Lorenzo vs.

Posadas (digest)
Lorenzo vs. Posadas
64 Phil 353
Facts:
On 27 May 1922, Thomas Hanley died in Zamboanga, leaving a will and considerable
amount of real and personal properties. Hanley’s will provides the following: his money
will be given to his nephew, Matthew Hanley, as well as the real estate owned by him. It
further provided that the property will only be given ten years after Thomas Hanley’s
death. Thus, in the testamentary proceedings, the Court of First Instance of Zamboanga
appointed P.J.M. Moore as trustee of the estate. Moore took oath of office on March 10,
1924, and resigned on Feb. 29, 1932. Pablo Lorenzo was appointed in his stead. Juan
Posadas, Collector of Internal Revenue, assessed inheritance tax against the estate
amounting to P2,057.74 which includes penalty and surcharge. He filed a motion in the
testamentary proceedings so that Lorenzo will be ordered to pay the amount due.
Lorenzo paid the amount in protest after CFI granted Posadas’ motion. He claimed that
the inheritance tax should have been assessed after 10 years. He asked for a refund but
Posadas declined to do so. The latter counterclaimed for the additional amount of
P1,191.27 which represents interest due on the tax and which was not included in the
original assessment. However, CFI dismissed this counterclaim. It also denied Lorenzo’s
claim for refund against Posadas. Hence, both appealed.
Issue: Whether the estate was delinquent in paying the inheritance tax and therefore
liable for the P1,191.27 that Posadas is asking for?
Held: Yes. It was delinquent because according to Sec. 1544 (b) of the Revised
Administrative Code, payment of the inheritance tax shall be made before delivering to
each beneficiary his share. This payment should have been made before March 10, 1924,
the date when P.J.M. Moore formally assumed the function of trustee.
Although the property was only to be given after 10 years from the death of Hanley, the
court considered that delivery to the trustee is delivery to cestui que trust, the beneficiary
within the meaning of Sec. 1544 (b).
Even though there was no express mention of the word “trust” in the will, the court of first
instance was correct in appointing a trustee because no particular or technical words are
required to create a testamentary trust (69 C.J.,p. 711). The requisites of a valid
testamentary trust are: 1) sufficient words to raise a trust, 2) a definite subject, 3) a certain
or ascertained object. There is no doubt that Hanley intended to create a trust since he
ordered in his will that certain of his properties be kept together undisposed during a fixed
period or for a stated purpose.

DIZON VS POSADAS JR (57 PHIL 465)

Dizon vs Posadas Jr
57 Phil 465 [GR No. L-36770 November 4, 1932]

Facts: Don Felix Dizon died on April 21, 1928. Before his death, he made a gift inter vivos in favor of
the plaintiff Luis W. Dizon of all his property according to a deed of a gift of which includes all the
property of Don Felix Dizon. The plaintiff did not receive the property of any kind of Don Felix upon
the death of the latter. Don Luis is the legitimate and only son of Don Felix. The defendant, collector of
internal revenue assess an inheritance tax of Php2,808.73 which Don Luis paid under protest and later
filed an action to recover sum of money thus paid. Plaintiff alleged that the inheritance tax is illegal
because he received the property, which is the basis of the tax from his father before his death by a
deed of gift inter vivos which was duly accepted and registered before the death of his father.

Issue: Whether or not the gift inter vivos is subject to inheritance tax.

Held: Yes. Section 1540 of the administrative code plainly does not tax gifts per se but only when
those gifts are made to those who shall prove to be the heirs, devisees, legatees or donees mortis
cause of the donor.

In this case, the scanty facts before us may not warrant the inference that the conveyance,
acknowledged by the donor 5 days before his death and accepted by the donee one day before the
donor’s death, was fraudulently made for the purpose of evading the inheritance tax. But the facts, in
our opinion, do not warrant the inference that the transfer was an advancement upon the inheritance
which the donee as the sole and forced heir of the donor, would be entitled to receive upon the death
of the donor.

VIDAL DE ROCES VS POSADAS JR (58 PHIL 108)

Vidal de Roces vs Posadas Jr
58 Phil 108 [GR No. L-34937 March 13, 1933]

Facts: On March 1o and 12, 1925, Esperanza Tuazon, by means of public documents, donated certain parcel of lands
situated in Manila to the plaintiffs herein who with their respective husbands accepted them in the same public documents
which were duly recorded in the registry of deeds. By virtue of said donations, the plaintiffs took possession of the said
lands, received the fruits thereof and obtained the corresponding transfer certificate of title. On January 25, 1926, the donor
died in the city of Manila leaving the forced heir and her will which was admitted to probate, she bequeathed to each of the
donees the sum of Php5,000. After the estate had been distributed among the instituted legatees and before the delivery of
their respective shares, the appellee herein, as collector of internal revenue, ruled that the appellant as donees and legatees
should pay as inheritance taxes the sums of Php16,673 and Php13,951.45 respectively. At first, the appellants refused to pay
the aforementioned taxes but, at the insistence of the appellee in order not to delay the adjudication of the legacies, they
agreed at last to pay them under protest. Hence, plaintiff-appellants filed an action to recover the taxes paid under protest.

