ESTATE TAX

Secs. 84-97, Sec. 104, NIRC, as amended by R.A. 10963 or the TRAIN Law

Revenue Regulations No. 12-2018 dated January 25, 2018 and issued March 15, 2018
General Principles & Determination of the Estate Tax

Lorenzo v. Posadas, G.R. No. 43082 dated June 18, 1937

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?

Ruling: 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.

Scra

 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 anticipation 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, (61 C. J., p. 1592.)
 If death is the generating source from which the power of the state to impose
inheritance
 "The right of the state to an inheritance tax accrues at the moment of death, and
hence is ordinarily measured as to any beneficiary by the value at that time of such
property as passes to him. Subsequent appreciation or depreciation is immaterial."
(Ross, Inheritance Taxation, p. 72.)
 Whatever may be the rule in other jurisdictions, we hold that a transmission by
inheritance is taxable at the time of the predecessor's death, notwithstanding the
postponement of the actual possession or enjoyment of the estate by the
beneficiary, and the tax measured by the value of the property transmitted at that
time regardless of its appreciation or depreciation.
 A trustee, no doubt, is entitled to receive a fair compensation for his services.
(Barney vs. Saunders, 16 How., 535; 14 Law. ed., 1047.) But from this it does not
follow that the compensation due him may lawfully be deducted in arriving at the
net value of the estate subject to tax. There is no statute in the Philippines which
requires trustees' commissions to be deducted in determining the net value of the
estate subject to inheritance tax. (61 C. J., p. 1705.) Furthermore, though a
testamentary trust has been created, it does not appear that the testator
intended that the duties of his executors and trustees should be separated. (Ibid.;
In re Vanneck's Estate, 161 N. Y. Supp., 893; 175 App. Div., 363; In re Collard's
Estate, 161 N. Y. Supp., 455.)
 Judicial expenses are expenses of administration (61 C. J., p. 1705) but, in State vs.
Hennepin County Probate Court (112 N. W., 878; 101 Minn., 485), it was said: "* * *
the compensation of a trustee, earned, not in the administration of the estate, but
in the management thereof for the benefit of the legatees or devisees, does not
come properly within the class or reason for exempting administration expenses. *
* * Services rendered in that behalf
 It is well-settled that inheritance taxation is governed by the statute in force at
the time of the death of the decedent (26 R. C. L., p. 206; 4 Cooley on Taxation,
4th ed., p. 3461). The taxpayer cannot foresee and ought not to be required to
 guess the outcome of pending measures. Of course, a tax statute may be made
retroactive in its operation. Liability for taxes under retroactive legislation has
been "one of the incidents of social life." (Seattle vs. Kelleher, 195 U. S., 351, 360;
49 Law. ed., 232; 25 Sup. Ct. Rep., 44.)
 But legislative intent that a tax statute should operate retroactively should be
perfectly clear. (Scwab vs. Doyle, 42 Sup. Ct. Rep., 491; Smietanka vs. First Trust
Savings Bank, 257 U. S., 602; Stockdale vs. Insurance Co., 20 Wall., 323; Lunch vs.
Turrish, 247 U. S., 221.) "A statute should be considered as prospective in its
operation, whether it enacts, amends, or repeals an inheritance tax, unless the
language of the statute clearly demands or expresses that it shall have a
retroactive effect, * * * " (61 C. J., 1602.)
 though the last paragraph of section 5 of Regulations No. 65 of the Department of
Finance makes section 3 of Act No. 3606, amending section 1544 of the Revised
Administrative Code, applicable to all estates the inheritance taxes due from which
have not been paid, Act No. 3606 itself contains no provisions indicating legislative
intent to give it retroactive effect. No such effect can be given the statute by this
court.
 Properly speaking, a statute is penal when it imposes punishment for an offense
committed against the state which, under the Constitution, the Executive has the
power to pardon. In common use, however, this sense has been enlarged to include
within the term "penal statutes" all statutes which command or prohibit certain
acts, and establish penalties
 Revenue laws, generally, which impose taxes collected by the means ordinarily
resorted to for the collection of taxes are not classed as penal laws, although
there are authorities to the contrary. (See Sutherland, Statutory Construction,
361; Twine Co. vs. Worthington, 141 U. S., 468; 12 Sup. Ct., 55; Rice vs. U. S., 4 C. C.
A., 104; 53 Fed., 910; Com. vs. Standard Oil Co., 101 Pa. St., 150; State vs. Wheeler,
44 P., 430; 25 Nev., 143.) Article 22 of the Revised Penal Code is not applicable to
the case at bar, and in the absence of clear legislative intent, we cannot give Act
No. 3606 a retroactive effect.
 The word "trust" is not mentioned or used in the will but the intention to create
one is clear. No particular or technical words are required to create a testamentary
trust. * (69 C. J., p. 711.) The words "trust" and "trustee", though apt for the
purpose, are not necessary. In fact, the use of these two words is not conclusive on
the question that a trust is created. (69 C. J., p. 714.)
 There is no doubt that the testator intended to create a trust. He ordered in his
will that certain of his properties be kept together undisposed during a fixed
period, for a stated purpose. The probate court certainly exercised sound
judgment in appointing a trustee to carry into effect the provisions of the will.
(See sec. 582, Code of Civil Procedure.)
  The word "trustee", appearing in subsection (b) of section 1543, should read
"fideicommissary" or "cestui que trust". There was an obvious mistake in translation
from the Spanish to the English version.

Gross Estate – Rule for Imposition

1. Valuation of gross estate
a. Decedent’s interest
b. Transfer in contemplation of death

Alejandro v. Geraldez, G.R. Nos. L-33849 & L-33968 dated August 18,
1977 (donation inter vivos vs. donation mortis causa)

FACTS: Petition for Review on Certiorari of the decisions of the CFI of Bulacan
 This is a case about donations inter vivos and mortis causa.
 The bone of contention is Lot No. 2502 of the Lolomboy Friar Lands Estate with an
area of 5, 678 sq. meters, situated in Sta. Maria Bulacan.
 Sps. Gavino Diaz and Severa Mendoza executed a Deed of Donation in favor of their
children, Olimpia, Angel, Andrea Diaz, and daughter-in-law Regina Fernando. In the
deed of donation, the Sps. Donated 8 lots, with reservations on certain lots, to their
children and daughters-in-law and with conditions that they are not allowed to alienate
the same to 3rd persons while the couple are still alive and that they shall continue to
administer the same until their death. The donees manifested their acceptance in the
same deed of donation. When Gavino died, Severa executed a deed of donation in favor
of Angel and Andrea, giving the siblings each a ½ portion of Lot 2377-A.
 When Severa died, Andrea sued her brother Angel for the partition of Lots 2377-A
and 2502. Teodorico Alejandro, the surviving spouse of Olimpia, moved to intervene
claiming 1/3 portion of Lot 2502.
 In his answer, Angel alleged that he had been occupying his share of Lot 2502 for more
than 20 years. The intervenors claimed that the 1949 donation was a void mortis causa
disposition.
 The CFI ruled that the donation was a donation mortis causa because the ownership of
the properties donated did not pass to the donees during the donor’s lifetime but was
transmitted to the donees only ―upon the death of the donors‖. It, however, sustained
the partition of Lot 2502 since it was an extrajudicial partition. Both parties appealed
to the SC, Andrea contending that it is a donation inter vivos while Alejandro
contending it to be mortis causa.

ISSUE: Whether or not the donation is a donation inter vivos or mortis causa.
HELD: Donation inter vivos

 An inter vivos donation of real property must be evidenced by a public

document and should be accepted by the donee in the same deed of donation or
in a separate instrument. In the latter case, the donor should be notified of the
acceptance in an authentic form and that step should be noted in both instruments.
x x x On the other hand, a transfer mortis causa should be embodied in a last
will and testament. It should not be called mortis causa. It is in reality a
legacy. If not embodied in a valid will, the donation is void.
 This Court advised notaries to apprise donors of the necessity of clearly specifying
whether, notwithstanding the donation, they wish to retain the right to control and
dispose at will of the property before their death, without the consent or
intervention of the beneficiary, since the reservation of such right would be a
conclusive indication that the transfer would be effective only at the donor’s death,
and, therefore, the formalities of testaments should be observed; while, a
converso, the express waiver of the right of free disposition would place the inter
vivos character of the donation beyond dispute. x x x It is the time of effectivity
(aside from the form) which distinguishes a donation inter vivos from a donation
mortis causa.
 Features which show that a deed of donation is inter vivos and not mortis
causa.—The donation in the instant case is inter vivos because it took effect
during the lifetime of the donors. x x x In that clause it is stated that, in
consideration of the affection and esteem of the donors for the donees and
the valuable services rendered by the donees to the donors, the latter, by
means of the deed of donation, wholeheartedly transfer and unconditionally
give to the donees the lots mentioned and described in the early part of the
deed, free from any kind of liens and debts. x x x The acceptance clause is
another indication that the donation is inter vivos. Donations mortis causa,
being in the form of a will, are never accepted by the donees during the
donors’ lifetime. Acceptance is a requirement for donations inter vivos.
 Condition that donees cannot sell during donors’ lifetime to a third person the
donated property implies immediate passage of ownership and, therefore donation
is inter vivos.—It is stipulated x x x that the donees cannot sell to a third person
the donated properties during the donors’ lifetime but if the sale is necessary to
defray the expenses and support of the donors, then the sale is valid. The limited
right to dispose of the donated lots, which the deed gives to the donees, implies
that ownership had passed to them by means of the donation and that, therefore,
the donation was already effective during the donors’ lifetime. That is a
characteristic of a donation inter vivos.
 All provisions of a deed of donation should be construed together in case of
conflicting statements therein. Case at bar.—The habendum clause indicates the
transfer of the ownership over the donated properties to the donees upon the
 execution of the deed. But the reddendum clause seems to imply that the
ownership was retained by the donors and would be transferred to the donees only
after their death. We have reflected on the meaning of the said contradictory
clauses. All the provisions of the deed, like those of a statute and testament,
should be construed together in order to ascertain the intention of the parties.
That task would have been rendered easier if the record shows the conduct of the
donors and the donees after the execution of the deed of donation. x x x Our
conclusion is that the aforequoted paragraph 3 of the reddendum or reservation
clause refers to the beneficial ownership (dominium utile) and not to the naked title
and that what the donors reserved to themselves, by means of that clause, was the
management of the donated lots and the fruits thereof. But, notwithstanding that
reservation, the donation, as shown in the habendum clause, was already effective
during their lifetime and was not made in contemplation of their death because the
deed transferred to the donees the naked ownership of the donated properties.
That conclusion is further supported by the fact that in the deed of donation, out
of the 8 lots owned by the donors, only 5 were donated

Gestopa v. CA G.R. No. 111904 dated October 5, 2000

Facts:

Spouses Diego and Catalina Danlag were the owners of six parcels of unregistered land.
They executed three deeds of donation MORTIS CAUSA, in favor of the Private
Respondent Mercedes Danlag. All deeds contained the reservation of the rights of the
donors

1) to AMEND, CANCEL OR REVOKE the donation during their lifetime, and

2) to SELL, MORTGAGE, OR ENCUMBER the properties donated during the
donors' lifetime, if deemed necessary.

Later, Diego Danlag, with the consent of his wife, executed a deed of donation INTER
VIVOS covering the aforementioned parcels of land plus two other parcels, again in favor
of private respondent. This deed of donation contained two conditions,

1) first, that the Danlag spouses shall continue to enjoy the fruits of the land
during their lifetime, and
2) second, that the donee cannot sell or dispose of the land during the lifetime of
the spouses, without their prior consent and approval .
 Mercedes caused the transfer of the parcels' tax declaration to her name and paid the
taxes thereon.

However, spouses Danlag later sold parcels 3 and 4 to herein petitioners, spouses
Gestopa. They also executed a deed of revocation recovering the 6 parcels of land subject
of the deed of donation inter vivos.

Consequently, private respondent filed with the RTC a petition for quieting of title
over the above parcels of land against the Gestopas and the Danlags. She alleged that she
was an illegitimate daughter of Diego Danlag; that she lived and rendered incalculable
beneficial services to Diego and his mother , Maura Danlag, when the latter was still alive .
In recognition of the services she rendered, Diego executed a Deed of Donation conveying
to her the six parcels of land. She accepted the donation in the same instrument ,
openly and publicly exercised rights of ownership over the donated properties, and
caused the transfer of the tax declarations to her name. However, through
machination, intimidation and undue influence, Diego persuaded the husband of Mercedes,
Eulalio Pilapil, to buy two of the six parcels covered by the deed of donation. Said donation
inter vivos was coupled with conditions and, according to Mercedes, since its perfection,
she had complied with all of them; that she had not been guilty of any act of ingratitude;
and that respondent Diego had no legal basis in revoking the subject donation and then in
selling the two parcels of land to the Gestopas.

