Weeks 1-8.docx

DR . FELISA L. VDA. DE SAN AGUSTIN, in substitution of JOSE Y. FERIA, in his capacity as Executor of the Estate of JOSE SAN AGUSTIN, petitioner, vs. COMMISSIONER OF INTERNAL REVENUE

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G.R. No. 138485. September 10, 2001| Vitug, J.

Issue: 1. The filing of a claim for refund [is] not essential before the filing of the petition for review. 2. The imposition by the respondent of surcharge, interest and penalties on the deficiency estate tax is not in accord with the law and therefore illegal.

Facts: 

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PFR to set aside 24 Feb 1999 Decision and 27 Apr 199 Resolution w/c reversed that of CTA (Jose y Feria, in his capacity as Executor of the Estate of Jose SA v. CIR. The CTA modified the deficiency assessment of the CIR for SIP imposed against the E of late JSA. 21 April 1980: Atty. JSA executed a holographic will leaving all his estate to his widow Dr. Felisa, and Ret. J. Jose Feria as Executor. 27 June 1990: Atty. JSA of Kakarong St. Makati died. 22 August 1990: Probate proceedings in RTC Makati B139 as SP.2554. 30 Aug 1990: Notice of death sent to CIR. 3 Sept 1990: An ETR reporting an est. of P1,673,432 was file don behalf of the estate with Request for Extension of 2 years to pay tax; Dr. Felisa has no sufficient funds; payment from estate proceeds. 4 Sept. 1990: BIR Dep. Comm. Victor Deoferio Jr. granted the RFE only for 6 months, subject to imposition of PI under Secs. 248 and 249 of NIRC. 11 Oct 1990: Probate court allowed the will and named Executor. 5 March 1991: RTC granted the Executor’s Inventory of the Estate with Motion for Authority to Withdraw Funds for payment of ET. 8 March 1991: Executor paid the ET of P1.6M as reported in the ETC filed with BIR (within the 6 months extension period). 23 Sept 1991: Dr. Felisa received a PAN (29 August 1991) showing deficiency ET of P538,509.50 which includes SIP of P976,540. 1 Oct 1991: Within the 10 day period given in the PAN the Executor file d a letter to CIR expressing readiness to pay the basic deficiency of P538K as soon as RTC approves withdrawal thereof, but requested that the SIP of P438,040.38 be waived. (Reason: Assessed deficiency arose n account of difference in zonal valuation used by Estate and BIR; and ETD per return of P1.6M was already paid within the extension period. 4 October 1991: CIR issued AN reiterating demand in the PAN and requested payment within 30 days. 31 October 1991: Executor requested the CIR’s reconsideration of the P976K assessment and waiver of SIP. 31 Dec 1991: CIR accepted payment of BDT of P538K thru its Receivables Accounts Billing Division. Request for reconsideration was not acted upon. 21 Sept 1992: Executor received a letter from CIR stating that no legal justification for the waiver of the SIP and compromise penalty herein , and requested payment of the P438K within 10 days. 25 January 1993: Estate paid the P438K under protest. 18 Feb 1993: PFR filed by Executor with CTA praying that Commissioner’s letter/decision be reversed and a refund of the p438K be ordered. CIR opposed said PFR alleging that CTA’s jurisdiction was not properly invoked; no claim for tax refund of the deficiency tax collected was filed with BIR before the PFR was filed in violation of Secs. 204 & 230 of NIRC; and no statutory basis for the refund. 21 April 1994: CTA upheld its jurisdiction and modified CIR’s assessment for SIP from P438K 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. CIR appealed to the CA.

24 February 1999, the CA granted the petition of the CIR and held that the CTA did not acquire jurisdiction over the subject matter and that, accordingly, its decision was null and void.

Ruling and Ratio: 1. Court held the petition partly meritorious. It has a resemblance with Roman Catholic Bishop of Cebu v. CIR: Herein the RCB of Cebu paid P5, 201.52 under protest by way of IT, S, I and filed PFR before CTA. Collector (Commissioner now) alleged that RCB failed to file a written claim for refund pursuant to Sec.306 of Tax Code. Convinced, the CTA dismissed the petition for lack of jurisdiction. The Court finds no reason to abandon said ruling. RA 1125 creating the CTA. Herein, the Decisions of the CIR in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising under the NIRC or other law or part of the law administered by the BIR --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-0030155 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.

