1. CIR vs. PinedaFacts: Atanasio Pineda died, survived by his wife, Felicisima Bagtas, and 15 children, the eldest of whom is Manuel B. Pineda, a lawyer. Estate proceedings were had in the Court of First Instance of Manila (Case No. 71129) wherein the surviving widow was appointed administratrix. The estate was divided among and awarded to the heirs and the proceedings terminated on June 8, 1948. Manuel B. Pineda's share amounted to about P2,500.00.

The Bureau of Internal Revenue investigated the income tax liability of the estate for the years 1945, 1946, 1947 and 1948 and it found that the corresponding income tax returns were not filed.

Manuel B. Pineda, who received the assessment, contested the same. Subsequently, he appealed to the Court of Tax Appeals alleging that he was appealing "only that proportionate part or portion pertaining to him as one of the heirs.

Court of Tax Appeals rendered judgment reversing the decision of the Commissioner on the ground that his right to assess and collect the tax has prescribed. The Commissioner appealed and this Court affirmed the findings of the Tax Court in respect to the assessment for income tax for the year 1947 but held that the right to assess and collect the taxes for 1945 and 1946 has not prescribed.

Court of Tax Appeals rendered judgment holding Manuel B. Pineda liable for the payment corresponding to his share

The Commissioner of Internal Revenue has appealed to Us and has proposed to hold Manuel B. Pined liable for the payment of all the taxes found by the Tax Court to be due from the estate in the total amount of P760.28 instead of only for the amount of taxes corresponding to his share in the estate. Manuel B. Pineda opposes the proposition on the ground that as an heir he is liable for unpaid income tax due the estate only up to the extent of and in proportion to any share he received.

Issue: Whether or not he is liable for all the taxes.

Held: Pineda is liable for the assessment as an heir and as a holder- transferee of property belonging to the estate/taxpayer. As an heir he is individually answerable for the part of the tax proportionate to the share he received from the

inheritance. 3 His liability however cannot exceed the amount of

his share. 4

As a holder of property belonging to the estate, Pineda is liable for the tax up to the amount of the property in his possession. The reason is that the Government has a lien on the P2,500.00 received by him from the estate as his share in the inheritance, for

unpaid income taxes 4 for which said estate is liable, pursuant to the last paragraph of Section 315 of the Tax Code.

By virtue of such lien, the Government has the right to subject the property in Pineda's possession. After such payment, Pineda

will have a right of contribution from his co-heirs, 5 to achieve an adjustment of the proper share of each heir in the distributable estate.

All told, the Government has two days of collecting the taxes in question. One, by going after all the heirs and collecting from each one of them the amount of the tax proportionate to the inheritance received.

Another remedy, pursuant to the lien created by Section 315 of the Tax Code upon all property and rights to property belonging to the taxpayer for unpaid income tax is by subjecting said property of the estate which is in the hands of an heir or transferee to the payment of the tax due the estate. The Bureau of Internal Revenue should be given, in instances like the case at bar, the necessary discreation to avail itself of the most expeditious way to collect the tax as may be envisioned in the particular provision of the Tax Code above quoted, because taxes are the lifeblood of Government and their prompt and certain availability is an imperious need.

2. CIR vs. Prieto

Facts:

Doña Teresa Tuason y de la Paz died in Manila on March 9, 1951 leaving a last will and testament, subsequently admitted to probate in the Court of First Instance of said city (Civil Case No. 13447). It provided that, with the exception of five specific legacies amounting to P80,800.00, all her property be distributed in equal shares among 14 heirs, respondents Antonio, Benito and Mauro, all surnamed Prieto, being amongst them.

As stated heretofore, the will of Doña Teresa Tuason y de la Paz directed that, after the payment of the specific legacies therein provided for, the residue of her estate should be divided in equal parts among 14 heirs, namely: (1) Antonio Prieto, (2) Benito Prieto, (3) Mauro Prieto, (4) Rosario Legarda, (5) Alejandro Legarda, (6) Teresa Legarda, (7) Beatriz Legarda, (8) Jose Legarda, (9) Teresa Valdez, (10) Jose Valdez, (11) Maria Rosario Valdez, (12) Carmen Valdez, (13) Maria Rita Valdez, and (14) — constituting only one group of heirs — the Valdezes named Rafael, Mercedes, Manuel, Natividad, Benito and Jose Francisco.