However, petitioners averred that the deed of donation dated January 16, 1973 was
null and void because it was obtained by the private respondent through machination and
undue influence.

RTC ruled that the both the donations mortis causa and inter vivos as revoked, and
therefore have no legal effect. The trial court also declared the spouses Danlag as the
absolute owners of the disputed lands.

However, CA reversed the decision of the RTC upon appeal.

ISSUES:

a. Whether or not the donation in this case is inter vivos or mortis causa to determine
whether the donor intended to transfer the ownership over the properties upon the
execution of the deed.
b. Whether or not the revocation is valid

Ruling:
 On the first issue, the court held that the donation was INTER VIVOS and that the
donor intended to transfer the ownership of the properties.

1) Diego Danlag donated the properties in consideration of love and affection for the
donee.
2) the reservation of lifetime usufruct indicates that the donor intended to transfer
the naked ownership over the properties. As correctly posed by the Court of
Appeals, what was the need for such reservation if the donor and his spouse
remained the owners of the properties?
3) the donor reserved sufficient properties for his maintenance in accordance with his
standing in society, indicating that the donor intended to part with the six parcels
of land.
4) THE DONEE ACCEPTED THE DONATION. A limitation on the right to sell during
the donor’s life implied that ownership had passed to the donees and donation was
already effective during the donor’s lifetime .

No. A valid donation, once accepted, becomes irrevocable, except on account of

OFFICIOUSNESS, FAILURE BY THE DONEE TO COMPLY WITH THE CHARGES
IMPOSED IN THE DONATION, OR INGRATITUDE. The donor-spouses did not invoke
any of these reasons in the deed of revocation.

SCRA

 Crucial in resolving whether the donation was inter vivos or mortis causa is the
determination of whether the donor intended to transfer the ownership over
the properties upon the execution of the deed. In ascertaining the intention of
the donor, all of the deed’s provisions must be read together.
 In the case of Alejandro vs. Geraldez, 78 SCRA 245 (1977), we said that an
acceptance clause is a mark that the donation is inter vivos. Acceptance is a
requirement for donations inter vivos. Donations mortis causa, being in the form
of a will, are not required to be accepted by the donees during the donors’
lifetime.
 The Court of Appeals did not err in concluding that the right to dispose of the
properties belonged to the donee. The donor’s right to give consent was merely
intended to protect his usufructuary interests. In Alejandro, we ruled that a
limitation on the right to sell during the donors’ lifetime implied that ownership
had passed to the donees and donation was already effective during the donors’
lifetime.
 A valid donation, once accepted, becomes irrevocable, except on account of
officiousness, failure by the donee to comply with the charges imposed in the
 donation, or ingratitude. The donor-spouses did not invoke any of these reasons
in the deed of revocation.

c. Revocable transfer
d. Property passing under general power of appointment
e. Proceeds of life insurance
f. Prior interests
g. Transfers for insufficient consideration
2. Exclusion from gross estate: capital of surviving spouse
3. Deduction from gross estate
a. Standard deduction
b. Claims against the estate

Johannes v. Imperial, G.R. No. L-19153 dated June 30, 1922

B. E. JOHANNES, as principal administrator of the estate of Carmen Theodora

Johannes, realtor, vs. CARLOS A. IMPERIAL, as Judge of the Court of First
Instance, City of Manila, respondent.

Facts

 A petition for certiorari and a temporary injunction, in which the relators prayed
for an order of this court:
o "(A) To annul the appointment of Alfred D'Almeida as administrator of said
deposit in the Philippines; and all acts and proceedings taken by him as said
administrator; and,
o "(B) To issue an order itself, or one to the said Judge George R. Harvey,
directing the manager of the 'Philippine National Bank,' to place to the
credit of B. E. Johannes, as administrator of the estate of Carmen Theodora
Johannes, all of the funds of said Carmen D'Almeida (Johannes), now on
deposit with the said bank, subject to the order of said court. And, as the
act of the said Alfred D'Almeida in having himself appointed administrator
was in evident bad faith, as clearly appears from the petition asking his
appointment, the court is requested to grant relators five thousand pesos
(P5,000), as damages caused by delay, expensive and unnecessary litigation,
and such other relief as the court may deem in equity proper."
 Upon a hearing, the prayer was denied, and the petition dismissed in an opinion
written by Justice Malcolm and concurred in by all the other members of this
court.
  It appears that the petitioner is the husband of Carmen Theodora Johannes,
deceased, who, at the time of her death, was a resident of Singapore, Straits
Settlements, and a citizen of Great Britain; that he is also a foreigner and a citizen
of Great Britain and an actual resident of Singapore; that Alfred D'Almeida is a
brother of the deceased Carmen Theodora Johannes, and a bona fide resident of
the City of Manila; that at the time of her death Carmen Theodora Johannes had
P109,722.55 on deposit in one of the banks in the City of Manila; and that the
petitioner, her surviving husband, was indebted to a bank in Manila for about
P20,000. That the deceased left no will in the absence of which the petitioner
claims to be her sole heir and entitled to all of her estate. That there were no
debts against the estate of the deceased. Upon the death of his wife, the
petitioner was duly appointed as administrator of her estate by the court at
Singapore, and qualified and entered upon the discharge of his duties. After the
decision was rendered by this court in case No. 18600, supra, the petitioner came
to Manila and claims to have established a temporary residence at the Manila Hotel,
based upon which, in legal effect, he asked for an order of court that Alfred
D'Almeida be removed as ancillary administrator, and that he be appointed.
 From an order of the lower court denying that petition, an original petition was
filed here to review the proceedings of the lower court.
 There is a marked legal distinction between the authority of a court to appoint and
the authority to remove an administrator after he is appointed. Here, the
appointment was made and the administrator had qualified and entered upon the
discharge of his duties. There was no contest over the appointment, and the court
had jurisdiction of the petition and of the subject-matter. It was not a case of
where two or more petitions were filed, in which each was claiming the right to be
appointed, or in which the court decided which one of the petitioners should be
appointed. It was a case in which only one petition was presented to the court, and
to which no objections were filed and in which it appeared the petitioner was a
brother of the deceased, and that the estate was the owner of property in the City
of Manila. The court, having jurisdiction and the appointment having been made, the
only question here presented is whether Alfred D'Almeida should be removed and
the petitioner substituted as ancillary administrator.
 CLAIMING ATTORNEY’S FEES
ISSUE: WoN Alfred D'Almeida should be removed and the petitioner substituted as
ancillary administrator
RULING:
 As the court said in case No. 18600 (Johannes vs. Harvey, supra):
 "The ancillary administration is proper, whenever a person dies, leaving in a country
other than that of his last domicile, property to be administered in the nature of
assets of the decedent, liable for his individual debts or to be distributed among
his heirs.
 "It is almost a universal rule to give the surviving spouse a preference when an
administrator is to be appointed, unless for a strong reasons it is deemed advisable
to name someone else. This preference has a particular force under Spanish law
precedents. However, the Code of Civil Procedure, in section 642, while naming the
surviving husband or wife as the case may be, as one to whom administration can be
granted, leaves this to the discretion of the court to determine for it may be found
that the surviving spouse is unsuitable for the responsibility. . . .
 "Undoubtedly, if the husband should come into this jurisdiction, the court would
give consideration to his petition that he be named the ancillary administrator for
local purposes. Ancillary letters should ordinarily be granted to the domiciliary
representative, if he applies therefor, or to his nominee, or attorney; but in the
absence of express statutory requirement the court may in its discretion appoint
some other person."
 The real contention of the petitioner is that, because he had the legal right to
apply for and be appointed in the first instance, such right is continuous, and that
he could be appointed any time on his own application. That is not the law. Although
it is true that in the first instance everything else being equal and upon the grounds
of comity, in ordinary cases, the court would appoint the petitioner or his nominee
an ancillary administrator, but even then, as stated in the above opinion, the
appointment is one of more or less legal discretion. But that is not this case. Here,
in legal effect, it is sought to oust an administrator who was appointed without
protest or objection where the court had jurisdiction of the petitioner and of the
subject-matter.
 Again, it appears that Carmen Theodora Johannes died August 21, 1921, and on
September 19, 1921, the petitioner was appointed administrator of her estate by
the Supreme Court of Straits Settlements on his own petition, and on October 1,
1921, based upon his petition, Alfred D'Almeida, the brother of the deceased, was
appointed administrator of her estate in Manila. The initial proceeding against the
appointment of Alfred D'Almeida, as administrator, was filed in this court on
January 21, 1922.
 At the time of the appointment here, the court had primary and original
jurisdiction, and no objections were then made. The question as to whom should
have been appointed ancillary administrator, if presented at the proper time and in
the proper way, is not before this court. Here, the appointment was made on the
1st day of October, 1921, and no formal objections were made until the 21st day of
January, 1922.
 The petition is denied, the injunction dissolved and the case dismissed.
 It appears that the debts of the estate, if any, are nominal, and that the only asset
here is the money on deposit in the bank. Hence, the administration of the estate
itself is a matter of form only and should be very simple and inexpensive. Even
though it is foreign money, it is the duty of the court to protect it from any illegal,
unjust, or unreasonable charges. All claims against the estate should be for just
 debts only, or for the actual expenses of administration, and those should be
reasonable. No other claims should be allowed.
 If, as claimed, the real dispute here is whether the brothers and sisters of the
deceased are entitled to share in her estate, or whether the petitioner only, as the
surviving husband, is entitled to all of it, that question is not one of administration,
and any expense and attorneys' fees incurred by either party for the settlement of
that question is a personal matter to them, and should not be allowed as claims
against the estate. Claims against the estate should only be for just debts or
expense for the administration of the estate itself.
 Cost in favor of the respondent. So ordered.

Domingo v. Garlitos, G.R. No. L-18994 dated June 29, 1963

MELECIO R. DOMINGO, as Commissioner of Internal Revenue, petitioner, vs. HON.
LORENZO C. GARLITOS, in his capacity as Judge of the Court of First Instance of
Leyte, and SIMEONA K. PRICE, as administratrix of the Intestate Estate of the
late Walter Scott Price, respondents.

This is a petition for certiorari and mandamus against the Judge of the Court of First
Instance of Leyte, Hon. Lorenzo C. Garlitos, presiding, seeking to annul certain orders of
the court and for an order in this Court directing the respondent court below to execute
the judgment in favor of the Government against the estate of Walter Scott Price for
internal revenue taxes.

It appears that in Melecio R. Domingo vs. Hon. Judge S. C. Moscoso, 106 Phil., 1138, this
Court declared as final and executory the order for the payment by the estate of the
estate and inheritance taxes, charges and penalties amounting to P40,058.55, issued by
the Court of First Instance of Leyte in special proceedings No. 14 entitled "In the Matter
of the Intestate Estate of the Late Walter Scott Price." In order to enforce the claims
against the estate the fiscal presented a petition dated June 21, 1961, to the court below
for the execution of the judgment. The petition was, however, denied by the court which
held that the execution is not justifiable as the Government is indebted to the estate
under administration in the amount of P262,200. The orders of the court below dated
August 20, 1960 and September 28, 1960, respectively, are as follows:

"Atty. Benedicto submitted a copy of the contract between Mrs. Simeona K. Price,
Administratrix of the estate of her late husband Walter Scott Price and Director Zoilo
Castrillo of the Bureau of Lands dated September 19, 1956 and acknowledged before
Notary Public Salvador V. Esguerra, legal adviser in Malacañang to Executive Secretary De
Leon dated December 14, 1956, the note of His Excellency, Pres. Carlos P. Garcia, to
Director Castrillo dated August 2, 1958, directing the latter to pay to Mrs. Price the sum
of P368,140.00, and an extract of page 765 of Republic Act No. 2700 appropriating the
sum of P262,200.00 for the payment to the Leyte Cadastral Survey, Inc., represented by
the administratrix Simeona K. Price, as directed in the above note of the President.
Considering these facts, the Court orders that the payment of inheritance taxes in the
sum of P40,058.55 due the Collector of Internal Revenue as ordered paid by this Court on
July 5, 1960 in accordance with the order of the Supreme Court promulgated July 30,
1960 in 106 Phil., 1138, be deducted from the amount of P262,200.00 due and payable to
the administratrix Simeona K. Price, in this estate, the balance to be paid by the
Government to her without further delay." (Order of August 20, 1960)

"The Court has nothing further to add to its order dated August 20, 1960 and it orders
that the payment of the claim of the Collector of Internal Revenue be deferred until the
Government shall have paid its accounts to the administratrix herein amounting to
P262,200.00. It may not be amiss to repeat that it is only fair for the Government. as a
debtor, to pay its accounts to its citizens-creditors before it can insist in the prompt
payment of the latter's account to it, specially taking into consideration that the amount
due the Government draws interests while the credit due to the present estate does not
accrue any interest." (Order of September 28, 1960)

The petition to set aside the above orders of the court below and for the execution of the
claims of the Government against the estate must be denied for lack of merit. The
ordinary procedure by which to settle claims or indebtedness against the estate of a
deceased person, as an inheritance tax, is for the claimant to present a claim before the
probate court so that said court may order the administrator to pay the amount thereof.
To such effect is the decision of this Court in Aldamiz vs. Judge of the Court of First
Instance of Mindoro, G.R. No. L-2360, Dec. 29, 1949, thus:
 
". . . a writ of execution is not the proper procedure allowed by the Rules of Court for the
payment of debts and expenses of administration. The proper procedure is for the court
to order the sale of personal estate or the sale or mortgage of real property of the
deceased and all debts or expenses of administration should be paid out of the proceeds
of the sale or mortgage. The order for the sale or mortgage should be issued upon motion
of the administrator and with the written notice to all the heirs, legatees and devises
residing in the Philippines, according to Rule 89, section 3, and Rule 90, section 2. And
when sale or mortgage of real estate is to be made, the regulations contained in Rule 90,
section 7, should be complied with.