2. It would appear that, as early as 23 September 1991, the estate already received a PAN indicating a DET of P538,509.50. Within the 10 period given in the PAN, respondent Commissioner received a letter from petitioner expressing the latters readiness to pay the basic DET of P538,509.50 as soon as the trial court would have approved the withdrawal of that sum from the estate but requesting that the surcharge, interests and penalties be waived. On 04 October 1991, however, petitioner received from the Commissioner notice insisting payment of the tax due on or before the lapse of thirty (30) days from

receipt thereof. The DET of P538, 509.50 was not paid until 19 December 1991. 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 25% 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. The computation of the CTA conforms with the law, i.e., computed on the deficiency tax from the date prescribed for its payment until it is paid. The CTA correctly held that the compromise penalty of P20,000.00 could not be imposed on petitioner, a compromise being, by its nature, mutual in essence. The payment made under protest by petitioner could only signify that there was no agreement that had effectively been reached between the parties. 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. In sum, the tax liability of the estate includes a surcharge of P134,627.37 and interest of P13,462.74 or a total of P148,090.00.

FERDINAND R. MARCOS II, petitioner, vs. COURT OF APPEALS, THE COMMISSIONER OF THE BUREAU OF INTERNAL REVENUE and HERMINIA D. DE GUZMAN, respondents. G.R. No. 120880 | June 5, 1997 | Torres, Jr. J. Fact No.1: Bongbong Marcos sought for the reversal of the ruling of the Court of Appeals to grant CIR's petition to levy the properties of the late Pres. Marcos to cover the payment of his tax delinquencies during the period of his exile in the US. The Marcos family was assessed by the BIR, and notices were constructively served to the Marcoses, however the assessment were not protested administratively by Mrs. Marcos and the heirs of the late president so that they became final and unappealable after the period for filing of opposition has prescribed. 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: Is the contention of Bongbong Marcos correct? Ruling and Ratio: No. The deficiency income tax assessments and estate tax assessment are already final and unappealable -and-the subsequent levy of real properties is a tax remedy resorted to by the government, sanctioned by Section 213 and 218 of the National Internal Revenue Code. This summary tax remedy is distinct and separate from the other tax remedies (such as Judicial Civil actions and Criminal actions), and is not affected or precluded by the pendency of any other tax remedies instituted by the government. The approval of the court, sitting in probate, or as a settlement tribunal over the deceased is not a mandatory requirement in the collection of estate taxes. It cannot therefore be argued that the Tax Bureau erred in proceeding with the levying and sale of the properties allegedly owned by the late President, on the ground that it was required to seek first the probate court's sanction. There is nothing in the Tax Code, and in the pertinent remedial laws that implies the necessity of the probate or estate settlement court's approval of the state's claim for estate taxes, before the same can be enforced and collected. On the contrary, under Section 87 of the NIRC, it is the probate or settlement court which is bidden not to authorize the executor or judicial administrator of the decedent's estate to deliver any distributive share to any party interested in the estate, unless it is shown a Certification by the Commissioner of Internal Revenue that the estate taxes have been paid. This provision disproves the petitioner's contention that it is the probate court which approves the assessment and collection of the estate tax. Fact No. 2: After the death of former President Marcos, Special audit team disclosed that Marcoses failed to file a written notice of the death of the decedent, an estate tax returns as well as several income tax returns covering the years 1982 to 1986. BIR issued deficiency estate tax assessment among others and were personally and constructively served to the last known

address of Marcoses. No administrative protest were served by Imelda or the heir of the late President, thus notices of levy on real property were issued. Having no response, properties were awarded in favor of the government. Marcos II questioned the levy assailing that said properties were under probate hearing thus, should not be summarily levied by BIR. Issue: Whether or not the BIR has authority to collect by the summary remedy of levying upon, and sale of real properties of the decedent, estate tax deficiencies, without the cognition and authority of the court sitting in probate over the supposed will of the deceased. Ruling and Ratio: Yes. The approval of the curt, sitting in probate, or as a settlement tribunal over the deceased is not a mandatory requirement in the collection of estate taxes… 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 the estate taxes, before the same can be enforced and collected. If there is any issue as to the validity of the BIR’s decision to assess the estate taxes, this should have been pursued through the proper administrative and judicial avenues provided for by law. Facts No. 3: Ferdinand Marcos II assailed the decision of the CA declaring the deficiency income tax assessments upon the estate and the properties of his late father final despite the pendency of the probate proceedings of the will of the late president. On the other hand, the BIR argued that the state authority to collect taxes is paramount. Issue: Is the approval of the court a mandatory requirement in the collection of taxes? Ruling and Ratio: No. The enforcement of tax laws and collection of taxes are of paramount importance for the sustenance of government. Taxes are the lifeblood of the government and should be collected without unnecessary hindrance. However, such collection should be made in accordance with law as any arbitrariness will negate the very reason for government itself. It is therefore necessary to reconcile the apparently conflicting interest of the authorities and the taxpayers so that the real purpose of taxation, which is the promotion of the common good, may be achieved. (Ferdinand R. Marcos II assailed the decision of the Court of Appeals declaring the deficiency income tax assessments and estate tax assessments upon the estate and properties of his late father despite the pendency of the probate proceedings of the will of the late President. On the other hand, the BIR argued that the State’s authority to collect internal revenue taxes is paramount.) 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. Issue: Is the contention of Marcos correct? Ruling and Ratio: No. The approval of the court, sitting in probate or as a settlement tribunal over the deceased’s estate, is not a mandatory requirement in the collection of estate taxes. 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. The enforcement of tax laws and the collection of taxes are of paramount importance for the sustenance of government. Taxes are the lifeblood of government and should be collected without unnecessary hindrance. However, such collection should be made in accordance with law as any arbitrariness will negate the existence of government itself. 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. 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.)

