.R. No. 113725               June 29, 2000 also at the time that the lease of Balbinito G.
also at the time that the lease of Balbinito G. Guanzon of the said lot shall expire,
JOHNNY S. RABADILLA,1 petitioner,
vs.
COURT OF APPEALS AND MARIA MARLENA2 COSCOLUELLA Y BELLEZA
VILLACARLOS, respondents.
DECISION
PURISIMA, J.:
This is a petition for review of the decision of the Court of Appeals, 3 dated December
23, 1993, in CA-G.R. No. CV-35555, which set aside the decision of Branch 52 of the
Regional Trial Court in Bacolod City, and ordered the defendants-appellees (including
herein petitioner),  as  heirs of Dr. Jorge Rabadilla, to reconvey title over Lot No. 1392,
together with its fruits and interests, to the estate of Aleja Belleza.
The antecedent facts are as follows:
In a Codicil appended to the Last Will and Testament of testatrix Aleja Belleza, Dr.
Jorge Rabadilla, predecessor-in-interest of the herein petitioner, Johnny S. Rabadilla,
was instituted as a devisee of 511, 855 square meters of that parcel of land surveyed
as Lot No. 1392 of the Bacolod Cadastre. The said Codicil, which was duly probated
and admitted in Special Proceedings No. 4046 before the then Court of First Instance
of Negros Occidental, contained the following provisions:
"FIRST
I give, leave and bequeath the following property owned by me to Dr. Jorge Rabadilla
resident of 141 P. Villanueva, Pasay City:
(a) Lot No. 1392 of the Bacolod Cadastre, covered by Transfer Certificate of Title No.
RT-4002 (10942), which is registered in my name according to the records of the
Register of Deeds of Negros Occidental.
(b) That should Jorge Rabadilla die ahead of me, the aforementioned property and
the rights which I shall set forth hereinbelow, shall be inherited and acknowledged by
the children and spouse of Jorge Rabadilla.
xxx
FOURTH
(a)....It is also my command, in this my addition (Codicil), that should I die and Jorge
Rabadilla shall have already received the ownership of the said Lot No. 1392 of the
Bacolod Cadastre, covered by Transfer Certificate of Title No. RT-4002 (10942), and
Jorge Rabadilla shall have the obligation until he dies, every year to give to Maria
Marlina Coscolluela y Belleza, Seventy (75) (sic) piculs of Export sugar and Twenty
Five (25) piculs of Domestic sugar, until the said Maria Marlina Coscolluela y Belleza
dies.
FIFTH
(a) Should Jorge Rabadilla die, his heir to whom he shall give Lot No. 1392 of the
Bacolod Cadastre, covered by Transfer Certificate of Title No. RT-4002 (10492), shall
have the obligation to still give yearly, the sugar as specified in the Fourth paragraph
of his testament, to Maria Marlina Coscolluela y Belleza on the month of December of
each year.
SIXTH
I command, in this my addition (Codicil) that the Lot No. 1392, in the event that the
one to whom I have left and bequeathed, and his heir shall later sell, lease, mortgage
this said Lot, the buyer, lessee, mortgagee, shall have also the obligation to respect
and deliver yearly ONE HUNDRED (100) piculs of sugar to Maria Marlina Coscolluela y
Belleza, on each month of December, SEVENTY FIVE (75) piculs of Export and
TWENTY FIVE (25) piculs of Domestic, until Maria Marlina shall die, lastly should the
buyer, lessee or the mortgagee of this lot, not have respected my command in this
my addition (Codicil), Maria Marlina Coscolluela y Belleza, shall immediately seize this
Lot No. 1392 from my heir and the latter's heirs, and shall turn it over to my near
desendants, (sic) and the latter shall then have the obligation to give the ONE
HUNDRED (100) piculs of sugar until Maria Marlina shall die. I further command in
this my addition (Codicil) that my heir and his heirs of this Lot No. 1392, that they
will obey and follow that should they decide to sell, lease, mortgage, they cannot
negotiate with others than my near descendants and my sister." 4
Pursuant to the same Codicil, Lot No. 1392 was transferred to the deceased, Dr.
Jorge Rabadilla, and Transfer Certificate of Title No. 44498 thereto issued in his
name.
Dr. Jorge Rabadilla died in 1983 and was survived by his wife Rufina and children
Johnny (petitioner), Aurora, Ofelia and Zenaida, all surnamed Rabadilla.
On August 21, 1989, Maria Marlena Coscolluela y Belleza Villacarlos brought a
complaint, docketed as Civil Case No. 5588, before Branch 52 of the Regional Trial
Court in Bacolod City, against the above-mentioned heirs of Dr. Jorge Rabadilla, to
enforce the provisions of subject Codicil. The Complaint alleged that the defendant-
heirs violated the conditions of the Codicil, in that:
1. Lot No. 1392 was mortgaged to the Philippine National Bank and the Republic during each sugar crop year, which is in the total amount of ONE HUNDRED FIVE
Planters Bank in disregard of the testatrix's specific instruction to sell, lease, or THOUSAND PESOS (P105,000.00).
mortgage only to the near descendants and sister of the testatrix.
That the above-mentioned amount will be paid or delivered on a staggered cash
2. Defendant-heirs failed to comply with their obligation to deliver one hundred (100) installment, payable on or before the end of December of every sugar crop year, to
piculs of sugar (75 piculs export sugar and 25 piculs domestic sugar) to plaintiff Maria wit:
Marlena Coscolluela y Belleza from sugar crop years 1985 up to the filing of the
complaint as mandated by the Codicil, despite repeated demands for compliance. For 1985-86, TWENTY SIX THOUSAND TWO HUNDRED FIFTY (P26,250.00) Pesos,
payable on or before December of crop year 1988-89;
3. The banks failed to comply with the 6th paragraph of the Codicil which provided
that in case of the sale, lease, or mortgage of the property, the buyer, lessee, or For 1986-87, TWENTY SIX THOUSAND TWO HUNDRED FIFTY (P26,250.00) Pesos,
mortgagee shall likewise have the obligation to deliver 100 piculs of sugar per crop payable on or before December of crop year 1989-90;
year to herein private respondent.
For 1987-88, TWENTY SIX THOUSAND TWO HUNDRED FIFTY (P26,250.00) Pesos,
The plaintiff then prayed that judgment be rendered ordering defendant-heirs to payable on or before December of crop year 1990-91; and
reconvey/return-Lot No. 1392 to the surviving heirs of the late Aleja Belleza, the
For 1988-89, TWENTY SIX THOUSAND TWO HUNDRED FIFTY (P26,250.00) Pesos,
cancellation of TCT No. 44498 in the name of the deceased, Dr. Jorge Rabadilla, and
payable on or before December of crop year 1991-92." 5
the issuance of a new certificate of title in the names of the surviving heirs of the late
Aleja Belleza.
However, there was no compliance with the aforesaid Memorandum of Agreement
except for a partial delivery of 50.80 piculs of sugar corresponding to sugar crop year
On February 26, 1990, the defendant-heirs were declared in default but on March 28,
1988 -1989.
1990 the Order of Default was lifted, with respect to defendant Johnny S. Rabadilla,
who filed his Answer, accordingly.
On July 22, 1991, the Regional Trial Court came out with a decision, dismissing the
complaint and disposing as follows:
During the pre-trial, the parties admitted that:
"WHEREFORE, in the light of the aforegoing findings, the Court finds that the action
On November 15, 1998, the plaintiff (private respondent)  and a certain Alan Azurin,
is prematurely filed as no cause of action against the defendants has as yet arose in
son-in-law of the herein petitioner who was lessee of the property and acting as
favor of plaintiff. While there maybe the non-performance of the command as
attorney-in-fact of defendant-heirs, arrived at an amicable settlement and entered
mandated exaction from them simply because they are the children of Jorge
into a Memorandum of Agreement on the obligation to deliver one hundred piculs of
Rabadilla, the title holder/owner of the lot in question, does not warrant the filing of
sugar, to the following effect:
the present complaint. The remedy at bar must fall. Incidentally, being in the
"That for crop year 1988-89, the annuity mentioned in Entry No. 49074 of TCT No. category as creditor of the left estate, it is opined that plaintiff may initiate the
44489 will be delivered not later than January of 1989, more specifically, to wit: intestate proceedings, if only to establish the heirs of Jorge Rabadilla and in order to
give full meaning and semblance to her claim under the Codicil.
75 piculs of 'A' sugar, and 25 piculs of 'B' sugar, or then existing in any of our names,
Mary Rose Rabadilla y Azurin or Alan Azurin, during December of each sugar crop In the light of the aforegoing findings, the Complaint being prematurely filed is
year, in Azucar Sugar Central; and, this is considered compliance of the annuity as DISMISSED without prejudice.
mentioned, and in the same manner will compliance of the annuity be in the next
SO ORDERED."6
succeeding crop years.
On appeal by plaintiff, the First Division of the Court of Appeals reversed the decision
That the annuity above stated for crop year 1985-86, 1986-87, and 1987-88, will be
of the trial court; ratiocinating and ordering thus:
complied in cash equivalent of the number of piculs as mentioned therein and which
is as herein agreed upon, taking into consideration the composite price of sugar
"Therefore, the evidence on record having established plaintiff-appellant's right to
receive 100 piculs of sugar annually out of the produce of Lot No. 1392; defendants-
appellee's obligation under Aleja Belleza's codicil, as heirs of the modal heir, Jorge
Rabadilla, to deliver such amount of sugar to plaintiff-appellant; defendants-
appellee's admitted non-compliance with said obligation since 1985; and, the punitive
consequences enjoined by both the codicil and the Civil Code, of seizure of Lot No.
1392 and its reversion to the estate of Aleja Belleza in case of such non-compliance,
this Court deems it proper to order the reconveyance of title over Lot No. 1392 from
the estates of Jorge Rabadilla to the estate of Aleja Belleza. However, plaintiff-
appellant must institute separate proceedings to re-open Aleja Belleza's estate,
secure the appointment of an administrator, and distribute Lot No. 1392 to Aleja
Belleza's legal heirs in order to enforce her right, reserved to her by the codicil, to
receive her legacy of 100 piculs of sugar per year out of the produce of Lot No. 1392
until she dies.
Accordingly, the decision appealed from is SET ASIDE and another one entered
ordering defendants-appellees, as heirs of Jorge Rabadilla, to reconvey title over Lot
No. 1392, together with its fruits and interests, to the estate of Aleja Belleza.
SO ORDERED."7
Dissatisfied with the aforesaid disposition by the Court of Appeals, petitioner found
his way to this Court via the present petition, contending that the Court of Appeals