In accordance with the project of partition submitted in the probate proceedings and duly approved by the court, the total value of the estate amounted to P3,513,073.63. Deducting therefrom the value of the five specific legacies amounting to P80,800.00; the net would be P3,432,273.60 to be divided among the 14 heirs at the rate of P245,162.40 for each of them.

Because of the impossibility of dividing the real properties of the testatrix equally among the 14 heirs, to respondents Antonio, Benito and Mauro Prieto were allotted properties with a total value greater than that of the properties allotted to the other 11 heirs. It was, therefore, agreed that, to equalize the shares of the heirs, the three respondents should reimburse in cash to their co-heirs the resulting difference in value.

Issue: whether or not there has been an overpayment in connection with respondents' respective inheritance tax liability.

Whether the demand for refund was within the reglementary period.

Held: The above shows conclusively that the cash payments demanded from and made by respondents were for the purpose of making equal the share of each one of the fourteen heirs instituted in the last will of the deceased Doña Teresa Tuason y de la Paz.

But petitioner contends that the individual share of each heir in the net estate is what appears in the project of partition, and that the cash payments made by respondents are immaterial in the determination of their respective inheritance tax because the money paid did not form part of the estate of the decedent. We find no merits in these contentions.

It can not be disputed that the inheritance tax should be paid on the basis of the value of the properties inherited by an heir. On the other hand, it is clear in this case that what each of the respondents really and actually received as his share in the inheritance is the value of the properties allotted to them minus what they had to pay to their co-heirs to compensate the latter for the difference in value existing between the properties allotted to respondents, on the one hand, and those allotted to the other heirs, on the other. To claim otherwise would be closing one's eyes to the realities of the case. The resulting amount, therefore, is the just and fair basis for the determination of the tax liability of respondents.

The claim for refund was within the reglemantary period. That when the tax is paid in installments, the prescriptive period of two years provided in section 306 of the Revenue Code should he counted from the date of the final payment. We agree with this view as being reasonable and which appears to be the uniform doctrine in American jurisdiction. This rule proceeds from the theory that, in contemplation of tax laws, there is no payment until the whole or entire tax liability is completely paid. Thus, a payment of a part or portion thereof, can not operate to start the commencement of the statute of limitations.

3. CIR vs. CA

Facts: Pedro Pajonar, a member of the Philippine Scout, Bataan Contingent, during the second World War, was a part of the infamous Death March by reason of which he suffered shock and became insane. His sister Josefina Pajonar became the guardian over his person, while his property was placed under the guardianship of the Philippine National Bank (PNB) by the Regional Trial Court of Dumaguete City.

PNB filed an accounting of the decedent's property under guardianship valued at P3,037,672.09 in Special Proceedings No. 1254. However, the PNB did not file an estate tax return, instead it advised Pedro Pajonar's heirs to execute an extrajudicial settlement and to pay the taxes on his estate.

Josefina Pajonar filed a petition with the Regional Trial Court of Dumaguete City for the issuance in her favor of letters of administration of the estate of her brother. The trial court appointed Josefina Pajonar as the regular administratrix of Pedro Pajonar's estate.

Pursuant to a second assessment by the BIR for deficiency estate tax, the estate of Pedro Pajonar paid estate tax in the amount of P1,527,790.98. Josefina Pajonar, in her capacity as administratrix and heir of Pedro Pajonar's estate, filed a protest on January 11,

1989 with the BIR praying that the estate tax payment in the amount of P1,527,790.98, or at least some portion of it, be returned to the heirs. Without waiting for her protest to be resolved by the BIR, Josefina Pajonar filed a petition for review with the Court of Tax Appeals (CTA), praying for the refund of P1,527,790.98, or in the alternative, P840,202.06, as erroneously paid estate tax.

CTA ordered the Commissioner of Internal Revenue to refund Josefina Pajonar the amount of P252,585.59, representing

erroneously paid estate tax for the year 1988. 5 Among the deductions from the gross estate allowed by the CTA were the amounts of P60,753 representing the notarial fee for the Extrajudicial Settlement and the amount of P50,000 as the attorney's fees in Special Proceedings No. 1254 for guardianship.

Issue: whether the notarial fee paid for the extrajudicial settlement in the amount of P60,753 and the attorney's fees in the guardianship proceedings in the amount of P50,000 may be allowed as deductions from the gross estate of decedent in order to arrive at the value of the net estate.