THE ESTATE OF HILARIO M. RUIZ, EDMOND RUIZ, Executor, petitioner, vs. THE COURT OF APPEALS (Former Special Sixth Division), MARIA PILAR RUIZ-MONTES, MARIA CATHRYN RUIZ, CANDICE ALBERTINE RUIZ, MARIA ANGELINE RUIZ and THE PRESIDING JUDGE OF THE REGIONAL TRIAL COURT OF PASIG, BRANCH 156, respondents.

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G.R. No. 118671. January 29, 1996 | Puno, J.

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Facts:

Issue: Whether

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June 27, 1987: Hilario M. Ruiz executed a holographic will naming as his heirs his only son, Edmond Ruiz, his adopted daughter, private respondent Maria Pilar Ruiz Montes, and his three granddaughters, private respondents Maria Cathryn, Candice Albertine and Maria Angeline, all children of Edmond Ruiz. The testator bequeathed to his heirs substantial cash, personal and real properties and named Edmond Ruiz executor of his estate. April 12, 1988: Hilario Ruiz died. The cash component of his estate was distributed among Edmond Ruiz and private respondents, howvever, executor Edmond did not take any action for the probate of his father’s holographic will. June 29, 1992, after 4 years. It was Maria Pilar (adopted) who filed before the RTC B156 Pasig, a petition for the probate and approval of Hilario Ruiz will and for the issuance of LT to Edmond Ruiz who opposed the same on the ground that the will was executed under undue influence. November 2, 1992: The H&L at No. 2 Oliva Street, Valle Verde IV, Pasig which the testator bequeathed to 3 daughters of Maria Pilar - was leased out by Edmond Ruiz to third persons. January 19, 1993; Probate court ordered Edmond to deposit with the CoC the rental deposit and payments of P540, 000.00 for the 1-year lease of the Valle Verde property. After deducting P191, 416.14 for repair and maintenance expenses on the estate, Edmond turned over P348, 583.56, representing the balance of the rent. March 1993: Edmond moved for the release of P50K to pay the RET on the RPE. RTC approved only P7,722.00 May 14, 1993, Edmond withdrew his opposition to the probate of the will. May 18, 1993: RTC admitted the will to probate and ordered the issuance of LT (23 June) to Edmond conditioned upon the filing of a bond in the amount of P50K. July 28, 1993,Edmond filed an Ex-Parte Motion for Release of Funds – rent payments deposited with the CoC. Maria Pilar opposed and filed a Motion for Release of Funds to Certain Heirs and Motion for Issuance of Certificate of Allowance of Probate Will (the distribution of the Valle Verde property and the Blue Ridge apartments pursuant to the holographic will). August 26, 1993: RTC denied Edmond’s motion, but granted the respondents’. It ordered the delivery of the titles to and possession of the properties.

Edmond moved for MR. Then withdraw motion to release fund since lease contract is renewed for another year. RTC still ordered release of funds to Edmond for necessary expenses of administration and allowances for support of testator’s 3 granddaughters deductible from their inheritance; hold in abeyance release of titles to Maria Pilar and 3 granddaughters until lapse of 6 months. CA found no GADLEJ on the part of RTC judge, and upheld its ruling.

