government.
 Ferdinand Bongbong Marcos II filed the instant petition for certiorari and prohibition under Rule
65 of the Rules of Court, with prayer for temporary restraining order and/or writ of preliminary
injunction. Petitioner contends that the probate court is not precluded from denying a request by
the government for the immediate payment of taxes, and should order the payment of the same
only within the period fixed by the probate court for the payment of all the debts of the decedent.
 Petitioner posits that notices of levy, notices of sale, and subsequent sale of properties of the late
President Marcos effected by the BIR are null and void for disregarding the established procedure
for the enforcement of taxes due upon the estate of the deceased.

ISSUE: Is Ferdinand Bongbong Marcos II correct?

 In view of all the foregoing, the Court rules that the deficiency income tax assessments and estate
tax assessment, are already final and (u)nappealable -and- the subsequent levy of real properties
is a tax remedy resorted to by the government, sanctioned by Section 213 and 218 of the National
Internal Revenue Code.
 It is discernible that the approval of the court, sitting in probate, or as a settlement tribunal over
the deceased is not a mandatory requirement in the collection of estate taxes. It cannot therefore
be argued that the Tax Bureau erred in proceeding with the levying and sale of the properties
allegedly owned by the late President, on the ground that it was required to seek first the probate
court's sanction. There is nothing in the Tax Code, and in the pertinent remedial laws that implies
the necessity of the probate or estate settlement court's approval of the state's claim for estate
taxes, before the same can be enforced and collected. On the contrary, under Section 87 of the
NIRC, it is the probate or settlement court which is bidden not to authorize the executor or
judicial administrator of the decedent's estate to deliver any distributive share to any party
interested in the estate, unless it is shown a Certification by the Commissioner of Internal
Revenue that the estate taxes have been paid. This provision disproves the petitioner's contention
that it is the probate court which approves the assessment and collection of the estate tax.
 The omission to file an estate tax return, and the subsequent failure to contest or appeal the
assessment made by the BIR is fatal to the petitioner's cause, as under the above-cited provision,
in case of failure to file a return, the tax may be assessed at any time within ten years after the
omission, and any tax so assessed may be collected by levy upon real property within three years
following the assessment of the tax. Since the estate tax assessment had become final and
unappealable by the petitioner's default as regards protesting the validity of the said assessment,
there is now no reason why the BIR cannot continue with the collection of the said tax. Any
objection against the assessment should have been pursued following the avenue paved in Section
229 of the NIRC on protests on assessments of internal revenue taxes.

CIR vs. CA
G.R. No. 123206 March 22, 2000

 Pedro Pajonar, a member of the Philippine Scout, Bataan Contingent, during the second World
War, was a part of the infamous Death March by reason of which he suffered shock and became
 His sister Josefina Pajonar became the guardian over his person, while his property was placed
under the guardianship of the Philippine National Bank (PNB) by the Regional Trial Court of
Dumaguete City, Branch 31, in Special Proceedings No. 1254.
 He died on January 10, 1988 and was survived by his two brothers Isidro P. Pajonar and Gregorio
Pajonar, his sister Josefina Pajonar, nephews Concordio Jandog and Mario Jandog and niece
Conchita Jandog.
 On May 11, 1988, the PNB filed an accounting of the decedent's property under guardianship
valued at P3,037,672.09 in a Special Proceeding. However, the PNB did not file an estate tax
return, instead it advised Pedro Pajonar's heirs to execute an extrajudicial settlement and to pay
the taxes on his estate. Pursuant to the assessment by BIR, the estate of Pedro Pajonar paid taxes
in the amount of P2,557.
 Josefina Pajonar filed a petition with the Regional Trial Court of Dumaguete City for the issuance
in her favor of letters of administration of the estate of her brother. Pursuant to a second
assessment by the BIR for deficiency estate tax, the estate of Pedro Pajonar paid estate tax in the
amount of P1,527,790.98.
 Josefina Pajonar, in her capacity as administratrix and heir of Pedro Pajonar's estate, filed a
protest on January 11, 1989 with the BIR praying that the estate tax payment in the amount of
P1,527,790.98, or at least some portion of it, be returned to the heirs. However, on August 15,
1989, without waiting for her protest to be resolved by the BIR, Josefina Pajonar filed a petition
for review with the Court of Tax Appeals (CTA), praying for the refund of P1,527,790.98, or in
the alternative, P840,202.06, as erroneously paid estate tax.
 Among the deductions from the gross estate allowed by the CTA were the amounts of P60,753
representing the notarial fee for the Extrajudicial Settlement and the amount of P50,000 as the
attorney's fees in Special Proceedings No. 1254 for guardianship.

ISSUE: Is the notarial fee paid for the extrajudicial settlement in the amount of P60,753 and the attorney's
fees in the guardianship proceedings in the amount of P50,000 allowed as deductions from the gross
estate of decedent in order to arrive at the value of the net estate?