Issue: Whether or not inheritance tax should be imposed on donations inter vivos.

Held: Yes. The tax collected by the appellee on the properties donated in 1925 really constitutes an inheritance tax imposed
on the transmission of said properties in contemplation or in consideration of the donor’s death and under circumstance that
the donees were later instituted as the former’s legatees. For this reason, the law considers such transmission in the form of
gifts inter vivos, as advances on the inheritance and nothing therein violates any constitutional provision, in as much as said
legislation is within the power of the legislature.

Property subject to inheritance tax – the inheritance tax ordinarily applies to all property within the power of the state to
reach passing by will or the laws regulating intestate succession or by gifts inter vivos in the manner designated by statute,
whether such property be real or personal, tangible or intangible, corporeal or incorporeal.

While a donee inter vivos, who after the predecessor’s death proved to be an heir, legatee or donee mortis causa, would have
to pay the tax, another donee inter vivos who did not prove to be an heir, a legatee or a donee mortis causa of the
predecessor, would be exempt from such tax.

It may be inferred from the allegations contained in par 2 and 7 thereof that said donations inter vivos were made in
consideration of the donor’s death. We refer to the allegations that such transmissions were effected in the month of March
1925, that the donor died in January 1926, and that the donees were instituted legatees in the donor’s will which was
admitted in probate. It is from these allegations, especially the last, that we infer a presumption juris tantum that said
donations were made mortis causa and, as such are subject to payment of inheritance tax.
Collector of Internal Revenue vs. Fisher
GR. No. L-11622
January 28, 1961

DOCTRINE:
“Reciprocity must be total. If any of the two states collects or imposes or does not exempt any
transfer, death, legacy or succession tax of any character, the reciprocity does not work.”

FACTS:
Walter G. Stevenson was born in the Philippines of British parents, married
in Manila to another British subject, Beatrice. He died in 1951 in California
where he and his wife moved to.
In his will, he instituted Beatrice as his sole heiress to certain real and
personal properties, among which are 210,000 shares of stocks in Mindanao
Mother Lode Mines (Mines).
Ian Murray Statt (Statt), the appointed ancillary administrator of his estate
filed an estate and inheritance tax return. He made a preliminary return to
secure the waiver of the CIR on the inheritance of the Mines shares of stock.
In 1952, Beatrice assigned all her rights and interests in the estate to the
spouses Fisher.
Statt filed an amended estate and inheritance tax return claiming
ADDITIOANL EXEMPTIONS, one of which is the estate and inheritance tax on
the Mines’ shares of stock pursuant to a reciprocity proviso in the NIRC,
hence, warranting a refund from what he initially paid. The collector denied
the claim. He then filed in the CFI of Manila for the said amount.
CFI ruled that (a) the ½ share of Beatrice should be deducted from the net
estate of Walter, (b) the intangible personal property belonging to the estate
of Walter is exempt from inheritance tax pursuant to the reciprocity proviso
in NIRC.

ISSUE/S:
Whether or not the estate can avail itself of the reciprocity proviso in the
NIRC granting exemption from the payment of taxes for the Mines shares of
stock.

RULI
NG:
NO.
Reciprocity must be total. If any of the two states collects or
imposes or does not exempt any transfer, death, legacy or
succession tax of any character, the reciprocity does not work.
In the Philippines, upon the death of any citizen or resident,
or non- resident with properties, there are imposed upon his
estate, both an estate and an inheritance tax.
But, under the laws of California, only inheritance tax is
imposed. Also, although the Federal Internal Revenue Code imposes an estate
tax, it does not grant exemption on the basis of reciprocity. Thus, a Filipino
citizen shall always be at a disadvantage. This is not what the legislators
intended.
SPECIFICALLY:
Section122 of the NIRC provides that “No tax shall be collected
under this Title in respect of intangible personal property
(a) if the decedent at the time of his death was a resident of
a foreign country which at the time of his death did not
impose a transfer of tax or death tax of any character in
respect of intangible personal property of citizens of the
Philippines not residing in that foreign country, or
(b) if the laws of the foreign country of which the decedent was a
resident at the time of his death allow a similar exemption from
transfer taxes or death taxes of every character in respect of
intangible personal property owned by citizens of the Philippines
not residing in that foreign country."
On the other hand, Section 13851 of the California Inheritance Tax
Law provides that intangible personal property is exempt from tax
if the decedent at the time of his death was a resident of a
territory or another State of the United States or of a foreign state
or country which then imposed a legacy, succession, or death tax
in respect to intangible personal property of its own residents, but
either:.
Did not impose a legacy, succession, or death tax of any character
in respect to intangible personal property of residents of this
State, or
Had in its laws a reciprocal provision under which intangible
personal property of a non-resident was exempt from legacy,
succession, or death taxes of every character if the Territory or
other State of the United States or foreign state or country in
which the nonresident resided allowed a similar exemption in
respect to intangible personal property of residents of the Territory
or State of the United States or foreign state or country of
residence of the decedent."
Wells Fargo Bank & Union Trust Company v CIR GR No L-46720, June 28, 1940