erred in ordering the reversion of Lot 1392 to the estate of the testatrix Aleja Belleza
on the basis of paragraph 6 of the Codicil, and in ruling that the testamentary
institution of Dr. Jorge Rabadilla is a modal institution within the purview of Article
882 of the New Civil Code.
The petition is not impressed with merit.
Petitioner contends that the Court of Appeals erred in resolving the appeal in
accordance with Article 882 of the New Civil Code on modal institutions and in
deviating from the sole issue raised which is the absence or prematurity of the cause
of action. Petitioner maintains that Article 882 does not find application as there was
no modal institution and the testatrix intended a mere simple substitution - i.e. the
instituted heir, Dr. Jorge Rabadilla, was to be substituted by the testatrix's "near
descendants" should the obligation to deliver the fruits to herein private respondent
be not complied with. And since the testatrix died single and without issue, there can
be no valid substitution and such testamentary provision cannot be given any effect.
The petitioner theorizes further that there can be no valid substitution for the reason
that the substituted heirs are not definite, as the substituted heirs are merely referred
to as "near descendants" without a definite identity or reference as to who are the
"near descendants" and therefore, under Articles 8438 and 8459 of the New Civil Code,
the substitution should be deemed as not written.
The contentions of petitioner are untenable. Contrary to his supposition that the
Court of Appeals deviated from the issue posed before it, which was the propriety of
the dismissal of the complaint on the ground of prematurity of cause of action, there
was no such deviation. The Court of Appeals found that the private respondent had a
cause of action against the petitioner. The disquisition made on modal institution
was, precisely, to stress that the private respondent had a legally demandable right
against the petitioner pursuant to subject Codicil; on which issue the Court of Appeals
ruled in accordance with law.
It is a general rule under the law on succession that successional rights are
transmitted from the moment of death of the decedent10 and compulsory heirs are
called to succeed by operation of law. The legitimate children and descendants, in
relation to their legitimate parents, and the widow or widower, are compulsory
heirs.11 Thus, the petitioner, his mother and sisters, as compulsory heirs of the
instituted heir, Dr. Jorge Rabadilla, succeeded the latter by operation of law, without
need of further proceedings, and the successional rights were transmitted to them
from the moment of death of the decedent, Dr. Jorge Rabadilla.
Under Article 776 of the New Civil Code, inheritance includes all the property, rights
and obligations of a person, not extinguished by his death. Conformably, whatever
rights Dr. Jorge Rabadilla had by virtue of subject Codicil were transmitted to his
forced heirs, at the time of his death. And since obligations not extinguished by death
also form part of the estate of the decedent; corollarily, the obligations imposed by
the Codicil on the deceased Dr. Jorge Rabadilla, were likewise transmitted to his
compulsory heirs upon his death.
In the said Codicil, testatrix Aleja Belleza devised Lot No. 1392 to Dr. Jorge Rabadilla,
subject to the condition that the usufruct thereof would be delivered to the herein
private respondent every year. Upon the death of Dr. Jorge Rabadilla, his compulsory
heirs succeeded to his rights and title over the said property, and they also assumed
his (decedent's) obligation to deliver the fruits of the lot involved to herein private
respondent. Such obligation of the instituted heir reciprocally corresponds to the right
of private respondent over the usufruct, the fulfillment or performance of which is
now being demanded by the latter through the institution of the case at bar.
Therefore, private respondent has a cause of action against petitioner and the trial
court erred in dismissing the complaint below.
Petitioner also theorizes that Article 882 of the New Civil Code on modal institutions is
not applicable because what the testatrix intended was a substitution - Dr. Jorge
Rabadilla was to be substituted by the testatrix's near descendants should there be
noncompliance with the obligation to deliver the piculs of sugar to private
respondent.
Again, the contention is without merit.
Substitution is the designation by the testator of a person or persons to take the
place of the heir or heirs first instituted. Under substitutions in general, the testator
may either (1) provide for the designation of another heir to whom the property shall
pass in case the original heir should die before him/her, renounce the inheritance or
be incapacitated to inherit, as in a simple substitution, 12 or (2) leave his/her property
to one person with the express charge that it be transmitted subsequently to another
or others, as in a fideicommissary substitution.13 The Codicil sued upon contemplates
neither of the two.
In simple substitutions, the second heir takes the inheritance in default of the first
heir by reason of incapacity, predecease or renunciation. 14 In the case under
consideration, the provisions of subject Codicil do not provide that should Dr. Jorge
Rabadilla default due to predecease, incapacity or renunciation, the testatrix's near
descendants would substitute him. What the Codicil provides is that, should Dr. Jorge
Rabadilla or his heirs not fulfill the conditions imposed in the Codicil, the property
referred to shall be seized and turned over to the testatrix's near descendants.
Neither is there a fideicommissary substitution here and on this point, petitioner is
correct. In a fideicommissary substitution, the first heir is strictly mandated to
preserve the property and to transmit the same later to the second heir.15 In the case
under consideration, the instituted heir is in fact allowed under the Codicil to alienate
the property provided the negotiation is with the near descendants or the sister of
the testatrix. Thus, a very important element of a fideicommissary substitution is
lacking; the obligation clearly imposing upon the first heir the preservation of the
property and its transmission to the second heir. "Without this obligation to preserve
clearly imposed by the testator in his will, there is no fideicommissary
substitution."16 Also, the near descendants' right to inherit from the testatrix is not
definite. The property will only pass to them should Dr. Jorge Rabadilla or his heirs
not fulfill the obligation to deliver part of the usufruct to private respondent.
Another important element of a fideicommissary substitution is also missing here.
Under Article 863, the second heir or the fideicommissary to whom the property is
transmitted must not be beyond one degree from the first heir or the fiduciary. A
fideicommissary substitution is therefore, void if the first heir is not related by first
degree to the second heir.17 In the case under scrutiny, the near descendants are not
at all related to the instituted heir, Dr. Jorge Rabadilla.
The Court of Appeals erred not in ruling that the institution of Dr. Jorge Rabadilla
under subject Codicil is in the nature of a modal institution and therefore, Article 882
of the New Civil Code is the provision of law in point. Articles 882 and 883 of the New
Civil Code provide:
Art. 882. The statement of the object of the institution or the application of the
property left by the testator, or the charge imposed on him, shall not be considered
as a condition unless it appears that such was his intention.
That which has been left in this manner may be claimed at once provided that the
instituted heir or his heirs give security for compliance with the wishes of the testator
and for the return of anything he or they may receive, together with its fruits and
interests, if he or they should disregard this obligation.
Art. 883. When without the fault of the heir, an institution referred to in the
preceding article cannot take effect in the exact manner stated by the testator, it
shall be complied with in a manner most analogous to and in conformity with his
wishes.
The institution of an heir in the manner prescribed in Article 882 is what is known in
the law of succession as an institucion sub modo  or a modal institution. In a modal
institution, the testator states (1) the object of the institution, (2) the purpose or
application of the property left by the testator, or (3) the charge imposed by the
testator upon the heir.18 A "mode" imposes an obligation upon the heir or legatee but
it does not affect the efficacy of his rights to the succession.19 On the other hand, in a
conditional testamentary disposition, the condition must happen or be fulfilled in
order for the heir to be entitled to succeed the testator. The condition suspends but
does not obligate; and the mode obligates but does not suspend. 20 To some extent, it
is similar to a resolutory condition. 21
From the provisions of the Codicil litigated upon, it can be gleaned unerringly that the
testatrix intended that subject property be inherited by Dr. Jorge Rabadilla. It is
likewise clearly worded that the testatrix imposed an obligation on the said instituted
heir and his successors-in-interest to deliver one hundred piculs of sugar to the
herein private respondent, Marlena Coscolluela Belleza, during the lifetime of the
latter. However, the testatrix did not make Dr. Jorge Rabadilla's inheritance and the
effectivity of his institution as a devisee, dependent on the performance of the said
obligation. It is clear, though, that should the obligation be not complied with, the
property shall be turned over to the testatrix's near descendants. The manner of
institution of Dr. Jorge Rabadilla under subject Codicil is evidently modal in nature
because it imposes a charge upon the instituted heir without, however, affecting the
efficacy of such institution.
Then too, since testamentary dispositions are generally acts of liberality, an obligation
imposed upon the heir should not be considered a condition unless it clearly appears
from the Will itself that such was the intention of the testator. In case of doubt, the WHEREFORE, the petition is hereby DISMISSED and the decision of the Court of
institution should be considered as modal and not conditional.22 Appeals, dated December 23, 1993, in CA-G.R. No. CV-35555 AFFIRMED. No
pronouncement as to costs
Neither is there tenability in the other contention of petitioner that the private
respondent has only a right of usufruct but not the right to seize the property itself SO ORDERED.
from the instituted heir because the right to seize was expressly limited to violations
by the buyer, lessee or mortgagee.