"Execution may issue only where the devises, legatees or heirs have entered into
possession of their respective portions in the estate prior to settlement and payment of
the debts and expenses of administration and it is later ascertained that there are such
debts and expenses to be paid, in which case 'the court having jurisdiction of the estate
may, by order for that purpose, after hearing, settle the amount of their several
liabilities, and order how much and in what manner each person shall contribute, and may
issue execution if circumstances require' (Rule 89 section 6; see also Rule 74, section 4;
Italics ours.) And this is not the instant case."

The legal basis for such a procedure is the fact that in the testate or intestate
proceedings to settle the estate of a deceased person, the properties belonging to the
estate are under the jurisdiction of the court and such jurisdiction continues until said
properties have been distributed among the heirs entitled thereto. During the pendency of
the proceedings all the estate is in custodia legis and the proper procedure is not to allow
the sheriff, in case of a court judgment, to seize the properties but to ask the court for
an order to require the administrator to pay the amount due from the estate and required
to be paid.

Another ground for denying the petition of the provincial fiscal is the fact that the court
having jurisdiction of the estate had found that the claim of the estate against the
Government has been recognized and an amount of P262,200 has already been
appropriated for the purpose by a corresponding law (Rep. Act No. 2700). Under the above
circumstances, both the claim of the Government for inheritance taxes and the claim of
the intestate for services rendered have already become overdue and demandable as well
as fully liquidated. Compensation, therefore, takes place by operation of law, in accordance
with the provisions of Articles 1279 and 1290 of the Civil Code, and both debts are
extinguished to the concurrent amount, thus:

"Art. 1200. When all the requisites mentioned in article 1279 are present, compensation
takes effect by operation of law, and extinguishes both debts to the concurrent amount,
even though the creditors and debtors are not aware of the compensation."

It is clear, therefore, that the petitioner has no clear right to execute the judgment for
taxes against the estate of the deceased Walter Scott Price. Furthermore, the petition
for certiorari and mandamus is not the proper remedy for the petitioner. Appeal is the
remedy.

Scra
Fully due and demandable, pwede na mag legal compensation.
Taxation; Inheritance tax; Procedure in enforcement against estate of deceased person;
Claim must be filed before probate court.—The ordinary procedure by which to settle
claims or indebtedness against the estate of a deceased person, as an inheritance tax, is
for the claimant to present a claim before the probate court so that said court may order
the administrator to pay the amount hereof (Aldamiz vs. Judge of the Court of First
Instance of Mindoro, L-2360, Dec. 29, 1949).
Same; Same; Same; Same; Legal basis.—The legal basis for such a procedure is the fact
that in the testate or intestate proceedings to settle the estate of a deceased person,
the properties belonging to the estate are under the jurisdiction of the court and such
jurisdiction continues until said properties have been distributed among the heirs entitled
thereto. During the pendency of the proceedings all the estate is in custodia Legis and the
proper procedure is not to allow the sheriff. in case of a court judgment, to seize the
properties but to ask the court for an order to require the administrator to pay the
amount due from the estate and required to be paid.

Same; Same; Compensation between taxes and claims of intestate recognized and
appropriated for by law.—The fact that the court having jurisdiction of the estate had
found that the claim of the estate against the Government has been appropriated for the
purpose by a corresponding law (Rep. Act No. 2700) shows that both the claim of the
Government for inheritance taxes and the claim of the intestate for services rendered
have already become overdue and demandable as well as fully liquidated. Compensation,
therefore, takes place by operation of law, in accordance with the provisions of Articles
1279 and 1290 of the Civil Code, and both debts are extinguished to the concurrent
amount. Domingo vs. Garlitos, 8 SCRA 443, No. L-18994 June 29, 1963

Philippine Deposit Insurance Corporation v. BIR, G.R. No. 158261 dated December 18, 2006
 In Re: Petition for Assistance in the Liquidation of the Rural Bank of Bokod
(Benguet), Inc., PDIC vs. Bureau of Internal Revenue,  511 SCRA 123, December 18,
2006

FACTS:
The Bangko Sentral ng Pilipinas, after finding the irregularities wherein various loan
irregularities were uncovered and the insolvent condition of the Rural Bank of Bokod
(Benguet), Inc. (RBBI) ordered its Board of Directors to take substantial measures to
rehabilitate the bank but the latter failed to implement said measures. In a letter, dated
20 May 1986, the SES (Supervision and Examination Sector) Department III required the
RBBI management to infuse fresh capital into the bank, within 30 days from date of the
advice, and to correct all the exceptions noted. However, up to the termination of the
subsequent general examination conducted by the SES Department III, no concrete action
was taken by the RBBI management. RBBI remained in insolvent financial condition and it
could no longer safely resume business with the depositors, creditors, and the general
public hence, the Monetary Board ordered the liquidation of the bank.
The designated BSP liquidator filed with the RTC a Petition for Assistance in the
Liquidation of RBBI. Subsequently, the receivership and liquidation was transferred to the
Philippine Deposit Insurance Corporation (PDIC). The PDIC filed a Motion for Approval of
Project of Distribution of the assets of RBBI without filing the final return of RBBI for
the year its operations were stopped. During the hearing, the Bureau of Internal Revenue
(BIR) through Atty. Justo Reginaldo, manifested that PDIC should secure a tax clearance
certificate from the BIR, pursuant to Section 52(C) of Republic Act No. 842. PDIC argues
that the closure of banks under Section 30 of the New Central Bank Act is summary in
nature and procurement of tax clearance as required under Section 52(C) of the Tax Code
of 1997 is not a condition precedent.

The RTC ordered the PDIC to first secure a tax clearance from the appropriate BIR
Regional Office and held in abeyance the approval of the Project of Distribution of the
assets of the RBBI by virtue thereof.

ISSUE: Whether or not submission of tax clearance is a requirement for a bank to be

close and placed under receivership.

Ruling: Not necessary, it is only necessary when BIR and the SEC is party to the
case.
o A judgment or order may be appealed only when it is final, meaning that it
completely disposes of the case and definitively adjudicates the respective rights
of the parties, leaving thereafter no substantial proceedings to be had in
connection with the case except the proper execution of the judgment or order. In
Re: Petition for Assistance in the Liquidation of the Rural Bank of Bokod (Benguet),
Inc.,
o An interlocutory order is not appealable until after the rendition of the judgment
on the merits, given that a contrary rule would delay the administration of justice
and unduly burden the courts; An original action for certiorari under Rule 65 is an
appropriate remedy to assail an interlocutory order when (1) the tribunal issued
such order without or in excess of jurisdiction or with grave abuse of discretion,
and (2) the assailed interlocutory order is patently erroneous and the remedy of
appeal would not afford adequate and expeditious relief. In Re: Petition for
Assistance in the Liquidation of the Rural Bank of Bokod (Benguet), Inc.,
o Taxation; Section 52 (C) of the Tax Code of 1997 and BIR-SEC Regulations No. 1
refer to a voluntary dissolution and/or liquidation of a corporation through its
adoption of a resolution or plan to that effect, or an involuntary dissolution of a
corporation by order of the Securities and Exchange Commission.— The afore-
quoted Tax Code provision and regulations refer to a voluntary dissolution and/or
liquidation of a corporation through its adoption of a resolution or plan to that
effect, or an involuntary dissolution of a corporation by order of the SEC. They
make no reference at all to a situation similar to the one at bar in which a banking
corporation is ordered closed and placed under receivership by the BSP and its
assets judicially liquidated. Now, the determining question is, whether Section
52(C) of the Tax Code of 1997 and BIR-SEC Regulations No. 1 could be made to
apply to the present case. This Court rules in the negative. First, Section 52(C) of
 the Tax Code of 1997 and the BIR-SEC Regulations No. 1 regulate the relations only
as between the SEC and the BIR, making a certificate of tax clearance a prior
requirement before the SEC could approve the dissolution of a corporation. In
Spec. Proc. No. 91-SP-0060 pending before the RTC, RBBI was placed under
receivership and ordered liquidated by the BSP, not the SEC; and the SEC is not
even a party in the said case, although the BIR is. This Court cannot find any basis
to extend the SEC requirements for dissolution of a corporation to the liquidation
proceedings of RBBI before the RTC when the SEC is not even involved therein.
o Section 30 of the New Central Bank Act lays down the proceedings for receivership
and liquidation of a bank; There are substantial differences in the procedure for
involuntary dissolution and liquidation of a corporation under the Corporation Code,
and that of a banking corporation under the New Central Bank Act, so that the
require
o The filing by the Philippine Deposit Insurance Corporation of a final tax return on
behalf of a bank subject of liquidation proceedings should already address the
supposed concern of the Bureau of Internal Revenue and would already enable the
latter to determine if the bank still had outstanding liabilities.
o The Government, in this case, cannot generally claim preference of credit, and
receive payment ahead of the other creditors of RBBI. Duties, taxes, and
fees due the Government enjoy priority only when they are with reference to a
specific movable property, under Article 2241(1) of the Civil Code, or
immovable property, under Article 2242(1) of the same Code. However, with
reference to the other real and personal property of the debtor, sometimes
referred to as “free property,” the taxes and assessments due the National
Government, other than those in Articles 2241(1) and 2242(1) of the Civil
Code, will come only in ninth place in the order of preference.
o Irrefragably, liquidation proceedings cannot be summary in nature. It requires the
holding of hearings and presentation of evidence of the parties concerned, i.e.,
creditors who must prove and substantiate their claims, and the liquidator disputing
the same. It also allows for multiple appeals, so that each creditor may appeal a
final order rendered against its claim. Hence, liquidation proceedings may very well
be highly-contested and drawn-out, because, at the end of it all, all claims against
the corporation undergoing litigation must be settled definitively and its assets
properly disposed of.
Gabin v. Melliza, G.R. No. L-1849 dated October 25, 1949

Facts:
In his lifetime, Melliza contracted the services of Gabin to administer certain
haciendas belonging to the former for a period of thirty years at a compensation of 350
cavans of palay per agricultural year with the stipulation that Gabin cannot be dismissed
from the service without just and legal cause during the time she cared to serve within
the said period of thirty years and in case of dismissal she shall have the right to be
indemnified for the rest of the period at the rate of 150 cavans of palay for each
agricultural year.

After Melliza's death in 1995, his executrix took from Gabin the administration of
said haciendas. Thereafter, Gabin filed a claim against the estate for the payment of 150
cavans of palay per agricultural year for twenty-nine years. The heirs however opposed the
claim since: 1) the claim is not a claim for money; 2) the agreement was terminated at the
death of the principal; 3) Melliza cannot, except by a will, dispose of the administration of
his property; and 4) there was no consideration for the granting of such administration for
30yrs with remuneration.

The probate court sustained the first ground of the opposition and denied the
claim. Hence, this appeal.

Issue:
Whether or not appellant’s claim is one that is allowed in a testamentary
proceedings.