HELD: Yes.
 The Court ruled that judicial expenses are expenses of administration. Administration expenses,
as an allowable deduction from the gross estate of the decedent for purposes of arriving at the
value of the net estate, have been construed by the federal and state courts of the United States to
include all expenses “essential to the collection of the assets, payment of debts or the distribution
of the property to the persons entitled to it.” In other words, the expenses must be essential to the
proper settlement of the estate. It is clear then that the extrajudicial settlement was for the purpose
of payment of taxes and the distribution of the estate to the heirs. The execution of the
extrajudicial settlement necessitated the notarization of the same. Hence the Contract of Legal
Services of March 28, 1988 entered into between respondent Josefina Pajonar and counsel was
presented in evidence for the purpose of showing that the amount of P60,753.00 was for the
notarization of the Extrajudicial Settlement. It follows then that the notarial fee of P60,753.00
was incurred primarily to settle the estate of the deceased Pedro Pajonar. Said amount should then
be considered an administration expenses actually and necessarily incurred in the collection of the
assets of the estate, payment of debts and distribution of the remainder among those entitled
thereto. Thus, the notarial fee of P60,753 incurred for the Extrajudicial Settlement should be
allowed as a deduction from the gross estate.
 Attorney's fees, on the other hand, in order to be deductible from the gross estate must be
essential to the settlement of the estate. The guardianship proceeding in this case was necessary
for the distribution of the property of the deceased Pedro Pajonar. As correctly pointed out by
respondent CTA, the PNB was appointed guardian over the assets of the deceased, and that
necessarily the assets of the deceased formed part of his gross estate. It is clear therefore that the
attorney's fees incurred in the guardianship proceeding in Spec. Proc. No. 1254 were essential to
the distribution of the property to the persons entitled thereto. Hence, the attorney's fees incurred
in the guardianship proceedings in the amount of P50,000.00 should be allowed as a deduction
from the gross estate of the decedent.

G.R. No. 111904
 Spouses Diego and Catalina Danlag were the owners of six parcels of unregistered lands. They
executed three deeds of donation mortis causa, two of which are dated March 4, 1965 and another
dated October 13, 1966, in favor of private respondent Mercedes Danlag-Pilapil. All deeds
contained the reservation of the rights of the donors (1) to amend, cancel or revoke the donation
during their lifetime, and (2) to sell, mortgage, or encumber the properties donated during the
donors' lifetime, if deemed necessary.
 On January 16, 1973, Diego Danlag, with the consent of his wife, Catalina Danlag, executed a
deed of donation inter vivos covering the aforementioned parcels of land plus two other parcels
again in favor of private respondent Mercedes. This contained two conditions, that (1) the Danlag
spouses shall continue to enjoy the fruits of the land during their lifetime, and that (2) the donee
cannot sell or dispose of the land during the lifetime of the said spouses, without their prior
consent and approval. Mercedes caused the transfer of the parcels' tax declaration to her name
and paid the taxes on them. On June 28, 1979 and August 21, 1979, Diego and Catalina Danlag
sold parcels 3 and 4 to herein petitioners, Mr. and Mrs. Agripino Gestopa. On September 29,
1979, the Danlags executed a deed of revocation recovering the six parcels of land subject of the
aforecited deed of donation inter vivos.
 On March 1, 1983, Mercedes Pilapil filed with the RTC a petition against the Gestopas and the
Danlags, for quieting of title over the above parcels of land. She alleged that she was an
illegitimate daughter of Diego Danlag; that she lived and rendered incalculable beneficial services
to Diego and his mother, Maura Danlag, when the latter was still alive. In recognition of the
services she rendered, Diego executed a Deed of Donation on March 20, 1973, conveying to her
the six (6) parcels of land. She accepted the donation in the same instrument, openly and publicly
exercised rights of ownership over the donated properties, and caused the transfer of the tax
declarations to her name.
 Through machination, intimidation and undue influence, Diego persuaded the husband of
Mercedes, Eulalio Pilapil, to buy two of the six parcels covered by the deed of donation. Said
donation inter vivos was coupled with conditions and, according to Mercedes, since its perfection,
she had complied with all of them; that she had not been guilty of any act of ingratitude; and that
respondent Diego had no legal basis in revoking the subject donation and then in selling the two
parcels of land to the Gestopas.

ISSUE: Whether the second donation made was inter vivos or mortis causa.

HELD: Inter vivos.

 Note first that the granting clause shows that Diego donated the properties out of love and
affection for the donee. This is a mark of a donation inter vivos.[14] Second, the reservation of
lifetime usufruct indicates that the donor intended to transfer the naked ownership over the
properties. As correctly posed by the Court of Appeals, what was the need for such reservation if
the donor and his spouse remained the owners of the properties? Third, the donor reserved
sufficient properties for his maintenance in accordance with his standing in society, indicating
that the donor intended to part with the six parcels of land.[15] Lastly, the donee accepted the
donation. Acceptance is a requirement for donations inter vivos. Donations mortis causa, being in
the form of a will, are not required to be accepted by the donees during the donors' lifetime.
 The attending circumstances in the execution of the subject donation also demonstrated the real
intent of the donor to transfer the ownership over the subject properties upon its
execution.[16] Prior to the execution of donation inter vivos, the Danlag spouses already executed
three donations mortis causa. As correctly observed by the Court of Appeals, the Danlag spouses
were aware of the difference between the two donations. If they did not intend to donate inter
vivos, they would not again donate the four lots already donated mortis causa. Petitioners' counter
argument that this proposition was erroneous because six years after, the spouses changed their
intention with the deed of revocation, is not only disingenious but also fallacious. Petitioners
cannot use the deed of revocation to show the spouses' intent because its validity is one of the
issues in this case.