In the interpretation of Wills, when an uncertainty arises on the face of the Will, as to
the application of any of its provisions, the testator's intention is to be ascertained
from the words of the Will, taking into consideration the circumstances under which it
was made.23 Such construction as will sustain and uphold the Will in all its parts must
be adopted.24

Subject Codicil provides that the instituted heir is under obligation to deliver One
Hundred (100) piculs of sugar yearly to Marlena Belleza Coscuella. Such obligation is
imposed on the instituted heir, Dr. Jorge Rabadilla, his heirs, and their buyer, lessee,
or mortgagee should they sell, lease, mortgage or otherwise negotiate the property
involved. The Codicil further provides that in the event that the obligation to deliver
the sugar is not respected, Marlena Belleza Coscuella shall seize the property and
turn it over to the testatrix's near descendants. The non-performance of the said
obligation is thus with the sanction of seizure of the property and reversion thereof to
the testatrix's near descendants. Since the said obligation is clearly imposed by the
testatrix, not only on the instituted heir but also on his successors-in-interest, the
sanction imposed by the testatrix in case of non-fulfillment of said obligation should
equally apply to the instituted heir and his successors-in-interest.

Similarly unsustainable is petitioner's submission that by virtue of the amicable

settlement, the said obligation imposed by the Codicil has been assumed by the
lessee, and whatever obligation petitioner had become the obligation of the lessee;
that petitioner is deemed to have made a substantial and constructive compliance of
his obligation through the consummated settlement between the lessee and the
private respondent, and having consummated a settlement with the petitioner, the
recourse of the private respondent is the fulfillment of the obligation under the
amicable settlement and not the seizure of subject property.