Ruling:
The Rules provides that all persons having money claims against the decedent to file
them in the office of the clerk of said court; likewise, another provision provides that all
claims for money against the decedent arising from contract, express or implied,
whether the same be due, not due, or contingent, all claims for funeral expenses and
expenses of the last sickness of the decedent, and judgment for money against the
decedent, must be filed within the time limited in the notice. "By money claims, is
meant any claim for 'money, debt, or interest thereon,' according to section 21 of Rule 3
and section 1 of Rule 88. Not all money claims may, however, be presented, but only
those which are proper against the decedent, that is, claims upon a liability
contracted by the decedent before his death. Accordingly, claims arising after his
death cannot thus be presented, except funeral expenses."

The Court finds no valid reason to reverse the order appealed from on the following
grounds:
 1. The claim in question arose after the death of the decedent; and
2. the claim is not for money, debt, or interest thereon but for 150 cavans of palay a
year for 29 agricultural years (one agricultural year having elapsed before the
death of Raymundo Melliza). Even if it wanted to, the probate court could not
determine in advance the value of the palay in money because the price of palay
varies from year to year.

The order appealed from is affirmed.

Vera v. Fernandez, G.R. No. L-31364 dated March 30, 1979

FACTS:
Petitioner CIR and BIR Regional Director filed an Allowance of Claim and for an Order of
Payment of Taxes in the Special Proceedings for the settlement of  intestate estate of
Luis Tongoy. The claim represents the indebtedness of the deceased to the government
for the deficiency income taxes for the years 1963 and 1964. The petitioners filed the
motions after the expiration of the time limited in the notice but before an order of the
distribution is entered. Respondent Judge Fernandez granted the opposition by the
Administrator on the ground that the claim has already prescribed.
ISSUE:
May the claim for taxes against the estate of a deceased person be still collected?

o RULING:
Yes. The claim for taxes against a decedent’s estate is exempted from the
application of the statute of non-claims as taxes are the lifeblood of the
government and their prompt and certain availability are imperious need.
o This is not a case of prescription. Claims for taxes may be collected even after the
distribution of the decedent’s estate among his heirs who shall be liable therefore
in proportion of their share.
o A perusal of the aforequoted provisions, shows that it makes no mention of claims
for monetary obligations of the decedent created by law, such as taxes which is
entirely of different character from the claims expressly enumerated therein,
such as: “all claims for money against the decedent arising from contract, express
or implied, whether the same be due, not due or contingent, all claims for funeral
expenses and expenses for the last sickness of the decedent and judgment for
money against the decedent.” Under the familiar rule of statutory construction of
expressio unius est exclusio alterius, the mention of one thing implies the exclusion
of another thing not mentioned. Thus, if a statute enumerates the things upon
which it is to operate, everything else must necessarily, and by implication be
excluded from its operation and effect.
o That abolition of the Committee on Claims does not alter the bask railing kid down
giving exception on the claim for taxes from being filed as the other claims
 mentioned in the Rule should be filed before the Court. Claims for taxes may be
collected even after the distribution of the decedent’s estate among his heirs
who shall be liable therefor in proportion of their share in the inheritance.
(Government of the Philippines vs. Pamintuan, 55 Phil. 13). The reason for the more
liberal treatment of claims for taxes against a decedent’s estate in the form of
exception from the application of the statute of non-claims, is not hard to find.
Taxes are the lifeblood of the Government and their prompt and certain availability
are imperious need. (Commissioner of Internal Revenue vs. Pineda, G.R. No. L-
22734, September 15, 1967, 21 SCRA 105). Upon taxation depends the Government
ability to serve the people for whose benefit taxes are collected, To safeguard
such interest, neglect or omission of government officials entrusted with the
collection of taxes should not be allowed to bring harm or detriment to the people,
in the same manner as private persons may foe made to suffer individually on
account of his own negligence, the presumption being that they take good care of
their personal affairs. This should not hold true to government officials with
respect to matters not of their own personal concern. This is the philosophy behind
the government’s exception, as a general rule, from the operation of the principle
of estoppel.
o Furthermore, as held in Commissioner of Internal Revenue vs. Pineda, supra, citing
the last paragraph of Section 315 of the Tax Code payment of income tax shall be a
lien in favor of the Government of the Philippines from the time the assessment
was made by the Commissioner of Internal Revenue until paid with interests,
penalties, etc. By virtue of such lien, this Court held that the property of the
estate already in the hands of an heir or transferee may be subject to the payment
of the tax due the estate. A fortiori, before the inheritance has passed to the
heirs, the unpaid taxes due the decedent may be collected, even without its having
been presented under Section 2 of Rule 36 of the Rules of Court, It may truly be
said that until the property of the estate of the decedent has vested in the heirs,
the decedent, represented by his estate, continues as if he were still alive, subject
to the payment of such taxes as would be collectible from the estate even after his
death. Thus in the case abovecited, the income taxes sought to be collected were
due from the estate, for the three years 1946, 1947 and 1948 following his death
in May, 1945.
o in the instant case, petitioners filed an application (Motion for Allowance of Claim
and for an Order of Payment of Taxes) which, though filed after the expiration of
the time previously limited but before an order of the distribution is entered,
should have been granted by the respondent court, in the absence of any valid
ground, as none was shown, justifying denial of the motion, especially considering
that it was for allowance of claim for taxes due from the estate, which in effect
represents a claim of the people at large, the only reason given for the denial being
that the claim was filed out of the previously limited period, sustaining thereby
private respondents’ contention, erroneously as has been demonstrated.
Dizon v. CTA, G.R. No. 140944 dated April 30, 2008
RAFAEL ARSENIO S. DIZON, in his capacity as the Judicial Administrator of the Estate
of the deceased JOSE P. FERNANDEZ, petitioner, vs. COURT OF TAX APPEALS and
COMMISSIONER OF INTERNAL REVENUE, respondents.

Facts:
o On November 7, 1987, Jose P. Fernandez died.
o Thereafter, a petition for the probate of his will was filed.
o The probate court then appointed retired Supreme Court Justice Arsenio P. Dizon
and petitioner, Atty. Rafael Arsenio P. Dizon as Special and Assistant Special
Administrator.
o Justice Dizon authorized Atty. Jesus M. Gonzales (Atty. Gonzales) to sign and file
on behalf of the Estate the required estate tax return and to represent the same
in securing a Certificate of Tax Clearance.
o On April 27, 1990, BIR Regional Director issued Certification stating that the
taxes due on the transfer of real and personal properties of Jose had been fully
paid and said properties may be transferred to his heirs.
o Petitioner requested the probate court's authority to sell several properties
forming part of the Estate, for the purpose of paying its creditors.
o Petitioner manifested that Manila Bank, a major creditor of the Estate was not
included, as it did not file a claim with the probate court since it had security over
several real estate properties forming part of the Estate.
o However, on November 26, 1991, the Assistant Commissioner for Collection of the
BIR, issued Estate Tax Assessment Notice demanding the payment of
P66,973,985.40 as deficiency estate tax.

Issue:
            Whether the actual claims of the creditors may be fully allowed as deductions
from the gross estate of Jose despite the fact that the said claims were reduced or
condoned through compromise agreements entered into by the Estate with its creditors

Ruling:
            It is admitted that the claims of the Estate's aforementioned creditors have
been condoned - mode of extinguishing an obligation.
            The U.S. court ruled that the appropriate deduction is the value that the claim had
at the date of the decedent's death. Also, as held in Propstra v. U.S., where a lien claimed
against the estate was certain and enforceable on the date of the decedent's death, the
fact that the claimant subsequently settled for lesser amount did not preclude the estate
from deducting the entire amount of the claim for estate tax purposes. These
pronouncements essentially confirm the general principle that post-death developments
are not material in determining the amount of the deduction.
            The court expresses its agreement with the date-of-death valuation rule.
First. There is no law, nor do we discern any legislative intent in our tax laws, which
disregard the date-of-death valuation principle and particularly provide that post-death
developments must be considered in determining the net value of the estate. It bears
emphasis that tax burdens are not to be imposed, nor presumed to be imposed, beyond
what the statute expressly and clearly imports, tax statutes being construed strictissimi
juris against the government. Any doubt on whether a person, article or activity is taxable
is generally resolved against taxation.
Second. Such construction finds relevance and consistency in our Rules on Special
Proceedings wherein the term "claims" required to be presented against a decedent's
estate is generally construed to mean debts or demands of a pecuniary nature which could
have been enforced against the deceased in his lifetime, or liability contracted by the
deceased before his death.
Therefore, the claims existing at the time of death are significant to, and should be made
the basis of, the determination of allowable deductions.

SCRA

o No evidentiary value can be given the pieces of evidence submitted by the Bureau
of Internal Revenue (BIR), as the rules on documentary evidence require that these
documents must be formally offered before the Court of Tax Appeals
o Courts cannot consider evidence which has not been formally offered; Doctrine laid
down in Vda. de Oñate still subsists in this jurisdiction; Vda. de Oñate is merely an
exception to the general rule; Being an exception, it may be applied only when there
is strict compliance with the requisites mentioned therein.—The CTA and the CA
rely solely on the case of Vda. de Oñate, 250 SCRA 283 (1995), which reiterated
this Court’s previous rulings in People in the admission and consideration of exhibits
which were not formally offered during the trial. Although in a long line of cases
many of which were decided after Vda. de Oñate, we held that courts cannot
consider evidence which has not been formally offered, nevertheless, petitioner
cannot validly assume that the doctrine laid down in Vda. de Oñate has already been
abandoned.
o The presentation of the Bureau of Internal Revenue’s (BIR’s) evidence is not a mere
procedural technicality which may be disregarded considering that it is the only
means by which the Court of Tax Appeals (CTA) may ascertain and verify the truth
of BIR’s claims against the Estate. omission. This, we take against the BIR.
o It is admitted that the claims of the Estate’s aforementioned creditors have been
condoned. As a mode of extinguishing an obligation, condonation or remission of
debt is defined as: an act of liberality, by virtue of which, without receiving any
 equivalent, the creditor renounces the enforcement of the obligation, which is
extinguished in its entirety or in that part or aspect of the same to which the
remission refers. It is an essential characteristic of remission that it be
gratuitous, that there is no equivalent received for the benefit given; once such
equivalent exists, the nature of the act changes. It may become dation in payment
when the creditor receives a thing different from that stipulated; or novation,
when the object or principal conditions of the obligation should be changed; or
compromise, when the matter renounced is in litigation or dispute and in exchange
of some concession which the creditor receives.
o Court agrees with the date-of-death valuation rule; Tax burdens are not to be
imposed nor presumed to be imposed beyond what the statute expressly and clearly
imports, tax statutes being construed strictissimi juris against the government.—
We express our agreement with the date-of-death valuation rule, made pursuant to
the ruling of the U.S. Supreme Court in Ithaca Trust Co. v. United States, 279 U.S.
151, 49 S. Ct. 291, 73 L.Ed. 647 (1929). First. There is no law, nor do we discern any
legislative intent in our tax laws, which disregards the date-of-death valuation
principle and particularly provides that post-death developments must be
considered in determining the net value of the estate. It bears emphasis that tax
burdens are not to be imposed, nor presumed to be imposed, beyond what the
statute expressly and clearly imports, tax statutes being construed strictissimi
juris against the government. Any doubt on whether a person, article or activity is
taxable is generally resolved against taxation. Second. Such construction finds
relevance and consistency in our Rules on Special Proceedings wherein the term
“claims” required to be presented against a decedent’s estate is generally construed
to mean debts or demands of a pecuniary nature which could have been enforced
against the deceased in his lifetime, or liability contracted by the deceased before
his death. Therefore, the claims existing at the time of death are significant to,
and should be made the basis of, the determination of allowable deductionsc. Claims
against insolvent persons
d. Unpaid mortgages and losses
e. Property previously taxed (vanishing deduction)
f. Transfers for public use
g. Family home
h. Amount Received by Heirs under R.A. 4917
4. Resident, non-resident alien
5. Reciprocity of exemption (Sec. 104)

Collector v. Fisher, 1 SCRA 93

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 Murra y 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.

RULING:
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."