FACTS:
Birdie Lillian Eye died on September 16, 1932 at Los Angeles, California, the place of her alleged last
residence and domicile. Among the properties she left was her 1⁄2 conjugal shares of stock in the
Benguet Consolidated Mining Co., an anonymous partnership, organized under the laws of the
Philippines. She left a will duly admitted to probate in California where her estate was administered and
settled. Wells Fargo was the duly appointed trustee. The Federal and California State’s inheritance
taxes due thereon have been duly paid. The Collector of Internal Revenue in the Philippines, however,
sought to subject the shares of stock to inheritance tax, to which Wells Fargo objected.

ISSUE:
Whether the shares of stock are subject to Philippine inheritance tax

RULING:
Yes. Originally, the settled law in the United States is that intangibles have only one situs for the
purpose of inheritance tax, and such situs is in the domicile of the decedent at the time of his or her
death. But the rule has been relaxed.
The maxim “mobilia sequuntur personam” up which the rule rests, has been decried as a mere fiction of
law having its origin in considerations of general convenience and public policy and cannot be applied to
limit or control the right of the state to tax properly within its jurisdiction and must yield to established
fact of legal ownership, actual presence and control elsewhere, and cannot be applied if to do so would
result in inescapable and patent injustice.
This rests on either of two fundamental considerations:

. (1)  Upon the recognition of the inherent power of each government to tax persons, properties
and rights within its jurisdiction
and enjoying, thus, the protect of its laws; and
. (2)  Upon the principle that as to intangibles, a single location in space is hardly possible,
considering the multiple, distinct
relationships which may be entered into with respect thereto.

Herein, the actual situs of the shares of stock is in the Philippines, the corporation being domiciled
therein. Accordingly the jurisdiction of the Philippine government to tax must be upheld. 

Velilla vs. Posadas, 62 Phil. 624

FACTS:
On May 27, 1992, Thomas Hanley died leaving a will and considerable
amount of real and personal
properties. Under the will, the real properties were to
pass to Thomas’ nephew Matthew ten years after
the two executors named in the will was appointed trustee. During petitioner
Lorenzo’s incumbency as
trustee, the defendant Collector of Internal Revenue assessed against the
estate an inheritance tax in the
a
mount of P1,434.24 which, together with the penalties for delinquency in
payment, amounted to
P2,052.74. Lorenzo paid the said amount under protest, notifying defendant
Posadas that unless the
amount was promptly refunded suit would be brought for its reco
very. Posadas overruled Lorenzo’s
protest and refused to refund the said amount. Lorenzo went to the CFI but
the latter dismissed his
complaint and Posadas’ counterclaim.
ISSUE:
When does the inheritance tax accrue and when must it be satisfied?
HELD:
The
accrual of the inheritance tax is distinct from the obligation to pay the same.
Section 1536 as
amended, of the Administrative Code, imposes the tax upon "every
transmission by virtue of inheritance,
devise, bequest, gift mortis causa, or advance in antici
pation of inheritance, devise, or bequest." The tax
therefore is upon transmission or the transfer or devolution of property of a
decedent, made effective by
his death.
From the fact, however, that Thomas Hanley died on May 27, 1922, it does
not follow th
at the obligation
to pay the tax arose as of the date. The time for the payment on inheritance
tax is clearly fixed by section
1544 of the Revised Administrative Code as amended by Act No. 3031, in
relation to section 1543 of the
same Code. The two section
s follow:
SEC. 1543.
Exemption of certain acquisitions and transmissions
.
—
The following shall not be
taxed:
(a) The merger of the usufruct in the owner of the naked title.
(b) The transmission or delivery of the inheritance or legacy by the fiduciary
heir or
legatee to the trustees.
(c) The transmission from the first heir, legatee, or donee in favor of another
beneficiary,
in accordance with the desire of the predecessor.
SEC. 1544.
When tax to be paid
.
—
The tax fixed in this article shall be paid: