[1] G.R. No.
G.R. No. 210987               November 24, 2014 Same; Same; Certiorari; In the recent case of City of Manila v. Grecia-Cuerdo, 715
THE PHILIPPINE AMERICAN LIFE AND GENERAL INSURANCE
COMPANY, Petitioner,  vs. THE SECRETARY OF FINANCE and THE
COMMISSIONER OF INTERNAL REVENUE, Respondents.
Remedial Law; Civil Procedure; Appeals; Admittedly, there is no provision in law
that expressly provides where exactly the ruling of the Secretary of Finance under
the adverted National Internal Revenue Code (NIRC) provision is appealable to.—
Admittedly, there is no provision in law that expressly provides where exactly the
ruling of the Secretary of Finance under the adverted NIRC provision is appealable
to. However, We find that Sec. 7(a)(1) of RA 1125, as amended, addresses the
seeming gap in the law as it vests the CTA, albeit impliedly, with jurisdiction over
the CA petition as “other matters” arising under the NIRC or other laws administered
by the BIR.
Statutory Construction; Courts should not follow the letter of a statute when to do so
would depart from the true intent of the legislature or would otherwise yield
conclusions inconsistent with the purpose of the act.—It is axiomatic that laws
should be given a reasonable interpretation which does not defeat the very purpose
for which they were passed. Courts should not follow the letter of a statute when to
do so would depart from the true intent of the legislature or would otherwise yield
conclusions inconsistent with the purpose of the act. This Court has, in many cases
involving the construction of statutes, cautioned against narrowly interpreting a
statute as to defeat the purpose of the legislator, and rejected the literal interpretation
of statutes if to do so would lead to unjust or absurd results.
Court of Tax Appeals; Appeals; To leave undetermined the mode of appeal from the
Secretary of Finance would be an injustice to taxpayers prejudiced by his adverse
rulings. To remedy this situation, the Supreme Court (SC) implies from the purpose
of Republic Act (RA) No. 1125 and its amendatory laws that the Court of Tax
Appeals (CTA) is the proper forum with which to institute the appeal.—To leave
undetermined the mode of appeal from the Secretary of Finance would be an
injustice to taxpayers prejudiced by his adverse rulings. To remedy this situation, We
imply from the purpose of RA 1125 and its amendatory laws that the CTA is the
proper forum with which to institute the appeal. This is not, and should not, in any
way, be taken as a derogation of the power of the Office of President but merely as
recognition that matters calling for technical knowledge should be handled by the
agency or quasi-judicial body with specialization over the controversy. As the
specialized quasi-judicial agency mandated to adjudicate tax, customs, and
assessment cases, there can be no other court of appellate jurisdiction that can decide
the issues raised in the CA petition, which involves the tax treatment of the shares of
stocks sold.
Assignment No. 1- Taxation Law 2
SCRA 182 (2014), the Supreme Court (SC) En Banc has ruled that the Court of Tax
Appeals (CTA) now has the power of certiorari in cases within its appellate
jurisdiction.—In the recent case of City of Manila v. Grecia-Cuerdo, 715 SCRA 182
(2014), the Court En Banc has ruled that the CTA now has the power of certiorari in
cases within its appellate jurisdiction.
Taxation; Donor’s Tax; The absence of donative intent, if that be the case, does not
exempt the sales of stock transaction from donor’s tax since Sec. 100 of the National
Internal Revenue Code (NIRC) categorically states that the amount by which the fair
market value of the property exceeded the value of the consideration shall be deemed
a gift.—Petitioner’s substantive arguments are unavailing. The absence of donative
intent, if that be the case, does not exempt the sales of stock transaction from donor’s
tax since Sec. 100 of the NIRC categorically states that the amount by which the
fair market value of the property exceeded the value of the consideration
shall be deemed a gift. Thus, even if there is no actual donation, the
difference in price is considered a donation by fiction of law. Moreover, Sec.
7(c.2.2) of RR 06-08 does not alter Sec. 100 of the NIRC but merely sets the
parameters for determining the “fair market value” of a sale of stocks. Such
issuance was made pursuant to the Commissioner’s power to interpret tax
laws and to promulgate rules and regulations for their implementation.
DECISION
VELASCO, JR., J.:
Nature of the Case
Before the Court is a Petition for Review on Certiorari under Rule 45 of the
Rules of Court assailing and seeking the reversal of the Resolutions of the
Court of Appeals (CA) in CA-G.R. SP No. 127984, dated May 23, 20131 and
January 21, 2014, which dismissed outright the petitioner's appeal from the
Secretary of Finance's review of BIR Ruling No. 015-122 for lack of
jurisdiction.
The Facts
Petitioner The Philippine American Life and General Insurance Company
(Philamlife) used to own 498,590 Class A shares in Philam Care Health
Systems, Inc. (PhilamCare), representing 49.89% of the latter's outstanding
capital stock. In 2009, petitioner, in a bid to divest itself of its interests in the
Page 1 of 35
health maintenance organization industry, offered to sell its shareholdings
in PhilamCare through competitive bidding. Thus, on September 24, 2009,
petitioner's Class A shares were sold for USD 2,190,000, or PhP 104,259,330
based on the prevailing exchange rate at the time of the sale, to STI
Investments, Inc., who emerged as the highest bidder.3
After the sale was completed and the necessary documentary stamp and
capital gains taxes were paid, Philamlife filed an application for a certificate
authorizing registration/tax clearance with the Bureau of Internal Revenue
(BIR) Large Taxpayers Service Division to facilitate the transfer of the shares.
Months later, petitioner was informed that it needed to secure a BIR ruling
in connection with its application due to potential donor’s tax liability. In
compliance, petitioner, on January 4, 2012, requested a ruling4 to confirm
that the sale was not subject to donor’s tax, pointing out, in its request, the
following: that the transaction cannot attract donor’s tax liability since there
was no donative intent and,ergo, no taxable donation, citing BIR Ruling [DA-
(DT-065) 715-09] dated November 27, 2009;5 that the shares were sold at
their actual fair market value and at arm’s length; that as long as the
transaction conducted is at arm’s length––such that a bona fide business
arrangement of the dealings is done inthe ordinary course of business––a
sale for less than an adequate consideration is not subject to donor’s tax;
and that donor’s tax does not apply to saleof shares sold in an open bidding
process.
On January 4, 2012, however, respondent Commissioner on Internal
Revenue (Commissioner) denied Philamlife’s request through BIR Ruling No.
015-12. As determined by the Commissioner, the selling price of the shares
thus sold was lower than their book value based on the financial statements
of PhilamCare as of the end of 2008.6 As such, the Commisioner held,
donor’s tax became imposable on the price difference pursuant to Sec. 100
of the National Internal Revenue Code (NIRC), viz:
SEC. 100. Transfer for Less Than Adequate and full Consideration.- Where
property, other than real property referred to in Section 24(D), is
transferred for less than an adequate and full consideration in money or
money’s worth, then the amount by which the fair market value of the
property exceeded the value of the consideration shall, for the purpose of
the tax imposed by this Chapter, be deemed a gift, and shall be included in
computing the amount of gifts made during the calendar year.
Assignment No. 1- Taxation Law 2
The afore-quoted provision, the Commissioner added, is implemented by
Revenue Regulation 6-2008 (RR 6-2008), which provides:
SEC. 7. SALE, BARTER OR EXCHANGE OF SHARES OF STOCK NOT TRADED
THROUGH A LOCAL STOCK EXCHANGE PURSUANT TO SECS. 24(C), 25(A)(3),
25(B), 27(D)(2), 28(A)(7)(c), 28(B)(5)(c) OF THE TAX CODE, AS AMENDED. —
(c) Determination of Amount and Recognition of Gain or Loss –
(c.1) In the case of cash sale, the selling price shall be the consideration per
deed of sale.
(c.1.4) In case the fair market value of the shares of stock sold, bartered, or
exchanged is greater than the amount of money and/or fair market value of
the property received, the excess of the fair market value of the shares of
stock sold, bartered or exchanged overthe amount of money and the fair
market value of the property, if any, received as consideration shall be
deemed a gift subject to the donor’stax under Section 100 of the Tax Code,
as amended.
(c.2) Definition of ‘fair market value’of Shares of Stock. – For purposes of
this Section, ‘fair market value’ of the share of stock sold shall be:
(c.2.2) In the case of shares of stock not listed and traded in the local stock
exchanges, the book value of the shares of stock as shown in the financial
statements duly certified by an independent certified public accountant
nearest to the date of sale shall be the fair market value.
In view of the foregoing, the Commissioner ruled that the difference
between the book value and the selling price in the sales transaction is
taxable donation subject to a 30% donor’s tax under Section 99(B) of the
NIRC.7Respondent Commissioner likewise held that BIR Ruling [DA-(DT-065)
715-09], on which petitioner anchored its claim, has already been revoked
by Revenue Memorandum Circular (RMC) No. 25-2011.8
Aggrieved, petitioner requested respondent Secretary of Finance (Secretary)
to review BIR Ruling No. 015-12, but to no avail. For on November 26, 2012,
respondent Secretary affirmed the Commissioner’s assailed ruling in its
entirety.9
Page 2 of 35
 Ruling of the Court of Appeals
Not contented with the adverse results, petitioner elevated the case to the
CA via a petition for review under Rule 43, assigning the following errors:10
A.
The Honorable Secretary of Finance gravely erred in not
finding that the application of Section 7(c.2.2) of RR 06-08 in
the Assailed Ruling and RMC 25-11 is void insofar as it
altersthe meaning and scope of Section 100 of the Tax
Code.
B.
The Honorable Secretary of Finance gravely erred in finding
that Section 100 of the Tax Code is applicable tothe sale of
the Sale of Shares.
1. The Sale of Shares were sold at their fair market value
and for fair and full consideration in money or money’s
worth.
2. The sale of the Sale Shares is a bona fide business
transaction without any donative intent and is therefore
beyond the ambit of Section 100 of the Tax Code.
3. It is superfluous for the BIR to require an express
provision for the exemption of the sale of the Sale Shares
from donor’s tax since Section 100 of the Tax Code does not
explicitly subject the transaction to donor’s tax.
C.
The Honorable Secretary of Finance gravely erred in failing
to find that in the absence of any of the grounds mentioned
in Section 246 of the Tax Code, rules and regulations, rulings
or circulars – such as RMC 25-11 – cannot be given
retroactive application to the prejudice of Philamlife.
Assignment No. 1- Taxation Law 2
On May 23, 2013, the CA issued the assailed Resolution dismissing the CA
Petition, thusly:
WHEREFORE, the Petition for Review dated January 9, 2013 is DISMISSED for
lack of jurisdiction.
SO ORDERED.
In disposing of the CA petition, the appellate court ratiocinated that it is the
Court of Tax Appeals (CTA), pursuant to Sec. 7(a)(1) of Republic Act No. 1125
(RA 1125),11 as amended, which has jurisdiction over the issues raised. The
outright dismissal, so the CA held, is predicated on the postulate that BIR
Ruling No. 015-12 was issued in the exercise of the Commissioner’s power
to interpret the NIRC and other tax laws. Consequently, requesting for its
review can be categorized as "other matters arising under the NIRC or other
laws administered by the BIR," which is under the jurisdiction of the CTA,
not the CA.
Philamlife eventually sought reconsideration but the CA, in its equally
assailed January 21, 2014 Resolution, maintained its earlier position. Hence,
the instant recourse.
Issues
Stripped to the essentials, the petition raises the following issues in both
procedure and substance:
1. Whether or not the CA erred in dismissing the CA Petition for lack of
jurisdiction; and
2. Whether or not the price difference in petitioner’s adverted sale of shares
in PhilamCare attracts donor’s tax.
Procedural Arguments
a. Petitioner’s contentions
Insisting on the propriety of the interposed CA petition, Philamlife, while
conceding that respondent Commissioner issued BIR Ruling No. 015-12 in
Page 3 of 35
accordance with her authority to interpret tax laws, argued nonetheless
that such ruling is subject to review by the Secretary of Finance under Sec. 4
of the NIRC, to wit:
SECTION 4. Power of the Commissioner to Interpret Tax Laws and to Decide
Tax Cases. – The power to interpret the provisions of this Code and other
tax laws shall be under the exclusive and original jurisdiction of the
Commissioner, subject to review by the Secretary of Finance.
The power to decide disputed assessments, refunds of internal revenue
taxes, fees or other charges, penalties imposed in relation thereto, or other
matters arising under this Code orother laws or portions thereof
administered by the Bureau of Internal Revenue is vested in the
Commissioner, subject to the exclusive appellate jurisdiction of the Court of
Tax Appeals. Petitioner postulates that there is a need to differentiate the
rulings promulgated by the respondent Commissioner relating to those
rendered under the first paragraph of Sec. 4 of the NIRC, which are
appealable to the Secretary of Finance, from those rendered under the
second paragraph of Sec. 4 of the NIRC, which are subject to review on
appeal with the CTA.
This distinction, petitioner argues, is readily made apparent by Department
Order No. 7-02,12 as circularized by RMC No. 40-A-02.
Philamlife further averred that Sec.7 of RA 1125, as amended, does not find
application in the case at bar since it only governs appeals from the
Commissioner’s rulings under the second paragraph and does not
encompass rulings from the Secretary of Finance in the exercise of his
power of review under the first, as what was elevated to the CA. It added
that under RA 1125, as amended, the only decisions of the Secretary
appealable to the CTA are those rendered in customs cases elevated to him
automatically under Section 2315 of the Tariff and Customs Code.13
There is, thus, a gap in the law when the NIRC, as couched, and RA 1125, as
amended, failed to supply where the rulings of the Secretary in its exercise
of its power of review under Sec. 4 of the NIRC are appealable to. This gap,
petitioner submits, was remedied by British American Tobacco v.
Camacho14 wherein the Court ruled that where what is assailed is the
validity or constitutionality of a law, or a rule or regulation issued by the
Assignment No. 1- Taxation Law 2
administrative agency, the regular courts have jurisdiction to pass upon the
same.
In sum, appeals questioning the decisions of the Secretary of Finance in the
exercise of its power of review under Sec. 4 of the NIRC are not within the
CTA’s limited special jurisdiction and, according to petitioner, are appealable
to the CA via a Rule 43 petition for review.
b. Respondents’ contentions
Before the CA, respondents countered petitioner’s procedural arguments by
claiming that even assuming arguendo that the CTA does not have
jurisdiction over the case, Philamlife, nevertheless,committed a fatal error
when it failed to appeal the Secretary of Finance’s ruling to the Office of the
President (OP). As made apparent by the rules, the Department of Finance is
not among the agencies and quasi-judicial bodies enumerated under Sec. 1,
Rule 43 of the Rules of Court whose decisions and rulings are appealable
through a petition for review.15 This is in stark contrast to the OP’s specific
mention under the same provision, so respondents pointed out.
To further reinforce their argument, respondents cite the President’s power
of review emanating from his power of control as enshrined under Sec. 17
of Article VII of the Constitution, which reads:
Section 17.The President shall have control of all the executive
departments, bureaus, and offices. He shall ensure that the laws be
faithfully executed.
The nature and extent of the President’s constitutionally granted power of
control have beendefined in a plethora of cases, most recently in Elma v.
Jacobi,16 wherein it was held that:
x x x This power of control, which even Congress cannot limit, let alone
withdraw, means the power of the Chief Executive to review, alter, modify,
nullify, or set aside what a subordinate, e.g., members of the Cabinet and
heads of line agencies, had done in the performance of their duties and to
substitute the judgment of the former for that of the latter.
Page 4 of 35
In their Comment on the instant petition, however, respondents asseverate
that the CA did not err in its holding respecting the CTA’s jurisdiction over
the controversy.
The Court’s Ruling
The petition is unmeritorious.
Reviews by the Secretary of Finance pursuant to Sec. 4 of the NIRC are
appealable to the CTA
To recapitulate, three different, if not conflicting, positions as indicated
below have been advanced by the parties and by the CA as the proper
remedy open for assailing respondents’ rulings:
1. Petitioners: The ruling of the Commissioner is subject to review by the
Secretary under Sec. 4 of the NIRC, and that of the Secretary to the CA via
Rule 43;
2. Respondents: The ruling of the Commissioner is subject to review by the
Secretary under Sec. 4 of the NIRC, and that of the Secretary to the Office of
the President before appealing to the CA via a Rule 43 petition; and
3. CA: The ruling of the Commissioner is subject to review by the CTA.
We now resolve.