Scra

o Husband and wife; Conjugal partnership.—In the absence of any ante-nuptial

agreement, the husband and wife are presumed to have adopted the system of
conjugal partnership.
o The property relations of husband and wife who were married in 1909 are governed
by article 1325 of the Spanish Civil Code and not by article 124 of the New Civil
Code.
o Artide 1325 of the Old Civil Code and article 124 of the New Civil Code both adhere
to the so-called nationality theory of determining the property relations of spouses
where one of them is a foreigner and they have made no prior agreement as to the
administration, disposition and ownership of their conjugal properties. In such a
case, the national law of the husband becomes the dominant law in determining the
property relations of the spouses. However, there is a difference between two
articles. Article 124 expressly provides that it applies regardless of where the
marriage was celebrated, while article 1325 is limited to marriages contracted
abroad. Both articles apply only to mixed marriages between a Filipino and a
foreigner.
o English law governs the property relations of a man and woman, both British
citizens, who were married in Manila 1909.
o In the absence of proof of a foreign law, the processual presumption is that it is
the same as the law of the forum.
o Article 10 of the old Civil Code does not govern the property relations of husband
and wife. It refers to successional rights, which are distinct from the property
relations of the spouses.
o In determining- the net taxable estate of a deceased British subject, for purposes
of the estate and inheritance taxes, where said deceased was married to another
British citizen in Manila in 1909, the one-half conjugal share of the surviving wife
should be deducted inasmuch as they are presumed to have adopted the system of
conjugal partnership in the absence of an ante-nuptial agreement.
o Foreign laws do not prove themselves in our courts. They are not a matter of
judicial notice. Like any other fact, they must be alleged and proven.
o Reciprocity in exemption.—Under section 122 of the Tax Code and section
13851 of the California Inheritance Tax Law, the reciprocity must be total,
that is, with respect to transfer or death taxes of any and every character,
in the case of the Philippine law, and to legacy, succession, or death taxes of
any and every character, in the case of the California law. Therefore, if any
of the two states collects or imposes and does not exempt any transfer,
death, legacy, or succession tax of any character, the reciprocity does not
work. The shares of stock in the Philippines, left by a deceased resident of
California, are subject to the Philippine inheritance tax. The reciprocity
provisions of section 122 of the Tax Code are not applicable because there is
no total reciprocity under the two laws.
o The amount allowed under the Federal Estate Tax Law is in the nature of a
deduction and not of an exemption, regarding which reciprocity cannot be claimed
under section 122 of the Philippine Tax Code. Nor is reciprocity allowed under the
Federal Law.
o For purposes of the estate and inheritance taxes, the assessed value of real estate
is considered as the fair market value only when evidence to the contrary has not
 been submitted. If there is such contrary evidence, the assessed value will not be
considered the fair market value
o Shares of stock of a Philippine (domestic) corporation have a situs here for
purposes of taxation. Their situs is not California where the certificates were
located and in whose stock exchange the shares were registered. Their fair market
value should be based on the price prevailing in this country where they are sought
to be taxed.
o The Supreme Court will not disturb the ruling of the Tax Court, allowing the
administrator's fee, lawyer's fee and judicial and administration expenses as
liabilities of the estate, it appearing the said items were likewise allowed by the
probate court. The ruling of the Tax Court, disallowing an additional amount for
funeral expenses, for lack of evidence, should be upheld. The Supreme Court will
set aside the factual findings of the Tax Court only in case they are not supported
by any evidence.
o The distinction between a domiciliary and an ancillary administration serves only to
distinguish one administration from the other, for the two proceedings are
separate and independent. The reason for the ancillary administration is that a
grant of administration does not, ex proprio vigore, have any effect beyond the
limits of the country in which it was granted. In other words, there is a regular
administration under the control of the court, where claims must be presented and
approved and expenses of administration allowed before the deductions from the
estate can be authorized.
o A debt of the decedent, which was incurred in California and which was allowed by
the California court, having jurisdiction over the domiciliary administration, should,
nevertheless, be presented to the Philippine probate court for allowance in order
that it may constitute a valid claim against the Philippine estate under ancillary
administration.
o No deduction from the estate of a nonresident alien is allowed unless the value of
his gross estate not situated in the Philippines is stated in the return. This
requirement is intended to enable the revenue officer to determine how much of
the debt may be deducted pursuant to section 89(b)(l) of the Tax Code. The
deduction is allowed only to the extent of that portion of the debt, which is
equivalent to the proportion that the Philippine estate bears to the total estate
wherever situated. If the Philippine estate constitutes but 1/5 of the entire
estate, wherever situated, then only 1/5 of the debt may be deducted. If no
statement of the estate situated outside the Philippines is attached to the return,
then no part of the debt may be deducted from the decedents' estate.
o In the absence of any statutory provision clearly or expressly directing or
authorizing the payment of interest on taxes overpaid, the National Government
cannot be required to pay interest. Collector of Internal Revenue vs. Fisher, 1 SCRA
93, No. L-11622, No. L-11668 January 28, 1961
6. Tax credits for estate taxes
7. Exemption of certain acquisitions and transmissions
8. Tax returns
a. Time to file and notice

Elegado v. CTA, G.R. No. L-68385 dated May 12, 1989

Facts
In March 1976, Warren Graham, an American national and a former resident of the
Philippines, died in Oregon, USA. As certain shares of stock are left in the Philippines, his
son Ward Graham filed an estate tax return. On the basis of such return, the Commission
of Internal Revenue (CIR) assessed the descendant’s estate in the amount of P96,509.35.
The assessment was protested by the law firm of Bump, Yang, and Walker on behalf of the
estate which was denied by the CIR.
Meanwhile, Ildefonso Elegado was the appointed administrator for the properties left by
Graham in the Philippines. Pending the resolution by the CIR on the protest filed by the
American law firm, he filed a second estate tax return which was provisionally assessed by
the CIR the amount of P72,948.87.
Meanwhile still, in the probate proceedings filed in the Philippines for the properties of
Warren Graham, the CIR filed a motion for the allowance of the original estate tax
assessed at P96,509.35. The CIR said that this liability had not yet been paid although the
assessment had long become final and executory. Elegado contends that the first
assessment is not binding on him because it was based on a return filed for by foreign
lawyers who do not have knowledge of our tax laws.

ISSUE: Whether or not Elegado is correct.

HELD: No. The Supreme Court held that Elegado’s contention is flimsy. Elegado cannot be
serious when he argues that the first assessment was invalid because the foreign lawyers
who filed the return on which it was based were not familiar with our tax laws and
procedure. Our lawyers and taxpayers cannot avoid paying tax assessments by simply
saying that they do not know our tax laws. If our own lawyers and taxpayers cannot claim
similar preferences, it follows that foreigners cannot be any less bound by laws in our
country.

Ignorance of the law excuses no one (Ignorantia legis non excusat).

Scra
o It is noted that in the letter of July 3, 1980, imposing the second assessment of
P72,948.87, the Commissioner made it clear that “the aforesaid amount is
considered provisional only based on the estate tax return filed subject to
investigation by this Office for final determination of the correct estate tax due
 from the estate. Any amount that may be found due after said investigation will be
assessed and collected later.” It is illogical to suggest that a provisional assessment
can supersede an earlier assessment which had clearly become final and executory.
o The second contention is no less flimsy. The petitioner cannot be serious when he
argues that the first assessment was invalid because the foreign lawyers who filed
the return on which it was based were not familiar with our tax laws and procedure.
Is the petitioner suggesting that they are excused from compliance therewith
because of their ignorance? If our own lawyers and taxpayers cannot claim a similar
preference because they are not allowed to claim a like ignorance, it stands to
reason that foreigners cannot be any less bound by our own laws in our own country.
A more obvious and shallow discrimination than that suggested by the petitioner is
indeed difficult to find.
2) whether the said stocks should be assessed as of the time of the owner's death or six
months thereafter
The question of whether or not the shares of stock left by the decedent should be
considered conjugal property or belonging to him alone is immaterial in these
proceedings. So too is the time at which the assessment of these shares of stock
should have been made by the BIR. These questions were not resolved by the Court
of Tax Appeals because it had no jurisdiction to act on the petitioner's appeal from
an assessment that had already been cancelled. The assessment being no longer
controversial or renewable, there was no justification for the respondent court to
rule on the petition except to dismiss it.
Marcos II v. CA, G.R. No. 120880 dated June 5, 1997 (effect of non-filing of Estate Tax
Return)

Facts: Following the death of former President Marcos in 1989, a Special Tax Audit Team
was created on June 27, 1990 to conduct investigations and examinations of tax liabilities
of the late president, his family, associates and cronies. The investigation disclosed that
the Marcoses failed to file a written notice of death of the decedent estate tax return
and income tax returns for the years 1982 to 1986, all in violation of the Tax Code.
Criminal charges were field against Mrs. Marcos for violation of Secs. 82, 83 and 84,
NIRC.

The CIR thereby caused the preparation of the estate tax return for the estate of the
late president, the income returns of the Marcos spouses for 1985 and 1986 and the
income tax returns of petitioner Marcos II for 1982 to 1985. On July 26, 1991, the BIR
issued deficiency estate tax assessments and the corresponding deficiency income tax
assessments. Copies of deficiency estate and income tax assessments were served
personally and constructively on August 26, 1991 and September 12, 1991 upon Mrs.
Marcos. Likewise, copies of the deficiency income tax assessments against petitioner
Marcos were personally and constructively served. Formal assessment notices were served
upon Mrs. Marcos on October 20, 1992.

The deficiency tax assessments were not administratively protested by the Marcoses
within 30 days from service thereof. Subsequently, the CIR issued a total of 30 notices to
levy on real property against certain parcels of land and other real property owned by
Marcoses.

Notices of sale at public auction were duly posted at the Tacloban City Hall and the public
auction for the sale of 11 parcels of land took place on July 5, 1993. There being no bidder,
the lots were declared forfeited in favor of the government.

Petitioner filed a petition for certiorari and prohibition with an application for TRO before
the CA to annul and set aside the notices of levy as well as the notice of sale and to enjoin
the BIR from proceeding with the auction. The CA dismissed the petition ruling that the
deficiency assessments for the estate and income taxes have already become final and
unappealable and may thus be enforced by summary remedy of levying upon the real
property.
Marcos contends that the properties could not be levied to cover the tax dues because
they are still pending probate with the court, and settlement of tax deficiencies could not
be had, unless there is an order by the probate court or until the probate proceedings are
terminated.