Suffice it to state that a Will is a personal, solemn, revocable and free act by which a
person disposes of his property, to take effect after his death. 25 Since the Will
expresses the manner in which a person intends how his properties be disposed, the
wishes and desires of the testator must be strictly followed. Thus, a Will cannot be
the subject of a compromise agreement which would thereby defeat the very purpose
of making a Will.
G.R. No. L-43082             June 18, 1937
PABLO LORENZO, as trustee of the estate of Thomas Hanley, deceased, plaintiff-
appellant,
vs.
JUAN POSADAS, JR., Collector of Internal Revenue, defendant-appellant.
Pablo Lorenzo and Delfin Joven for plaintiff-appellant.
Office of the Solicitor-General Hilado for defendant-appellant.
LAUREL, J.:
On October 4, 1932, the plaintiff Pablo Lorenzo, in his capacity as trustee of the
estate of Thomas Hanley, deceased, brought this action in the Court of First Instance
of Zamboanga against the defendant, Juan Posadas, Jr., then the Collector of
Internal Revenue, for the refund of the amount of P2,052.74, paid by the plaintiff as
inheritance tax on the estate of the deceased, and for the collection of interst thereon
at the rate of 6 per cent per annum, computed from September 15, 1932, the date
when the aforesaid tax was [paid under protest. The defendant set up a counterclaim
for P1,191.27 alleged to be interest due on the tax in question and which was not
included in the original assessment. From the decision of the Court of First Instance
of Zamboanga dismissing both the plaintiff's complaint and the defendant's
counterclaim, both parties appealed to this court.
It appears that on May 27, 1922, one Thomas Hanley died in Zamboanga,
Zamboanga, leaving a will (Exhibit 5) 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 probate. Said will provides, among other
things, as follows:
4. I direct that any money left by me be given to my nephew Matthew Hanley.
5. I direct that all real estate owned by me at the time of my death be not sold or
otherwise disposed of for a period of ten (10) years after my death, and that the
same be handled and managed by the executors, and proceeds thereof to be given to
my nephew, Matthew Hanley, at Castlemore, Ballaghaderine, County of
Rosecommon, Ireland, and that he be directed that the same be used only for the
education of my brother's children and their descendants.
6. I direct that ten (10) years after my death my property be given to the above
mentioned Matthew Hanley to be disposed of in the way he thinks most
advantageous.
xxx     xxx     xxx
8. I state at this time I have one brother living, named Malachi Hanley, and that my
nephew, Matthew Hanley, is a son of my said brother, Malachi Hanley.
The Court of First Instance of Zamboanga considered it proper for the best interests
of ther 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 February 29, 1932, when he
resigned and the plaintiff herein was appointed in his stead.
During the incumbency of the plaintiff as trustee, the defendant Collector of Internal
Revenue, alleging that the estate left by the deceased at the time of his death
consisted of realty valued at P27,920 and personalty valued at P1,465, and allowing a
deduction of P480.81, assessed against the estate an inheritance tax in the amount
of P1,434.24 which, together with the penalties for deliquency 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. On March 15, 1932, the
defendant filed a motion in the testamentary proceedings pending before the Court of
First Instance of Zamboanga (Special proceedings No. 302) praying that the trustee,
plaintiff herein, be ordered to pay to the Government the said sum of P2,052.74. The
motion was granted. On September 15, 1932, the plaintiff paid said amount under
protest, notifying the defendant at the same time that unless the amount was
promptly refunded suit would be brought for its recovery. The defendant overruled
the plaintiff's protest and refused to refund the said amount hausted, plaintiff went to
court with the result herein above indicated.
In his appeal, plaintiff contends that the lower court erred:
I. In holding that the real property of Thomas Hanley, deceased, passed to his
instituted heir, Matthew Hanley, from the moment of the death of the former, and
that from the time, the latter became the owner thereof.
II. In holding, in effect, that there was deliquency in the payment of inheritance tax
due on the estate of said deceased.
III. In holding that the inheritance tax in question be based upon the value of the
estate upon the death of the testator, and not, as it should have been held, upon the
value thereof at the expiration of the period of ten years after which, according to the
testator's will, the property could be and was to be delivered to the instituted heir.
IV. In not allowing as lawful deductions, in the determination of the net amount of
the estate subject to said tax, the amounts allowed by the court as compensation to
the "trustees" and paid to them from the decedent's estate.
V. In not rendering judgment in favor of the plaintiff and in denying his motion for in so far as forced heirs are concerned. But the language of article 657 of the Civil
new trial. Code is broad and makes no distinction between different classes of heirs. That
article does not speak of forced heirs; it does not even use the word "heir". It speaks
The defendant-appellant contradicts the theories of the plaintiff and assigns the of the rights of succession and the transmission thereof from the moment of death.
following error besides: The provision of section 625 of the Code of Civil Procedure regarding the
authentication and probate of a will as a necessary condition to effect transmission of
The lower court erred in not ordering the plaintiff to pay to the defendant the sum of
property does not affect the general rule laid down in article 657 of the Civil Code.
P1,191.27, representing part of the interest at the rate of 1 per cent per month from
The authentication of a will implies its due execution but once probated and allowed
April 10, 1924, to June 30, 1931, which the plaintiff had failed to pay on the
the transmission is effective as of the death of the testator in accordance with article
inheritance tax assessed by the defendant against the estate of Thomas Hanley.
657 of the Civil Code. Whatever may be the time when actual transmission of the
inheritance takes place, succession takes place in any event at the moment of the
The following are the principal questions to be decided by this court in this appeal:
decedent's death. The time when the heirs legally succeed to the inheritance may
(a) When does the inheritance tax accrue and when must it be satisfied? (b) Should
differ from the time when the heirs actually receive such inheritance. "Poco importa",
the inheritance tax be computed on the basis of the value of the estate at the time of
says Manresa commenting on article 657 of the Civil Code, "que desde el falleimiento
the testator's death, or on its value ten years later? (c) In determining the net value
del causante, hasta que el heredero o legatario entre en posesion de los bienes de la
of the estate subject to tax, is it proper to deduct the compensation due to trustees?
herencia o del legado, transcurra mucho o poco tiempo, pues la adquisicion ha de
(d) What law governs the case at bar? Should the provisions of Act No. 3606
retrotraerse al momento de la muerte, y asi lo ordena el articulo 989, que debe
favorable to the tax-payer be given retroactive effect? (e) Has there been deliquency
considerarse como complemento del presente." (5 Manresa, 305; see also, art. 440,
in the payment of the inheritance tax? If so, should the additional interest claimed by
par. 1, Civil Code.) Thomas Hanley having died on May 27, 1922, the inheritance tax
the defendant in his appeal be paid by the estate? Other points of incidental
accrued as of the date.
importance, raised by the parties in their briefs, will be touched upon in the course of
this opinion.
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
(a) The accrual of the inheritance tax is distinct from the obligation to pay the same.
inheritance tax is clearly fixed by section 1544 of the Revised Administrative Code as
Section 1536 as amended, of the Administrative Code, imposes the tax upon "every
amended by Act No. 3031, in relation to section 1543 of the same Code. The two
transmission by virtue of inheritance, devise, bequest, gift mortis causa, or advance
sections follow:
in anticipation of inheritance,devise, or bequest." The tax therefore is upon
transmission or the transfer or devolution of property of a decedent, made effective
SEC. 1543. Exemption of certain acquisitions and transmissions . — The following shall
by his death. (61 C. J., p. 1592.) It is in reality an excise or privilege tax imposed on
not be taxed:
the right to succeed to, receive, or take property by or under a will or the intestacy
law, or deed, grant, or gift to become operative at or after death. Acording to article (a) The merger of the usufruct in the owner of the naked title.
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 (b) The transmission or delivery of the inheritance or legacy by the fiduciary heir or
succeed immediately to all of the property of the deceased ancestor. The property legatee to the trustees.
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 (c) The transmission from the first heir, legatee, or donee in favor of another
death." (Bondad vs. Bondad, 34 Phil., 232. See also, Mijares vs. Nery, 3 Phil., 195; beneficiary, in accordance with the desire of the predecessor.
Suilong & Co., vs. Chio-Taysan, 12 Phil., 13; Lubrico vs. Arbado, 12 Phil., 391;
In the last two cases, if the scale of taxation appropriate to the new beneficiary is
Innocencio vs. Gat-Pandan, 14 Phil., 491; Aliasas vs.Alcantara, 16 Phil., 489; Ilustre