Preliminarily, it bears stressing that there is no dispute that what is involved
herein is the respondent Commissioner’s exercise of power under the first
paragraph of Sec. 4 of the NIRC––the power to interpret tax laws. This, in
fact, was recognized by the appellate court itself, but erroneously held that
her action in the exercise of such power is appealable directly to the CTA. As
correctly pointed out by petitioner, Sec. 4 of the NIRC readily provides that
the Commissioner’s power to interpret the provisions of this Code and other
tax laws is subject to review by the Secretary of Finance. The issue that now
arises is this––where does one seek immediate recourse from the adverse
ruling of the Secretary of Finance in its exercise of its power of review under
Sec. 4?
Assignment No. 1- Taxation Law 2
Admittedly, there is no provision in law that expressly provides where
exactly the ruling of the Secretary of Finance under the adverted NIRC
provision is appealable to. However, We find that Sec. 7(a)(1) of RA 1125, as
amended, addresses the seeming gap in the law asit vests the CTA, albeit
impliedly, with jurisdiction over the CA petition as "other matters" arising
under the NIRC or other laws administered by the BIR. As stated:
Sec. 7. Jurisdiction.- The CTA shall exercise:
a. Exclusive appellate jurisdiction to review by appeal, as herein provided:
1. Decisions of the Commissioner of Internal Revenue in cases involving
disputed assessments, refunds of internal revenue taxes, fees or other
charges, penalties in relation thereto, or other matters arising under the
National Internal Revenue or other laws administered by the Bureau of
Internal Revenue. (emphasis supplied)
Even though the provision suggests that it only covers rulings of the
Commissioner, We hold that it is, nonetheless, sufficient enough to include
appeals from the Secretary’s review under Sec. 4 of the NIRC.
It is axiomatic that laws should be given a reasonable interpretation which
does not defeat the very purpose for which they were passed.17 Courts
should not follow the letter of a statute when to do so would depart from
the true intent of the legislature or would otherwise yield conclusions
inconsistent with the purpose of the act.18 This Court has, in many cases
involving the construction of statutes, cautioned against narrowly
interpreting a statute as to defeat the purpose of the legislator, and rejected
the literal interpretation of statutes if todo so would lead to unjust or
absurd results.19
Indeed, to leave undetermined the mode of appeal from the Secretary of
Finance would be an injustice to taxpayers prejudiced by his adverse rulings.
To remedy this situation, Weimply from the purpose of RA 1125 and its
amendatory laws that the CTA is the proper forum with which to institute
the appeal. This is not, and should not, in any way, be taken as a derogation
of the power of the Office of President but merely as recognition that
matters calling for technical knowledge should be handled by the agency or
quasi-judicial body with specialization over the controversy. As the
Page 5 of 35
specialized quasi-judicial agency mandated to adjudicate tax, customs, and
assessment cases, there can be no other court of appellate jurisdiction that
can decide the issues raised inthe CA petition, which involves the tax
treatment of the shares of stocks sold. Petitioner, though, nextinvites
attention to the ruling in Ursal v. Court of Tax Appeals20 to argue against
granting the CTA jurisdiction by implication, viz:
Republic Act No. 1125 creating the Court of Tax Appeals did not grant it
blanket authority to decide any and all tax disputes. Defining such special
court’s jurisdiction, the Act necessarily limited its authority to those matters
enumerated therein. Inline with this idea we recently approved said court’s
order rejecting an appeal to it by Lopez & Sons from the decision of the
Collector ofCustoms, because in our opinion its jurisdiction extended only to
a review of the decisions of the Commissioner of Customs, as provided
bythe statute — and not to decisions of the Collector of Customs. (Lopez &
Sons vs. The Court of Tax Appeals, 100 Phil., 850, 53 Off. Gaz., [10] 3065).
xxxx
x x x Republic Act No. 1125 is a complete law by itself and expressly
enumerates the matters which the Court of Tax Appeals may consider; such
enumeration excludes all others by implication. Expressio unius est exclusio
alterius.
Petitioner’s contention is untenable. Lest the ruling in Ursalbe taken out of
context, but worse as a precedent, it must be noted that the primary reason
for the dismissal of the said case was that the petitioner therein lacked the
personality to file the suit with the CTA because he was not adversely
affected by a decision or ruling of the Collector of Internal Revenue, as was
required under Sec. 11 of RA 1125.21 As held:
We share the view that the assessor had no personality to resort to the
Court of Tax Appeals. The rulings of the Board of Assessment Appeals did
not "adversely affect" him. At most it was the City of Cebu that had been
adversely affected in the sense that it could not thereafter collect higher
realty taxes from the abovementioned property owners. His opinion, it is
true had been overruled; but the overruling inflicted no material damage
upon him or his office. And the Court of Tax Appeals was not created to
decide mere conflicts of opinion between administrative officers or
Assignment No. 1- Taxation Law 2
agencies. Imagine an income tax examiner resorting to the Court of Tax
Appeals whenever the Collector of Internal Revenue modifies, or lower his
assessment on the return of a tax payer!22
The appellate power of the CTA includes certiorari
Petitioner is quick to point out, however, that the grounds raised in its CA
petition included the nullity of Section 7(c.2.2) of RR 06-08 and RMC 25-11.
In an attempt to divest the CTA jurisdiction over the controversy, petitioner
then cites British American Tobacco, wherein this Court has expounded on
the limited jurisdiction of the CTA in the following wise:
While the above statute confers on the CTA jurisdiction to resolve tax
disputes in general, this does not include cases where the constitutionality
of a law or rule is challenged. Where what is assailed is the validity or
constitutionality of a law, or a rule or regulation issued by the administrative
agency in the performance of its quasi legislative function, the regular
courts have jurisdiction to pass upon the same. The determination of
whether a specific rule or set of rules issued by an administrative agency
contravenes the law or the constitution is within the jurisdiction of the
regular courts. Indeed, the Constitution vests the power of judicial review or
the power to declare a law, treaty, international or executive agreement,
presidential decree, order, instruction, ordinance, or regulation inthe courts,
including the regional trial courts. This is within the scope of judicial power,
which includes the authority of the courts to determine inan appropriate
action the validity of the acts of the political departments. Judicial power
includes the duty of the courts of justice to settle actual controversies
involving rights which are legally demandable and enforceable, and to
determine whether or not there has been a grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government.23
Vis-a-vis British American Tobacco, it bears to stress what appears to be a
contrasting ruling in Asia International Auctioneers, Inc. v. Parayno, Jr., to
wit:
Similarly, in CIR v. Leal, pursuant to Section 116 of Presidential Decree No.
1158 (The National Internal Revenue Code, as amended) which states that
"[d]ealers in securities shall pay a tax equivalent to six (6%) per centum of
Page 6 of 35
their gross income. Lending investors shall pay a tax equivalent to five (5%)
per cent, of their gross income," the CIR issued Revenue Memorandum
Order (RMO) No. 15-91 imposing 5% lending investor’s tax on pawnshops
based on their gross income and requiring all investigating units of the BIR
to investigate and assess the lending investor’s tax due from them. The
issuance of RMO No. 15-91 was an offshoot of the CIR’s finding that the
pawnshop business is akin to that of "lending investors" as defined in
Section 157(u) of the Tax Code. Subsequently, the CIR issued RMC No. 43-91
subjecting pawn tickets to documentary stamp tax. Respondent therein,
Josefina Leal, owner and operator of Josefina’s Pawnshop, asked for a
reconsideration of both RMO No. 15-91 and RMC No. 43-91, but the same
was denied by petitioner CIR. Leal then filed a petition for prohibition with
the RTC of San Mateo, Rizal, seeking to prohibit petitioner CIR from
implementing the revenue orders. The CIR, through the OSG, filed a motion
to dismiss on the ground of lack of jurisdiction. The RTC denied the motion.
Petitioner filed a petition for certiorari and prohibition with the CA which
dismissed the petition "for lack of basis." In reversing the CA, dissolving the
Writ of Preliminary Injunction issued by the trial court and ordering the
dismissal of the case before the trial court, the Supreme Court held that
"[t]he questioned RMO No. 15-91 and RMC No. 43-91 are actually rulings or
opinions of the Commissioner implementing the Tax Code on the taxability
of pawnshops." They were issued pursuant to the CIR’s power under Section
245 of the Tax Code "to make rulings or opinions in connection with the
implementation of the provisions of internal revenue laws, including ruling
on the classification of articles of sales and similar purposes."The Court held
that under R.A. No. 1125 (An Act Creating the Court of Tax Appeals), as
amended, such rulings of the CIR are appealable to the CTA.
In the case at bar, the assailed revenue regulations and revenue
memorandum circulars are actually rulings or opinions of the CIR on the tax
treatment of motor vehicles sold at public auction within the SSEZ to
implement Section 12 of R.A. No. 7227 which provides that "exportation or
removal of goods from the territory of the [SSEZ] to the other parts of the
Philippine territory shall be subject to customs duties and taxes under the
Customs and Tariff Codeand other relevant tax laws of the Philippines."
They were issued pursuant to the power of the CIR under Section 4 of the
National Internal Revenue Code x x x.24 (emphasis added)
The respective teachings in British American Tobacco and Asia International
Auctioneers, at first blush, appear to bear no conflict––that when the
Assignment No. 1- Taxation Law 2
validity or constitutionality of an administrative rule or regulation is assailed,
the regular courts have jurisdiction; and if what is assailed are rulings or
opinions of the Commissioner on tax treatments, jurisdiction over the
controversy is lodged with the CTA. The problem with the above postulates,
however, is that they failed to take into consideration one crucial point––a
taxpayer can raise both issues simultaneously.
Petitioner avers that there is now a trend wherein both the CTA and the CA
disclaim jurisdiction over tax cases: on the one hand, mere prayer for the
declaration of a tax measure’s unconstitutionality or invalidity before the
CTA can result in a petition’s outright dismissal, and on the other hand, the
CA will likewise dismiss the same petition should it find that the primary
issue is not the tax measure’s validity but the assessment or taxability of the
transaction or subject involved. To illustrate this point, petitioner cites the
assailed Resolution, thusly: Admittedly, in British American Tobacco vs.
Camacho, the Supreme Court has ruled that the determination of whether a
specific rule or set of rules issued by an administrative agency contravenes
the law or the constitution is within the jurisdiction of the regular courts,
not the CTA.
Petitioner essentially questions the CIR’s ruling that Petitioner’s sale of
shares is a taxable donation under Sec. 100 of the NIRC. The validity of Sec.
100 of the NIRC, Sec. 7 (C.2.2) and RMC 25-11 is merely questioned
incidentally since it was used by the CIR as bases for its unfavourable
opinion. Clearly, the Petition involves an issue on the taxability of the
transaction rather than a direct attack on the constitutionality of Sec. 100,
Sec.7 (c.2.2.) of RR 06-08 and RMC 25-11. Thus, the instant Petition properly
pertains to the CTA under Sec. 7 of RA 9282.
As a result of the seemingly conflicting pronouncements, petitioner submits
that taxpayers are now at a quandary on what mode of appeal should be
taken, to which court or agency it should be filed, and which case law should
be followed.
Petitioner’s above submission is specious.
In the recent case of City of Manila v. Grecia-Cuerdo,25 the Court en banc
has ruled that the CTA now has the power of certiorari in cases within its
appellate jurisdiction. To elucidate:
Page 7 of 35
The prevailing doctrine is that the authority to issue writs of certiorari
involves the exercise of original jurisdiction which must be expressly
conferred by the Constitution or by law and cannot be implied from the
mere existence of appellate jurisdiction. Thus, x x x this Court has ruled
against the jurisdiction of courts or tribunals over petitions for certiorari on
the ground that there is no law which expressly gives these tribunals such
power. Itmust be observed, however, that x x x these rulings pertain not to
regular courts but to tribunals exercising quasijudicial powers. With respect
tothe Sandiganbayan, Republic Act No. 8249 now provides that the special
criminal court has exclusive original jurisdiction over petitions for the
issuance of the writs of mandamus, prohibition, certiorari, habeas corpus,
injunctions, and other ancillary writs and processes in aid of its appellate
jurisdiction.
In the same manner, Section 5 (1), Article VIII of the 1987 Constitution
grants power to the Supreme Court, in the exercise of its original
jurisdiction, to issue writs of certiorari, prohibition and mandamus. With
respect to the Court of Appeals, Section 9 (1) of Batas Pambansa Blg. 129
(BP 129) gives the appellate court, also in the exercise of its original
jurisdiction, the power to issue, among others, a writ of certiorari, whether
or not in aid of its appellate jurisdiction. As to Regional Trial Courts, the
power to issue a writ of certiorari, in the exercise of their original
jurisdiction, is provided under Section 21 of BP 129.
The foregoing notwithstanding, while there is no express grant of such
power, with respect to the CTA, Section 1, Article VIII of the 1987
Constitution provides, nonetheless, that judicial power shall be vested in
one Supreme Court and in such lower courts as may be established by law
and that judicial power includes the duty of the courts of justice to settle
actual controversies involving rights which are legally demandable and
enforceable, and to determine whether or not there has been a grave abuse
of discretion amounting to lack or excess of jurisdiction on the part of any
branch or instrumentality of the Government.
On the strength of the above constitutional provisions, it can be fairly
interpreted that the power of the CTA includes that of determining whether
or not there has been grave abuse of discretion amounting to lack or excess
of jurisdiction on the part of the RTC in issuing an interlocutory order in
cases falling within the exclusive appellate jurisdiction of the tax court. It,
Assignment No. 1- Taxation Law 2
thus, follows that the CTA, by constitutional mandate, is vested with
jurisdiction to issue writs of certiorari in these cases.
Indeed, in order for any appellate court to effectively exercise its appellate
jurisdiction, it must have the authority to issue, among others, a writ of
certiorari. In transferring exclusive jurisdiction over appealed tax cases to
the CTA, it can reasonably be assumed that the law intended to transfer also
such power as is deemed necessary, if not indispensable, in aid of such
appellate jurisdiction. There is no perceivable reason why the transfer
should only be considered as partial, not total. (emphasis added)
Evidently, City of Manilacan be considered as a departure from Ursal in that
in spite of there being no express grant in law, the CTA is deemed granted
with powers of certiorari by implication. Moreover, City of Manila
diametrically opposes British American Tobacco to the effect that it is now
within the power of the CTA, through its power of certiorari, to rule on the
validity of a particular administrative ruleor regulation so long as it is within
its appellate jurisdiction. Hence, it can now rule not only on the propriety of
an assessment or tax treatment of a certain transaction, but also on the
validity of the revenue regulation or revenue memorandum circular on
which the said assessment is based.
Guided by the doctrinal teaching in resolving the case at bar, the fact that
the CA petition not only contested the applicability of Sec. 100 of the NIRC
over the sales transaction but likewise questioned the validity of Sec. 7
(c.2.2) of RR 06-08 and RMC 25-11 does not divest the CTA of its jurisdiction
over the controversy, contrary to petitioner's arguments.
The price difference is subject to donor's tax
Petitioner's substantive arguments are unavailing. The absence of donative
intent, if that be the case, does not exempt the sales of stock transaction
from donor's tax since Sec. 100 of the NIRC categorically states that the
amount by which the fair market value of the property exceeded the value
of the consideration shall be deemed a gift.1âwphi1 Thus, even if there is no
actual donation, the difference in price is considered a donation by fiction of
law.
Page 8 of 35
Moreover, Sec. 7(c.2.2) of RR 06-08 does not alter Sec. 100 of the NIRC but
merely sets the parameters for determining the "fair market value" of a sale
of stocks. Such issuance was made pursuant to the Commissioner's power
to interpret tax laws and to promulgate rules and regulations for their
implementation.
Lastly, petitioner is mistaken in stating that RMC 25-11, having been issued
after the sale, was being applied retroactively in contravention to Sec. 246
of the NIRC.26 Instead, it merely called for the strict application of Sec. 100,
which was already in force the moment the NIRC was enacted.
WHEREFORE, the petition is hereby DISMISSED. The Resolutions of the Court
of Appeals in CA-G.R. SP No. 127984 dated May 23, 2013 and January 21,
2014 are hereby AFFIRMED.