Issue: WoN contention is correct

Ruling:
o While taxes are the lifeblood of the government and should be collected without
unnecessary hindrance, such collection should be made in accordance with law as
any arbitrariness will negate the very reason for government itself.
o The authority of the Regional Trial Court, sitting, albeit with limited jurisdiction, as
a probate court over the estate of a deceased individual, is not a trifling thing, but
the court’s jurisdiction, once invoked, and made effective, cannot be treated with
indifference nor should it be ignored with impunity by the very parties invoking its
authority.
o In the Philippine experience, the enforcement and collection of estate tax, is
executive in character, as the legislature has seen it fit to ascribe this task to the
Bureau of Internal Revenue. Section 3 of the National Internal Revenue Code
attests to this: “Sec. 3. Powers and duties of the Bureau.—The powers and duties
of the Bureau of Internal Revenue shall comprehend the assessment and collection
of all national internal revenue taxes, fees, and charges, and the enforcement of all
forfeitures, penalties, and fines connected therewith, including the execution of
judgments in all cases decided in its favor by the Court of Tax Appeals and the
ordinary courts. Said Bureau shall also give effect to and administer the
supervisory and police power conferred to it by this Code or other laws.”
o From the foregoing, it is discernible that the approval of the court, sitting in
probate, or as a settlement tribunal over the deceased is not a mandatory
requirement in the collection of estate taxes. It cannot therefore be argued that
the Tax Bureau erred in proceeding with the levying and sale of the properties
allegedly owned by the late President, on the ground that it was required to seek
first the probate court’s sanction. There is nothing in the Tax Code, and in the
pertinent remedial laws that implies the necessity of the probate or estate
settlement court’s approval of the state’s claim for estate taxes, before the same
can be enforced and collected.
o We hold otherwise. The Notices of Levy upon real property were issued within
the prescriptive period and in accordance with the provisions of the present
Tax Code. The deficiency tax assessment, having already become final,
executory, and demandable, the same can now be collected through the
summary remedy of distraint or levy pursuant to Section 205 of the NIRC.
o The omission to file an estate tax return, and the subsequent failure to
contest or appeal the assessment made by the BIR is fatal to the petitioner’s
cause, as under the above-cited provision, in case of failure to file a return,
the tax may be assessed at any time within ten years after the omission, and
any tax so assessed may be collected by levy upon real property within three
years following the assessment of the tax. Since the estate tax assessment
had become final and unappealable by the petitioner’s default as regards
protesting the validity of the said assessment, there is now no reason why the
BIR cannot continue with the collection of the said tax. Any objection against
 the assessment should have been pursued following the avenue paved in Section
229 of the NIRC on protests on assessments of internal revenue taxes.
o Petitioner further argues that “the numerous pending court cases questioning
the late president’s ownership or interests in several properties (both real and
personal) make the total value of his estate, and the consequent estate tax
due, incapable of exact pecuniary determination at this time. Thus,
respondents’ assessment of the estate tax and their issuance of the Notices
of Levy and sale are premature and oppressive.” He points out the pendency of
Sandiganbayan Civil Case Nos. 0001-0034 and 0141, which were filed by the
government to question the ownership and interests of the late President in
real and personal properties located within and outside the Philippines.
Petitioner, however, omits to allege whether the properties levied upon by the
BIR in the collection of estate taxes upon the decedent’s estate were among
those involved in the said cases pending in the Sandiganbayan. Indeed, the
court is at a loss as to how these cases are relevant to the matter at issue.
The mere fact that the decedent has pending cases involving ill-gotten wealth
does not affect the enforcement of tax assessments over the properties
indubitably included in his estate.
o It is not the Department of Justice which is the government agency tasked to
determine the amount of taxes due upon the subject estate, but the Bureau of
Internal Revenue, whose determinations and assessments are presumed correct
and made in good faith. The taxpayer has the duty of proving otherwise. In
the absence of proof of any irregularities in the performance of official
duties, an assessment will not be disturbed.
o Even an assessment based on estimates is prima facie valid and lawful where it
does not appear to have been arrived at arbitrarily or capriciously. The burden
of proof is upon the complaining party to show clearly that the assessment is
erroneous. Failure to present proof of error in the assessment will justify the
judicial affirmance of said assessment. In this instance, petitioner has not
pointed out one single provision in the Memorandum of the Special Audit Team
which gave rise to the questioned assessment, which bears a trace of falsity.
Indeed, the petitioner’s attack on the assessment bears mainly on the alleged
improbable and unconscionable amount of the taxes charged. But mere rhetoric
cannot supply the basis for the charge of impropriety of the assessments
made.
o Objections to assessments should be raised by means of the ample remedies
afforded the taxpayer by the Tax Code, with the Bureau of Internal Revenue and
the Court of Tax Appeals, and not via a Petition for Certiorari, under the pretext
of grave abuse of discretion.+
o In the case of notices of levy issued to satisfy the delinquent estate tax, the
delinquent taxpayer is the Estate of the decedent, and not necessarily, and
exclusively, the heirs of the deceased.+
 o Where there was an opportunity to raise objections to government action, and such
opportunity was disregarded, for no justifiable reason, the party claiming
oppression then becomes the oppressor of the orderly functions of the government;
He who comes to court must come with clean hands, otherwise he not only taints his
name, but ridicules the very structure of established authority.

b. Payment of tax
9. Obligations of executor, administrator, officers, others

Vera v. Fernandez, G.R. No. L-31364 dated March 30, 1979

FACTS:
Petitioner CIR and BIR Regional Director filed an Allowance of Claim and for an Order of
Payment of Taxes in the Special Proceedings for the settlement of  intestate estate of
Luis Tongoy. The claim represents the indebtedness of the deceased to the government
for the deficiency income taxes for the years 1963 and 1964. The petitioners filed the
motions after the expiration of the time limited in the notice but before an order of the
distribution is entered. Respondent Judge Fernandez granted the opposition by the
Administrator on the ground that the claim has already prescribed.
ISSUE:
May the claim for taxes against the estate of a deceased person be still collected?

o RULING:
Yes. The claim for taxes against a decedent’s estate is exempted from the
application of the statute of non-claims as taxes are the lifeblood of the
government and their prompt and certain availability are imperious need.
o This is not a case of prescription. Claims for taxes may be collected even after the
distribution of the decedent’s estate among his heirs who shall be liable therefore
in proportion of their share.
o A perusal of the aforequoted provisions, shows that it makes no mention of claims
for monetary obligations of the decedent created by law, such as taxes which is
entirely of different character from the claims expressly enumerated therein,
such as: “all claims for money against the decedent arising from contract, express
or implied, whether the same be due, not due or contingent, all claims for funeral
expenses and expenses for the last sickness of the decedent and judgment for
money against the decedent.” Under the familiar rule of statutory construction of
expressio unius est exclusio alterius, the mention of one thing implies the exclusion
of another thing not mentioned. Thus, if a statute enumerates the things upon
 which it is to operate, everything else must necessarily, and by implication be
excluded from its operation and effect.
o That abolition of the Committee on Claims does not alter the bask railing kid down
giving exception on the claim for taxes from being filed as the other claims
mentioned in the Rule should be filed before the Court. Claims for taxes may he
collected even after the distribution of the decedent’s estate among his heirs
who shall be liable therefor in proportion of their share in the inheritance.
(Government of the Philippines vs. Pamintuan, 55 Phil. 13). The reason for the more
liberal treatment of claims for taxes against a decedent’s estate in the form of
exception from the application of the statute of non-claims, is not hard to find.
Taxes are the lifeblood of the Government and their prompt and certain availability
are imperious need. (Commissioner of Internal Revenue vs. Pineda, G.R. No. L-
22734, September 15, 1967, 21 SCRA 105). Upon taxation depends the Government
ability to serve the people for whose benefit taxes are collected, To safeguard
such interest, neglect or omission of government officials entrusted with the
collection of taxes should not be allowed to bring harm or detriment to the people,
in the same manner as private persons may foe made to suffer individually on
account of his own negligence, the presumption being that they take good care of
their personal affairs. This should not hold true to government officials with
respect to matters not of their own personal concern. This is the philosophy behind
the government’s exception, as a general rule, from the operation of the principle
of estoppel.
o Furthermore, as held in Commissioner of Internal Revenue vs. Pineda, supra, citing
the last paragraph of Section 315 of the Tax Code payment of income tax shall be
a lien in favor of the Government of the Philippines from the time the assessment
was made by the Commissioner of Internal Revenue until paid with interests,
penalties, etc. By virtue of such lien, this Court held that the property of the
estate already in the hands of an heir or transferee may be subject to the payment
of the tax due the estate. A fortiori, before the inheritance has passed to the
heirs, the unpaid taxes due the decedent may be collected, even without its having
been presented under Section 2 of Rule 36 of the Rules of Court, It may truly be
said that until the property of the estate of the decedent has vested in the heirs,
the decedent, represented by his estate, continues as if he were still alive, subject
to the payment of such taxes as would be collectible from the estate even after his
death. Thus in the case abovecited, the income taxes sought to be collected were
due from the estate, for the three years 1946, 1947 and 1948 following his death
in May, 1945.
o in the instant case, petitioners filed an application (Motion for Allowance of Claim
and for an Order of Payment of Taxes) which, though filed after the expiration of
the time previously limited but before an order of the distribution is entered,
should have been granted by the respondent court, in the absence of any valid
ground, as none was shown, justifying denial of the motion, especially considering
that it was for allowance of claim for taxes due from the estate, which in effect
represents a claim of the people at large, the only reason given for the denial being
that the claim was filed out of the previously limited period, sustaining thereby
private respondents’ contention, erroneously as has been demonstrated.
Pastor v. CA, G.R. No. L-56340 dated June 24, 1983

FACTS
o Alvaro Pastor, Sr. (PASTOR, SR.), a Spanish subject, died in Cebu City survived by
his Spanish wife
o Sofia Bossio (who also died on October 21, 1966), their two legitimate children
Alvaro Pastor, Jr. (PASTOR, JR.) and Sofia Pastor de Midgely (SOFIA), and an
illegitimate child, not natural, by the name of Lewellyn Barlito Quemada. PASTOR,
JR. is a Philippine citizen, having been naturalized in 1936.
o SOFIA is a Spanish subject. QUEMADA is a Filipino by his mother's citizenship.
o On November 13, 1970, QUEMADA filed a petition for the probate and allowance
of an alleged holographic will of PASTOR, SR. with the Court of First Instance of
Cebu. The will contained only one testamentary disposition: a legacy in favor of
QUEMADA consisting of 30% of PASTOR, SR.'s 42% share in the operation by
Atlas Consolidated Mining and Development Corporation (ATLAS) of some mining
claims in Pina-Barot, Cebu.
o On November 21, 1970, the PROBATE COURT, upon motion of QUEMADA and after
an ex parte hearing, appointed him special administrator of the entire estate of
PASTOR, SR., whether or not covered or affected by the holographic will. He
assumed office as such on December 4, 1970 after filing a bond of P 5,000.00.
o QUEMADA as special administrator, instituted against PASTOR, JR. and his wife an
action for reconveyance of alleged properties of the estate, which included the
properties subject of the legacy and which were in the names of the spouses
PASTOR, JR. and his wife, Maria Elena Achaval de Pastor, who claimed to be the
owners thereof in their own rights, and not by inheritance.
o PASTOR, JR. and his sister SOFIA filed their opposition to the petition for
probate and the order appointing QUEMADA as special administrator.
o The PROBATE COURT issued an order allowing the will to probate. Appealed to the
Court of Appeals, the order was affirmed in a decision dated May 9, 1977. On
petition for review, the Supreme Court in G.R. No. L-46645 dismissed the petition
in a minute resolution.
o For two years after remand of the case to the PROBATE COURT, QUEMADA filed
pleading after pleading asking for payment of his legacy and seizure of the
properties subject of said legacy. PASTOR, JR. and SOFIA opposed these
pleadings on the ground of pendency of the reconveyance suitwith another branch
of the Cebu Court of First Instance. All pleadings remained unacted upon by the
o The PROBATE COURT set the hearing on the intrinsic validity of the will but upon
objection of PASTOR, JR. and SOFIA on the e ground of pendency of the
reconveyance suit, no hearing was held on March 25. Instead, the PROBATE COURT
required the parties to submit their respective position papers as to how much
inheritance QUEMADA was entitled to receive under the wig. Pursuant thereto,
PASTOR. JR. and SOFIA submitted their Memorandum of authorities dated April
 10, which in effect showed that determination of how much QUEMADA should
receive was still premature. QUEMADA submitted his Position paper dated April
20, 1980. ATLAS, upon order of the Court, submitted a sworn statement of
royalties paid to the Pastor Group of tsn from June 1966 (when Pastor, Sr. died) to
February 1980.
o On August 20, 1980, while the reconveyance suit was still being litigated, the
PROBATE COURT issued the now assailed Order of Execution and Garnishment,
resolving the question of ownership of the royalties’ payable by ATLAS and ruling in
effect that the legacy to QUEMADA was not inofficious.
o The order being "immediately executory", QUEMADA succeeded in obtaining a
Writ of Execution and Garnishment on September 4, 1980, and in serving the same
on ATLAS on the same day. Notified of the Order on September 6, 1980, the
oppositors sought reconsideration thereof on the same date primarily on the ground
that the PROBATE COURT gravely abused its discretion when it resolved the
question of ownership of the royalties and ordered the payment of QUEMADA's
legacy after prematurely passing upon the intrinsic validity of the will. In the
meantime, the PROBATE COURT ordered suspension of payment of all royalties due
PASTOR, JR. and/or his assignees until after resolution of oppositors' motion for
reconsideration.
o Before the Motion for Reconsideration could be resolved, however, PASTOR, JR.,
this time joined by his wife Ma. ELENA ACHAVAL DE PASTOR filed with the Court
of Appeals a Petition for certiorari and Prohibition. The petition was denied.
o On December 9, 1980, PASTOR, JR. and his wife moved for reconsideration of the
Court of Appeal's decision of November 18, 1980, calling the attention of the
appellate court to another order of the Probate Court dated November 11, 1980, by
which the oppositors' motion for reconsideration of the Probate Court's Order of
August 20, 1980 was denied.
o Hence, this Petition for Review by certiorari with prayer for a writ of pre y
injunction, assailing the decision of the Court of Appeals dated November 18, 1980
as well as the orders of the Probate Court dated August 20, 1980, November 11,
1980 and December 17, 1980, Med by petitioners on March 26, 1981, followed by a
Supplemental Petition with Urgent Prayer for Restraining Order.

Issue: WoN the ordered of payment of legacy to Quemada issued by the probate court is
valid.

Ruling: No, the estate and inheritance tax must be cleared first before the legacy must
be paid by quemada.

cThere is a necessity and propriety of a special administrator and later on an executor

and/or administrator in these proceedings, in spite of this Court's declaration that the
oppositors are the forced heirs and the petitioner is merely vested with the character of
a voluntary heir to the extent of the bounty given to him (under) the will insofar as the
same will not prejudice the legitimes of the oppositors, for the following reasons:

1. To submit a complete inventory of the estate of the decedent-testator Alvaro

Pastor, Sr.;
2. To administer and to continue to put to prolific utilization of the properties of the
decedent;
3. To keep and maintain the houses and other structures and fences belonging to the
estate, since the forced heirs are residing in Spain, and prepare them for delivery to
the heirs in good order after partition and when directed by the Court, but only
after the payment of estate and inheritance taxes
o The question of ownership is as a rule, an extraneous matter in a probate
proceeding
o The rule is that execution of a judgment must conform to that decreed in the
dispositive part of the decision. (Philippine-American Insurance Co. vs. Honorable
Flores, 97 SCRA 811.) However, in case of ambiguity or uncertainty, the body of the
decision may be scanned for guidance in construing the judgment.
o Issue of ownership was not resolved by the probate court in this case.—Nowhere in
the dispositive portion is there a declaration of ownership of specific properties.
On the contrary, it is manifest therein that ownership was not resolved. For it
confined itself to the question of extrinsic validity of the will, and the need for and
propriety of appointing a special administrator. Thus it allowed and approved the
holographic will “with respect to its extrinsic validity, the same having been duly
authenticated pursuant to the requisites or solemnities prescribed by law.” It
declared that the intestate estate administration aspect must proceed “subject to
the outcome of the suit for reconveyance of ownership and possession of real and
personal properties in Civil Case 274-T before Branch IX of the CFI of Cebu.”
[Parenthetically, although the statement refers only to the “intestate” aspect, it
defies understanding how ownership by the estate of some properties could be
deemed finally resolved for purposes of testate administration, but not so for
intestate purposes. Can the estate be the owner of a property for testate but not
for intestate purposes?] Then again, the Probate Order (while indeed it does not
direct the implementation of the legacy) conditionally stated that the intestate
administration aspect must proceed “unless . . . it is proven . . . that the legacy to be
given and delivered to the petitioner does not exceed the free portion of the
estate of the testator,” which clearly implies that the issue of impairment of
legitime (an aspect of intrinsic validity) was in fact not resolved. Finally, the
Probate Order did not rule on the propriety of allowing QUEMADA to remain as
special administrator of estate properties not covered by the holographic will,
“considering that this (Probate) Order should have been properly issued solely as a
resolution on the issue of whether or not to allow and approve the aforestated will.”
o The Supreme Court affirmed in the previous case only what was adjudged in the
Probate Court’s Probate Order.
o It was, therefore, error for the assailed implementing Orders to conclude that the
Probate Order adjudged with finality the question of ownership of the mining
properties and royalties, and that, premised on this conclusion, the dispositive
portion of the said Probate Court directed the special administrator to pay the
legacy in dispute.
o In case of death of one of the spouses their respective proprietary rights must be
liquidated and the debts paid in the succession proceedings for the deceased
spouse.—When PASTOR, SR. died in 1966, he was survived by his wife, aside from
his two legitimate children and one illegitimate son. There is therefore a need to
liquidate the conjugal partnership and set apart the share of PASTOR, SR.’s wife in
the conjugal partnership preparatory to the administration and liquidation of the
estate of PASTOR, SR. which will include, among others, the determination of the
extent of the statutory usufructuary right of his wife until her death. When the
disputed Probate Order was issued on December 5, 1972, there had been no
liquidation of the community properties of PASTOR, SR. and his wife.
o So also, as of the same date, there had been no prior definitive determination of
the assets of the estate of PASTOR, SR. There was an inventory of his properties
presumably prepared by the special administrator, but it does not appear that it
was ever the subject of a hearing or that it was judicially approved. The
reconveyance or recovery of properties allegedly owned but not in the name of
PASTOR, SR. was still being litigated in another court. There was no appropriate
determination, much less payment, of the debts of the decedent and his estate. x x
x
o The ordered payment of legacy would be violative of the rule requiring prior
liquidation of the estate of the deceased, i.e., the determination of the assets of
the estate and payment of all debts and expenses, before apportionment and
distribution of the residue among the heirs and legatees. (Bernardo vs. Court of
Appeals, 7 SCRA 367.) Neither has the estate tax been paid on the estate of
PASTOR, SR. Payment therefore of the legacy to QUEMADA would collide with the
provision of the National Internal Revenue Code requiring payment of estate tax
before delivery to any beneficiary of his distributive share of the estate (Section
107 [c]).
o A legacy is not a debt of the estate for which a writ of execution may issue.—The
above provision clearly authorizes execution to enforce payment of debts of estate.
A legacy is not a debt of the estate; indeed, legatees are among those against whom
execution is authorized to be issued.
o It is within a court’s competence to order the execution of a final judgment; but to
order the execution of a final order (which is not even meant to be executed) by
reading into it terms that are not there and in utter disregard of existing rules and
law, is manifest grave abuse of discretion tantamount to lack of jurisdiction.
 Consequently, the rule that certiorari may not be invoked to defeat the right of a
prevailing party to the execution of a valid and final judgment, is inapplicable. For
when an order of execution is issued with grave abuse of discretion or is at variance
with the judgment sought to be enforced (PVTA vs. Honorable Gonzales, 92 SCRA
172), certiorari will lie to abate the order of execution.

San Agustin v. CIR, G.R. No. 138485, September 10, 2001 (deficiency, Sec. 93)
Facts
o "Atty. Jose San Agustin of 2904 Kakarong St., Olympia, Makati died on June 27,
1990 leaving his wife Dra. Felisa L. San Agustin as sole heir. He left a holographic
will executed on April 21, 1980 giving all his estate to his widow, and naming retired
Justice Jose Y. Feria as Executor thereof.
o "Probate proceedings were instituted on August 22, 1990, in the Regional Trial
Court (RTC) of Makati, Branch 139, docketed as Sp. Proc. No. M-2554. Pursuantly,
notice of decedent's death was sent to the Commissioner of Internal Revenue on
August 30, 1990.
o "On September 3, 1990, an estate tax return reporting an estate tax due of
P1,676,432.00 was filed on behalf of the estate, with a request for an extension of
two years for the payment of the tax, inasmuch as the decedent's widow (did) not
personally have sufficient funds, and that the payment (would) have to come from
the estate.
o "In his letter/answer, dated September 4, 1990, BIR Deputy Commissioner Victor
A. Deoferio, Jr., granted the heirs an extension of only six (6) months, subject to
the imposition of penalties and interests under Sections 248 and 249 of the
National Internal Revenue Code, as amended.
o "In the probate proceedings, on October 11, 1990, the RTC allowed the will and
appointed Jose Feria as Executor of the estate. On December 5, 1990, the
executor submitted to the probate court an inventory of the estate with a motion
for authority to withdraw funds for the payment of the estate tax. Such authority
was granted by the probate court on March 5, 1991. Thereafter, on March 8, 1991,
the executor paid the estate tax in the amount of P1,676,432 as reported in the
Tax Return filed with the BIR. This was well within the six (6) months extension
period granted by the BIR.
o "On September 23, 1991, the widow of the deceased, Felisa L. San Agustin,
received a Pre-Assessment Notice from the BIR, dated August 29, 1991, showing a
deficiency estate tax of P538,509.50, which, including surcharge, interest and
penalties, amounted to P976,540.00.
o "On October 1, 1991, within the ten-day period given in the pre-assessment notice,
the executor filed a letter with the petitioner Commissioner expressing readiness
to pay the basic deficiency estate tax of P538,509.50 as soon as the Regional Trial
 Court approves withdrawal thereof, but, requesting that the surcharge, interest,
and other penalties, amounting to P438,040.38 be waived, considering that the
assessed deficiency arose only on account of the difference in zonal valuation used
by the Estate and the BIR, and that the estate tax due per return of
P1,676,432.00 was already paid in due time within the extension period.
o "On October 4, 1991, the Commissioner issued an Assessment Notice reiterating
the demand in the pre-assessment notice and requesting payment on or before
thirty (30) days upon receipt thereof.
o "In a letter, dated October 31, 1991, the executor requested the Commissioner a
reconsideration of the assessment of P976,549.00 and waiver of the surcharge,
interest, etc.
o "On December 18, 1991, the Commissioner accepted payment of the basic
deficiency tax in the amount of P538,509.50 through its Receivable Accounts
Billing Division.
o "The request for reconsideration was not acted upon until January 21, 1993, when
the executor received a letter, dated September 21, 1992, signed by the
Commissioner, stating that there is no legal justification for the waiver of the
interests, surcharge and compromise penalty in this case, and requiring full payment
of P438,040.38 representing such charges within ten (10) days from receipt
thereof.
o "In view thereof, the respondent estate paid the amount of P438,040.38 under
protest on January 25, 1993.
o "On February 18, 1993, a Petition for Review was filed by the executor with the
CTA with the prayer that the Commissioner's letter/decision, dated September 21,
1992 be reversed and that a refund of the amount of P438,040.38 be ordered.
o "The Commissioner opposed the said petition, alleging that the CTA's jurisdiction
was not properly invoked inasmuch as no claim for a tax refund of the deficiency
tax collected was filed with the Bureau of Internal Revenue before the petition was
filed, in violation of Sections 204 and 230 of the National Internal Revenue Code.
Moreover, there is no statutory basis for the refund of the deficiency surcharges,
interests and penalties charged by the Commissioner upon the estate of the
decedent.
o "Upholding its jurisdiction over the dispute, the CTA rendered its Decision, dated
April 21, 1994, modifying the CIR's assessment for surcharge, interests and other
penalties from P438,040.38 to P13,462.74, representing interest on the deficiency
estate tax, for which reason the CTA ordered the reimbursement to the
respondent estate the balance of P423,577.64,
o On 30 May 1994, the decision of the Court of Tax Appeals was appealed by the
Commissioner of Internal Revenue to the Court of Appeals. 
o the Court of Appeals granted the petition of the Commissioner of Internal Revenue
and held that the Court of Tax Appeals did not acquire jurisdiction over the
subject matter and that, accordingly, its decision was null and void.
o The petitioner in that case paid under protest the sum of P5,201.52 by way of
income tax, surcharge and interest and, forthwith, filed a petition for review
before the Court of Tax Appeals. Then respondent Collector (now Commissioner) of
Internal Revenue set up several defenses, one of which was that petitioner had
failed to first file a written claim for refund, pursuant to Section 306 of the Tax
Code, of the amounts paid. Convinced that the lack of a written claim for refund
was fatal to petitioner's recourse to it, the Court of Tax Appeals dismissed the
petition for lack of jurisdiction. On appeal to this Court, the tax court's ruling was
reversed; the Court held: "We agree with petitioner that Section 7 of Republic Act
No. 1125, creating the Court of Tax Appeals,
Issue:
Ruling:
o The case has a striking resemblance to the controversy in Roman Catholic
Archbishop of Cebu vs. Collector of Internal Revenue. The petitioner in that
case paid under protest the sum of P5,201.52 by way of income tax, surcharge
and interest and, forthwith, filed a petition for review before the Court of Tax
Appeals. Then respondent Collector (now Commissioner) of Internal Revenue set
up several defenses, one of which was that petitioner had failed to first file a
written claim for refund, pursuant to Section 306 of the Tax Code, of the
amounts paid. Convinced that the lack of a written claim for refund was fatal to
petitioner’s recourse to it, the Court of Tax Appeals dismissed the petition for
lack of jurisdiction. On appeal to this Court, the tax court’s ruling was reversed;
the Court held: “We agree with petitioner that Section 7 of Republic Act No.
1125, creating the Court of Tax Appeals, in providing for appeals from—x x x
allows an appeal from a decision of the Collector in cases involving ‘disputed
assessments’ as distinguished from cases involving ‘refunds of internal revenue
taxes, fees or other charges, x x x’; that the present action involves a disputed
assessment’; because from the time petitioner received assessments Nos. 17-
EC-00301-55 and 17-AC-600107-56 disallowing certain deductions claimed by
him in his income tax returns for the years 1955 and 1956, he already
protested and refused to pay the same, questioning the correctness and legality
of such assessments; and that the petitioner paid the disputed assessments
under protest before filing his petition for review with the Court a quo, only to
forestall the sale of his properties that had been placed under distraint by the
respondent Collector since December 4, 1957. To hold that the taxpayer has
now lost the right to appeal from the ruling on the disputed assessment but
must prosecute his appeal under section 306 of the Tax Code, which requires a
taxpayer to file a claim for refund of the taxes paid as a condition precedent to
his right to appeal, would in effect require of him to go through a useless and
needless ceremony that would only delay the disposition of the case, for the
Collector (now Commissioner) would certainly disallow the claim for refund in
the same way as he disallowed the protest against the assessment. The law,
 should not be interpreted as to result in absurdities.” The Court sees no cogent
reason to abandon the above dictum and to require a useless formality that can
serve the interest of neither the government nor the taxpayer. The tax court
has aptly acted in taking cognizance of the taxpayer’s appeal to it.
o The delay in the payment of the deficiency tax within the time prescribed for
its payment in the notice of assessment justifies the imposition of a 25%
surcharge in consonance with Section 248A(3) of the Tax Code. The basic
deficiency tax in this case being P538,509.50, the twenty-five percent thereof
comes to P134,627.37. Section 249 of the Tax Code states that any deficiency
in the tax due would be subject to interest at the rate of twenty percent (20%)
per annum, which interest shall be assessed and collected from the date
prescribed for its payment until full payment is made.
o Regrettably for petitioner, the need for an authority from the probate court in
the payment of the deficiency estate tax, over which respondent Commissioner
has hardly any control, is not one that can negate the application of the Tax
Code provisions aforequoted. Taxes, the lifeblood of the government, are meant
to be paid without delay and often oblivious to contingencies or conditions.