greater than that paid by the first, the former must pay the difference.
vs. Alaras Frondosa, 17 Phil., 321; Malahacan vs. Ignacio, 19 Phil., 434; Bowa vs.
Briones, 38 Phil., 27; Osario vs. Osario & Yuchausti Steamship Co., 41 Phil., 531; Fule
SEC. 1544. When tax to be paid. — The tax fixed in this article shall be paid:
vs. Fule, 46 Phil., 317; Dais vs. Court of First Instance of Capiz, 51 Phil., 396; Baun
vs. Heirs of Baun, 53 Phil., 654.) Plaintiff, however, asserts that while article 657 of (a) In the second and third cases of the next preceding section, before entrance into
the Civil Code is applicable to testate as well as intestate succession, it operates only possession of the property.
(b) In other cases, within the six months subsequent to the death of the predecessor; beneficiary by the value at that time of such property as passes to him. Subsequent
but if judicial testamentary or intestate proceedings shall be instituted prior to the appreciation or depriciation is immaterial." (Ross, Inheritance Taxation, p. 72.)
expiration of said period, the payment shall be made by the executor or administrator
before delivering to each beneficiary his share. Our attention is directed to the statement of the rule in Cyclopedia of Law of and
Procedure (vol. 37, pp. 1574, 1575) that, in the case of contingent remainders,
If the tax is not paid within the time hereinbefore prescribed, interest at the rate of taxation is postponed until the estate vests in possession or the contingency is
twelve per centum per annum shall be added as part of the tax; and to the tax and settled. This rule was formerly followed in New York and has been adopted in Illinois,
interest due and unpaid within ten days after the date of notice and demand thereof Minnesota, Massachusetts, Ohio, Pennsylvania and Wisconsin. This rule, horever, is
by the collector, there shall be further added a surcharge of twenty-five per centum. by no means entirely satisfactory either to the estate or to those interested in the
property (26 R. C. L., p. 231.). Realizing, perhaps, the defects of its anterior system,
A certified of all letters testamentary or of admisitration shall be furnished the we find upon examination of cases and authorities that New York has varied and now
Collector of Internal Revenue by the Clerk of Court within thirty days after their requires the immediate appraisal of the postponed estate at its clear market value
issuance. and the payment forthwith of the tax on its out of the corpus of the estate
transferred. (In re  Vanderbilt, 172 N. Y., 69; 69 N. E., 782; In re Huber, 86 N. Y.
It should be observed in passing that the word "trustee", appearing in subsection (b)
App. Div., 458; 83 N. Y. Supp., 769; Estate of Tracy, 179 N. Y., 501; 72 N. Y., 519;
of section 1543, should read "fideicommissary" or "cestui que trust". There was an
Estate of Brez, 172 N. Y., 609; 64 N. E., 958; Estate of Post, 85 App. Div., 611; 82 N.
obvious mistake in translation from the Spanish to the English version.
Y. Supp., 1079. Vide also, Saltoun vs. Lord Advocate, 1 Peter. Sc. App., 970; 3 Macq.
H. L., 659; 23 Eng. Rul. Cas., 888.) California adheres to this new rule (Stats. 1905,
The instant case does fall under subsection (a), but under subsection (b), of section
sec. 5, p. 343).
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
But whatever may be the rule in other jurisdictions, we hold that a transmission by
properties in question to P. J. M. Moore as trustee on March 10, 1924.
inheritance is taxable at the time of the predecessor's death, notwithstanding the
postponement of the actual possession or enjoyment of the estate by the beneficiary,
(b) The plaintiff contends that the estate of Thomas Hanley, in so far as the real
and the tax measured by the value of the property transmitted at that time
properties are concerned, did not and could not legally pass to the instituted heir,
regardless of its appreciation or depreciation.
Matthew Hanley, until after the expiration of ten years from the death of the testator
on May 27, 1922 and, that the inheritance tax should be based on the value of the
(c) Certain items are required by law to be deducted from the appraised gross in
estate in 1932, or ten years after the testator's death. The plaintiff introduced
arriving at the net value of the estate on which the inheritance tax is to be computed
evidence tending to show that in 1932 the real properties in question had a
(sec. 1539, Revised Administrative Code). In the case at bar, the defendant and the
reasonable value of only P5,787. This amount added to the value of the personal
trial court allowed a deduction of only P480.81. This sum represents the expenses
property left by the deceased, which the plaintiff admits is P1,465, would generate an
and disbursements of the executors until March 10, 1924, among which were their
inheritance tax which, excluding deductions, interest and surcharge, would amount
fees and the proven debts of the deceased. The plaintiff contends that the
only to about P169.52.
compensation and fees of the trustees, which aggregate P1,187.28 (Exhibits C, AA,
EE, PP, HH, JJ, LL, NN, OO), should also be deducted under section 1539 of the
If death is the generating source from which the power of the estate to impose
Revised Administrative Code which provides, in part, as follows: "In order to
inheritance taxes takes its being and if, upon the death of the decedent, succession
determine the net sum which must bear the tax, when an inheritance is concerned,
takes place and the right of the estate to tax vests instantly, the tax should be
there shall be deducted, in case of a resident, . . . the judicial expenses of the
measured by the vlaue of the estate as it stood at the time of the decedent's death,
testamentary or intestate proceedings, . . . ."
regardless of any subsequent contingency value of any subsequent increase or
decrease in value. (61 C. J., pp. 1692, 1693; 26 R. C. L., p. 232; Blakemore and
A trustee, no doubt, is entitled to receive a fair compensation for his services (Barney
Bancroft, Inheritance Taxes, p. 137. See also Knowlton vs. Moore, 178 U.S., 41; 20
vs. Saunders, 16 How., 535; 14 Law. ed., 1047). But from this it does not follow that
Sup. Ct. Rep., 747; 44 Law. ed., 969.) "The right of the state to an inheritance tax
the compensation due him may lawfully be deducted in arriving at the net value of
accrues at the moment of death, and hence is ordinarily measured as to any
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 (61 C. J., p. 1705). Furthermore, though a testamentary
trust has been created, it does not appear that the testator intended that the duties
of his executors and trustees should be separated. (Ibid.; In re  Vanneck's Estate, 161
N. Y. Supp., 893; 175 App. Div., 363; In re  Collard's Estate, 161 N. Y. Supp., 455.)
On the contrary, in paragraph 5 of his will, the testator expressed the desire that his
real estate be handled and managed by his executors until the expiration of the
period of ten years therein provided. Judicial expenses are expenses of administration
(61 C. J., p. 1705) but, in State vs. Hennepin County Probate Court (112 N. W., 878;
101 Minn., 485), it was said: ". . . The compensation of a trustee, earned, not in the
administration of the estate, but in the management thereof for the benefit of the
legatees or devises, does not come properly within the class or reason for exempting
administration expenses. . . . Service rendered in that behalf have no reference to
closing the estate for the purpose of a distribution thereof to those entitled to it, and
are not required or essential to the perfection of the rights of the heirs or legatees. . .
. Trusts . . . of the character of that here before the court, are created for the the
benefit of those to whom the property ultimately passes, are of voluntary creation,
and intended for the preservation of the estate. No sound reason is given to support
the contention that such expenses should be taken into consideration in fixing the
value of the estate for the purpose of this tax."
(d) The defendant levied and assessed the inheritance tax due from the estate of
Thomas Hanley under the provisions of section 1544 of the Revised Administrative
Code, as amended by section 3 of Act No. 3606. But Act No. 3606 went into effect on
January 1, 1930. It, therefore, was not the law in force when the testator died on
May 27, 1922. The law at the time was section 1544 above-mentioned, as amended
by Act No. 3031, which took effect on March 9, 1922.
It is well-settled that inheritance taxation is governed by the statute in force at the
time of the death of the decedent (26 R. C. L., p. 206; 4 Cooley on Taxation, 4th ed.,
p. 3461). The taxpayer can not foresee and ought not to be required to guess the
outcome of pending measures. Of course, a tax statute may be made retroactive in
its operation. Liability for taxes under retroactive legislation has been "one of the
incidents of social life." (Seattle vs. Kelleher, 195 U. S., 360; 49 Law. ed., 232 Sup.
Ct. Rep., 44.) But legislative intent that a tax statute should operate retroactively
should be perfectly clear. (Scwab vs. Doyle, 42 Sup. Ct. Rep., 491; Smietanka vs.
First Trust & Savings Bank, 257 U. S., 602; Stockdale vs. Insurance Co., 20 Wall.,
323; Lunch vs. Turrish, 247 U. S., 221.) "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, . . . ." (61 C. J., P. 1602.) Though the last paragraph of section 5
of Regulations No. 65 of the Department of Finance makes section 3 of Act No. 3606,
amending section 1544 of the Revised Administrative Code, applicable to all estates
the inheritance taxes due from which have not been paid, Act No. 3606 itself contains
no provisions indicating legislative intent to give it retroactive effect. No such effect
can begiven the statute by this court.
The defendant Collector of Internal Revenue maintains, however, that certain
provisions of Act No. 3606 are more favorable to the taxpayer than those of Act No.
3031, that said provisions are penal in nature and, therefore, should operate
retroactively in conformity with the provisions of article 22 of the Revised Penal Code.
This is the reason why he applied Act No. 3606 instead of Act No. 3031. Indeed,
under Act No. 3606, (1) the surcharge of 25 per cent is based on the tax only,
instead of on both the tax and the interest, as provided for in Act No. 3031, and (2)
the taxpayer is allowed twenty days from notice and demand by rthe Collector of
Internal Revenue within which to pay the tax, instead of ten days only as required by
the old law.
Properly speaking, a statute is penal when it imposes punishment for an offense
committed against the state which, under the Constitution, the Executive has the
power to pardon. In common use, however, this sense has been enlarged to include
within the term "penal statutes" all status which command or prohibit certain acts,
and establish penalties for their violation, and even those which, without expressly
prohibiting certain acts, impose a penalty upon their commission (59 C. J., p. 1110).
Revenue laws, generally, which impose taxes collected by the means ordinarily
resorted to for the collection of taxes are not classed as penal laws, although there
are authorities to the contrary. (See  Sutherland, Statutory Construction, 361; Twine
Co. vs. Worthington, 141 U. S., 468; 12 Sup. Ct., 55; Rice vs. U. S., 4 C. C. A., 104;
53 Fed., 910; Com. vs. Standard Oil Co., 101 Pa. St., 150; State vs. Wheeler, 44 P.,
430; 25 Nev. 143.) Article 22 of the Revised Penal Code is not applicable to the case
at bar, and in the absence of clear legislative intent, we cannot give Act No. 3606 a
retroactive effect.
(e) The plaintiff correctly states that the liability to pay a tax may arise at a certain
time and the tax may be paid within another given time. As stated by this court, "the
mere failure to pay one's tax does not render one delinqent until and unless the
entire period has eplased within which the taxpayer is authorized by law to make
such payment without being subjected to the payment of penalties for fasilure to pay
his taxes within the prescribed period." (U. S. vs. Labadan, 26 Phil., 239.)
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 beneficiery 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. 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 (69 C. J., p. 711). 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 (69 C. J., p. 714). "To create a trust by will the
testator must indicate in the will his intention so to do by using language sufficient to
separate the legal from the equitable estate, and with sufficient certainty designate
the beneficiaries, their interest in the ttrust, the purpose or object of the trust, and
the property or subject matter thereof. Stated otherwise, 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." (69 C. J., pp.
705,706.) 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
appointment a trustee to carry into effect the provisions of the will (see sec. 582,
Code of Civil Procedure).
P. J. M. Moore became trustee on March 10, 1924. On that date trust estate vested in
him (sec. 582 in relation to sec. 590, Code of Civil Procedure). 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. This is so for the reason already stated that the
delivery of the estate to the trustee was in esse  delivery of the same estate to
the cestui que trust, the beneficiary in this case. A trustee is but an instrument or
agent for the cestui que trust  (Shelton vs. King, 299 U. S., 90; 33 Sup. Ct. Rep., 689;
57 Law. ed., 1086). When Moore accepted the trust and took possesson of the trust
estate he thereby admitted that the estate belonged not to him but to his cestui que
trust  (Tolentino vs. Vitug, 39 Phil.,126, cited in 65 C. J., p. 692, n. 63). He did not
acquire any beneficial interest in the estate. He took such legal estate only as the
proper execution of the trust required (65 C. J., p. 528) and, his estate ceased upon
the fulfillment of the testator's wishes. The estate then vested absolutely in the
beneficiary (65 C. J., p. 542).
The highest considerations of public policy also justify the conclusion we have
reached. Were we to hold that the payment of the tax could be postponed or delayed
by the creation of a trust of the type at hand, the result would be plainly disastrous.
Testators may provide, as Thomas Hanley has provided, that their estates be not
delivered to their beneficiaries until after the lapse of a certain period of time. In the
case at bar, the period is ten years. In other cases, the trust may last for fifty years,
or for a longer period which does not offend the rule against petuities. The collection
of the tax would then be left to the will of a private individual. The mere suggestion
of this result is a sufficient warning against the accpetance of the essential to the
very exeistence of government. (Dobbins vs. Erie Country, 16 Pet., 435; 10 Law. ed.,
1022; Kirkland vs. Hotchkiss, 100 U. S., 491; 25 Law. ed., 558; Lane County vs.
Oregon, 7 Wall., 71; 19 Law. ed., 101; Union Refrigerator Transit Co. vs. Kentucky,
199 U. S., 194; 26 Sup. Ct. Rep., 36; 50 Law. ed., 150; Charles River Bridge vs.
Warren Bridge, 11 Pet., 420; 9 Law. ed., 773.) The obligation to pay taxes rests not
upon the privileges enjoyed by, or the protection afforded to, a citizen by the
government but upon the necessity of money for the support of the state (Dobbins
vs. Erie Country, supra). For this reason, no one is allowed to object to or resist the
payment of taxes solely because no personal benefit to him can be pointed out.
(Thomas vs. Gay, 169 U. S., 264; 18 Sup. Ct. Rep., 340; 43 Law. ed., 740.) While
courts will not enlarge, by construction, the government's power of taxation (Bromley
vs. McCaughn, 280 U. S., 124; 74 Law. ed., 226; 50 Sup. Ct. Rep., 46) they also will
not place upon tax laws so loose a construction as to permit evasions on merely
fanciful and insubstantial distictions. (U. S. vs. Watts, 1 Bond., 580; Fed. Cas. No.
16,653; U. S. vs. Wigglesirth, 2 Story, 369; Fed. Cas. No. 16,690, followed in Froelich
& Kuttner vs. Collector of Customs, 18 Phil., 461, 481; Castle Bros., Wolf & Sons vs.
McCoy, 21 Phil., 300; Muñoz & Co. vs. Hord, 12 Phil., 624; Hongkong & Shanghai
Banking Corporation vs. Rafferty, 39 Phil., 145; Luzon Stevedoring Co. vs. Trinidad,
43 Phil., 803.) When proper, a tax statute should be construed to avoid the
possibilities of tax evasion. Construed this way, the statute, without resulting in
injustice to the taxpayer, becomes fair to the government.
That taxes must be collected promptly is a policy deeply intrenched in our tax system.
Thus, no court is allowed to grant injunction to restrain the collection of any internal
revenue tax ( sec. 1578, Revised Administrative Code; Sarasola vs. Trinidad, 40 Phil.,
252). In the case of Lim Co Chui vs. Posadas (47 Phil., 461), this court had occassion
to demonstrate trenchment adherence to this policy of the law. It held that "the fact
that on account of riots directed against the Chinese on October 18, 19, and 20,
1924, they were prevented from praying their internal revenue taxes on time and by
mutual agreement closed their homes and stores and remained therein, does not
authorize the Collector of Internal Revenue to extend the time prescribed for the
payment of the taxes or to accept them without the additional penalty of twenty five
per cent." (Syllabus, No. 3.)
". . . It is of the utmost importance," said the Supreme Court of the United States, ". .
. that the modes adopted to enforce the taxes levied should be interfered with as
little as possible. Any delay in the proceedings of the officers, upon whom the duty is
developed of collecting the taxes, may derange the operations of government, and
thereby, cause serious detriment to the public." (Dows vs. Chicago, 11 Wall., 108; 20
Law. ed., 65, 66; Churchill and Tait vs. Rafferty, 32 Phil., 580.)
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. 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 provisions cases is
mandatory (see  and cf. Lim Co Chui vs. Posadas, supra), and neither the Collector of
Internal Revenuen or this court may remit or decrease such interest, no matter how
heavily it may burden the taxpayer.
To the tax and interest due and unpaid within ten days after the date of notice and
demand thereof by the Collector of Internal Revenue, a surcharge of twenty-five per
centum should be added (sec. 1544, subsec. (b), par. 2, Revised Administrative
Code). Demand was made by the Deputy Collector of Internal Revenue upon Moore
in a communiction dated October 16, 1931 (Exhibit 29). The date fixed for the
payment of the tax and interest was November 30, 1931. November 30 being an
official holiday, the tenth day fell on December 1, 1931. As the tax and interest due
were not paid on that date, the estate became liable for the payment of the
surcharge.
cent on both the tax and interest, and also P10, the compromise sum fixed by the
defendant (Exh. 29), giving a grand total of P3,634.43.
As the plaintiff has already paid the sum of P2,052.74, only the sums of P1,581.69 is
legally due from the estate. This last sum is P390.42 more than the amount
demanded by the defendant in his counterclaim. But, as we cannot give the
defendant more than what he claims, we must hold that the plaintiff is liable only in
the sum of P1,191.27 the amount stated in the counterclaim.
The judgment of the lower court is accordingly modified, with costs against the
plaintiff in both instances. So ordered.
Avanceña, C.J., Abad Santos, Imperial, Diaz and Concepcion, JJ., concur.
Villa-Real, J., concurs.

In view of the foregoing, it becomes unnecessary for us to discuss the fifth error
assigned by the plaintiff in his brief.

We shall now compute the tax, together with the interest and surcharge due from the
estate of Thomas Hanley inaccordance with the conclusions we have reached.

At the time of his death, the deceased left real properties valued at P27,920 and
personal properties worth P1,465, or a total of P29,385. Deducting from this amount
the sum of P480.81, representing allowable deductions under secftion 1539 of the
Revised Administrative Code, we have P28,904.19 as the net value of the estate
subject to inheritance tax.

The primary tax, according to section 1536, subsection (c), of the Revised
Administrative Code, should be imposed at the rate of one per centum upon the first
ten thousand pesos and two per centum upon the amount by which the share exceed
thirty thousand pesos, plus an additional two hundred per centum. One per centum
of ten thousand pesos is P100. Two per centum of P18,904.19 is P378.08. Adding to
these two sums an additional two hundred per centum, or P965.16, we have as
primary tax, correctly computed by the defendant, the sum of P1,434.24.

To the primary tax thus computed should be added the sums collectible under section
1544 of the Revised Administrative Code. First should be added P1,465.31 which
stands for interest at the rate of twelve per centum per annum from March 10, 1924,
the date of delinquency, to September 15, 1932, the date of payment under protest,
G.R. No. 89783 February 19, 1992
a period covering 8 years, 6 months and 5 days. To the tax and interest thus
computed should be added the sum of P724.88, representing a surhcarge of 25 per
MARIANO B. LOCSIN, JULIAN J. LOCSIN, JOSE B. LOCSIN, AUREA B. LOCSIN,
MATILDE L. CORDERO, SALVADOR B. LOCSIN and MANUEL V. DEL
ROSARIO, petitioners,
vs.
THE HON. COURT OF APPEALS, JOSE JAUCIAN, FLORENTINO JAUCIAN, MERCEDES
JAUCIAN ARBOLEDA, HEIRS OF JOSEFINA J. BORJA, HEIRS OF EDUARDO JAUCIAN
and HEIRS OF VICENTE JAUCIAN, respondents.
Aytona Law Office and Siquia Law Offices for petitioners.
Mabella, Sangil & Associates for private respondents.
NARVASA, C.J.:
Reversal of the decision of the Court of Appeals in CA-G.R. No. CV-11186 — affirming
with modification the judgment of the Regional Trial Court of Albay in favor of the
plaintiffs in Civil Case No. 7152 entitled "Jose Jaucian, et al. v. Mariano B. Locsin, et
al.,"  an action for recovery of real property with damages — is sought. in these
proceedings initiated by petition for review on certiorari in accordance with Rule 45 of
the Rules of Court.
The petition was initially denied due course and dismissed by this Court. It was
however reinstated upon a second motion for reconsideration filed by the petitioners,
and the respondents were required to comment thereon. The petition was thereafter
given due course and the parties were directed to submit their memorandums.
These, together with the evidence, having been carefully considered, the Court now
decides the case.
First, the facts as the Court sees them in light of the evidence on record:
The late Getulio Locsin had three children named Mariano, Julian and Magdalena, all
surnamed Locsin. He owned extensive residential and agricultural properties in the
provinces of Albay and Sorsogon. After his death, his estate was divided among his
three (3) children as follows:
(a) the coconut lands of some 700 hectares in Bual, Pilar, Sorsogon, were adjudicated
to his daughter, Magdalena Locsin;
(b) 106 hectares of coconut lands were given to Julian Locsin, father of the
petitioners Julian, Mariano, Jose, Salvador, Matilde, and Aurea, all surnamed Locsin;
(c) more than forty (40) hectares of coconut lands in Bogtong, eighteen (18) hectares
of riceland in Daraga, and the residential lots in Daraga, Albay and in Legazpi City
went to his son Mariano, which Mariano brought into his marriage to Catalina Jaucian
in 1908. Catalina, for her part, brought into the marriage untitled properties which
she had inherited from her parents, Balbino Jaucian and Simona Anson. These were
augmented by other properties acquired by the spouses in the course of their
union,1 which however was not blessed with children.
Eventually, the properties of Mariano and Catalina were brought under the Torrens
System. Those that Mariano inherited from his father, Getulio Locsin, were surveyed
cadastrally and registered in the name of "Mariano Locsin, married to Catalina
Jaucian.'' 2
Mariano Locsin executed a Last Will and Testament instituting his wife, Catalina, as
the sole and universal heir of all his properties. 3 The will was drawn up by his wife's
nephew and trusted legal adviser, Attorney Salvador Lorayes. Attorney Lorayes
disclosed that the spouses being childless, they had agreed that their properties, after
both of them shall have died should revert to their respective sides of the
family, i.e., Mariano's properties would go to his "Locsin relatives" ( i.e., brothers and
sisters or nephews and nieces), and those of Catalina to her "Jaucian relatives." 4
Don Mariano Locsin died of cancer on September 14, 1948 after a lingering illness. In
due time, his will was probated in Special Proceedings No. 138, CFI of Albay without
any opposition from both sides of the family. As directed in his will, Doña Catalina
was appointed executrix of his estate. Her lawyer in the probate proceeding was
Attorney Lorayes. In the inventory of her husband's estate 5 which she submitted to
the probate court for approval, 6 Catalina declared that "all items mentioned from
Nos. 1 to 33 are the private properties of the deceased and form part of his capital at
the time of the marriage with the surviving spouse, while items Nos. 34 to 42 are
conjugal." 7
Among her own and Don Mariano's relatives, Doña Catalina was closest to her
nephew, Attorney Salvador Lorayes, her nieces, Elena Jaucian, Maria Lorayes-
Cornelio and Maria Olbes-Velasco, and the husbands of the last two: Hostilio Cornelio
and Fernando Velasco. 8 Her trust in Hostilio Cornelio was such that she made him
custodian of all the titles of her properties; and before she disposed of any of them,
she unfailingly consulted her lawyer-nephew, Attorney Salvador Lorayes. It was Atty.
Lorayes who prepared the legal documents and, more often than not, the witnesses
to the transactions were her niece Elena Jaucian, Maria Lorayes-Cornelio, Maria
Olbes-Velasco, or their husbands. Her niece, Elena Jaucian, was her life-long
companion in her house.
Don Mariano relied on Doña Catalina to carry out the terms of their compact, hence,
nine (9) years after his death, as if in obedience to his voice from the grave, and fully
cognizant that she was also advancing in years, Doña Catalina began transferring, by
sale, donation or assignment, Don Mariano's as well as her own, properties to their
respective nephews and nieces. She made the following sales and donation of
properties which she had received from her husband's estate, to his Locsin nephews 17 Nov. 26, 1975 Deed of Sale in favor of 373 P 1,000 Leonor Satuito
and nieces: Aurea Locsin Mariano B. Locsin

EXHIBIT DATE PARTICULARS AREA/SQ.M. PRICE WITNESSES 19 Sept. 1, 1975 Conditional Donation in 1,130 P 3,000 - ditto -
favor of Mariano Locsin
23 Jan. 26, 1957 Deed of Absolute Sale in 962 P 481
favor of Mariano Locsin 1-MVRJ Dec. 29, 1972 Deed of Reconveyance 1,5110.66 P 1,000 Delfina Anson
in favor of Manuel V. del (Lot 2155) Antonio Illegible
1-JRL Apr. 7, 1966 Deed of Sale in favor of 430,203 P 20,000 Rosario whose maternal
Jose R. Locsin grandfather was Getulio
Locsin
1-JJL Mar. 22, 1967 Deed of Sale in favor of 5,000 P 1,000 Hostilio Cornello
Julian Locsin (Lot 2020) Helen M. Jaucian 2-MVRJ June 30, 1973 Deed of Reconveyance 319.34 P 500 Antonio Illegible
in favor of Manuel V. del (Lot 2155) Salvador Nical
1 Nov. 29, 1974 Deed of Donation in 26,509
Rosario but the rentals
favor Aurea Locsin,
from bigger portion of
Matilde L. Cordero
Lot 2155 leased to Filoil
and Salvador Locsin
Refinery were assigned to
Maria Jaucian Lorayes
2 Feb. 4, 1975 Deed of Donation in 34,045
Cornelio
favor Aurea Locsin,
Matilde L. Cordero
Of her own properties, Doña Catalina conveyed the following to her own nephews
and Salvador Locsin
and nieces and others:
3 Sept. 9, 1975 Deed of Donation in (Lot 2059)
EXHIBIT DATE PARTICULARS AREA/SQ.M. PRICE
favor Aurea Locsin,
Matilde L. Cordero 2-JJL July 16, 1964 Deed of Sale in favor 5,000 P 1,000
and Salvador Locsin Vicente Jaucian (lot 2020)
(6,825 sqm. when
4 July 15, 1974 Deed of Absolute Sale in 1,424 Hostilio Cornelio
resurveyed)
favor of Aurea B. Locsin Fernando Velasco
24 Feb. 12, 1973 Deed of Absolute Sale 100 P 1,000
5 July 15, 1974 Deed of Absolute Sale in 1,456 P 5,750 Hostilio Cornelio
in favor of Francisco M.
favor of Aurea B. Locsin Elena Jaucian
Maquiniana
6 July 15, 1974 Deed of Absolute Sale in 1,237 P 5,720 - ditto -
26 July 15, 1973 Deed of Absolute Sale in 130 P 1,300
favor of Aurea B. Locsin
favor of Francisco
Maquiniana
7 July 15, 1974 Deed of Absolute Sale in 1,404 P 4,050 - ditto -
favor of Aurea B. Locsin
27 May 3, 1973 Deed of Absolute Sale in 100 P 1,000
favor of Ireneo Mamia
15 Nov. 26, 1975 Deed of Sale in favor of 261 P 4,930 - ditto -
Aurea Locsin
28 May 3, 1973 Deed of Absolute Sale in 75 P 750
favor of Zenaida Buiza
16 Oct. 17, 1975 Deed of Sale in favor of 533 P 2,000 Delfina Anson
Aurea Locsin M. Acabado
29 May 3, 1973 Deed of Absolute Sale in 150 P 1,500
favor of Felisa Morjella
30 Apr. 3, 1973 Deed of Absolute Sale in 31 P 1,000
favor of Inocentes Motocinos
31 Feb. 12, 1973 Deed of Absolute Sale in 150 P 1,500
favor of Casimiro Mondevil
32 Mar. 1, 1973 Deed of Absolute Sale in 112 P 1,200
favor of Juan Saballa
25 Dec. 28, 1973 Deed of Absolute Sale in 250 P 2,500
of Rogelio Marticio
Doña Catalina died on July 6, 1977.
Four years before her death, she had made a will on October 22, 1973 affirming and
ratifying the transfers she had made during her lifetime in favor of her husband's,
and her own, relatives. After the reading of her will, all the relatives agreed that there
was no need to submit it to the court for probate because the properties devised to
them under the will had already been conveyed to them by the deceased when she
was still alive, except some legacies which the executor of her will or estate, Attorney
Salvador Lorayes, proceeded to distribute.
In 1989, or six (6) years after Doña Catalina's demise, some of her Jaucian nephews
and nieces who had already received their legacies and hereditary shares from her
estate, filed action in the Regional Trial Court of Legaspi City (Branch VIII, Civil Case
No. 7152) to recover the properties which she had conveyed to the Locsins during
her lifetime, alleging that the conveyances were inofficious, without consideration,
and intended solely to circumvent the laws on succession. Those who were closest to
Doña Catalina did not join the action.
After the trial, judgment was rendered on July 8, l985 in favor of the plaintiffs
(Jaucian), and against the Locsin defendants, the dispositive part of which reads:
WHEREFORE, this Court renders judgment for the plaintiffs and against the
defendants:
(1) declaring the, plaintiffs, except the heirs of Josefina J. Borja and Eduardo Jaucian,
who withdrew, the rightful heirs and entitled to the entire estate, in equal portions, of
Catalina Jaucian Vda. de Locsin, being the nearest collateral heirs by right of
representation of Juan and Gregorio, both surnamed Jaucian, and full-blood brothers
of Catalina;
(2) declaring the deeds of sale, donations, reconveyance and exchange and all other
instruments conveying any part of the estate of Catalina J. Vda. de Locsin including,
but not limited to those in the inventory of known properties (Annex B of the
complaint) as null and void ab-initio;
(3) ordering the Register of Deeds of Albay and/or Legazpi City to cancel all
certificates of title and other transfers of the real properties, subject of this case, in
the name of defendants, and derivatives therefrom, and issue new ones to the
plaintiffs;
(4) ordering the defendants, jointly and severally, to reconvey ownership and
possession of all such properties to the plaintiffs, together with all muniments of title
properly endorsed and delivered, and all the fruits and incomes received by the
defendants from the estate of Catalina, with legal interest from the filing of this
action; and where reconveyance and delivery cannot be effected for reasons that
might have intervened and prevent the same, defendants shall pay for the value of
such properties, fruits and incomes received by them, also with legal interest from
the filing, of this case
(5) ordering each of the defendants to pay the plaintiffs the amount of P30,000.00 as
exemplary damages; and the further sum of P20,000.00 each as moral damages; and
(6) ordering the defendants to pay the plaintiffs attorney's fees and litigation
expenses, in the amount of P30,000.00 without prejudice to any contract between
plaintiffs and counsel.
Costs against the defendants.9
The Locsins appealed to the Court of Appeals (CA-G.R. No. CV-11186) which
rendered its now appealed judgment on March 14, 1989, affirming the trial court's
decision.
The petition has merit and should be granted.
The trial court and the Court of Appeals erred in declaring the private respondents,
nephews and nieces of Doña Catalina J. Vda. de Locsin, entitled to inherit the
properties which she had already disposed of more than ten (10) years before her
death. For those properties did not form part of her hereditary estate, i.e., "the
property and transmissible rights and obligations existing at the time of (the
decedent's) death and those which have accrued thereto since the opening of the
succession." 10 The rights to a person's succession are transmitted from the moment
of his death, and do not vest in his heirs until such time. 11  Property which Doña
Catalina had transferred or conveyed to other persons during her lifetime no longer
formed part of her estate at the time of her death to which her heirs may lay
claim.  Had she died intestate, only the property that remained in her estate at the
time of her death devolved to her legal heirs; and even if those transfers were, one
and all, treated as donations, the right arising under certain circumstances to impugn
and compel the reduction or revocation of a decedent's gifts inter vivos does not
inure to the respondents since neither they nor the donees are compulsory (or
forced) heirs. 12
There is thus no basis for assuming an intention on the part of Doña Catalina, in
transferring the properties she had received from her late husband to his nephews
and nieces, an intent to circumvent the law in violation of the private respondents'
rights to her succession. Said respondents are not her compulsory heirs, and it is not
pretended that she had any such, hence there were no legitimes that could
conceivably be impaired by any transfer of her property during her lifetime. All that
the respondents had was an expectancy  that in nowise restricted her freedom to
dispose of even her entire estate subject only to the limitation set forth in Art. 750,
Civil Code which, even if it were breached, the respondents may not invoke:
Art. 750. The donation may comprehend all the present property of the donor or part
thereof, provided he reserves, in full ownership or in usufruct, sufficient means for
the support of himself, and of all relatives who, at the time of the acceptance of the
donation, are by law entitled to be supported by the donor. Without such reservation,
the donation shall be reduced on petition of any person affected. (634a)
The lower court capitalized on the fact that Doña Catalina was already 90 years old
when she died on July 6, 1977. It insinuated that because of her advanced years she
may have been imposed upon, or unduly influenced and morally pressured by her
husband's nephews and nieces (the petitioners) to transfer to them the properties
which she had inherited from Don Mariano's estate. The records do not support that
conjecture.
For as early as 1957, or twenty-eight (28) years before her death, Doña Catalina had
already begun transferring to her Locsin nephews and nieces the properties which
she received from Don Mariano. She sold a 962-sq.m. lot on January 26, 1957 to his
nephew and namesake Mariano Locsin II. 13 On April 7, 1966, or 19 years before she
passed away, she also sold a 43 hectare land to another Locsin nephew, Jose R.
Locsin.14 The next year, or on March 22, 1967, she sold a 5,000-sq.m. portion of Lot
2020 to Julian Locsin.15
On March 27, 1967, Lot 2020 16 was partitioned by and among Doña Catalina, Julian
Locsin, Vicente Jaucian and Agapito Lorete. 17 At least Vicente Jaucian, among the
other respondents in this case, is estopped from assailing the genuineness and due
execution of the sale of portions of Lot 2020 to himself, Julian Locsin, and Agapito
Lorete, and the partition agreement that he (Vicente) concluded with the other co-
owners of Lot 2020.
Among Doña, Catalina's last transactions before she died in 1977 were the sales of
property which she made in favor of Aurea Locsin and Mariano Locsin in 1975. 18
There is not the slightest suggestion in the record that Doña Catalina was mentally
incompetent when she made those dispositions. Indeed, how can any such
suggestion be made in light of the fact that even as she was transferring properties
to the Locsins, she was also contemporaneously disposing of her other properties in
favor of the Jaucians? She sold to her nephew, Vicente Jaucian, on July 16, 1964 (21
years before her death) one-half (or 5,000 sq.m.) of Lot 2020. Three years later, or
on March 22, 1967, she sold another 5000 sq.m. of the same lot to Julian Locsin. 19
From 1972 to 1973 she made several other transfers of her properties to her relatives
and other persons, namely: Francisco Maquiniana, Ireneo Mamia, Zenaida Buiza,
Feliza Morjella, Inocentes Motocinos, Casimiro Mondevil, Juan Saballa and Rogelio
Marticio. 20 None of those transactions was impugned by the private respondents.
In 1975, or two years before her death, Doña Catalina sold some lots not only to Don
Mariano's niece, Aurea Locsin, and his nephew, Mariano Locsin
II, 21 but also to her niece, Mercedes Jaucian Arboleda. 22 If she was competent to
make that conveyance to Mercedes, how can there be any doubt that she was
equally competent to transfer her other pieces of property to Aurea and Mariano II?
The trial court's belief that Don Mariano Locsin bequeathed his entire estate to his
wife, from a "consciousness of its real origin" which carries the implication that said
estate consisted of properties which his wife had inherited from her parents, flies in
the teeth of Doña Catalina's admission in her inventory of that estate, that "items 1 to
33 are the private properties of the deceased (Don Mariano) and forms ( sic) part of
his capital at the time of the marriage with the surviving spouse, while items 34 to 42
are conjugal properties, acquired during the marriage." She would have known better
than anyone else whether the listing included any of her paraphernal property so it is
safe to assume that none was in fact included. The inventory was signed by her
under oath, and was approved by the probate court in Special Proceeding No. 138 of
the Court of First Instance of Albay. It was prepared with the assistance of her own
nephew and counsel, Atty. Salvador Lorayes, who surely would not have prepared a
false inventory that would have been prejudicial to his aunt's interest and to his own,
since he stood to inherit from her eventually.
This Court finds no reason to disbelieve Attorney Lorayes' testimony that before Don
Mariano died, he and his wife (Doña Catalina), being childless, had agreed that their
respective properties should eventually revert to their respective lineal relatives. As
the trusted legal adviser of the spouses and a full-blood nephew of Doña Catalina, he
would not have spun a tale out of thin air that would also prejudice his own interest.
Little significance, it seems, has been attached to the fact that among Doña Catalina's  
nephews and nieces, those closest to her: (a) her lawyer-nephew Attorney Salvador
Lorayes; (b) her niece and companion Elena Jaucian: (c) her nieces Maria Olbes-
Velasco and Maria Lorayes-Cornelio and their respective husbands, Fernando Velasco
and Hostilio Cornelio, did not join the suit to annul and undo the dispositions of
property which she made in favor of the Locsins, although it would have been to their
advantage to do so. Their desistance persuasively demonstrates that Doña Catalina
acted as a completely free agent when she made the conveyances in favor of the
petitioners. In fact, considering their closeness to Doña Catalina it would have been
well-nigh impossible for the petitioners to employ "fraud, undue pressure, and subtle
manipulations" on her to make her sell or donate her properties to them. Doña
Catalina's niece, Elena Jaucian, daughter of her brother, Eduardo Jaucian, lived with
her in her house. Her nephew-in-law, Hostilio Cornelio, was the custodian of the titles
of her properties. The sales and donations which she signed in favor of the
petitioners were prepared by her trusted legal adviser and nephew, Attorney Salvador
Lorayes. The (1) deed of donation dated November 19,
197423 in favor of Aurea Locsin, (2) another deed of donation dated February 4,
1975 24 in favor of Matilde Cordero, and (3) still another deed dated September 9,
1975 25 in favor of Salvador Lorayes, were all witnessed by Hostilio Cornelio (who is
married to Doña Catalina's niece, Maria Lorayes) and Fernando Velasco who is
married to another niece, Maria Olbes.26 The sales which she made in favor of Aurea
Locsin on July 15, 1974 27 were witnessed by Hostilio Cornelio and Elena Jaucian.
Given those circumstances, said transactions could not have been anything but free
and voluntary acts on her part.

Apart from the foregoing considerations, the trial court and the Court of Appeals
erred in not dismissing this action for annulment and reconveyance on the ground of
prescription. Commenced decades after the transactions had been consummated,
and six (6) years after Doña Catalina's death, it prescribed four (4) years after the
subject transactions were recorded in the Registry of Property, 28 whether considered
an action based on fraud, or one to redress an injury to the rights of the plaintiffs.
The private respondents may not feign ignorance of said transactions because the
registration of the deeds was constructive notice thereof to them and the whole
world.29

WHEREFORE, the petition for review is granted. The decision dated March 14, 1989
of the Court of Appeals in CA-G.R. CV No. 11186 is REVERSED and SET ASIDE. The
private respondents' complaint for annulment of contracts and reconveyance of
properties in Civil Case No. 7152 of the Regional Trial Court, Branch VIII of Legazpi
City, is DISMISSED, with costs against the private respondents, plaintiffs therein.

SO ORDERED.

Cruz, Griño-Aquino and Medialdea, JJ., concur.