the probate court, after admitting the will to probate but before payment of the estates debts and obligations, has the authority: (1) to grant an allowance from the funds of the estate for the support of the testators grandchildren; (2) to order the release of the titles to certain heirs; and (3) to grant possession of all properties of the estate to the executor of the will. On the matter of allowance, Section 3 of Rule 83 of ROC provides that “Allowance to widow and family. - The widow and minor or incapacitated children of a deceased person, during the settlement of the estate, shall receive therefrom under the direction of the court, such allowance as are provided by law.” It is settled that allowances for support under therein should not be limited to the minor or incapacitated children of the deceased. Article 188 of the NCC, applicable at ToD of Hilario, provides that during the liquidation of the conjugal partnership, the deceaseds legitimate spouse and children, regardless of their age, civil status or gainful employment, are entitled to provisional support from the funds of the estate. The law is rooted on the fact that the right and duty to support, especially the right to education, subsist even beyond the age of majority. Grandchildren are not entitled to provisional support from the funds of the decedent’s estate. The law clearly limits the allowance to widow and children. It was error for the CA to sustain the RTC’s order granting an allowance to the grandchildren of the testator pending settlement of his estate. RTC also erred in ordering the release of the titles of the bequeathed properties to private respondents six months after the date of first publication of notice to creditors. An order releasing titles to properties of the estate amounts to an advance distribution of the estate which is allowed only under the following conditions in Section 2 that part of the estate not affected by any controversy or appeal may be distributed in advance by the court among the heirs or legatees. And Section 1 of Rule 90 provides for the order of distribution of residue made. No distribution shall be allowed until the payment of the obligations above-mentioned has been made or provided for, unless the distributes, or any of them, give a bond, in a sum to be fixed by the court, conditioned for the payment of said obligations within such time as the court directs.

In settlement of estate proceedings, the distribution of the estate properties can only be made: (1) after all the debts, funeral charges, expenses of administration, allowance to the widow, and estate tax have been paid; or (2) before payment of said obligations only if the distributees or any of them gives a bond in a sum fixed by the court conditioned upon the payment of said obligations within such time as the court directs, or when provision is made to meet those obligations. The lapse of six months from the date of first publication of the notice to creditors speaks of notice to creditors, not payment of debts and obligations. Hilario Ruiz allegedly left no debts when he died but the taxes on his estate had not hitherto been paid, much less ascertained. The estate tax is one of those obligations that must be paid before distribution of the estate. If not yet paid, the rule requires that the distributees post a bond or make such provisions as to meet the said tax obligation in proportion to their respective shares in the inheritance. Notably, at the time the order was issued the properties of the estate had not yet been inventoried and appraised. The intrinsic validity of Hilarios holographic will was controverted by petitioner before the probate court assailing the distributive shares of the devisees and legatees inasmuch as his fathers will included the estate of his mother and allegedly impaired his legitime as an intestate heir of his mother. The Rules provide that if there is a controversy as to who are the lawful heirs of the decedent and their distributive shares in his estate, the probate court shall proceed to hear and decide the same as in ordinary cases It was relevantly noted by the probate court that petitioner had deposited with it only a portion of the one-year rental income from the Valle Verde property. Petitioner did not deposit its succeeding rents after renewal of the lease. Neither did he render an accounting of such funds. Petitioner must be reminded that his right of ownership over the properties of his father is merely inchoate as long as the estate has not been fully settled and partitioned. As executor, he is a mere trustee of his father’s estate. The funds of the estate in his hands are trust funds and he is held to the duties and responsibilities of a trustee of the highest order. He cannot unilaterally assign to himself and possess all his parents properties and the fruits thereof without first submitting an inventory and appraisal of all real and personal properties of the deceased, rendering a true account of his administration, the expenses of administration, the amount of the obligations and estate tax, all of which are subject to a determination by the court as to their veracity, propriety and justness.

ILDEFONSO O. ELEGADO, as Ancillary Administrator of the Testate Estate of the late WARREN TAYLOR GRAHAM, petitioner vs. HON. COURT OF TAX APPEALS and COMMISSIONER OF INTERNAL REVENUE respondents. G.R. No. L-68385 | May 12, 1989 | Cruz, J.

The petitioner raises three basic questions, to wit, (1) whether the shares of stocks left by the decedent should be treated as his exclusive, and not conjugal, property; (2) whether the said stocks should be assessed as of the time of the owner's death or six months thereafter; and (3) whether the appeal filed with the respondent court should be considered moot and academic. Ruling and Ratio:

Facts: 

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It is obvious from the express cancellation of the 2nd assessment for P72, 948.87 that Ildefonso had been deprived of a cause of action as it was precisely from this assessment that he was appealing. In its decision, the CTA said that the petition questioning the assessment of July 3, 1980, was "premature" since the protest to the assessment had not yet been resolved. As a matter of fact it had: the said assessment had been cancelled by virtue of the letter. The CTA was on surer ground, however, when it followed with the finding that the said cancellation had rendered the petition moot and academic. There was really no more assessment to review. The petitioner argues that the issuance of the 2nd assessment had the effect of canceling the first assessment; and that the subsequent cancellation of the 2nd assessment did not have the effect of automatically reviving the first. Moreover, the 1st assessment is not binding on him because it was based on a return filed by foreign lawyers who had no knowledge of our tax laws or access to the CTA. In imposing the second assessment of P72, 948.87, the Commissioner made it clear that "the aforesaid amount is considered provisional only. It is illogical to suggest that a provisional assessment can supersede an earlier assessment which had clearly become final and executory. In view of the finality of the first assessment, the petitioner cannot now raise the question of its validity before this Court any more than he could have done so before the Court of Tax Appeals. What the estate of the decedent should have done earlier, following the denial of its protest on July 7, 1978, was to appeal to the Court of Tax Appeals within the reglementary period of 30 days after it received notice of said denial. It was in such appeal that the petitioner could then have raised the first two issues he now raises without basis in the present petition.

March 14, 1976, Warren Taylor Graham, an American national formerly resident in the Philippines, died in Oregon, U.S.A. He left certain shares of stock in the Philippines, his son, Ward Graham, filed an ETR on September 16, 1976, with the Philippine Revenue Representative in San Francisco, U.S.A. 9 Feb 1978: Basing on the ETR, CIR assessed the decedent's estate an estate tax in the amount of P96, 509.35. March 7, 1978: This assessment was protested on by the law firm of Bump, Young and Walker on behalf of the estate It was denied by the Commissioner on July 7, 1978. No further action was taken by the estate in pursuit of that protest. 18 January 1977: Decedent's will was admitted to probate in the Circuit Court of Oregon. Ward as Executor then appointed Ildefonso Elegado, the herein petitioner, as his AIF for the allowance of the will in the Philippines who commence probate proceedings in CFI Rizal. December 18, 1978: Will was allowed with Ildefonso as ancillary administrator; who filed a 2nd ETR with the BIR on June 4, 1980. Therein, the CIR imposed an assessment on the estate in the amount of P72,948.87. This was protested on behalf of the estate by the ALG Office on August 13, 1980. While this protest was pending, the CIR filed in the probate proceedings a motion for the allowance of the basic estate tax of P96,509.35 as assessed on February 9, 1978. He said that this liability had not yet been paid although the assessment had long become final and executory. Ildefonso regarded this motion as an implied denial of the protest filed on August 13, 1980, against the 2nd assessment of P72, 948.87 so he filed on September 15, 1981, a PFR with the CTA challenging the said assessment. The Commissioner did not immediately answer (a delay of 195 days) and in the end instead cancelled the protested assessment in a letter to the decedent's estate; and notified to the CTA in a MTD on the ground that the protest had become moot and academic. The MTD was granted and the petition dismissed on April 25, 1984. The petitioner then came to this Court on certiorari under Rule 45 of the Rules of Court.

2. 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 CTA 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 reviewable, there was no justification for the respondent court to rule on the petition except to dismiss it.

Issue: Whether or not the respondent Court of Tax Appeals erred in dismissing the petitioner's appeal on grounds of jurisdiction and lack of a cause of action. (Appeal from what? That is the question)

If indeed the CIR committed an error in the computation of the estate tax, as the petitioner insists, that error can no longer be rectified because the original assessment has long become final and executory.

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RAFAEL ARSENIO S. DIZON, in his capacity as the Judicial Administrator of the Estate of the deceased JOSE P. FERNANDEZ, v. COURT OF TAX APPEALS and COMMISSIONER OF INTERNAL REVENUE.

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

G.R. No. 140944 | April 30, 2008| Nachura, J. Facts:  Estate Taxation – Allowable Deductions, Date-of-Death Valuation Principle  Jose P. Fernandez died in November 7, 1987. Thereafter, a petition for the probate of his will was filed. The probate court appointed Atty. Rafael Arsenio P. Dizon as administrator of the Estate of Jose Fernandez.  An estate tax return was filed later on which showed ZERO estate tax liability. BIR thereafter issued a deficiency estate tax assessment, demanding payment of Php 66.97 million as deficiency estate tax. This was subsequently reduced by CTA to Php 37.42 million. The CA affirmed the CTA’s ruling, hence, the instant petition.  The petitioner claims that in as much as the valid claims of creditors against the Estate are in excess of the gross estate, no estate tax was due. On the other hand, respondents argue that since the claims of the Estate’s creditors have been condoned, such claims may no longer be deducted from the gross estate of the decedent. Issue: Whether the actual claims of 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 and Ratio: Yes. Following the US Supreme Court’s ruling in Ithaca Trust Co. v. United States, the Court held that post-death developments are not material in determining the amount of deduction. This is because estate tax is a tax imposed on the act of transferring property by will or intestacy and, because the act on which the tax is levied occurs at a discrete time, i.e., the instance of death, the net value of the property transferred should be ascertained, as nearly as possible, as of the that time. This is the date-of-death valuation rule. The Court, in adopting the date-of-death valuation principle, explained that: 

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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. 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

Issue: Whether or not the CTA and the CA gravely erred in allowing the admission of the pieces of evidence which were not formally offered by the BIR. YES. The CTA is categorically described as a court of record. As cases filed before it are litigated de novo, party-litigants shall prove every minute aspect of their cases. As such, those evidence submitted by the BIR has no evidentiary weight, as the rules on documentary evidence require that these documents must be formally offered before the CTA. The Revised Rules on Evidence which reads: SEC. 34. Offer of evidence. The court shall consider no evidence which has not been formally offered. The purpose for which the evidence is offered must be specified. The CTA and the CA rely solely on the case of Vda. de Oate, which reiterated this Court's previous rulings in People v. Napat-a and People v. Mate on the admission and consideration of exhibits which were not formally offered during the trial. The Court reiterates that Vda. de Oate 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; otherwise, the general rule in Section 34 of Rule 132 of the Rules of Court should prevail. A common fact threads through Vda. de Oate and Ramos that does not exist at all in the instant case. In the aforementioned cases, the exhibits were marked at the pre-trial proceedings to warrant the pronouncement that the same were duly incorporated in the records of the case.

APOLINARIA AUSTRIA-MAGAT, petitioner, vs. HON. COURT OF APPEALS and FLORENTINO LUMUBOS, DOMINGO COMIA, TEODORA CARAMPOT, ERNESTO APOLO, SEGUNDA SUMPELO, MAMERTO SUMPELO and RICARDO SUMPELO, respondents. G.R. No. 106755 |February 1, 2002 | De Leon, Jr. J Facts:  Basilisa Comerciante is a mother of five (5) children, namely, Rosario Austria, Consolacion Austria, herein petitioner Apolinaria Austria-Magat, Leonardo, and one of herein respondents, Florentino Lumubos. Leonardo died in a Japanese concentration camp at Tarlac during World War II.  Basilisa bought a parcel of residential land together with the improvement thereon covered and described in Transfer Certificate of Title No. RT-4036 (T-3268) and known as Lot 1, Block 1, Cavite Beach Subdivision, with an area of 150 square meters, located in Bagong Pook, San Antonio, Cavite City.  Basilisa executed a document designated as Kasulatan sa Kaloobpala (Donation).  Few years after, Basilisa executed a Deed of Absolute Sale of the subject house and lot in favor of herein petitioner Apolinaria Austria-Magat for (P5,000.00).  As the result of the registration of that sale, Transfer Certificate of Title (TCT for brevity) No. RT-4036 in the name of the donor was cancelled and in lieu thereof TCT No. T-10434 was issued by the Register of Deeds of Cavite City in favor of petitioner Apolinaria Austria-Magat.  Respondents Teodora Carampot, Domingo Comia, and Ernesto Apolo (representing their deceased mother Consolacion Austria), Ricardo, Mamerto and Segunda, all surnamed Sumpelo (representing their deceased mother Rosario Austria) and Florentino Lumubos filed before the RTC of Cavite an action against the petitioner for annulment of TCT and other relevant documents, and for reconveyance and damages.  RTC dismissed the case. According to the trial court, the donation is a donation mortis causa pursuant to Article 728 of the New Civil Code inasmuch as the same expressly provides that it would take effect upon the death of the donor; that the provision stating that the donor reserved the right to revoke the donation is a feature of a donation mortis causa which must comply with the formalities of a will; and that inasmuch as the donation did not follow the formalities pertaining to wills, the same is void and produced no effect whatsoever. Hence, the sale by the donor of the said property was valid since she remained to be the absolute owner thereof during the time of the said transaction.  The decision of the trial court was reversed by the CA and held that it is a Donation Inter Vivos. Hence, this appeal. Issue: Whether CA ignored the rules of interpretation of contracts when it considered the donation in question as Inter Vivos? Ruling and Ratio: No. The donation is inter vivos. The express irrevocability of the same (hindi na mababawi) is the distinctive standard that identifies that

document as a donation inter vivos. The other provisions therein which seemingly make the donation mortis causa do not go against the irrevocable character of the subject donation. The Court disagree with the petitioner’s contention that the provisions which state that the same will only take effect upon the death of the donor and that there is a prohibition to alienate, encumber, dispose, or sell the same, are proofs that the donation is mortis causa. The said provisions should be harmonized with its express irrevocability. If the donor intended to maintain full ownership over the said property until her death, she could have expressly stated therein a reservation of her right to dispose of the same. The prohibition on the donor to alienate the said property during her lifetime is proof that naked ownership over the property has been transferred to the donees. It also supports the irrevocable nature of the donation considering that the donor has already divested herself of the right to dispose of the donated property. Another indication in the deed of donation that the donation is inter vivos is the acceptance clause therein of the donees. We have ruled that an acceptance clause is a mark that the donation is inter vivos. Acceptance is a requirement for donations inter vivos. On the other hand, donations mortis causa, being in the form of a will, are not required to be accepted by the donees during the donors lifetime The four-year prescriptive period is not applicable to the case at bar for the reason that there is no fraud in this case. There being no fraud in the trust relationship between the donor and the donees including the herein petitioner, the action for reconveyance prescribes in ten (10) years. The appealed decision is AFFIRMED.

JARABINI G. DEL ROSARIO v. ASUNCION G. FERRER, substituted by her heirs, VICENTE, PILAR, ANGELITO, FELIXBERTO, JR., all surnamed G. FERRER, and MIGUELA FERRER ALTEZA, G.R. No. 187056 | September 20. 2010 | Abad, J.

Facts: 

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Spouses Gonzales executed document entitled "Donation Mortis Causa" in favor of their 2 children, Asuncion and Emiliano and their granddaughter, Jarabini (Daughter of predeceased son, Zoilo) covering 126 sg.m lot and house on it in equal shares. Although denominated as a donation mortis causa, which in law is the equivalent of a will, the deed had no attestation clause and was witnessed by only two persons. The named donees, however, signified their acceptance of the donation on the face of the document. Guadalupe, the donor wife, died in September 1968. A few months later or on December 19, 1968, Leopoldo, the donor husband, executed a deed of assignment of his rights and interests in subject property to their daughter Asuncion. Leopoldo died in June 1972. In 1998, Jarabini filed a "petition for the probate of the August 27, 1968 deed of donation mortis causa" before the RTC. Asuncion opposed the petition, invoking his father Leopoldo's assignment of his rights and interests in the property to her. After trial, the RTC rendered a decision dated June 20, 2003, 5 finding that the donation was in fact one made inter vivos, the donors' intention being to transfer title over the property to the donees during the donors' lifetime, given its irrevocability. Consequently, said the RTC, Leopoldo's subsequent assignment of his rights and interest in the property was void since he had nothing to assign. The RTC thus directed the registration of the property in the name of the donees in equal shares. CA - reversed RTC. The CA held that Jarabini cannot, through her petition for the probate of the deed of donation mortis causa, collaterally attack Leopoldo's deed of assignment in Asuncion's favor . CA held that the donation, being one given mortis causa, did not comply with the requirements of a notarial will, rendering the same void.

Issue: Whether or not the spouses Leopoldo and Guadalupe’s donation to Asuncion, Emiliano, and Jarabini was a donation mortis causa, as it was denominated, or in fact a donation inter vivos. Ruling and Ratio: The document in question in this case was captioned "Donation Mortis Causa" is not controlling. This Court has held that, if a donation by its terms is inter vivos, this character is not altered by the fact that the donor styles it mortis causa. The Court thus said in Austria-Magat that the express "irrevocability" of the donation is the "distinctive standard that identifies the document as a donation inter vivos." Here, the donors plainly said that it is "our will that this Donation Mortis Causa shall be irrevocable

and shall be respected by the surviving spouse." The intent to make the donation irrevocable becomes even clearer by the proviso that a surviving donor shall respect the irrevocability of the donation. Consequently, the donation was in reality a donation inter vivos. The donors in this case of course reserved the "right, ownership, possession, and administration of the property" and made the donation operative upon their death. But this Court has consistently held that such reservation (reddendum) in the context of an irrevocable donation simply means that the donors parted with their naked title, maintaining only beneficial ownership of the donated property while they lived. The three donees signed their acceptance of the donation, which acceptance the deed required. This Court has held that an acceptance clause indicates that the donation is inter vivos, since acceptance is a requirement only for such kind of donations. Donations mortis causa, being in the form of a will, need not be accepted by the donee during the donor's lifetime. As Justice J. B. L. Reyes said in Puig v. Peñaflorida, in case of doubt, the conveyance should be deemed a donation inter vivos rather than mortis causa, in order to avoid uncertainty as to the ownership of the property subject of the deed. Since the donation in this case was one made inter vivos, it was immediately operative and final. The reason is that such kind of donation is deemed perfected from the moment the donor learned of the donee's acceptance of the donation. The acceptance makes the donee the absolute owner of the property donated. Given that the donation in this case was irrevocable or one given inter vivos, Leopoldo's subsequent assignment of his rights and interests in the property to Asuncion should be regarded as void for, by then, he had no more rights to assign. The trial court cannot be faulted for passing upon, in a petition for probate of what was initially supposed to be a donation mortis causa, the validity of the document as a donation inter vivos and the nullity of one of the donor's subsequent assignment of his rights and interests in the property. The ruling of the trial court is REINSTATED.

SPS. AGRIPINO GESTOPA and ISABEL SILARIO GESTOPA, petitioners, vs. COURT OF APPEALS and MERCEDES DANLAG y PILAPIL, respondents. G.R. No. 111904| October 5, 2000 | QUISUMBING, J. Facts: 

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Spouses Diego and Catalina Danlag were the owners of the 6 parcels of unregistered lands and they executed three deeds of donation mortis causa, two of which are in favor of private respondent Mercedes Danlag-Pilapil which were embodied in a deed: The first deed pertained to parcels 1 & 2; second deed pertain to parcel 3 and the last deed contained parcel 4. The spouses have maintained that in all the deeds they have executed, it has 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. Subsequently, Diego with the consent of his wife executed a deed of donation inter vivos (January 16, 1973) covering the aforementioned parcels of land plus two other parcels still in favor of Mercedes. This contained two conditions, that (1) the Danlag spouses shall continue to enjoy the fruits of the land during their lifetime, and that (2) the donee can not sell or dispose of the land during the lifetime of the said spouses, without their prior consent and approval. Mercedes caused the transfer of the parcels' tax declaration to her name and paid the taxes on them. Sometime in 1979, the spouses Danlag sold parcels 3 and 4 (same lands covered in the two donations made) to herein petitioners, Mr. and Mrs. Agripino Gestopa. On September 29, 1979, the Danlags executed a deed of revocation recovering the six parcels of land subject of the aforecited deed of donation inter vivos.

Respondent’s contention: -filed against the Gestopas and the Danlags, for quieting of title over the above parcels of land; 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 and in recognition of the services she rendered, Diego executed a Deed of Donation conveying to her the parcels of land; that 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; that she had complied all the conditions in the donation or she has not been guilty of any act of ingratitude, and; that Diego had no legal basis to revoke the donation and to sell it to the petitioners.

Petitioner’s contention: -the donation made on January 16, 1973 (referring to the inter vivos or the second donation) was null and void because it was obtained by Mercedes through machinations and undue influence and it left the donor without any property at all; that even assuming it was validly executed, the intention was for the donation to take effect upon the death of the donor. -that the donor did not only reserve the right to enjoy the fruits of the properties, but also prohibited the done from selling or disposing the land without the consent and approval of the Danlag spouses which implies that the donor still had control and ownership over the donated properties. Hence, the donation was post mortem. 

Ruling of the Trial Court: favored the plaintiff and ruled that the reservation clause in all the deeds of donation indicated that Diego did not make any donation and the purchase by Mercedes of the two parcels of land covered by the Deed of Donation Inter Vivos bolstered this conclusion, and; that Mercedes committed fraud and machination in preparing all the deeds of donation without explaining to Diego their contents.

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Ruling of the Court of Appeals: reversed the trial court and ruled that the deed of donation inter vivos dated January 16, 1973 as not having been revoked and consequently the same remains in full force and effect; that the reservation by the donor of lifetime usufruct indicated that he transferred to Mercedes the ownership over the donated properties; that the right to sell belonged to the donee, and the donor's right referred to that of merely giving consent; that the donor changed his intention by donating inter vivos properties already donated mortis causa; that the transfer to Mercedes' name of the tax declarations pertaining to the donated properties implied that the donation was inter vivos; and that Mercedes did not purchase two of the six parcels of land donated to her. Issue: Whether or not the donation was inter vivos or mortis causa? SUPREME COURT: It is a donation inter vivos. 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 this case, first, the granting clause shows that Diego donated the properties out of love and affection for the done and this is a mark of a donation inter vivos. Second, the reservation of lifetime usufruct indicates that the donor intended to transfer the naked ownership over the properties. Third, the donor reserved sufficient properties for his maintenance in accordance with his standing in society, indicating that the donor intended to part with the six parcels of land. Lastly, the donee accepted the donation. 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. 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. The attending circumstances in the execution of the subject donation also demonstrated the real intent of the donor to transfer the ownership over the subject properties upon its execution. Prior to the execution of donation inter vivos, the Danlag spouses already executed three donations mortis causa. Lastly, 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. Furthermore, the records do not show that the donor-spouses instituted any action to revoke the, consequently, the supposed revocation on September 29, 1979, had no legal effect. WHEREFORE, the instant petition for review is DENIED. The assailed decision of the Court of Appeals, is AFFIRMED.