Marcos II v. CA, G.R. No. 120880 dated June 5, 1997 (who has control over the
collection of estate tax)

Facts: Following the death of former President Marcos in 1989, a Special Tax Audit Team
was created on June 27, 1990 to conduct investigations and examinations of tax liabilities
of the late president, his family, associates and cronies. The investigation disclosed that
the Marcoses failed to file a written notice of death of the decedent estate tax return
and income tax returns for the years 1982 to 1986, all in violation of the Tax Code.
Criminal charges were field against Mrs. Marcos for violation of Secs. 82, 83 and 84,
NIRC.

The CIR thereby caused the preparation of the estate tax return for the estate of the
late president, the income returns of the Marcos spouses for 1985 and 1986 and the
income tax returns of petitioner Marcos II for 1982 to 1985. On July 26, 1991, the BIR
issued deficiency estate tax assessments and the corresponding deficiency income tax
assessments. Copies of deficiency estate and income tax assessments were served
personally and constructively on August 26, 1991 and September 12, 1991 upon Mrs.
Marcos. Likewise, copies of the deficiency income tax assessments against petitioner
Marcos were personally and constructively served. Formal assessment notices were served
upon Mrs. Marcos on October 20, 1992.

The deficiency tax assessments were not administratively protested by the Marcoses
within 30 days from service thereof. Subsequently, the CIR issued a total of 30 notices to
levy on real property against certain parcels of land and other real property owned by
Marcoses.

Notices of sale at public auction were duly posted at the Tacloban City Hall and the public
auction for the sale of 11 parcels of land took place on July 5, 1993. There being no bidder,
the lots were declared forfeited in favor of the government.

Petitioner filed a petition for certiorari and prohibition with an application for TRO before
the CA to annul and set aside the notices of levy as well as the notice of sale and to enjoin
the BIR from proceeding with the auction. The CA dismissed the petition ruling that the
deficiency assessments for the estate and income taxes have already become final and
unappealable and may thus be enforced by summary remedy of levying upon the real
property.

Issue:
Ruling:
o While taxes are the lifeblood of the government and should be collected without
unnecessary hindrance, such collection should be made in accordance with law as
any arbitrariness will negate the very reason for government itself.
o The authority of the Regional Trial Court, sitting, albeit with limited jurisdiction, as
a probate court over the estate of a deceased individual, is not a trifling thing, but
the court’s jurisdiction, once invoked, and made effective, cannot be treated with
indifference nor should it be ignored with impunity by the very parties invoking its
authority.
o In the Philippine experience, the enforcement and collection of estate tax, is
executive in character, as the legislature has seen it fit to ascribe this task to the
Bureau of Internal Revenue. Section 3 of the National Internal Revenue Code
attests to this: “Sec. 3. Powers and duties of the Bureau.—The powers and duties
of the Bureau of Internal Revenue shall comprehend the assessment and collection
of all national internal revenue taxes, fees, and charges, and the enforcement of all
forfeitures, penalties, and fines connected therewith, including the execution of
judgments in all cases decided in its favor by the Court of Tax Appeals and the
ordinary courts. Said Bureau shall also give effect to and administer the
supervisory and police power conferred to it by this Code or other laws.”
o From the foregoing, it is discernible that the approval of the court, sitting in
probate, or as a settlement tribunal over the deceased is not a mandatory
requirement in the collection of estate taxes. It cannot therefore be argued that
the Tax Bureau erred in proceeding with the levying and sale of the properties
allegedly owned by the late President, on the ground that it was required to seek
first the probate court’s sanction. There is nothing in the Tax Code, and in the
pertinent remedial laws that implies the necessity of the probate or estate
 settlement court’s approval of the state’s claim for estate taxes, before the same
can be enforced and collected.
o We hold otherwise. The Notices of Levy upon real property were issued within
the prescriptive period and in accordance with the provisions of the present
Tax Code. The deficiency tax assessment, having already become final,
executory, and demandable, the same can now be collected through the
summary remedy of distraint or levy pursuant to Section 205 of the NIRC.
o The omission to file an estate tax return, and the subsequent failure to
contest or appeal the assessment made by the BIR is fatal to the petitioner’s
cause, as under the above-cited provision, in case of failure to file a return,
the tax may be assessed at any time within ten years after the omission, and
any tax so assessed may be collected by levy upon real property within three
years following the assessment of the tax. Since the estate tax assessment
had become final and unappealable by the petitioner’s default as regards
protesting the validity of the said assessment, there is now no reason why the
BIR cannot continue with the collection of the said tax. Any objection against
the assessment should have been pursued following the avenue paved in Section
229 of the NIRC on protests on assessments of internal revenue taxes.
o Petitioner further argues that “the numerous pending court cases questioning
the late president’s ownership or interests in several properties (both real and
personal) make the total value of his estate, and the consequent estate tax
due, incapable of exact pecuniary determination at this time. Thus,
respondents’ assessment of the estate tax and their issuance of the Notices
of Levy and sale are premature and oppressive.” He points out the pendency of
Sandiganbayan Civil Case Nos. 0001-0034 and 0141, which were filed by the
government to question the ownership and interests of the late President in
real and personal properties located within and outside the Philippines.
Petitioner, however, omits to allege whether the properties levied upon by the
BIR in the collection of estate taxes upon the decedent’s estate were among
those involved in the said cases pending in the Sandiganbayan. Indeed, the
court is at a loss as to how these cases are relevant to the matter at issue.
The mere fact that the decedent has pending cases involving ill-gotten wealth
does not affect the enforcement of tax assessments over the properties
indubitably included in his estate.
o It is not the Department of Justice which is the government agency tasked to
determine the amount of taxes due upon the subject estate, but the Bureau of
Internal Revenue, whose determinations and assessments are presumed correct
and made in good faith. The taxpayer has the duty of proving otherwise. In
the absence of proof of any irregularities in the performance of official
duties, an assessment will not be disturbed.
o Even an assessment based on estimates is prima facie valid and lawful where it
does not appear to have been arrived at arbitrarily or capriciously. The burden
 of proof is upon the complaining party to show clearly that the assessment is
erroneous. Failure to present proof of error in the assessment will justify the
judicial affirmance of said assessment. In this instance, petitioner has not
pointed out one single provision in the Memorandum of the Special Audit Team
which gave rise to the questioned assessment, which bears a trace of falsity.
Indeed, the petitioner’s attack on the assessment bears mainly on the alleged
improbable and unconscionable amount of the taxes charged. But mere rhetoric
cannot supply the basis for the charge of impropriety of the assessments
made.
o Objections to assessments should be raised by means of the ample remedies
afforded the taxpayer by the Tax Code, with the Bureau of Internal Revenue and
the Court of Tax Appeals, and not via a Petition for Certiorari, under the pretext
of grave abuse of discretion.+
o In the case of notices of levy issued to satisfy the delinquent estate tax, the
delinquent taxpayer is the Estate of the decedent, and not necessarily, and
exclusively, the heirs of the deceased.+
o Where there was an opportunity to raise objections to government action, and such
opportunity was disregarded, for no justifiable reason, the party claiming
oppression then becomes the oppressor of the orderly functions of the government;
He who comes to court must come with clean hands, otherwise he not only taints his
name, but ridicules the very structure of established authority.

Polido v. CA, G.R. No. 170632 dated July 10, 2007 (withdrawals from bank deposit
accounts); Sec. 97, TRAIN Law

Facts:
After the death of her husband, Julian Polido, petitioner Eugenia D. Polido (Polido) sought
to withdraw money from the joint savings deposit she and her husband maintained with the
Philippine National Bank (PNB). Petitioner Polido, however, failed to make the said
withdrawal as private respondent, Mariano Gasat (Gasat), who claimed to be the couple‘s
adopted child, objected thereto.
Petitioner Polido then filed a complaint before the Regional Trial Court (RTC) a motion for
the issuance of a preliminary injunction against Gasat. In his answer with compulsory
counterclaim, he alleged that he is an adopted child of the couple. Gasat subsequently filed
an Omnibus Motion withdrawing the allegation he had made that he is an adopted son of
the couple. He moved to convert the case to an action for partition of the estate of his
grandfather, Narciso Polido. To Gasat‘s prayer to convert the action to one for partition,
Polido filed an Opposition. And she moved for Judgment on the Pleadings.

The trial court denied Gasat‘s motion to convert the case to an action for partition and
granted Polido‘s motion for judgment on the pleadings. On appeal, the Court of Appeals
(CA) dismissed his appeal for failure to pay the required docket fee on time. However, on
motion for reconsideration, the CA admitted Gasat‘s docket fee.

ISSUE:
1. Whether or not the rule on non-payment of docket fees may be
relaxed to allow a belated payment thereof
2. Won the trial court erred in granting Eugenia’s motion for judgement
on the pleading.
3. WON Eugenia may withdraw from the joint savings account to her
and her late husband?

Ruling
1. Indeed, jurisprudence allows the relaxation of the Rule on non-payment of
appellate docket fees. Notwithstanding the mandatory nature of the requirement
of payment of appellate docket fees, the Court also recognizes that its strict
application is qualified by the following: first, failure to pay those fees within the
reglementary period allows only discretionary, not automatic, dismissal; second,
such power should be used by the court in conjunction with its exercise of sound
discretion in accordance with the tenets of justice and fair play, as well as with a
great deal of circumspection in consideration of all attendant circumstances.

The relaxation by the appellate court of the rule on non-payment of the appellate
docket fee appears justified as a perusal of the records of the case shows
persuasive and weighty reasons to give due course to the appeal.
2. Gasats answer with the compulsory counter claim raised others issues which are
independent on his claim of adoptive filiation which would defeat petiotioner’s main
cause of action – for the court to enjoin gasat and all person acting under hin from
preventing the officers or employees of the PNB from releasing the deposit to her.
3. NO- Eugenia cannot withdraw any amount thereof because it is a part of the Estate
of Jacinto as provided that a and as provided for by laws before the bank allows
any withdrawal, the plaintiff has to follow certain procedures required by other
laws governing estate settlement, that is, - (a) Payment of Estate Tax, if any; (b)
BIR Tax Clearance; (c) Present a duly published Extrajudicial Partition executed by
the heirs adjudicating said amount to such heir, unless a competent Court issues an
Order allowing the plaintiff to withdraw [from] said account.
It bears noting that petitioner and her deceased husband Polido were childless;
hence, Gasat, who is a son of Polido's sister Petra P. Gasat, could inherit from
Polido.

Parenthetically, Section 97 of the National Internal Revenue Code states:

If a bank has knowledge of the death of a person, who maintained a bank deposit
account alone, or jointly with another, it shall not allow any withdrawal from the
said deposit account unless the Commissioner had certified that the taxes imposed
thereon by this Title have been paid; Provided, however, That the administrator of
the estate or any one (1) of the heirs of the decedent may, upon authorization by
the Commissioner, withdraw an amount not exceeding Twenty thousand pesos
(P20,000) without the said certification. For this purpose, all withdrawal slips shall
contain a statement to the effect that all of the joint depositors are still living at
the time of withdrawal by any one of the joint depositors and such statement shall
be under oath by the said depositors.

There being no ground to merit petitioner's Motion for Judgment on the Pleadings,
the trial court erred in granting the same.