SO ORDERED.
[2] G.R. No. 149570             March 12, 2004
HEIRS OF ROSENDO SEVILLA FLORENCIO, as represented by ESTRELLITA
FLORENCIO-CRUZ and RODRIGO R. FLORENCIO, petitioners,  vs.HEIRS OF
TERESA SEVILLA DE LEON as represented by VALERIANA
MORENTE, respondents.
Remedial Law; Ejectment; In ejectment cases, the issue is the physical or
material possession (possession de facto) and any pronouncement made by
the trial court on the question of ownership is provisional in nature.—
Prefatorily, in ejectment cases, the issue is the physical or material
possession (possession de facto) and any pronouncement made by the trial
court on the question of ownership is provisional in nature. A judgment
rendered in ejectment cases shall not bar an action between the same
parties respecting title to the land and shall not be conclusive as to the facts
found therein in a case between the same parties upon a different cause of
action involving possession of the same property.
Civil Law; Donation; Donation is one of the modes of acquiring ownership;
Essential Elements of Donation.—Under the New Civil Code, donation is one
of the modes of acquiring ownership. Among the attributes of ownership is
Assignment No. 1- Taxation Law 2
the right to possess the property. The essential elements of donation are as
follows: (a) the essential reduction of the patrimony of the donor; (b) the
increase in the patrimony of the donee; and (c) the intent to do an act of
liberality or animus donandi. When applied to a donation of an immovable
property, the law further requires that the donation be made in a public
document and that the acceptance thereof be made in the same deed or in
a separate public instrument; in cases where the acceptance is made in a
separate instrument, it is mandated that the donor be notified thereof in an
authentic form, to be noted in both instruments.
Same; Same; Once the donation is accepted, it is generally considered
irrevocable and the donee becomes the absolute owner of the property,
except on account of officiousness, failure by the donee to comply with the
charge imposed in the donation, or ingratitude.—As a mode of acquiring
ownership, donation results in an effective transfer of title over the property
from the donor to the donee, and is perfected from the moment the donor
is made aware of the acceptance by the donee, provided that the donee is
not disqualified or prohibited by law from accepting the donation. Once the
donation is accepted, it is generally considered irrevocable, and the donee
becomes the absolute owner of the property, except on account of
officiousness, failure by the donee to comply with the charge imposed in the
donation, or ingratitude. The acceptance, to be valid, must be made during
the lifetime of both the donor and the donee. It must be made in the same
deed or in a separate public document, and the donee’s acceptance must
come to the knowledge of the donor.
Same; Same; In order that the donation of an immovable property may be
valid, it must be made in a public document; Registration of the deed in the
Office of the Register of Deeds or in the Assesor’s Office is not necessary for
it to be considered valid and official.—In order that the donation of an
immovable property may be valid, it must be made in a public document.
Registration of the deed in the Office of the Register of Deeds or in the
Assessor’s Office is not necessary for it to be considered valid and official.
Registration does not vest title; it is merely evidence of such title over a
particular parcel of land. The necessity of registration comes into play only
when the rights of third persons are affected. Furthermore, the heirs are
bound by the deed of contracts executed by their predecessors-in-interest.
DECISION
Page 9 of 35
CALLEJO, SR., J.:
Before us is a petition for review of the Joint Decision1 of the Court of
Appeals in CA-G.R. SP Nos. 59698-99 which affirmed the June 5, 2000
Decisions2 of the Regional Trial Court of Malolos, Bulacan, Branch 20 in Civil
Cases No. 1018-M-99 and 1019-M-99, and the resolution of the appellate
court denying the petitioners’ motion for reconsideration.
The Antecedents
Teresa Sevilla de Leon, owned a residential lot with an area of 828 square
meters located in San Miguel, Bulacan. The said lot was covered by Transfer
Certificate of Title (TCT) No. T-44349.3 In the 1960s, De Leon allowed the
spouses Rosendo and Consuelo Florencio to construct a house on the said
property and stay therein without any rentals therefor.
On September 26, 1966, De Leon, with the consent of her husband Luis,
leased the aforesaid parcel of land for ₱5 per month to Bienvenido Santos
"for as long as the lessor (Teresa de Leon) had an outstanding loan with the
Second Quezon City Development Bank of Quezon City but not to exceed
the period of fifteen (15) years."4 De Leon assigned her leasehold right in
favor of the Second Quezon City Development Bank. The lease and De
Leon’s leasehold right were annotated at the back of TCT No. T-44349 as
Entry Nos. 152248 and 152249,5 respectively. Thereafter, Bienvenido Santos
constructed a house thereon.
In November 1978, De Leon, then already a widow, died intestate. In
deference to her wishes, her heirs allowed Rosendo Florencio to continue
staying in the property. In March 1995, Florencio died intestate, but his
heirs, the respondents, remained in the property. On April 26, 1995, the
heirs of De Leon, through counsel, sent a letter to the heirs of Florencio,
demanding that they vacate the property within ninety (90) days from
receipt thereof.6 The latter refused and failed to vacate the property.
The heirs of De Leon, through Valeriana L. Morente, thereafter filed a
complaint for ejectment against the heirs of Florencio before the Municipal
Trial Court of San Miguel, Bulacan, docketed as Civil Case No. 2061. Therein,
the plaintiffs alleged that they were the pro-indiviso owners of the 828
square-meter lot covered by TCT No. T-44349, which they inherited from
Assignment No. 1- Taxation Law 2
their mother. During her lifetime, their mother allowed Florencio and his
family to occupy the property without any compensation, subject to the
condition that they shall vacate the same upon demand; such arrangement
went on even after their mother’s demise. They further averred that
sometime in 1995, they demanded that the heirs of Florencio vacate the
property, but that the latter refused to do so.7
The plaintiff thence prayed:
WHEREFORE, premises considered, it is most respectfully prayed that after
due hearing, judgment be rendered ordering defendants to:
1. Vacate the premises which they are presently occupying;
2. Pay plaintiff the amount of P100,000.00 as and by way of attorney’s fees;
3. Pay plaintiff P100,000.00 as moral damages;
4. Pay plaintiff P100,000.00 as exemplary damages.
5. Pay plaintiff P10,000.00 per month from April 26, 1995 up to and until
defendants vacate the premises.
Plaintiff prays for other reliefs just and equitable under the circumstances.8
In their answer to the complaint, the heirs of Florencio alleged that the
plaintiffs had no cause of action against them, as Teresa de Leon had
executed a Deed of Donation on October 1, 1976 over the said parcel of
land in favor of their predecessor, Rosendo Florencio. The latter accepted
the donation, as shown by his signature above his typewritten name on
page one of the deed. The execution of the deed was witnessed by Patria L.
Manotoc and Valeriana L. Morente. Atty. Tirso L. Manguiat, a notary public
in the City of Manila, notarized the deed on said date and entered it in his
notarial record as Doc. No. 1724, page 71, Book IV, series of 1976.9
The heirs of Florencio further averred that since then, their predecessor and
his family possessed the aforesaid property as owners. After De Leon’s
death, Florencio and his children, in coordination with Jose de Leon, the
administrator of the aforesaid property, arranged for the registration of the
Page 10 of 35
land subject of the donation in the name of Rosendo Florencio, which was,
however, superseded by the untimely demise of Jose de Leon in 1991. Thus,
the property remained in the name of Teresa Sevilla de Leon, even after
Florencio’s death in March of 1995.10
On February 1, 1996, the heirs of De Leon, represented by Valeriana L.
Morente, also filed a complaint for ejectment against the heirs of
Bienvenido Santos before the MTC of San Miguel, Bulacan, docketed as Civil
Case No. 2062.11 They prayed, thus:
WHEREFORE, premises considered, it is most respectfully prayed that after
due hearing, judgment be rendered ordering defendants to:
1. Vacate the premises which they are presently occupying;
2. Pay plaintiff the amount of P100,000.00 as and by way of attorney’s fees;
3. Pay plaintiff P100,000.00 as moral damages;
4. Pay plaintiff P100,000.00 as exemplary damages;
5. Pay plaintiff P10,000.00 per month from April 26, 1995 up to and until
defendants vacate the premises.
Plaintiff prays for other reliefs just and equitable under
circumstances.12
In their answer to the complaint, the heirs of Bienvenido Santos, through
counsel, alleged that the plaintiffs had no cause of action against them, and
that they did not occupy the property by mere tolerance but on the basis of
a contract of lease executed by De Leon on September 26, 1966.
Furthermore, De Leon donated the property to Rosendo Florencio on
October 1, 1976, and the latter, after the expiration of the contract of lease,
allowed and permitted them to continue and remain in possession of the
property without any compensation. According to the heirs of Bienvenido
Santos, only Florencio’s heirs had the right to cause their eviction from the
property by reason of the deed of donation executed in favor of the latter.
The trial of the two cases was consolidated.
Assignment No. 1- Taxation Law 2
The parties agreed to litigate the following issues:
After the preliminary conference, parties submitted their respective position
papers.
Plaintiffs raised and argued on the following issues:
a). Defendants’ possession of the premises was merely on the tolerance of
the late Teresa de Leon.
b). The alleged Deed of Donation does not exist, is patently a falsified
document and can never be the source of any right whatsoever.
Defendants, on the other hand, raised and argued on the following issues:
a). Defendants do not have only a better right of possession over the
questioned parcel of land and they do not have only the absolute and lawful
possession of the same but they have the absolute and lawful ownership of
the same not only against the plaintiffs but against the whole world.
b). Defendants are entitled to their counterclaim.13
On motion of the plaintiffs in both cases, the court issued an Order directing
the heirs of Florencio to produce the original of the Deed of Donation
the purportedly executed by Teresa de Leon. However, they failed to comply
with the order of the court and submitted a mere photocopy of the same.14
The plaintiffs adduced in evidence the following: (1) TCT No. T-44349 in the
name of Teresa Sevilla;15 (2) demand letters sent by the plaintiffs’ counsel
to the defendants demanding that the latter vacate the subject
premises;16 (3) affidavit-complaint of Valeriana Morente filed in the Office
of the Provincial Prosecutor of Bulacan docketed as I.S. No. 96-1513 for
falsification, perjury and applicable crimes against Rodrigo Florencio and
Atty. Tirso Manguiat, dated May 8, 1996;17 (4) affidavit-complaint executed
by Ramon de Leon Manotoc dated May 8, 1996;18 (5) copies of Teresa de
Leon’s passport issued on April 28, 1975 containing specimens of her
signature;19 (6) copy of Patria Manotoc’s passport issued on September 16,
1997 with her specimen signature therein;20 (7) copy of Valeriana
Morente’s passports issued on the following dates: (a) February 20,
Page 11 of 35
1967;21 (b) April 28, 1975;22 (c) October 4, 1984;23 and (d) August 22,
1994,24 with specimens of her signature appearing therein covering a span
of thirty years; (8) copy of the Certificate of Death of Patria Manotoc;25 (9)
Certification dated April 23, 1996 issued by Teresita R. Ignacio, Chief,
Archives Division of the Records Management and Archives Division of
Manila26 to the effect that nothing in the notarial register of Atty. Tirso L.
Manguiat show that he notarized a deed of donation dated October 1, 1976
in favor of Rosendo Florencio; (10) copy of Sinumpaang Salaysay dated July
19, 1996 executed by one Rodolfo Apolinario;27 and, (11) copies of the
official receipts of the real estate taxes paid.28
For their part, the heirs of Florencio adduced in evidence a photocopy of the
Deed of Donation dated October 1, 1976 purportedly executed by De Leon
in favor of Rosendo Florencio.29
The heirs of Bienvenido Santos submitted in evidence as Exhibits "1" and "1-
H" the Contract of Lease dated September 6, 1966 between Teresa Sevilla
and Bienvenido R. Santos.30
On December 3, 1996, the MTC rendered a decision in Civil Cases Nos. 2061
and 2062 dismissing the complaints for lack of jurisdiction upon the finding
that the issue of possession cannot be determined without resolving, in a
full blown trial, the issue of ownership.31
The heirs of De Leon appealed the decisions of the MTC to the RTC of
Bulacan, Branch 83, which rendered judgment reversing the decision of the
court a quo. It held that the MTC had jurisdiction over the cases; as such,
the trial court should proceed and render judgment therefor.
In the course of the proceedings, the defendants adduced in evidence a
copy of the Deed of Donation as certified by the RTC of Bulacan on May 29,
1996.32
On August 27, 1999, the MTC rendered an Amended Decision in Civil Case
No. 2061 in favor of the defendants and against the plaintiffs. The
dispositive portion of the decision reads:
Assignment No. 1- Taxation Law 2
WHEREFORE, the court finds the defendants as having a better right of
possession over the subject parcel of land as against the plaintiffs and
hereby orders this case DISMISSED.
For lack of evidence to prove bad faith on the part of the plaintiffs in the
filing of this case, and in line with the policy not to put premium on the right
to litigate, the counterclaim of the defendants is, likewise, ordered
DISMISSED.
With no pronouncements as to costs.
SO ORDERED.33
The decision was appealed to the RTC of Bulacan. On June 5, 2000, the RTC
rendered judgment reversing the decision of the MTC and rendered a new
judgment in favor of the plaintiffs, as follows:
WHEREFORE, premises considered, the Decision dated August 27, 1999,
rendered by the Municipal Trial Court of San Miguel, Bulacan, in Civil Case
No. 2061, is hereby set aside and a new one is hereby rendered, as follows:
a) Ordering the heirs of Rosendo Florencio and all those claiming any rights
under them to vacate the subject premises, particularly that parcel of land
covered by Transfer Certificate of Title (TCT) No. T-44349, situated in San
Jose, San Miguel, Bulacan;
b) Ordering the Heirs of Rosendo Florencio to pay the heirs of Teresa Sevilla
the amount of ₱2,000.00 per month as reasonable monthly rental on the
premises, to commence on April 1995 until the premises is vacated by them;
and
c) Ordering the heirs of Rosendo Florencio to pay the heirs of Teresa Sevilla
the amount of ₱10,000.00, as attorney’s fees and expenses of litigation.
SO ORDERED.34
The RTC ruled that the deed of donation was insufficient to support the
claim of the heirs of Florencio that they were the owners of the property
and were, thus, entitled to its possession.
Page 12 of 35
The defendants, now the petitioners, filed a petition for review with the
Court of Appeals of the decision of the RTC. On May 28, 2001, the Court of
Appeals rendered judgment dismissing the petition and affirming the RTC
decision. The CA adopted the findings of the RTC and its disquisitions on
why the deed of donation was not a credible piece of evidence to support
the petitioners’ claim over the property; hence, did not transfer title over
the property in favor of the petitioners.
First. The deed of donation (Exh. "1"), which purports to have been
executed in 1976, is not annotated on the title to the property which
remains registered in the name of Teresa Sevilla under TCT No. T-44349
(Exh. "A" and "A-1"). There is no showing whatsoever that the same or a
copy thereof was submitted to the Office of the Register of Deeds.
Second. As earlier pointed out, throughout the years, the real estate taxes
on the property continued to be paid in the name of Teresa Sevilla by the
caretaker Rodolfo Apolinario and nobody else. There is no showing that the
defendants had previously laid any claim of title or ownership over the
property and attempted to pay the taxes thereon.
Third. Although it purports to have been notarized in the City of Manila by
one Atty. Tirso L. Manguiat, there is no indication of its existence in the
notarial record of Atty. Manguiat, as per Certification dated April 23, 1996
(Exh. "L") of the Manila Records Management and Archives Office. One can
only wonder why from the place of execution in San Miguel, Bulacan on
October 1, 1976, its notarization on the same date had to be in the City of
Manila.
Fourth. The Court has noted, as anyone can easily do, that the signature
purported to be that of Teresa de Leon appearing in the deed of donation
(Exh. "1-B"), is dissimilar to her customary signatures affixed to her
passports (Exhs. "E" and "E-1"). The same is true with those of Patria
Manotoc and Valeriana L. Morente appearing in the same deed of donation
(Exhs. "1-D and "1-E"), with those of their customary signatures appearing in
their respective passports (Exhs. "F" and "F-1"; "G,""G-1" and "G-2"; "H,""H-
1" and "H-2"; "I" and "I-1" and "J" and "J-1").
And Fifth. There is no explanation given why since 1976, when the deed of
donation was supposedly executed, up to the present, the defendants did
Assignment No. 1- Taxation Law 2
not register the same to secure a new title in their names. In fact, there is no
showing that efforts toward that end were ever executed.
As it is, the Court holds that the deed of donation in question is not a
credible piece of evidence to support the defendants’ claim of acquisition of
title and ownership over the subject property and therefore insufficient to
justify their continuing possession and occupancy thereof. Thus, as against
defendants’ claim which is unregistered, the plaintiffs’ right over the
property as the legal heirs and successors-in-interest of the registered
owner must prevail.35
The Present Petition
The petitioners now contend in this case that the Court of Appeals and the
RTC erred in rendering judgment for the respondents, thus:
1. In finding no reversible error committed by the Regional Trial Court as an
appellate court and affirming its decision.
2. In concluding that the evidence presented reveals serious doubts as to
the veracity and authenticity of the notarized deed of donation, contrary to
the findings of the trial court that there is a legal presumption of regularity
in the execution thereof.
3. In holding that private respondents are entitled to possess the subject
property notwithstanding petitioners’ claim to the contrary and despite the
latter’s continuous, open and adverse possession for more than forty
years.36
The petitioners aver that donation is one of the modes of acquiring
ownership. Their claim for possession is precisely based on the deed of
donation executed by Teresa Sevilla de Leon on October 1, 1976 in favor of
their father, Rosendo Florencio. The aforesaid deed was duly notarized, and
by virtue of its notarization, such deed became a public document.
Furthermore, according to the petitioners, an examination of the deed
reveals that it had conformed to all the essential requisites of donation, as
required by the provisions of the New Civil Code; hence, its validity must be
presumed.37 From the time of the donation up to the present, the
Page 13 of 35
petitioners assert that they possessed the property openly, publicly and
against the whole world.
As regards the alleged forgery of the signatures of the donor and the
witnesses, the petitioners assert that absent any clear, positive and
convincing evidence that the same were forged, the presumption is that
they are genuine. The mere variance in the signatures of the donor and the
witnesses cannot be considered as conclusive proof of the forgery. They
aver that the Certification dated April 23, 1996 of the Manila Records
Management and Archives Office stating that no such notarized deed
existed in the notarial records of Atty. Manguiat cannot be conclusive
evidence that no donation ever existed. According to the petitioners, such
certification was merely preponderant and, therefore, not enough to
overthrow the presumption of regularity in the notarization as well as the
genuineness of the document.
The petitioners posit that their failure to register the deed of donation did
not affect its validity, it not being a requisite of a valid donation. They allege
that their effort to register the same during the lifetime of Jose de Leon, the
administrator of the property, did not materialize because of the latter’s
untimely death in 1991. The petitioners conclude that because of the
respondents’ failure to destroy the validity of the deed of donation, their
right over the property should prevail; the petitioners’ right accrued on
October 1, 1976, while that of the respondents accrued only in November of
1978.
In their comment, the respondents, through counsel, argue that the deed of
donation executed by De Leon dated October 1, 1976 in favor of Rosendo
Florencio is not a credible piece of evidence. The deed is insufficient to
justify the petitioners’ stay in the premises because the original copy was
never presented to them or to the court. Furthermore, while the photocopy
of the deed of donation states that it was notarized by a certain Tirso
Manguiat, a notary public for the City of Manila, under Doc. 1724, Page No.
71, Book No. IV, Series of 1976, the presumption of regularity in the
notarization of the deed was destroyed by the certification from the
Records Management and Archives Office of Manila that no such deed
exists. The respondents further assert that the signatures appearing on the
said deed, i.e., that of Teresa Sevilla de Leon, Patria Manotoc and Valeriana
Morente, were all forgeries.
Assignment No. 1- Taxation Law 2
According to the respondents, the following facts bolster the incredibility of
the deed of donation: (a) the deed of donation was executed in 1976 but
was not registered; (b) the TCT is still registered in the name of Teresa
Sevilla de Leon; (c) the owner’s duplicate copy of the TCT should have been
transmitted to the donees; and, (d) the real estate taxes were continuously
paid in the name of Teresa Sevilla de Leon. Thus, the respondents, as her
heirs, are the legal owners of the property.
The Ruling of the Court
The threshold issue in this case is whether or not the petitioners, as heirs of
Rosendo Florencio, who appears to be the donee under the unregistered
Deed of Donation, have a better right to the physical or material possession
of the property over the respondents, the heirs of Teresa de Leon, the
registered owner of the property.
The petition has no merit.
Prefatorily, in ejectment cases, the issue is the physical or material
possession (possession de facto) and any pronouncement made by the trial
court on the question of ownership is provisional in nature.38 A judgment
rendered in ejectment cases shall not bar an action between the same
parties respecting title to the land and shall not be conclusive as to the facts
found therein in a case between the same parties upon a different cause of
action involving possession of the same property.39
We agree with the petitioners that under the New Civil Code, donation is
one of the modes of acquiring ownership.40Among the attributes of
ownership is the right to possess the property.41
The essential elements of donation are as follows: (a) the essential
reduction of the patrimony of the donor; (b) the increase in the patrimony
of the donee; and (c) the intent to do an act of liberality or animus donandi.
When applied to a donation of an immovable property, the law further
requires that the donation be made in a public document and that the
acceptance thereof be made in the same deed or in a separate public
instrument; in cases where the acceptance is made in a separate
instrument, it is mandated that the donor be notified thereof in an
authentic form, to be noted in both instruments.42
Page 14 of 35
As a mode of acquiring ownership, donation results in an effective transfer
of title over the property from the donor to the donee, and is perfected
from the moment the donor is made aware of the acceptance by the donee,
provided that the donee is not disqualified or prohibited by law from
accepting the donation.43 Once the donation is accepted, it is generally
considered irrevocable, and the donee becomes the absolute owner of the
property, except on account of officiousness, failure by the donee to comply
with the charge imposed in the donation, or ingratitude.44The acceptance,
to be valid, must be made during the lifetime of both the donor and the
donee. It must be made in the same deed or in a separate public document,
and the donee’s acceptance must come to the knowledge of the donor.45
In order that the donation of an immovable property may be valid, it must
be made in a public document.46Registration of the deed in the Office of
the Register of Deeds or in the Assessor’s Office is not necessary for it to be
considered valid and official. Registration does not vest title; it is merely
evidence of such title over a particular parcel of land.47 The necessity of
registration comes into play only when the rights of third persons are
affected.48Furthermore, the heirs are bound by the deed of contracts
executed by their predecessors-in-interest.49
On the other hand, the fundamental principle is that a certificate of title
serves as evidence of an indefeasible and incontrovertible title to the
property in favor of the person whose name appears therein as the
registered owner.50The registered owner has the right to possess, enjoy
and dispose of the property without any limitations other than those
imposed by law.
In this case, the deed of donation, on its face, appears to bear all the
essential requisites of a valid donation inter vivos. With Teresa de Leon as
the donor and Rosendo Florencio as the donee, the deed of donation
appears to have been notarized by Notary Public Tirso Manguiat. On this
premise, Florencio, and after his death, his heirs, acquired ownership over
the property although Certificate of Title No. T-44349 under the name of
Teresa de Leon had not yet been cancelled.
However, as pointed out by the RTC and the Court of Appeals, there are
cogent facts and circumstances of substance which engender veritable
doubts as to whether the petitioners have a better right of possession over
Assignment No. 1- Taxation Law 2
the property other than the respondents, the lawful heirs of the deceased
registered owner of the property, Teresa de Leon, based on the Deed of
Donation.
First. Teresa de Leon purportedly executed the Deed of Donation on
October 1, 1976 in favor of Rosendo S. Florencio. If she, indeed, donated the
property, she would surely have turned over the owner’s duplicate of TCT
No. T-44349 to Florencio, to facilitate the issuance of a new title over the
property in his favor. There was an imperative need for the deed to be
registered in the Office of the Register of Deeds, and the title to the
property to be thereafter issued in the name of the donee, Florencio. Before
then, Florencio and his family had been residing in the property solely at the
sufferance of Teresa de Leon and her husband. Their possession of the
property and their continued stay therein was precarious. They could be
driven out from the property at any time by De Leon if she disowned the
deed or, after her death, by her heirs. It behooved Florencio to have the said
deed filed and duly registered51 with the Office of the Register of Deeds
without delay and, thereafter, to secure a new title under his name. This
would have resulted in the cancellation of TCT No. T-44349 under the name
of Teresa de Leon, and thereby averted any disturbance of Florencio’s
possession of the property, and after his death, that of his heirs.
At the very least, Florencio should have caused the annotation of the deed
immediately after October 1, 1976 or shortly thereafter, at the dorsal
portion of TCT No. T-44349. Such annotation would have been binding on
the respondents, as De Leon’s successors-in-interest, as well as to third
persons. However, Florencio failed to do so. Even as De Leon died intestate
in 1978, Florencio failed to secure title over the property in his name before
he himself died intestate in 1995. If, as the petitioners claimed, Florencio
acquired ownership over the property under the deed, it is incredible that
he would fail to register the deed and secure title over the property under
his name for almost twenty years. All these years, Florencio, and thereafter,
his heirs, remained passive and failed to act upon the deed of donation to
protect their right. This, the Court finds difficult to understand.
The claim that Florencio and his heirs sought the registration of the deed
and the transfer of the title to and under Florencio’s name from 1978 to
1991, in coordination with Jose de Leon is incredible. There is no evidence
on record that the deed of donation was ever filed with and registered in
the Office of the Register of Deeds at any time during the period from 1978
Page 15 of 35
to 1991. The petitioners’ claim that the registration of the deed was delayed
and later aborted by the demise of Jose de Leon is not substantiated by
evidence. Moreover, there is no reason why Florencio, or after his death,
the petitioners, could not have had the deed registered even after Jose de
Leon’s death.
Second. Florencio failed to inform the heirs of De Leon that the latter,
before her death, had executed a deed of donation on October 1, 1976 over
the property in his favor. It was only in 1996, or eighteen years after the
death of De Leon when the respondents sued the petitioners for ejectment
that the latter claimed, for the first time, that De Leon had executed a deed
of donation over the property in favor of their predecessor, Florencio.
Third. In the meantime, the respondents consistently paid the realty taxes
for the property from 1978 up to 1996, completely oblivious to the
existence of the deed of donation. On the other hand, Florencio, and, after
his death, the petitioners, never paid a single centavo for the realty taxes
due on the property, even as they continued staying in the property without
paying a single centavo therefor. The petitioners should have declared the
property under their names and paid the realty taxes therefor, if they truly
believed that they were its owners. They failed to do so. The fact of
Florencio’s inaction and that of the petitioners’ weakened the latter’s claim
that they acquired ownership over the property under the deed of
donation.
Fourth. The petitioners never adduced in evidence the owner’s duplicate of
TCT No. T-44349 under the name of De Leon. Their possession of the
owner’s duplicate of the title would have fortified their claim that indeed,
De Leon had intended to convey the property by donation to Florencio.
Furthermore, the petitioners did not explain why they failed to adduce in
evidence the said owner’s duplicate of the title. The only conclusion is that
the said owner’s duplicate copy was not turned over to Florencio
contemporaneously with or after the execution of the deed of donation;
hence, their failure to secure title over the property.52
Fifth. The respondents adduced in evidence the affidavit-complaint of
Valeriana Morente dated May 8, 1996, one of the witnesses to the deed, for
falsification and perjury against Florencio and Atty. Tirso Manguiat. They
also adduced the Certification dated April 23, 1996 issued by Teresita R.
Assignment No. 1- Taxation Law 2
Ignacio, Chief, Archives Division of the Records Management and Archives
Division of Manila, to the effect that nothing in the notarial register of Atty.
Tirso L. Manguiat, a notary public of Manila, showed that the latter
notarized a Deed of Donation executed by De Leon and Florencio in San
Miguel, Bulacan dated October 1, 1976. However, the petitioners failed to
adduce in evidence Atty. Manguiat’s counter-affidavit to the said complaint,
or, at the very least, a separate affidavit explaining the facts and
circumstances surrounding the notarization of the deed of donation.
Sixth. A reading of the deed will show that at the bottom of page one
thereof, Florencio was to subscribe and swear to the truth of his acceptance
of the donation before Municipal Mayor Marcelo G. Aure of San Miguel,
Bulacan. However, the mayor did not affix his signature above his
typewritten name, thus:
SUBSCRIBED AND SWORN to before me this 1st day of
October, 1976, the DONOR having exhibited her Res. Cert.
No. A-3723337 issued at Quezon City on January 10, 1976.
MARCELO G. AURE
Municipal Mayor53
It appears that a second page was added, with the name of Atty. Manguiat
typewritten therein as notary public, obviously, with the use of a different
typewriter.
In sum then, we agree with the RTC and the Court of Appeals that the deed
of donation relied upon by the petitioners is unreliable as evidence on which
to anchor a finding that the latter have a better right over the property than
the respondents, who, admittedly, are the heirs of Teresa de Leon, the
registered owner of the property under TCT No. T-44349 of the Registry of
Deeds of Bulacan.
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The Decisions of
the Regional Trial Court of Malolos, Bulacan, Branch 20, in Civil Cases Nos.
1018-M-99 and 1019-M-99, and the Court of Appeals in CA-G.R. SP No.
59698-99, are AFFIRMED.
SO ORDERED.
Page 16 of 35

[3] G.R. No. 198636               October 8, 2014
ESPERANZA C. CARINAN, Petitioner,  vs. SPOUSES GAVINO CUETO and
CARMELITA CUETO, Respondents.
Remedial Law; Civil Procedure; Appeals; Petition for Review on Certiorari;
The Supreme Court (SC) emphasizes that only questions of law may be
raised in a petition for review on certiorari.—At the outset, the Court
emphasizes that only questions of law may be raised in a petition for review
on certiorari. The Court is not a trier of facts. It is long settled that factual
findings of the trial court, when affirmed by the CA, will not be disturbed by
this Court. Such findings by the lower courts are entitled to great weight and
respect, and are deemed final and conclusive on this Court when supported
by evidence on record.
Civil Law; Donation; In order to sufficiently substantiate her claim that the
money paid by the respondents was actually a donation, Esperanza should
have also submitted in court a copy of their written contract evincing such
agreement.—In order to sufficiently substantiate her claim that the money
paid by the respondents was actually a donation, Esperanza should have
also submitted in court a copy of their written contract evincing such
agreement. Article 748 of the New Civil Code (NCC), which applies to
donations of money, is explicit on this point as it reads: Art. 748. The
donation of a movable may be made orally or in writing. An oral donation
requires the simultaneous delivery of the thing or of the document
representing the right donated. If the value of the personal property
donated exceeds five thousand pesos, the donation and the acceptance
shall be made in writing. Otherwise, the donation shall be void.
Remedial Law; Civil Procedure; Theory of the Case; When a party
deliberately adopts a certain theory and the case is decided upon that
theory in the court below, he will not be permitted to change the same on
appeal, because to permit him to do so would be unfair to the adverse
party.—Esperanza’s plea for a reversal of the lower courts’ rulings upon her
claim of co-ownership and allegation that the respondents were builders in
bad faith cannot be considered at this stage of the case. These claims raise
factual issues which are beyond the scope of a petition for review on
certiorari. More importantly, such defenses were not advanced by
Assignment No. 1- Taxation Law 2
Esperanza during the proceedings with the trial and appellate courts. Settled
is the rule that “defenses not pleaded in the answer may not be raised for
the first time on appeal. A party cannot, on appeal, change fundamentally
the nature of the issue in the case. When a party deliberately adopts a
certain theory and the case is decided upon that theory in the court below,
he will not be permitted to change the same on appeal, because to permit
him to do so would be unfair to the adverse party.
RESOLUTION
REYES, J.:
This is a petition for review under Rule 45 of the Rules of Court, which seeks
the reversal of the Decision1 dated June 30, 2011 and Resolution2 dated
September 15, 2011 of the Court of Appeals (CA) in CA-G.R. CV No. 94700.
The case originated from a complaint3 for specific performance with
damages filed by Spouses Gavino C. Cueto (Gavino) and Carmelita J. Cueto
(respondents) against Esperanza C. Carinan (Esperanza) and her son, Jazer C.
Carinan (Jazer). The respondents alleged that sometime in May 1986,
Esperanza and her husband, Jose Carinan (Jose), acquired from one Roberto
Ventura (Roberto) the rights over a parcel of land formerly covered by
Transfer Certificate of Title (TCT) No. T-129128 under the name of the
Government Service Insurance System (GSIS), measuring 180 square meters
and more particularly described as Lot 24, Block 20, Juana Complex I, Biñan,
Laguna. Their transaction was covered by a Deed of Assignment and
Transfer of Rights with Assumption of Obligations. Esperanza and Jose were
to assume the payment of the applicable monthly amortizations for the
subject land to the GSIS.4
Several amortizations remained unpaid by Esperanza and Jose, resulting in
an impending cancellation in 2005 of GSIS’ conditional sale of the subject
property to Roberto. It was then that Esperanza, then already a widow,
sought financial assistance from her brother, Gavino, in October 2005. The
respondents then paid from their conjugal savings Esperanza’s total
obligation of ₱785,680.37 under the subject deed of assignment.5
The respondents alleged that Esperanza and Jazer undertook to execute a
Deed of Absolute Sale in favor of the respondents once the title over the
Page 17 of 35
subject property was transferred to their names, subject to the condition
that they would be given the first option to buy it back within three years by
reimbursing the expenses incurred by the respondents on the
property.6 Besides satisfaction of the unpaid amortizations to GSIS, the
respondents paid for the transfer of the subject property from Roberto to
Esperanza, and the renovation of the residential house erected on the
subject land, resulting in additional expenses of ₱515,000.00.7 TCT No. T-
636804 already under the name of Esperanza was surrendered to the
respondents.8
Sometime in 2006, the respondents demanded from Esperanza and Jazer
the fulfillment of their commitment to transfer the subject property to the
respondents’ names through the execution of a deed of sale. When
Esperanza and Jazer failed to comply despite efforts for an amicable
settlement,9 the respondents filed with the Regional Trial Court (RTC) of
Biñan, Laguna the subject complaint for specific performance with damages,
which specifically sought the following reliefs:
WHEREFORE, it is respectfully prayed that after due hearing, judgment be
rendered for the plaintiffs, ordering defendants to execute a Deed of Sale
conveying the subject property in favor of plaintiffs or in the alternative pay
the sum of One Million Three Hundred Thousand Six Hundred Eighty Pesos
and 37/100 (₱1,300,680.37), with interest at the legal rate, until fully paid;
and to pay:
1) Moral damages in the amount of Three Hundred Thousand Pesos
(₱300,000.00);
2) Exemplary damages of One Hundred Thousand Pesos (₱100,000.00);
3) Attorney’s fees of One Hundred Thousand Pesos [(]₱100,000.00[)], plus
Three Thousand Pesos (₱3,000.00) every hearing day; and
4) Costs.
Other equitable reliefs are likewise prayed for10
Esperanza and Jazer disputed these claims. They argued that there was
neither a written or verbal agreement for the transfer of the disputed
Assignment No. 1- Taxation Law 2
property to the respondents’ names, nor a promise for the repayment of
the amounts that were paid by the respondents. Esperanza believed that
Gavino paid her outstanding balance with the GSIS out of sheer generosity
and pity upon her. She denied having borrowed the respondents’ money
because given her financial standing, she knew that she could not afford to
pay it back. Furthermore, to require her to execute a deed of sale for the
property’s full conveyance would totally disregard the payments that she
personally made for the purchase. Finally, Esperanza questioned Jazer’s
inclusion as a party to the case, claiming that he had no personal knowledge
nor was he privy to any negotiation with the respondents.
On December 15, 2009, the RTC of Biñan, Laguna, Branch 25 rendered its
Decision11 with dispositive portion that reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of
[the respondents] ordering [Esperanza and Jazer] to pay the following:
1. the amount of NINE HUNDRED TWENTY[-]SEVEN THOUSAND ONE
HUNDRED EIGHTY[-]TWO PESOS AND 12/100 (₱927,182.12) representing
the amount of P 785,680.37 [paid] by the [respondents] to the GSIS; and P
141,501.75 consisting of the expenses in transferring the title to the name
[of Esperanza and Jazer] plus the cost of improvements introduced on the
property, with legal interest from the time of demand until fully paid;
2. the amount of P 100,000.00 as attorney’s fees.
SO ORDERED.12
Given the substantial amount involved, the RTC ruled that the money paid
by the respondents for Esperanza’s arrears could not have been given
gratuitously, but was intended as a loan that demanded a repayment. This
arrangement was also bolstered by the fact that Esperanza surrendered
possession of the subject land’s TCT to the respondents. Had the parties
intended a donation, then Esperanza should have kept possession of the
title. Besides the amount of ₱785,680.37 paid to GSIS, expenses for transfer
and property renovation paid by the respondents were determined by the
court to total ₱141,501.75.13
Page 18 of 35
The RTC emphasized that Esperanza and Jazer could not be compelled to
convey the subject property to the respondents. Even granting that a
promise to sell was made by Esperanza, the same was unenforceable as it
was not reduced into writing.14 The inclusion of Jazer in the complaint was
sustained by the trial court, considering that he was the son of Esperanza
and the late Jose, whose estate had not yet been settled. Jazer, thus, had an
interest in the subject property and benefited from the transaction.
Feeling aggrieved, Esperanza and Jazer appealed to the CA.
On June 30, 2011, the CA rendered its Decision15 that affirmed the rulings
of the RTC. The CA agreed with the RTC’s finding that the respondents’
payment of the GSIS obligation could not have been gratuitous, considering
its substantial amount. The CA also took note of the fact that the
respondents retained possession of TCT No. T-636804 that covered the
subject property. The CA then held that to prevent unjust enrichment by
Esperanza, she should refund the payments which the respondents made to
GSIS, the expenses for transfer of title, and the cost of improvements
introduced on the property.16
Esperanza’s motion for reconsideration was denied in a Resolution17 dated
September 15, 2011. Hence, this petition for review on certiorari, which
cites the following grounds:
I. The [CA] gravely erred in declaring that a contract of loan was created
when respondent[s] paid [Esperanza’s] arrears with the GSIS and not a
donation or help extended by respondent[s] to [Esperanza].
II. The [CA] gravely erred in not finding the existence of co-ownership
between the parties.
III. The [CA] gravely erred in not declaring respondent[s] [builders] in bad
faith[,] hence not entitled to reimbursement of the costs of improvements
[on] the subject property.
IV. The [CA] gravely erred in affirming the award of attorney’s fees and/or
for not reducing the same for lack of evidence.18
The petition is bereft of merit.
Assignment No. 1- Taxation Law 2
At the outset, the Court emphasizes that only questions of law may be
raised in a petition for review on certiorari. The Court is not a trier of facts.
It is long settled that factual findings of the trial court, when affirmed by the
CA, will not be disturbed by this Court. Such findings by the lower courts are
entitled to great weight and respect, and are deemed final and conclusive
on this Court when supported by evidence on record.19
Taking into account the foregoing rules, the Court adopts the RTC’s and CA’s
finding that between Esperanza and the respondents, there was a clear
intention for a return of the amounts which the respondents spent for the
acquisition, transfer and renovation of the subject property. The
respondents then reasonably expected to get their money back from
Esperanza. Esperanza’s claim that the expenses and payments in her behalf
were purely gratuitous remained unsupported by records. As the CA
correctly observed:
Indeed, the absence of intention to be reimbursed is negated by the facts of
this case. [The respondents’] conduct never at any time intimated any
intention to donate in favor of [Esperanza and Jazer]. A donation is a simple
act of liberality where a person gives freely of a thing or right in favor of
another, who accepts it (Article 725, New Civil Code, as amended). But
when a large amount of money is involved, as in this case, this [c]ourt is
constrained to take [Esperanza and Jazer’s] claim of generosity by [the
respondents] with more than a grain of salt.20
Esperanza’s refusal to pay back would likewise result in unjust enrichment,
to the clear disadvantage of the respondents. "The main objective of the
principle against unjust enrichment is to prevent one from enriching himself
at the expense of another without just cause or consideration."21 While
Esperanza claims that her brother’s generosity was the consideration for the
respondents’ payment of her obligations, this was not sufficiently
established, that even the respondents vehemently denied the allegation.
In order to sufficiently substantiate her claim that the money paid by the
respondents was actually a donation, Esperanza should have also submitted
in court a copy of their written contract evincing such agreement. Article
748 of the New Civil Code (NCC), which applies to donations of money, is
explicit on this point as it reads:
Page 19 of 35
Art. 748. The donation of a movable may be made orally or in writing.
An oral donation requires the simultaneous delivery of the thing or of the
document representing the right donated.
If the value of the personal property donated exceeds five thousand pesos,
the donation and the acceptance shall be made in writing. Otherwise, the
donation shall be void.
As the Court ruled in Moreño-Lentfer v. Wolff,22 a donation must comply
with the mandatory formal requirements set forth by law for its validity.
When the subject of donation is purchase money, Article 748 of the NCC is
applicable. Accordingly, the donation of money as well as its acceptance
should be in writing. Otherwise, the donation is invalid for non-compliance
with the formal requisites prescribed by law.23
The respondents’ statement that they paid for Esperanza’s obligations
because they wanted to help her did not contradict an understanding for
the return of the claimed amounts. Clearly, the aid then needed by
Esperanza was for the immediate production of the money that could pay
for her obligations to the GSIS and effect transfer of title, in order that her
payments and interest over the property would not be forfeited. The help
accorded by the respondents corresponded to such need. It did not follow
that the respondents could no longer be allowed to later demand the
repayment. In disputing the claim against her, Esperanza imputed deceit
upon the respondents and claimed that they misled her into their real
intention behind the payment of her obligations and possession of TCT No.
T-636804. Deceit, however, is a serious charge which must be proven by
more than just bare allegations.
Although the Court affirms the trial and appellate courts' ruling that, first,
there was no donation in this case and, second, the respondents are entitled
to a return of the amounts which they spent for the subject property, it still
cannot sustain the respondents' plea for Esperanza's full conveyance of the
subject property. To impose the property's transfer to the respondents'
names would totally disregard Esperanza's interest and the payments which
she made for the property's purchase. Thus, the principal amount to be
returned to the respondents shall only pertain to the amounts that they
actually paid or spent. The Court finds no cogent reason to disturb the trial
Assignment No. 1- Taxation Law 2
court's resolve to require in its Decision dated December 15, 2009, around
four years after the sums were paid for the subject property's acquisition
and renovation, the immediate return of the borrowed amounts.
Esperanza's plea for a reversal of the lower courts' rulings upon her claim of
co-ownership and allegation that the respondents were builders in bad faith
cannot be considered at this stage of the case. These claims raise factual
issues which are beyond the scope of a petition for review on certiorari.
More importantly, such defenses were not advanced by Esperanza during
the proceedings with the trial and appellate courts. Settled is the rule that
"defenses not pleaded in the answer may not be raised for the first time on
appeal. A party cannot, on appeal, change fundamentally the nature of the
issue in the case. When a party deliberately adopts a certain theory and the
case is decided upon that theory in the court below, he will not be
permitted to change the same on appeal, because to permit him to do so
would be unfair to the adverse party."24
The award of attorney's fees in the respondents' favor is upheld, pursuant
to Article 2208 of the NCC and following the trial and appellate courts'
observation that the respondents were compelled to litigate in order to
protect their interests.
WHEREFORE, the petition is DENIED. The Decision dated June 30, 2011 and
Resolution dated September 15, 2011 of the Court of Appeals in CA-G.R. CV
No. 94700 are AFFIRMED.
SO ORDERED.
[4] G.R. No. 104726 February 11, 1999
VICTOR YAM & YEK SUN LENT, doing business under the name and style of
Philippine Printing Works; petitioners,  vs. THE COURT OF APPEALS and
MANPHIL INVESTMENT CORPORATION, respondents.
Civil Law; Donations; Donation and acceptance of a movable, the value of
which exceeds P5,000.00, must be made in writing, otherwise the same
shall be void.—Art. 1270, par. 2 of the Civil Code provides that express
condonation must comply with the forms of donation. Art. 748, par. 3
Page 20 of 35
provides that the donation and acceptance of a movable, the value of which
exceeds P5,000.00, must be made in writing, otherwise the same shall be
void. In this connection, under Art. 417, par. 1, obligations, actually referring
to credits, are considered movable property. In the case at bar, it is
undisputed that the alleged agreement to condone P266,146.88 of the
second IGLF loan was not reduced in writing.
Same; Same; Condonation; The appointment of a receiver operates to
suspend the authority of a corporation and of its directors and officers over
its property and effects, such authority being reposed in the receiver.—It is
to be noted that the alleged agreement to condone the amount in question
was supposedly entered into by the parties sometime in July 1986, that is,
after respondent corporation had been placed under receivership on
November 4, 1985. As held in Villanueva v. Court of Appeals “the
appointment of a receiver operates to suspend the authority of a
corporation] and of its directors and officers over its property and effects,
such authority being reposed in the receiver.” Thus, Sobrepeñas had no
authority to condone the debt.
Remedial Law; Appeals; It is settled that findings of fact of trial courts,
adopted and confirmed by the Court of Appeals, are final and conclusive
and, as a rule, will not be reviewed on appeal. —The second assignment of
error pertains to the petitioners’ allegation that they did not receive the two
letters of demand sent by private respondent on September 4 and
September 25, 1986. Both the lower court and the Court of Appeals found
otherwise. We have no reason to disturb this factual finding. It is settled
that findings of fact of trial courts, adopted and confirmed by the Court of
Appeals, are final and conclusive and, as a rule, will not be reviewed on
appeal.
MENDOZA, J.:
This is a petition for review of the decision 1 of the Court of Appeals
affirming in toto the decision of the Regional Trial Court of Manila (Branch
149), ordering petitioners to pay private respondent the amount of
P266,146.88 plus interest, service charge, penalty fees, and attorney's fees
and the costs, otherwise the chattel mortgage given to secure payment of
the loan would be foreclosed.
Assignment No. 1- Taxation Law 2
The following are the facts:
On May 10,1979, the parties in this case entered into a Loan Agreement
with Assumption of Solidary Liability whereby petitioners were given a loan
of P500,000.00 by private respondent. The contract provided for the
payment of 12% annual interest, 2% monthly penalty, 1 1/2% monthly
service charge, and 10% attorney's fees. 2Denominated the first Industrial
Guarantee and Loan Fund (IGLF), the loan was secured by a chattel
mortgage on the printing machinery in petitioners' establishment. 3
Petitioners subsequently obtained a second IGLF loan of P300,000.00
evidenced by two promissory notes, dated July 3, 1981 and September 30,
1981. For this purpose, a new loan agreement 4 was entered into by the
parties containing identical provisions as the first one, except as to the
annual interest which was increased to 14% and the service charge which
was reduced to 1% per annum. The deed of chattel mortgage was amended
correspondingly. 5
By April 2, 1985, petitioners had paid their first loan of P500,000.00. On
November 4, 1985, private respondent was placed under receivership by
the Central Bank and Ricardo Lirio and Cristina Destajo were appointed as
receiver and in-house examiner, respectively.
On May 17, 1986, petitioners made a partial payment of P50,000.00 on the
second loan. They later wrote private respondent a letter, dated June 18,
1986, proposing to settle their obligation. On July 2, 1986, private
respondent, through its counsel, replied with a counter-offer, namely, that it
would reduce the penalty charges up to P140,000.00, provided petitioners
can pay their obligation on or before July 30, 1986. 6
As of July 31, 1986, petitioners' total liability to private respondent was
P727,001.35, broken down as follows: 7
Principal — P295,469.47
Interest — 165,385.00
Penalties — 254,820.55
Page 21 of 35
Service Charges — 11,326.33
—————
TOTAL P727,001.35
On this date, petitioners paid P410,854.47 by means of a Pilipinas Bank
check, receipt of which was acknowledged by Destajo. 8 The corresponding
voucher for the check bears the following notation: "full payment of IGLF
LOAN." 9
The amount of P410,854.47 was the sum of the principal (P295,469.47) and
the interest; (P165,385.00) less the partial payment of P50,000.00. The
private respondent sent two demand letters to petitioners, dated
September 4, 1986 and September 25, 1986, seeking payment of the
balance of P266,146.88. As petitioners did not respond, private respondent
filed this case in the Regional Trial Court of Metro Manila for the collection
of P266,146.88 plus interests, penalties, and service charges or, in the
alternative, for the foreclosure of the mortgaged machineries.
In their Answer, petitioners claimed that they had fully paid their obligation
to private respondent. They contended that some time after receiving
private respondent's letter of July 25, 1986 (concerning the conditional offer
to reduce their penalty charges), petitioner Victor Yam and his wife, Elena
Yam, met with Carlos Sobrepeñas, president of respondent corporation,
during which the latter agreed to waive the penalties and service charges,
provided petitioners paid the principal and interest, computed as of July 31,
1986, less the earlier payment of P50,000.00. This is the reason why
according to them they only paid P410,854.47. Petitioners added that this
fact of full payment is reflected in the voucher accompanying the Pilipinas
Bank check they issued, which bore the notation "full payment of IGLF
loan."
On April 30, 1990, the lower court rendered a decision, the dispositive
portion of which reads:
WHEREFORE, in view of the foregoing, the defendants Victor Yam and Yek
Sun Lent are hereby ordered to pay jointly and severally, the principal loan.
balance of P266,146.88 as of September 4, 1986 plus interest at 14% per
Assignment No. 1- Taxation Law 2
annum, service charge at 1% per annum and penalty fees at 2% per month
and to pay plaintiff attorney's fees equivalent to 10% of the amount to be
recovered, and to pay the costs of suit, failing in which, the chattel mortgage
instituted on the printing machineries and equipment described in the Deed
of Chattel Mortgage dated May 10, 1979, as amended, is hereby declared
foreclosed and the subject thereof sold in accordance with law to satisfy the
judgment herein rendered.
SO ORDERED. 10
On appeal, the Court of Appeals affirmed the decision of the trial court in
toto. Hence, this petition. Petitioners reiterate the same assignment of
errors made by them before the Court of Appeals, to wit: 11
FIRST ASSIGNED ERROR
THAT THE LOWER COURT GRIEVOUSLY ERRED IN FAILING TO GIVE
CREDENCE TO THE DOCUMENTARY AS WELL AS TESTIMONIAL EVIDENCE OF
THE PETITIONERS RELATIVE TO THE PAYMENT TO THE RESPONDENT OF THE
ADDITIONAL LOAN UNDER THE AMENDMENT OF DEED OF CHATTEL
MORTGAGE: (EXHIBIT K, RESPONDENT) AND AS AGAINST THE TESTIMONY
OF RESPONDENT'S WITNESS, CRISTINA L. DESTAJO.
SECOND ASSIGNED ERROR
THAT THE COURT BELOW ERRED IN NOT TOTALLY DISREGARDING EXHIBITS
E AND F OF THE RESPONDENTS.
The question in whether petitioners are liable for the payment of the
penalties and service charges on their loan which, as of July 31, 1986,
amounted to P266;246.88.
The answer is in the affirmative. Art. 1270, par. 2 of the Civil Code provides
that express condonation must comply with the forms of donation. 12 Art.
748, par. 3 provides that the donation and acceptance of a movable, the
value of which exceeds P5,000,00, must be made in writing, otherwise the
same shall be void. In this connection, under Art. 417, par. 1, obligations,
actually referring to credits, l3 are considered movable property. In the case
Page 22 of 35
at bar, it is undisputed than the alleged agreement to condone P266,196.88
of the second IGLF loan was not reduced in writing. 14
Nonetheless, petitioners insist that the voucher covering the Pilipinas Bank
check for P410,854.47, containing the notation that the amount is in "full
payment of IGLF loan," constitutes documentary evidence of such oral
agreement. This contention is without merit. The notation in "full payment
of IGLF loan" merely states petitioners' intention in making the payment,
but in no way does it bind private respondent. It would have been a
different matter if the notation appeared in a receipt issued by respondent
corporation, through its receiver, because then it would be an admission
against interest. Indeed, if private respondent really condoned the amount
in question, petitioners should have asked for a certificate of full payment
from respondent corporation, as they did in the case of their first IGLF loan
of P500,000.00. 15
only the Central Bank would authorize the same "because [the CB] the
receiver." 20 Considering this, petitioners cannot feign ignorance and plead
good faith.
The second assignment of error pertains to the petitioners' allegation that
they did not receive the two letters of demand sent by private respondent
on September 4 and September 25, 1986. Both the lower court and the
Court of Appeals found otherwise. We have no reason to disturb this factual
finding. It is settled that findings of fact of trial courts, adopted and
confirmed by the Court of Appeals, are final and conclusive and, as a rule,
will not be reviewed on appeal. 21
WHEREFORE, the decision of the Court of Appeals is AFFIRMED.
SO ORDERED.

Petitioners, however, contend that the Central Bank examiner assigned to

respondent corporation, Cristina Destajo, signed the voucher in question.
Destajo claimed that, when she signed the voucher, she failed to notice the [5] G.R. No. 131953           June 5, 2002
statement that the amount of P410,854.47 was being given in "full payment
MA. ESTELA MAGLASANG, NICOLAS CABATINGAN and MERLY S.
of IGLF Loan." She said she merely took note of the amount and the check
CABATINGAN, petitioners,  vs.THE HEIRS OF CORAZON CABATINGAN,
number indicated therein. 16 In any event, Destajo, by countersigning the
namely, LUZ M. BOQUIA, PERLA M. ABELLA, ESTRELLA M. CAÑETE, LOURDES
voucher, did no more than acknowledge receipt of the payment. She cannot
M. YUSON, and JULIA L. MAYOL, HEIRS OF GENOVIVA C. NATIVIDAD namely,
be held to have ascented thereby to the payment in full of petitioners'
OSCAR C. NATIVIDAD, OLGA NATIVIDAD, ODETTE NATIVIDAD, OPHELIA
indebtedness to private respondent. It was obvious she had no authority to
NATIVIDAD, RICHARD NATIVIDAD, RAYMUND NATIVIDAD, RICHIE
condone any indebtedness, her "issuing official receipts, preparing check
NATIVIDAD, SONIA NATIVIDAD and ENCARNACION CABATINGAN VDA. DE
vouchers and documentation." 17
TRINIDAD, ALFREDO CABATINGAN and JESUSA C. NAVADA, respondents.
Moreover, it is to be noted that the alleged agreement to condone the
Donations; Donations Mortis Causa; Factors in Determining Whether a
amount in question was supposedly entered into by the parties sometime in
Donation is One of Mortis Causa.—In a donation mortis causa, “the right of
July 1986, that is, after respondent corporation had been placed under
disposition is not transferred to the donee while the donor is still alive.” In
receivership on November 4, 1985. As held in Villanueva v. Court of
determining whether a donation is one of mortis causa, the following
Appeals 18 "the appointment of a receiver operates to suspend the
characteristics must be taken into account: (1) It conveys no title or
authority of a [corporation] and of its directors and officers over its property
ownership to the transferee before the death of the transferor; or what
and effects, such authority being reposed in the receiver:" 19 Thus,
amounts to the same thing, that the transferor should retain the ownership
Sobrepeñas had no authority to condone the debt.
(full or naked) and control of the property while alive; (2) That before his
death, the transfer should be revocable by the transferor at will, ad nutum;
Indeed, Mrs. Yam herself testified that when she and her husband sought
but revocability may be provided for indirectly by means of a reserved
the release of the chattel mortgage over their property, they were told that

Assignment No. 1- Taxation Law 2 Page 23 of 35

power in the donor to dispose of the properties conveyed; and (3) That the
transfer should be void if the transferor should survive the transferee.
Same; Same; Words and Phrases; The phrase “to become effective upon the
death of the DONOR” admits of no other interpretation but that the donor
did not intend to transfer the ownership of the properties to the donee
during her lifetime.—In the present case, the nature of the donations as
mortis causa is confirmed by the fact that the donations do not contain any
clear provision that intends to pass proprietary rights to petitioners prior to
Cabatingan’s death. The phrase “to become effective upon the death of the
DONOR” admits of no other interpretation but that Cabatingan did not
intend to transfer the ownership of the properties to petitioners during her
lifetime.
Same; Same.—That the donations were made “in consideration of the love
and affection of the donor” does not qualify the donations as inter vivos
because transfers mortis causa may also be made for the same reason.
Same; Same; One of the decisive characteristics of a donation mortis causa
is that the transfer should be considered void if the donor should survive
the donee.—We apply the above rulings to the present case. The herein
subject deeds expressly provide that the donation shall be rescinded in case
petitioners predecease Conchita Cabatingan. As stated in Reyes v.
Mosqueda, one of the decisive characteristics of a donation mortis causa is
that the transfer should be considered void if the donor should survive the
donee. This is exactly what Cabatingan provided for in her donations. If she
really intended that the donation should take effect during her lifetime and
that the ownership of the properties donated be transferred to the donee
or independently of, and not by reason of her death, she would have not
expressed such proviso in the subject deeds.
Same; Same; Donations mortis causa partake of the nature of testamentary
provisions, and must be executed in accordance with the requisites on
solemnities of wills and testaments.—Considering that the disputed
donations are donations mortis causa, the same partake of the nature of
testamentary provisions and as such, said deeds must be executed in
accordance with the requisites on solemnities of wills and testaments under
Articles 805 and 806 of the Civil Code.
Assignment No. 1- Taxation Law 2
AUSTRIA-MARTINEZ, J.:
Posed for resolution before the Court in this petition for review
on certiorari filed under Rule 45 of the Rules of Court is the sole issue of
whether the donations made by the late Conchita Cabatingan are
donations inter vivos or mortis causa.
The facts of the case are as follows:
On February 17, 1992, Conchita Cabatingan executed in favor of her
brother, petitioner Nicolas Cabatingan, a "Deed of Conditional of Donation
(sic) Inter Vivos for House and Lot" covering one-half (½) portion of the
former's house and lot located at Cot-cot, Liloan, Cebu.1 Four (4) other
deeds of donation were subsequently executed by Conchita Cabatingan on
January 14, 1995, bestowing upon: (a) petitioner Estela C. Maglasang, two
(2) parcels of land - one located in Cogon, Cebu (307 sq. m.) and the other, a
portion of a parcel of land in Masbate (50,232 sq. m.); (b) petitioner Nicolas
Cabatingan, a portion of a parcel of land located in Masbate (80,000 sq. m.);
and (c) petitioner Merly S. Cabatingan, a portion of the Masbate property
(80,000 sq. m.).2 These deeds of donation contain similar provisions, to wit:
"That for and in consideration of the love and affection of the DONOR for
the DONEE, x x x the DONOR does hereby, by these presents, transfer,
convey, by way of donation, unto the DONEE the above-described property,
together with the buildings and all improvements existing thereon, to
become effective upon the death of the DONOR; PROVIDED,
HOWEVER, that in the event that the DONEE should die before the DONOR,
the present donation shall be deemed automatically rescinded and of no
further force and effect; x x x"3 (Emphasis Ours)
On May 9, 1995, Conchita Cabatingan died.
Upon learning of the existence of the foregoing donations, respondents filed
with the Regional Trial Court of Mandaue, Branch 55, an action for
Annulment And/Or Declaration of Nullity of Deeds of Donations and
Accounting, docketed as Civil Case No. MAN-2599, seeking the annulment of
said four (4) deeds of donation executed on January 14, 1995. Respondents
allege, inter alia, that petitioners, through their sinister machinations and
strategies and taking advantage of Conchita Cabatingan's fragile condition,
Page 24 of 35
caused the execution of the deeds of donation, and, that the documents are
void for failing to comply with the provisions of the Civil Code regarding
formalities of wills and testaments, considering that these are
donations mortis causa.4 Respondents prayed that a receiver be appointed
in order to preserve the disputed properties, and, that they be declared as
co-owners of the properties in equal shares, together with petitioner
Nicolas Cabatingan.5
Petitioners in their Amended Answer, deny respondents' allegations
contending that Conchita Cabatingan freely, knowingly and voluntarily
caused the preparation of the instruments.6
On respondents' motion, the court a quo rendered a partial judgment on
the pleadings on December 2, 1997 in favor of respondents, with the
following dispositive portion:
"WHEREREFORE, and in consideration of all the foregoing, judgment is
hereby rendered in favor of the plaintiffs and against the defendant and
unwilling co-plaintiff with regards (sic) to the four Deeds of Donation
Annexes "A", "A-1", "B" and Annex "C" which is the subject of this partial
decision by:
Declaring the four Deeds of Donation as null and void ab initio for being a
donation Mortis Causa and for failure to comply with formal and solemn
requisite under Art. 806 of the New Civil Code;
b) To declare the plaintiffs and defendants as well as unwilling co-plaintiff as
the heirs of the deceased Conchita Cabatingan and therefore hereditary co-
owners of the properties subject of this partial decision, as mandated under
Art. 777 of the New Civil Code;
SO ORDERED."7
The court a quo ruled that the donations are donations mortis causa and
therefore the four (4) deeds in question executed on January 14, 1995 are
null and void for failure to comply with the requisites of Article 806 of the
Civil Code on solemnities of wills and testaments.8
Assignment No. 1- Taxation Law 2
Raising questions of law, petitioners elevated the court a quo's decision to
this Court,9 alleging that:
"THE LOWER COURT PALPABLY DISREGARDED THE LONG-AND-WELL-
ESTABLISHED RULINGS OF THIS HONORABLE SUPREME COURT ON THE
CHARACTERIZATION OF DONATIONS AS INTER VIVOSOR
MORTIS CAUSA AND, INSTEAD, PROCEEDED TO INTERPRET THE DONATIONS
IN QUESTION IN A MANNER CONTRARY THERETO."10
Petitioners insist that the donations are inter vivos donations as these were
made by the late Conchita Cabatingan "in consideration of the love and
affection of the donor" for the donee, and there is nothing in the deeds
which indicate that the donations were made in consideration of
Cabatingan's death.11 In addition, petitioners contend that the stipulation
on rescission in case petitioners die ahead of Cabatingan is a resolutory
condition that confirms the nature of the donation as inter vivos.
Petitioners' arguments are bereft of merit.
In a donation mortis causa, "the right of disposition is not transferred to the
donee while the donor is still alive."12 In determining whether a donation is
one of mortis causa, the following characteristics must be taken into
account:
(1) It conveys no title or ownership to the transferee before the death of the
transferor; or what amounts to the same thing, that the transferor should
retain the ownership (full or naked) and control of the property while alive;
(2) That before his death, the transfer should be revocable by the transferor
at will, ad nutum; but revocability may be provided for indirectly by means
of a reserved power in the donor to dispose of the properties conveyed;
and
(3) That the transfer should be void if the transferor should survive the
transferee.13
In the present case, the nature of the donations as mortis causa is
confirmed by the fact that the donations do not contain any clear provision
Page 25 of 35
that intends to pass proprietary rights to petitioners prior to Cabatingan's
death.14 The phrase "to become effective upon the death of the DONOR"
admits of no other interpretation but that Cabatingan did not intend to
transfer the ownership of the properties to petitioners during her lifetime.
Petitioners themselves expressly confirmed the donations as mortis causa in
the following Acceptance and Attestation clauses, uniformly found in the
subject deeds of donation, to wit:
"That the DONEE does hereby accept the foregoing donation mortis causa
under the terms and conditions set forth therein, and avail herself of this
occasion to express her profound gratitude for the kindness and generosity
of the DONOR."
xxx
"SIGNED by the above-named DONOR and DONEE at the foot of this Deed of
Donation mortis causa, which consists of two (2) pages x x x."15
That the donations were made "in consideration of the love and affection of
the donor" does not qualify the donations as inter vivos because
transfers mortis causa may also be made for the same reason.16
Well in point is National Treasurer of the Phils. v. Vda. de Meimban.17 In
said case, the questioned donation contained the provision:
"That for and in consideration of the love and affection which the DONOR
has for the DONEE, the said Donor by these presents does hereby give,
transfer, and convey unto the DONEE, her heirs and assigns a portion of
ONE HUNDRED THOUSAND (100,000) SQUARE METERS, on the
southeastern part Pro-indiviso of the above described property. (The
portion herein donated is within Lot 2-B of the proposed amendment Plan
Subdivision of Lots Nos. 1 and 2, Psu-109393), with all the buildings and
improvements thereon, to become effective upon the death of the DONOR.
(italics supplied.)"18
Notably, the foregoing provision is similar to that contained in the donation
executed by Cabatingan. We held in Meimban case that the donation is
a mortis causa donation, and that the above quoted provision establishes
Assignment No. 1- Taxation Law 2
the donor's intention to transfer the ownership and possession of the
donated property to the donee only after the former's death. Further:
"As the donation is in the nature of a mortis causa disposition, the
formalities of a will should have been complied with under Article 728 of the
Civil Code, otherwise, the donation is void and would produce no effect. As
we have held in Alejandro v. Geraldez (78 SCRA 245,253), "If the donation is
made in contemplation of the donor's death, meaning that the full or naked
ownership of the donated properties will pass to the donee because of the
donor's death, then it is at that time that the donation takes effect, and it is
a donation mortis causa which should be embodied in a last will and
testament. (Citing Bonsato v. Court of Appeals, 95 Phil. 481)."19
We apply the above rulings to the present case. The herein subject deeds
expressly provide that the donation shall be rescinded in case petitioners
predecease Conchita Cabatingan. As stated in Reyes v. Mosqueda,20 one of
the decisive characteristics of a donation mortis causa is that the transfer
should be considered void if the donor should survive the donee. This is
exactly what Cabatingan provided for in her donations. If she really intended
that the donation should take effect during her lifetime and that the
ownership of the properties donated be transferred to the donee or
independently of, and not by reason of her death, she would have not
expressed such proviso in the subject deeds.1âwphi1.nêt
Considering that the disputed donations are donations mortis causa, the
same partake of the nature of testamentary provisions21 and as such, said
deeds must be executed in accordance with the requisites on solemnities of
wills and testaments under Articles 805 and 806 of the Civil Code, to wit:
"ART. 805. Every will, other than a holographic will, must be subscribed at
the end thereof by the testator himself or by the testator's name written by
some other person in his presence, and by his express direction, and
attested and subscribed by three or more credible witnesses in the presence
of the testator and of one another.
The testator or the person requested by him to write his name and the
instrumental witnesses of the will, shall also sign, as aforesaid, each and
every page thereof, except the last, on the left margin, and all the pages
Page 26 of 35
shall be numbered correlatively in letters placed on the upper part of each
page.
The attestation shall state the number of pages used upon which the will is
written , and the fact that the testator signed the will and every page
thereof, or caused some other person to write his name, under his express
direction, in the presence of the instrumental witnesses, and that the latter
witnessed and signed the will and all the pages thereof in the presence of
the testator and of one another.
If the attestation clause is in a language not known to the witnesses, it shall
be interpreted to them. (n)
ART. 806. Every will must be acknowledged before a notary public by the
testator and the witnesses. The notary public shall not be required to retain
a copy of the will, or file another with the office of the Clerk of Court. (n)"
The deeds in question although acknowledged before a notary public of the
donor and the donee, the documents were not executed in the manner
provided for under the above-quoted provisions of law. Thus, the trial court
did not commit any reversible error in declaring the subject deeds of
donation null and void.
WHEREFORE, the petition is hereby DENIED for lack of merit. SO ORDERED.
[6] G.R. No. 187056               September 20, 2010
JARABINI G. DEL ROSARIO, Petitioner,  vs. ASUNCION G. FERRER, substituted
by her heirs, VICENTE, PILAR, ANGELITO, FELIXBERTO, JR., all surnamed G.
FERRER, and MIGUELA FERRER ALTEZA, Respondents.
Donations; Donations Inter Vivos; Donations Mortis Causa; If a donation by
its terms is inter vivos, this character is not altered by the fact that the
donor styles it mortis causa.—That the document in question in this case
was captioned “Donation Mortis Causa” is not controlling. This Court has
held that, if a donation by its terms is inter vivos, this character is not
altered by the fact that the donor styles it mortis causa.
Same; Same; Same; Characteristics of Donations Mortis Causa;
“Irrevocability” is a quality absolutely incompatible with the idea of
Assignment No. 1- Taxation Law 2
conveyances mortis causa, where “revocability” is precisely the essence of
the act.—In Austria-Magat v. Court of Appeals, 375 SCRA 556 (2002), the
Court held that “irrevocability” is a quality absolutely incompatible with the
idea of conveyances mortis causa, where “revocability” is precisely the
essence of the act. A donation mortis causa has the following
characteristics: 1. It conveys no title or ownership to the transferee before
the death of the transferor; or, what amounts to the same thing, that the
transferor should retain the ownership (full or naked) and control of the
property while alive; 2. That before his death, the transfer should be
revocable by the transferor at will, ad nutum; but revocability may be
provided for indirectly by means of a reserved power in the donor to
dispose of the properties conveyed; and 3. That the transfer should be void
if the transferor should survive the transferee.
Same; Same; Same; In the context of an irrevocable donation, the
reservation (reddendum) by the donors of the “right, ownership,
possession, and administration of the property,” making the donation
operative upon their death, simply means that the donors parted with their
naked title, maintaining only beneficial ownership of the donated property
while they lived.—The donors in this case of course reserved the “right,
ownership, possession, and administration of the property” and made the
donation operative upon their death. But this Court has consistently held
that such reservation (reddendum) in the context of an irrevocable donation
simply means that the donors parted with their naked title, maintaining only
beneficial ownership of the donated property while they lived.
Same; Same; Same; An acceptance clause indicates that the donation is
inter vivos, since acceptance is a requirement only for such kind of
donations—donations mortis causa, being in the form of a will, need not be
accepted by the donee during the donor’s lifetime.—Notably, the three
donees signed their acceptance of the donation, which acceptance the deed
required. This Court has held that an acceptance clause indicates that the
donation is inter vivos, since acceptance is a requirement only for such kind
of donations. Donations mortis causa, being in the form of a will, need not
be accepted by the donee during the donor’s lifetime.
Same; Same; Same; In case of doubt, the conveyance should be deemed a
donation inter vivos rather than mortis causa, in order to avoid uncertainty
as to the ownership of the property subject of the deed.—As Justice J.B.L.
Reyes said in Puig v. Peñaflorida, 15 SCRA 276 (1965), in case of doubt, the
Page 27 of 35
conveyance should be deemed a donation inter vivos rather than mortis
causa, in order to avoid uncertainty as to the ownership of the property
subject of the deed.
Same; Same; Same; A donation inter vivos is deemed perfected from the
moment the donor learned of the donee’s acceptance of the donation,
making the donee the absolute owner of the property donated.—Since the
donation in this case was one made inter vivos, it was immediately
operative and final. The reason is that such kind of donation is deemed
perfected from the moment the donor learned of the donee’s acceptance of
the donation. The acceptance makes the donee the absolute owner of the
property donated.
Wills and Succession; Probate Proceedings; The rule on probate is not
inflexible and absolute—in the instant case, the trial court cannot be faulted
for passing upon, in a petition for probate of what was initially supposed to
be a donation mortis causa, the validity of the document as a donation inter
vivos and the nullity of one of the donor’s subsequent assignment of his
rights and interests in the property.—The trial court cannot be faulted for
passing upon, in a petition for probate of what was initially supposed to be a
donation mortis causa, the validity of the document as a donation inter
vivos and the nullity of one of the donor’s subsequent assignment of his
rights and interests in the property. The Court has held before that the rule
on probate is not inflexible and absolute. Moreover, in opposing the petition
for probate and in putting the validity of the deed of assignment squarely in
issue, Asuncion or those who substituted her may not now claim that the
trial court improperly allowed a collateral attack on such assignment
DECISION
ABAD, J.:
This case pertains to a gift, otherwise denominated as a donation mortis
causa, which in reality is a donation inter vivos made effective upon its
execution by the donors and acceptance thereof by the donees, and
immediately transmitting ownership of the donated property to the latter,
thus precluding a subsequent assignment thereof by one of the donors.
The Facts and the Case
Assignment No. 1- Taxation Law 2
On August 27, 1968 the spouses Leopoldo and Guadalupe Gonzales
executed a document entitled "Donation Mortis Causa"1 in favor of their
two children, Asuncion and Emiliano, and their granddaughter, Jarabini
(daughter of their predeceased son, Zoilo) covering the spouses’ 126-square
meter lot and the house on it in Pandacan, Manila2in equal shares. The
deed of donation reads:
It is our will that this Donation Mortis Causa shall be irrevocable and shall be
respected by the surviving spouse.
It is our will that Jarabini Gonzales-del Rosario and Emiliano Gonzales will
continue to occupy the portions now occupied by them.
It is further our will that this DONATION MORTIS CAUSA shall not in any way
affect any other distribution of other properties belonging to any of us
donors whether testate or intestate and where ever situated.
It is our further will that any one surviving spouse reserves the right,
ownership, possession and administration of this property herein donated
and accepted and this Disposition and Donation shall be operative and
effective upon the death of the DONORS.3
Although denominated as a donation mortis causa, which in law is the
equivalent of a will, the deed had no attestation clause and was witnessed
by only two persons. The named donees, however, signified their
acceptance of the donation on the face of the document.
Guadalupe, the donor wife, died in September 1968. A few months later or
on December 19, 1968, Leopoldo, the donor husband, executed a deed of
assignment of his rights and interests in subject property to their daughter
Asuncion. Leopoldo died in June 1972.
In 1998 Jarabini filed a "petition for the probate of the August 27, 1968 deed
of donation mortis causa" before the Regional Trial Court (RTC) of Manila in
Sp. Proc. 98-90589.4 Asuncion opposed the petition, invoking his father
Leopoldo’s assignment of his rights and interests in the property to her.
After trial, the RTC rendered a decision dated June 20, 2003,5 finding that
the donation was in fact one made inter vivos, the donors’ intention being
Page 28 of 35
to transfer title over the property to the donees during the donors’ lifetime,
given its irrevocability. Consequently, said the RTC, Leopoldo’s subsequent
assignment of his rights and interest in the property was void since he had
nothing to assign. The RTC thus directed the registration of the property in
the name of the donees in equal shares.6
On Asuncion’s appeal to the Court of Appeals (CA), the latter rendered a
decision on December 23, 2008,7reversing that of the RTC. The CA held that
Jarabini cannot, through her petition for the probate of the deed of
donation mortis causa, collaterally attack Leopoldo’s deed of assignment in
Asuncion’s favor. The CA further held that, since no proceeding exists for
the allowance of what Jarabini claimed was actually a donation inter vivos,
the RTC erred in deciding the case the way it did. Finally, the CA held that
the donation, being one given mortis causa, did not comply with the
requirements of a notarial will,8 rendering the same void. Following the
CA’s denial of Jarabini’s motion for reconsideration,9 she filed the present
petition with this Court.
Issue Presented
The key issue in this case is whether or not the spouses Leopoldo and
Guadalupe’s donation to Asuncion, Emiliano, and Jarabini was a donation
mortis causa, as it was denominated, or in fact a donation inter vivos.
The Court’s Ruling
That the document in question in this case was captioned "Donation Mortis
Causa" is not controlling. This Court has held that, if a donation by its terms
is inter vivos, this character is not altered by the fact that the donor styles
it mortis causa.10
In Austria-Magat v. Court of Appeals,11 the Court held that "irrevocability"
is a quality absolutely incompatible with the idea of conveyances mortis
causa, where "revocability" is precisely the essence of the act. A donation
mortis causa has the following characteristics:
1. It conveys no title or ownership to the transferee before the death of the
transferor; or, what amounts to the same thing, that the transferor should
retain the ownership (full or naked) and control of the property while alive;
Assignment No. 1- Taxation Law 2
2. That before his death, the transfer should be revocable by the transferor
at will, ad nutum; but revocability may be provided for indirectly by means
of a reserved power in the donor to dispose of the properties conveyed; and
3. That the transfer should be void if the transferor should survive the
transferee.12 (Underscoring supplied)
The Court thus said in Austria-Magat that the express "irrevocability" of the
donation is the "distinctive standard that identifies the document as a
donation inter vivos." Here, the donors plainly said that it is "our will that
this Donation Mortis Causa shall be irrevocable and shall be respected by
the surviving spouse." The intent to make the donation irrevocable becomes
even clearer by the proviso that a surviving donor shall respect the
irrevocability of the donation. Consequently, the donation was in reality a
donation inter vivos.
The donors in this case of course reserved the "right, ownership, possession,
and administration of the property" and made the donation operative upon
their death. But this Court has consistently held that such reservation
(reddendum) in the context of an irrevocable donation simply means that
the donors parted with their naked title, maintaining
only beneficial ownership of the donated property while they lived.13
Notably, the three donees signed their acceptance of the donation, which
acceptance the deed required.14 This Court has held that an acceptance
clause indicates that the donation is inter vivos, since acceptance is a
requirement only for such kind of donations.1awphi1 Donations mortis
causa, being in the form of a will, need not be accepted by the donee during
the donor’s lifetime.15
Finally, as Justice J. B. L. Reyes said in Puig v. Peñaflorida,16 in case of doubt,
the conveyance should be deemed a donation inter vivos rather than mortis
causa, in order to avoid uncertainty as to the ownership of the property
subject of the deed.
Since the donation in this case was one made inter vivos, it was immediately
operative and final. The reason is that such kind of donation is deemed
perfected from the moment the donor learned of the donee’s acceptance of
Page 29 of 35
the donation. The acceptance makes the donee the absolute owner of the
property donated.17
Given that the donation in this case was irrevocable or one given inter vivos,
Leopoldo’s subsequent assignment of his rights and interests in the property
to Asuncion should be regarded as void for, by then, he had no more rights
to assign. He could not give what he no longer had. Nemo dat quod non
habet.18
The trial court cannot be faulted for passing upon, in a petition for probate
of what was initially supposed to be a donation mortis causa, the validity of
the document as a donation inter vivos and the nullity of one of the donor’s
subsequent assignment of his rights and interests in the property. The Court
has held before that the rule on probate is not inflexible and
absolute.19 Moreover, in opposing the petition for probate and in putting
the validity of the deed of assignment squarely in issue, Asuncion or those
who substituted her may not now claim that the trial court improperly
allowed a collateral attack on such assignment.
WHEREFORE, the Court GRANTS the petition, SETS ASIDE the assailed
December 23, 2008 Decision and March 6, 2009 Resolution of the Court of
Appeals in CA-G.R. CV 80549, and REINSTATES in toto the June 20, 2003
Decision of the Regional Trial Court of Manila, Branch 19, in Sp. Proc. 98-
90589.
SO ORDERED.
[7] G.R. No. 120721             February 23, 2005
MANUEL G. ABELLO, JOSE C. CONCEPCION, TEODORO D. REGALA, AVELINO
V. CRUZ, petitioners,  vs. COMMISSIONER OF INTERNAL REVENUE and
COURT OF APPEALS, respondents.
Civil Law; Donations; Elements of a Donation.—Donation has the following
elements: (a) the reduction of the patrimony of the donor; (b) the increase
in the patrimony of the donee; and, (c) the intent to do an act of liberality or
animus donandi.
Assignment No. 1- Taxation Law 2
Same; Same; Same; Petitioners’ contribution of money without any material
consideration evinces animus donandi; The fact that their purpose for
donating was to aid in the election of the donee does not negate the
presence of donative intent.—Since animus donandi or the intention to do
an act of liberality is an essential element of a donation, petitioners argue
that it is important to look into the intention of the giver to determine if a
political contribution is a gift. Petitioners’ argument is not tenable. First of
all, donative intent is a creature of the mind. It cannot be perceived except
by the material and tangible acts which manifest its presence. This being the
case, donative intent is presumed present when one gives a part of one’s
patrimony to another without consideration. Second, donative intent is not
negated when the person donating has other intentions, motives or
purposes which do not contradict donative intent. This Court is not
convinced that since the purpose of the contribution was to help elect a
candidate, there was no donative intent. Petitioners’ contribution of money
without any material consideration evinces animus donandi. The fact that
their purpose for donating was to aid in the election of the donee does not
negate the presence of donative intent.
Same; Same; Same; Donative intent is not negated by the presence of other
intentions, motives or purposes which do not contradict donative intent.—
Since the purpose of an electoral contribution is to influence the results of
the election, petitioners again claim that donative intent is not present.
Petitioners attempt to place the barrier of mutual exclusivity between
donative intent and the purpose of political contributions. This Court
reiterates that donative intent is not negated by the presence of other
intentions, motives or purposes which do not contradict donative intent.
DECISION
AZCUNA, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Civil
Procedure, assailing the decision of the Court of Appeals in CA –G.R. SP No.
27134, entitled "Comissioner of Internal Revenue v. Manuel G. Abello, Jose
C. Concepcion, Teodoro D. Regala, Avelino V. Cruz and Court of Tax
Appeals," which reversed and set aside the decision of the Court of Tax
Appeals (CTA), ordering the Commissioner of Internal Revenue
(Commissioner) to withdraw his letters dated April 21, 1988 and August 4,
Page 30 of 35
1988 assessing donor’s taxes and to desist from collecting donor’s taxes
from petitioners.
During the 1987 national elections, petitioners, who are partners in the
Angara, Abello, Concepcion, Regala and Cruz (ACCRA) law firm, contributed
₱882,661.31 each to the campaign funds of Senator Edgardo Angara, then
running for the Senate. In letters dated April 21, 1988, the Bureau of
Internal Revenue (BIR) assessed each of the petitioners ₱263,032.66 for
their contributions. On August 2, 1988, petitioners questioned the
assessment through a letter to the BIR. They claimed that political or
electoral contributions are not considered gifts under the National Internal
Revenue Code (NIRC), and that, therefore, they are not liable for donor’s
tax. The claim for exemption was denied by the Commissioner.1  Sen. Angara does not affect the character of the fund transfers as donation
1ªvvphi1.nét
On September 12, 1988, petitioners filed a petition for review with the CTA,
which was decided on October 7, 1991 in favor of the petitioners. As
aforestated, the CTA ordered the Commissioner to desist from collecting
donor’s taxes from the petitioners.2
On appeal, the Court of Appeals reversed and set aside the CTA decision on
April 20, 1994.3 The appellate Court ordered the petitioners to pay donor’s
tax amounting to ₱263,032.66 each, reasoning as follows:
The National Internal Revenue Code, as amended, provides:
Sec. 91. Imposition of Tax. (a) There shall be levied, assessed, collected, and
paid upon the transfer by any person, resident, or non-resident, of the
property by gift, a tax, computed as provided in Section 92. (b) The tax shall
apply whether the transfer is in trust or otherwise, whether the gift is direct
or indirect, and whether the property is real or personal, tangible or
intangible.
Pursuant to the above-quoted provisions of law, the transfer of property by
gift, whether the transfer is in trust or otherwise, whether the gift is direct
or indirect, and whether the property is real or personal, tangible or
intangible, is subject to donor’s or gift tax.
Assignment No. 1- Taxation Law 2
A gift is generally defined as a voluntary transfer of property by one to
another without any consideration or compensation therefor (28 C.J. 620;
Santos vs. Robledo, 28 Phil. 250).
In the instant case, the contributions are voluntary transfers of property in
the form of money from private respondents to Sen. Angara, without
considerations therefor. Hence, they squarely fall under the definition of
donation or gift.
As correctly pointed out by the Solicitor General:
The fact that the contributions were given to be used as campaign funds of
or gift. There was thereby no retention of control over the disposition of the
contributions. There was simply an indication of the purpose for which they
were to be used. For as long as the contributions were used for the purpose
for which they were intended, Sen. Angara had complete and absolute
power to dispose of the contributions. He was fully entitled to the economic
benefits of the contributions.
Section 91 of the Tax Code is very clear. A donor’s or gift tax is imposed on
the transfer of property by gift.1awphi1.nét
The Bureau of Internal Revenue issued Ruling No. 344 on July 20, 1988,
which reads:
Political Contributions. – For internal revenue purposes, political
contributions in the Philippines are considered taxable gift rather than
taxable income. This is so, because a political contribution is indubitably not
intended by the giver or contributor as a return of value or made because of
any intent to repay another what is his due, but bestowed only because of
motives of philanthropy or charity. His purpose is to give and to bolster the
morals, the winning chance of the candidate and/or his party, and not to
employ or buy. On the other hand, the recipient-donee does not regard
himself as exchanging his services or his product for the money contributed.
But more importantly he receives financial advantages gratuitously.
When the U.S. gift tax law was adopted in the Philippines (before May 7,
1974), the taxability of political contributions was, admittedly, an unsettled
Page 31 of 35
issue; hence, it cannot be presumed that the Philippine Congress then had
intended to consider or treat political contributions as non-taxable gifts
when it adopted the said gift tax law. Moreover, well-settled is the rule that
the Philippines need not necessarily adopt the present rule or construction
in the United States on the matter. Generally, statutes of different states
relating to the same class of persons or things or having the same purposes
are not considered to be in pari materia because it cannot be justifiably
presumed that the legislature had them in mind when enacting the
provision being construed. (5206, Sutherland, Statutory Construction, p.
546.) Accordingly, in the absence of an express exempting provision of law,
political contributions in the Philippines are subject to the donor’s gift
tax. (cited in National Internal Revenue Code Annotated by Hector S. de
Leon, 1991 ed., p. 290).
In the light of the above BIR Ruling, it is clear that the political contributions
of the private respondents to Sen. Edgardo Angara are taxable gifts. The
vagueness of the law as to what comprise the gift subject to tax was made
concrete by the above-quoted BIR ruling. Hence, there is no doubt that
political contributions are taxable gifts.4
Petitioners filed a motion for reconsideration, which the Court of Appeals
denied in its resolution of June 16, 1995.5
Petitioners thereupon filed the instant petition on July 26, 1995. Raised are
the following issues:
1. DID THE HONORABLE COURT OF APPEALS ERR WHEN IT FAILED TO
CONSIDER IN ITS DECISION THE PURPOSE BEHIND THE ENACTMENT OF OUR
GIFT TAX LAW?
2. DID THE HONORABLE COURT OF APPEALS ERR IN NOT CONSIDERING THE
INTENTION OF THE GIVERS IN DETERMINING WHETHER OR NOT THE
PETITIONERS’ POLITICAL CONTRIBUTIONS WERE GIFTS SUBJECT TO DONORS
TAX?
3. DID THE HONORABLE COURT OF APPEALS ERR WHEN IT FAILED TO
CONSIDER THE DEFINITION OF AN "ELECTORAL CONTRIBUTION" UNDER THE
OMNIBUS ELECTION CODE IN DETERMINING WHETHER OR NOT POLITICAL
CONTRIBUTIONS ARE TAXABLE?
Assignment No. 1- Taxation Law 2
4. DID THE HONORABLE COURT OF APPEALS ERR IN NOT CONSIDERING THE
ADMINISTRATIVE PRACTICE OF CLOSE TO HALF A CENTURY OF NOT
SUBJECTING POLITICAL CONTRIBUTIONS TO DONORS TAX?
5. DID THE HONORABLE COURT OF APPEALS ERR IN NOT CONSIDERING THE
AMERICAN JURISPRUDENCE RELIED UPON BY THE COURT OF TAX APPEALS
AND BY THE PETITIONERS TO THE EFFECT THAT POLITICAL CONTRIBUTIONS
ARE NOT TAXABLE GIFTS?
6. DID THE HONORABLE COURT OF APPEALS ERR IN NOT APPLYING
AMERICAN JURISPRUDENCE ON THE GROUND THAT THIS WAS NOT KNOWN
AT THE TIME THE PHILIPPINES GIFT TAX LAW WAS ADOPTED IN 1939?
7. DID THE HONORABLE COURT OF APPEALS ERR IN RESOLVING THE CASE
MAINLY ON THE BASIS OF A RULING ISSUED BY THE RESPONDENT ONLY
AFTER THE ASSESSMENTS HAD ALREADY BEEN MADE?
8. DID THE HONORABLE COURT OF APPEALS ERR WHEN IT DID NOT
CONSTRUE THE GIFT TAX LAW LIBERALLY IN FAVOR OF THE TAXPAYER AND
STRICLTY AGAINST THE GOVERNMENT IN ACCORDANCE WITH APPLICABLE
PRINCIPLES OF STATUTORY CONSTRUCTION?6
First, Fifth and Sixth Issues
Section 91 of the National Internal Revenue Code (NIRC) reads:
(A) There shall be levied, assessed, collected and paid upon the transfer by
any person, resident or nonresident, of the property by gift, a tax, computed
as provided in Section 92
(B) The tax shall apply whether the transfer is in trust or otherwise, whether
the gift is direct or indirect, and whether the property is real or personal,
tangible or intangible.
The NIRC does not define transfer of property by gift. However, Article 18 of
the Civil Code, states:
In matters which are governed by the Code of Commerce and special laws,
their deficiency shall be supplied by the provisions of this Code.
Page 32 of 35
Thus, reference may be made to the definition of a donation in the Civil
Code. Article 725 of said Code defines donation as:
. . . an act of liberality whereby a person disposes gratuitously of a thing or
right in favor of another, who accepts it.
Donation has the following elements: (a) the reduction of the patrimony of
the donor; (b) the increase in the patrimony of the donee; and, (c) the intent
to do an act of liberality or animus donandi.7
The present case falls squarely within the definition of a donation.
Petitioners, the late Manuel G. Abello8 , Jose C. Concepcion, Teodoro D.
Regala and Avelino V. Cruz, each gave ₱882,661.31 to the campaign funds of
Senator Edgardo Angara, without any material consideration. All three
elements of a donation are present. The patrimony of the four petitioners
were reduced by ₱882,661.31 each. Senator Edgardo Angara’s patrimony
correspondingly increased by ₱3,530,645.249 . There was intent to do an
act of liberality or animus donandi was present since each of the petitioners
gave their contributions without any consideration.
Taken together with the Civil Code definition of donation, Section 91 of the
NIRC is clear and unambiguous, thereby leaving no room for construction.
In Rizal Commercial Banking Corporation v. Intermediate Appellate
Court10 the Court enunciated:
It bears stressing that the first and fundamental duty of the Court is to apply
the law. When the law is clear and free from any doubt or ambiguity, there
is no room for construction or interpretation. As has been our consistent
ruling, where the law speaks in clear and categorical language, there is no
occasion for interpretation; there is only room for application (Cebu
Portland Cement Co. v. Municipality of Naga, 24 SCRA 708 [1968])
Where the law is clear and unambiguous, it must be taken to mean exactly
what it says and the court has no choice but to see to it that its mandate is
obeyed (Chartered Bank Employees Association v. Ople, 138 SCRA 273
[1985]; Luzon Surety Co., Inc. v. De Garcia, 30 SCRA 111 [1969]; Quijano v.
Development Bank of the Philippines, 35 SCRA 270 [1970]).
Assignment No. 1- Taxation Law 2
Only when the law is ambiguous or of doubtful meaning may the court
interpret or construe its true intent.l^vvphi1.netAmbiguity is a condition of
admitting two or more meanings, of being understood in more than one
way, or of referring to two or more things at the same time. A statute is
ambiguous if it is admissible of two or more possible meanings, in which
case, the Court is called upon to exercise one of its judicial functions, which
is to interpret the law according to its true intent.
Second Issue
Since animus donandi or the intention to do an act of liberality is an
essential element of a donation, petitioners argue that it is important to
look into the intention of the giver to determine if a political contribution is
a gift. Petitioners’ argument is not tenable. First of all, donative intent is a
creature of the mind. It cannot be perceived except by the material and
tangible acts which manifest its presence. This being the case, donative
intent is presumed present when one gives a part of ones patrimony to
another without consideration. Second, donative intent is not negated when
the person donating has other intentions, motives or purposes which do not
contradict donative intent. This Court is not convinced that since the
purpose of the contribution was to help elect a candidate, there was no
donative intent. Petitioners’ contribution of money without any material
consideration evinces animus donandi. The fact that their purpose for
donating was to aid in the election of the donee does not negate the
presence of donative intent.
Third Issue
Petitioners maintain that the definition of an "electoral contribution" under
the Omnibus Election Code is essential to appreciate how a political
contribution differs from a taxable gift.11 Section 94(a) of the said Code
defines electoral contribution as follows:
The term "contribution" includes a gift, donation, subscription, loan,
advance or deposit of money or anything of value, or a contract, promise or
agreement to contribute, whether or not legally enforceable, made for the
purpose of influencing the results of the elections but shall not include
services rendered without compensation by individuals volunteering a
portion or all of their time in behalf of a candidate or political party. It shall
Page 33 of 35
also include the use of facilities voluntarily donated by other persons, the
money value of which can be assessed based on the rates prevailing in the
area.
Since the purpose of an electoral contribution is to influence the results of
the election, petitioners again claim that donative intent is not present.
Petitioners attempt to place the barrier of mutual exclusivity between
donative intent and the purpose of political contributions. This Court
reiterates that donative intent is not negated by the presence of other
intentions, motives or purposes which do not contradict donative intent.
Petitioners would distinguish a gift from a political donation by saying that
the consideration for a gift is the liberality of the donor, while the
consideration for a political contribution is the desire of the giver to
influence the result of an election by supporting candidates who, in the
perception of the giver, would influence the shaping of government policies
that would promote the general welfare and economic well-being of the
electorate, including the giver himself.
Petitioners’ attempt is strained. The fact that petitioners will somehow in
the future benefit from the election of the candidate to whom they
contribute, in no way amounts to a valuable material consideration so as to
remove political contributions from the purview of a donation. Senator
Angara was under no obligation to benefit the petitioners. The proper
performance of his duties as a legislator is his obligation as an elected public
servant of the Filipino people and not a consideration for the political
contributions he received. In fact, as a public servant, he may even be called
to enact laws that are contrary to the interests of his benefactors, for the
benefit of the greater good.
In fine, the purpose for which the sums of money were given, which was to
fund the campaign of Senator Angara in his bid for a senatorial seat, cannot
be considered as a material consideration so as to negate a donation.
Fourth Issue
Petitioners raise the fact that since 1939 when the first Tax Code was
enacted, up to 1988 the BIR never attempted to subject political
contributions to donor’s tax. They argue that:
Assignment No. 1- Taxation Law 2
. . . It is a familiar principle of law that prolonged practice by the
government agency charged with the execution of a statute, acquiesced in
and relied upon by all concerned over an appreciable period of time, is an
authoritative interpretation thereof, entitled to great weight and the
highest respect. . . .12
This Court holds that the BIR is not precluded from making a new
interpretation of the law, especially when the old interpretation was flawed.
It is a well-entrenched rule that
. . . erroneous application and enforcement of the law by public officers do
not block subsequent correct application of the statute (PLDT v. Collector of
Internal Revenue, 90 Phil. 676), and that the Government is never estopped
by mistake or error on the part of its agents (Pineda v. Court of First
Instance of Tayabas, 52 Phil. 803, 807; Benguet Consolidated Mining Co. v.
Pineda, 98 Phil. 711, 724).13
Seventh Issue
Petitioners question the fact that the Court of Appeals decision is based on a
BIR ruling, namely BIR Ruling No. 88-344, which was issued after the
petitioners were assessed for donor’s tax. This Court does not need to delve
into this issue. It is immaterial whether or not the Court of Appeals based its
decision on the BIR ruling because it is not pivotal in deciding this case. As
discussed above, Section 91 (now Section 98) of the NIRC as supplemented
by the definition of a donation found in Article 725 of the Civil Code, is clear
and unambiguous, and needs no further elucidation.
Eighth Issue
Petitioners next contend that tax laws are construed liberally in favor of the
taxpayer and strictly against the government. This rule of construction,
however, does not benefit petitioners because, as stated, there is here no
room for construction since the law is clear and unambiguous.
Finally, this Court takes note of the fact that subsequent to the donations
involved in this case, Congress approved Republic Act No. 7166 on
November 25, 1991, providing in Section 13 thereof that political/electoral
contributions, duly reported to the Commission on Elections, are not subject
Page 34 of 35
to the payment of any gift tax. This all the more shows that the political
contributions herein made are subject to the payment of gift taxes, since
the same were made prior to the exempting legislation, and Republic Act
No. 7166 provides no retroactive effect on this point.

WHEREFORE, the petition is DENIED and the assailed Decision and

Resolution of the Court of Appeals are AFFIRMED.

No costs.

SO ORDERED.

Assignment No. 1- Taxation Law 2 Page 35 of 35