Held: Expenses incurred in the extrajudicial settlement of the estate should be allowed as a deduction from the gross estate. "There is no requirement of formal administration. It is sufficient that the expense be a necessary contribution toward the settlement of the case."

Attorney's fees in order to be deductible from the gross estate must be essential to the collection of assets, payment of debts or the distribution of the property to the persons entitled to it. The services for which the fees are charged must relate to the proper settlement of the estate. This case, the guardianship proceeding was necessary for the distribution of the property of the late Pedro Pajonar to his rightful heirs.

Judicial expenses are expenses of administration. 19

Administration expenses, as an allowable deduction from the gross estate of the decedent for purposes of arriving at the value of the net estate includes all expenses "essential to the collection of the assets, payment of debts or the distribution of

the property to the persons entitled to it." 20 In other words, the expenses must be essential to the proper settlement of the estate. Expenditures incurred for the individual benefit of the heirs, devisees or legatees are not deductible.

Attorney's fees, on the other hand, in order to be deductible from the gross estate must be essential to the settlement of the estate.

Coming to the case at bar, the notarial fee paid for the extrajudicial settlement is clearly a deductible expense since such settlement effected a distribution of Pedro Pajonar's estate to his lawful heirs. Similarly, the attorney's fees paid to PNB for acting as the guardian of Pedro Pajonar's property during his lifetime should also be considered as a deductible administration expense. PNB provided a detailed accounting of decedent's property and gave advice as to the proper settlement of the latter's estate, acts which contributed towards the collection of decedent's assets and the subsequent settlement of the estate.

4. Lorenzo vs. Posadas

Facts: Thomas Hanley died in Zamboanga, Zamboanga, leaving a will (Exhibit 5) and considerable amount of real and personal properties. On June 14, 1922, proceedings for the probate of his will and the settlement and distribution of his estate were begun in the Court of First Instance of Zamboanga. The will was admitted to probate. Said will provides among other things, as follows:

"5. I direct that all real estate owned by me at the time of my death be not sold or otherwise disposed of for a period of ten (10) years after my death, and that the same be handled and managed by my executors, and proceeds thereof to be given to my nephew, Matthew Hanley, at Castlemore, Ballaghaderine, County of Rosecommon, Ireland, and that he be directed that the same be used only for the education of my brother's children and their descendants.

"6. I direct that ten (10) years after my death my property be given to the above-mentioned Matthew Hanley to be disposed of in the way he thinks most advantageous.

The Court of First Instance of Zamboanga considered it proper for the best interests of the estate to appoint a trustee to administer the real properties which, under the will, were to pass to Matthew Hanley ten years after the testator's death. Accordingly, P. J. M. Moore, one of the two executors named in the will, was, on March 8, 1924, appointed trustee. He acted as trustee until February 29, 1932, when he resigned and the plaintiff herein was appointed in his stead.

Defendant filed a motion in the t e s t a m e n t a r y p r o ce e d i n g s p e n d i n g b e f o r e t h e C o u r t o f F i r s t I n s t a n ce o f Zamboanga (Special proceedings No. 302) praying that the trustee, plaintiff herein, be ordered to pay to the Government the said sum of P2,052.74. The motion was granted. On September 15, 1932, the plaintiff paid this amount under protest, notifying the defendant at the same time that unless the amount was promptly refunded suit would be brought for its recovery. The defendant overruled the plaintiff's protest and refused to refund the said amount or any part thereof.

Issue: (a) When does the inheritance tax accrue and when must it be satisfied? (b) Should the inheritance tax be computed on the basis of the value of the estate at the time of the testator's death, or on its value ten years later? (c) In determining the net value of the estate subject to tax, is it proper to deduct the compensation due to trustees? (d) What law governs the case at bar? Should the provisions of Act No. 3606 favorable to the taxpayer be given retroactive effect? (e) Has there been delinquency in the payment of the inheritance tax? If so, should the additional interest claimed by the defendant in his appeal be paid by the estate?

Held:

A. The tax therefore is upon transmission or the transfer or devolution of property of a decedent, made effective by his death.

B. 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.

C. In paragraph 5 of his will, the testator expressed the desire that his real estate be handled and managed by his executors until the expiration of the period of ten years therein provided. Judicial expenses are expenses of administration

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 have no reference to closing the estate for the purpose of a distribution thereof to those entitled to it and are not required or essential to the perfection of the rights of the heirs or legatees. . . . Trusts . . . of the character of that here before the court, are created for the benefit of those to whom the property ultimately passes, are of voluntary creation, and intended for the preservation of the estate. No sound reason is given to support the contention that such expenses should be taken into consideration in fixing the value of the estate for the purpose of this tax."

D. It is well-settled that inheritance taxation is governed by the statute in force at the time of the death of the decedent. 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 presses that it shall have a retroactive effect,

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 c o n t r a r y . Article 22 of the Revised Penal Code is not applicable to the case at bar, and in the absence of clear legislative intent, we cannot give Act No. 3606 a retroactive effect.

E. The mere fact that the estate of the deceased was placed in trust did not remove it from the operation of our inheritance tax laws or exempt it from the payment of the inheritance tax. The corresponding inheritance tax should have been paid on or before March 10, 1924, to escape the penalties of the law.

5. Carlos Sison vs. Narcisa Teodoro

Facts: Court of First Instance of Manila, which has jurisdiction over the estate of the late Margarita David, issued an order appointing Carlos Moran Sison as j udicial administrator, without compensation, after filing a bond in the amount of P5,000. The next day, Carlos Moran Sison took his oath of office and put up the requisite bond which was duly approved by the court. On the same day, letters of administration were issued to him.

The judicial administrator filed an accounting of his administration which contains disbursement items.

Narcisa F. Teodoro, one of the heirs, objected to the approval of the above- quoted items on the ground that they are not necessary expenses of administration and should not be charged against the estate. The court approved the report of the administrator but disallowed the items objected to on the ground that they cannot be considered as expenses of administration.

Issue: whether a judicial administrator, serving w ithout compensation, is entitled to charge as an expense of administration the premiums aid on his bond.

Held: Expense incurred by an executor or administrator to produce a bond is not a proper charge against the estate. Section 680 of the Code of Civil Procedure (similar to section 7, Rule 86) does not authorize the executor or administrator to charge against the estate the money spent for the presentation, ruling, and substitution of a bond.

The position of an executor or administrator is one of trust. In fact, the Philippine Code of Civil Procedure so mentions it. It is proper for the law to safeguard the estates of deceased persons by requiring the executor or administrator to give a suitable bond. The ability to give this bond is in the nature of a qualification for the office. The execution and approval of the bond constitute a condition precedent to acceptance of the responsibilities of the trust.

It would be a very far-fetched construction to deduce that the giving of a bond in order to qualify for the office of executor or administrator is a necessary expense in the care, management, and settlement of the estate within the meaning of section 680 of the Code of Civil Procedure, for these are expenses incurred after the executor or administrator has met the requirements of the law and has entered upon the performance of his duties.

“There is nothing in the decision that may justify the conclusion that the allowance or disallowance of premiums paid on the bond of the administrator is made dependent on the receipt of compensation.”

6. Ferdinand Marcos vs. CA

Facts: On September 29, 1989, former President Ferdinand Marcos died in Honolulu, Hawaii, USA.

On June 27, 1990, a Special Tax Audit Team was created to conduct investigations and examinations of the tax liabilities and obligations of the late president, as well as that of his family, associates and "cronies". Said audit team concluded its investigation with a Memorandum dated July 26, 1991. The investigation disclosed that the Marcoses failed to file a written notice of the death of the decedent, an estate tax returns [sic], as well as several income tax returns covering the years 1982 to 1986, — all in violation of the National Internal Revenue Code (NIRC).

The Commissioner of Internal Revenue thereby caused the preparation and filing of the Estate Tax Return for the estate of the late president, the Income Tax Returns of the Spouses Marcos for the years 1985 to 1986, and the Income Tax Returns of petitioner Ferdinand 'Bongbong' Marcos II for the years 1982 to 1985. Then it issued deficiency assessments.

The deficiency tax assessments were not protested administratively, by Mrs. Marcos and the other heirs of the late president, within 30 days from service of said assessments.

On February 22, 1993, the BIR Commissioner issued twenty-two

notices of levy on real property against certain parcels of land owned by the Marcoses — to satisfy the alleged estate tax and deficiency income taxes of Spouses Marcos.

Notices of sale at public auction were posted on May 26, 1993, at the lobby of the City Hall of Tacloban City. The public auction for the sale of the eleven (11) parcels of land took place on July 5, 1993. There being no bidder, the lots were declared forfeited in favor of the government.

On June 25, 1993, petitioner Ferdinand 'Bongbong' Marcos II filed the instant petition for certiorari and prohibition under Rule 65 of the Rules of Court, with prayer for temporary restraining order and/or writ of preliminary injunction.

Issue: Daghan kaau.

Held: The nature of the process of estate tax collection has been described as follows:

"Strictly speaking, the assessment of an inheritance tax does not directly involve the administration of a decedent's estate, although it may be viewed as an incident to the complete settlement of an estate, and, under some statutes, it is made the duty of the probate court to make the amount of the inheritance tax a part of the final decree of distribution of the estate. It is not against the property of decedent, nor is it a claim against the estate as such, but it is against the interest or property right which the heir, legatee, devisee, etc., has in the property formerly held by decedent. Further, under some statutes, it has been held that it is not a suit or controversy between the parties, nor is it an adversary proceeding between the state and the person who owes the tax on the inheritance. However, under other statutes it has been held that the hearing and determination of the cash value of the assets and the determination of the tax are adversary proceedings. The proceeding has been held to be necessarily a proceeding in rem."

Claims for taxes, whether assessed before or after the death of the deceased, can be collected from the heirs even after the distribution of the properties of the decedent. They are exempted from the application of the statute of non-claims. The heirs shall be liable therefor, in proportion to their share in the inheritance.

The Government has two ways of collecting the taxes in question. One, by going after all the heirs and collecting from each one of them the amount of the tax proportionate to the inheritance received. Another remedy, pursuant to the lien created by Section 315 of the Tax Code upon all property and rights to property belong to the taxpayer for unpaid income tax, is by subjecting said property of the estate which is in the hands of an heir or transferee to the payment of the tax due the estate.

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.

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.

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.

Such assessment may be protested administratively by filing a request for reconsideration or reinvestigation in such form and manner as may be prescribed by implementing regulations within (30) days from receipt of the assessment. If the protest is denied in whole or in part, the individual, association or corporation adversely affected by the decision on the protest may appeal to the Court of Tax Appeals within thirty (30) days from receipt of said decision; otherwise, the decision shall become final, executory and demandable.

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.

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.

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, 16 whose determinations and assessments are presumed correct and made in

good faith. 17 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.

Petitioner argues that all the questioned Notices of Levy, however, must be nullified for having been issued without validly serving copies thereof to the petitioner. As a mandatory heir of the decedent, petitioner avers that he has an interest in the subject estate, and notices of levy upon its properties should have been served upon him.

We do not agree. 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 petitioner as heir of the deceased.

7. Dizon vs. CIR

FACTS:

There were claims against the estate which the BIR contested

stating that lower amounts were paid as compromise payments

during the settlement of the estate and these amounts should be

what will be considered as deductions in arriving at the net estate.

ISSUE:

Will the compromise amounts be the amounts considered as

deductions to the gross estate?

HELD:

NO. The deductions allowable are the amounts determined at

the time of death. Post-death developments are not material in

determining the amount of deduction. Thus, the Court applied

the “date-of-death valuation rule” which is the US rule on

deductions and which is applicable also in the Philippines. The

amount deductible is the debt which could have been enforced

against the deceased in his lifetime.

8. Republic of the Philippines vs. AFP Retirement and Separation Benefits

FACTS:

Lots X, Y-1 and Y-2 were lands of the public domain pursuant to Proclamation No. 168 (Proc. 168). In 1983, Proclamation No. 2273 (Proc. 2273) was issued which removed and segregated Lots Y-1 and Y-2 from the reservation and declaring them open for disposition to qualified applicants. As a result, only Lot X which consists of 15,020 square meters remained part of the reservation now known as Magsaysay Park.

The record discloses that the heirs of CabaloKusop and Atty. Flaviano petitioned the President to have Lots Y-1 and Y-2 taken out of the reservation for the reason that through their predecessor CabaloKusop (Kusop), they have acquired vested private rights over these lots. This campaign resulted in Proc. 2273, which re-classified and returned Lots Y-1 and Y-2 to their original alienable and disposable state.

In 1997, the heirs and Flaviano filed applications for the issuance of individual miscellaneous sales patents over the whole of Lot X. Consequently, 16 original certificates of title (OCTs) covering Lot X were issued in the names of the heirs, Flaviano and several others. These 16 titles were simultaneously conveyed to respondent AFP-Retirement and Separation Benefits System (AFP-RSBS).

Petitioner Republic of the Philippines a complaint for reversion, cancellation and annulment of the AFP-RSBS titles, on the thesis that they were issued over a public park which is classified as inalienable and non-disposable public land.

The heirs and Flaviano intervened, and, together with the AFP-RSBS, argued that their predecessor-in-interest Kusop had acquired vested interests over Lot X for having occupied the same

for more than 30 years. The RTC ruled in favor of the Republic.

The CA reversed the RTC and ruled that the lands in dispute are alienable and disposable lands. Hence this present appeal.

ISSUE: Whether or not the CA erred in ruling that the lands in question are alienable and disposable lands?

HELD: The Court grants the Petition.

CIVIL LAW: alienable and disposable lands; estoppel

From the wording of Proc. 168, the land it comprises is subject to sale or settlement, and thus alienable and disposable. However, this alienable and disposable character of the land covered by the proclamation was subsequently withdrawn, and the land was re-classified by then President Macapagal to pave the way for the establishment of a park reservation, subject only to previously acquired private rights. The heirs then lobbied for the exclusion of certain portions of the reservation which they claimed to be theirs, allegedly acquired by their predecessor Kusop through prescription. They were successful, for in 1983, then President Marcos issued Proc. 2273, which excluded and segregated Lots Y-1 and Y-2 from the coverage of Proc. 168. In addition, Proc. 2273 declared Lots Y-1 and Y-2 open for distribution to qualified beneficiaries which included the heirs. However, Lot X was retained as part of the reservation.

The heirs did not question Proc. 2273, precisely because they were the beneficiaries thereof; nor did they object to the retention of Lot X as part of the park reserve. Instead, in 1997, they applied for, and were granted, sales patents over Lot X.

Evidently, the sales patents over Lot X are null and void, for at the time the sales patents were applied for and granted, the land had lost its alienable and disposable character. It was set aside and was being utilized for a public purpose, that is, as a recreational park. And under the present Constitution, national parks are declared part of the public domain, and shall be conserved and may not be increased nor diminished, except by law.

The government, as the agent of the State, is possessed of the plenary power as the persona in law to determine who shall be the favored recipients of public lands, as well as under what terms they may be granted such privilege, not excluding the placing of obstacles in the way of their exercise of what otherwise would be ordinary acts of ownership.

The heirs and Flavianos actions betray their claim of ownership to Lot X. When Proc. 168 was issued, they did not institute action to question its validity, using as cause of action their claimed ownership and title over the land. The same is true when Proc. 2273 came out. They did not file suit to invalidate it because it contravenes their claimed ownership over Lot X. They simply sat and waited for the good graces of the government to fall on their laps. They simply waited for the State to declare them beneficiaries of the land.

The principle of estoppel bars one from denying the truth of a fact which has, in the contemplation of law, become settled by the acts and proceedings of judicial or legislative officers or by the act of the party himself, either by conventional writing or by

representations, express or implied or in pais.

Finally, as regards AFP-RSBS rights, the Court sustains the petitioners view that any title issued covering non-disposable lots even in the hands of an alleged innocent purchaser for value shall be cancelled.

The Court cannot ignore the basic principle that a spring cannot rise higher than its source; as successor-in-interest, AFP-RSBS cannot acquire a better title than its predecessor, the herein respondents-intervenors.

Petition is GRANTED. Decision of the Court of Appeals is ANNULLED and SET ASIDE.

9. Republic vs. Guzman

Facts: David Rey Guzman, a natural-born American citizen, is the

son of the spouses Simeon Guzman, 3 a naturalized American citizen, and Helen Meyers Guzman, an American citizen. In 1968 Simeon died leaving to his sole heirs Helen and David an estate consisting of several parcels of land located in Bagbaguin, Sta. Maria, Bulacan.

Helen and David executed a Deed of Extrajudicial Settlement of the Estate of Simeon Guzman dividing and adjudicating to themselves all the property belonging to the estate of Simeon.

Helen executed a Quitclaim Deed assigning, transferring and conveying to her son David her undivided one-half (1/2) interest on all the parcels of land subject matter of the Deed of Extrajudicial Settlement of the Estate of Simeon Guzman. Since the document appeared not to have been registered, Helen executed another document, a Deed of Quitclaim, on 9 August 1989 confirming the earlier deed of quitclaim as well as modifying the document to encompass all her other property in the Philippines.

David executed a Special Power of Attorney where he acknowledged that he became the owner of the parcels of land subject of the Deed of Quitclaim executed by Helen on 9 August 1989 and empowering Atty. Lolita G. Abela to sell or otherwise dispose of the lots.

Atty. Mario A. Batongbacal wrote the Office of the Solicitor General and furnished it with documents showing that David's ownership of the one-half (1/2) of the estate of Simeon Guzman was defective. On the basis thereof, the Government filed before the Regional Trial Court of Malolos Bulacan a Petition for Escheat praying that one-half (1/2) of David's interest in each of the subject parcels of land be forfeited in its favor. David filed a petition to dismiss.

Trial court dismissed the petition holding that the two (2) deeds of quitclaim executed by Helen Meyers Guzman had no legal force and effect so that the ownership of the property subject thereof

remained with her. 5

Issue: Whether the lands should be forfeited in favor of the government.

Held: As a rule, only a Filipino citizen can acquire private lands in the Philippines. The only instances when a foreigner can acquire private lands in the Philippines are by hereditary succession and if he was formerly a natural-born Filipino citizen who lost his Philippine citizenship.

Petitioner therefore contends that the acquisition of the parcels of land by David does not fall under any of these exceptions. It asserts that David being an American citizen could not validly acquire one-half (1/2) interest in each of the subject parcels of land by way of the two (2) deeds of quitclaim as they are in reality donations inter vivos. David maintains, on the other hand, that he acquired the property by right of accretion and not by way of donation, with the deeds of quitclaim merely declaring Helen's intention to renounce her share in the property and not an intention to donate.

There are three (3) essential elements of a donation: (a) the reduction of the patrimony of the donor; (b) the increase in the patrimony of the donee; and, (c) the intent to do an act of liberality or animus donandi. When applied to a donation of an immovable property, the law further requires that the donation be made in a public document and that there should be an acceptance thereof made in the same deed of donation

or in a separate public document. 7 In cases where the acceptance is made in a separate instrument, it is mandated that the donor should be notified thereof in an authentic form, to be noted in both instruments.

A perusal of the two (2) deeds of quitclaim reveals that Helen intended to convey to her son David certain parcels of land located in the Philippines, and to re-affirm the quitclaim she executed in 1981 which likewise declared a waiver and renunciation of her rights over the parcels of land. The language of the deed of quitclaim is clear that Helen merely contemplated a waiver of her rights, title and interest over the lands in favor of David, and not a donation. That a donation was far from Helen's mind is further supported by her deposition which indicated that she was aware that a donation of the parcels of land was not possible since Philippine law does not allow such an arrangement. 9 She reasoned that if she really intended to donate something to David it would have been more convenient if she sold the

property and gave him the proceeds therefrom. 10 It appears that foremost in Helen's mind was the preservation of the Bulacan realty within the bloodline of Simeon from where they originated, over and above the benefit that would accrue to David by reason

of her renunciation. 11 The element of animus donandi therefore was missing. cdll

The Special Power of Attorney merely acknowledges that David owns the property referred to and that he authorizes Atty. Abela to sell the same in his name. There is no intimation, expressly or impliedly, that David's acquisition of the parcels of land is by virtue of Helen's possible donation to him and we cannot look beyond the language of the document to make a contrary construction as this would be inconsistent with the parol evidence

rule. 12

Moreover, it is mandated that if an acceptance is made in a separate public writing the notice of the acceptance must be

noted not only in the document containing the acceptance but also in the deed of donation. It is necessary that formal notice thereof be given to the donor, and the fact that due notice has been given must be noted in both instruments. Then and only then is the donation perfected." 14

Where the deed of donation fails to show the acceptance, or where the formal notice of the acceptance made in a separate instrument is either not given to the donor or else noted in the deed of donation, and in the separate acceptance, the donation is null and void.

The inexistence of a donation does not render the repudiation made by Helen in favor of David valid. There is no valid repudiation of inheritance as Helen had already accepted her share of the inheritance when she, together with David, executed a Deed of Extrajudicial Settlement of the Estate of Simeon Guzman

Article 1056 of the Civil Code provides —

The acceptance or repudiation of an inheritance, once made is irrevocable and cannot be impugned, except when it was made through any of the causes that vitiate consent or when an unknown will appears.

Thus, pursuant to Art. 1056, Helen cannot belatedly execute an instrument which has the effect of revoking or impugning her previous acceptance of her one-half (1/2) share of the subject property from Simeon's estate. The nullity of the repudiation does not ipso facto operate to convert the parcels of land into res

nullius 18 to be escheated in favor of the Government. The repudiation being of no effect whatsoever the parcels of land should revert to their private owner, Helen, who, although being an American citizen, is qualified by hereditary succession to own the property subject of the litigation. llcd

10. Abello vs. CIR

Facts: During the 1987 national elections, petitioners, who are partners in the Angara, Abello, Concepcion, Regala and Cruz (ACCRA) law firm, contributed P882,661.31 each to the campaign funds of Senator Edgardo Angara, then running for the Senate.

The Bureau of Internal Revenue (BIR) assessed each of the petitioners P263,032.66 for their contributions.

Petitioners questioned the assessment through a letter to the BIR. They claimed that political or electoral contributions are not considered gifts under the National Internal Revenue Code (NIRC), and that, therefore, they are not liable for donor's tax. The claim for exemption was denied by the Commissioner.

Petitioners filed a petition for review with the CTA, which was decided on October 7, 1991 in favor of the petitioners.

The Court of Appeals reversed and set aside the CTA decision on

April 20, 1994. 3 The appellate Court ordered the petitioners to pay donor's tax amounting to P263,032.66 each.

Issue: Whether or not the contribution is subject to donor’s tax.

Held: Yes

Donation has the following elements: (a) the reduction of the

patrimony of the donor; (b) the increase in the patrimony of the

donee; and, (c) the intent to do an act of liberality or animus

donandi. 7

First of all, donative intent is a creature of the mind. It cannot be perceived except by the material and tangible acts which manifest its presence. This being the case, donative intent is presumed present when one gives a part of ones patrimony to another without consideration. Second, donative intent is not negated when the person donating has other intentions, motives or purposes which do not contradict donative intent.

The proper performance of his duties as a legislator is his obligation as an elected public servant of the Filipino people and not a consideration for the political contributions he received. In fact, as a public servant, he may even be called to enact laws that are contrary to the interests of his benefactors, for the benefit of the greater good. In fine, the purpose for which the sums of money were given, which was to fund the campaign of Senator Angara in his bid for a senatorial seat, cannot be considered as a material consideration so as to negate a donation. prcd

Congress approved Republic Act No. 7166 on November 25, 1991, providing in Section 13 thereof that political/electoral contributions, duly reported to the Commission on Elections, are not subject to the payment of any gift tax. This all the more shows that the political contributions herein made are subject to the payment of gift taxes, since the same were made prior to the exempting legislation, and Republic Act No. 7166 provides no retroactive effect on this point.

11. Lydia vs. BrigidoBanga

Facts: Spouses Placida Tabo-tabo and Lauro Sumipat, who contracted marriage on July 20, 1939, acquired three parcels of land. The couple was childless. Lauro Sumipat, however, sired five illegitimate children out of an extra- marital affair with Pedra Dacola, namely: herein defendants-appellees. Lauro Sumipat executed a document denominated “DEED OF ABSOLUTE TRANSFER AND/OR QUIT-CLAIM OVER REAL PROPERTIES” (the assailed document) in favor of defendants-appellees covering the three parcels of land (the properties).

When the assailed document was executed, Lauro Sumipat was already very sick and bedridden; that upon defendant-appellee Lydia’s request, their neighbor Benjamin Rivera lifted the body of Lauro Sumipat whereupon Lydia guided his (Lauro Sumipat’s) hand in affixing his signature on the assailed document which she had brought; that Lydia thereafter left but later returned on the same day and requested Lauro’s unlettered wife Placida to sign on the assailed document, as she did in haste, even without the latter getting a responsive answer to her query on what it was all about.

After Lauro Sumipat’s death on January 30, 1984, his wife Placida, hereinafter referred to as plaintiff-appellant, and defendants-appellees jointly administered the properties 50% of the produce of which went to plaintiff- appellant. ADCEaH

As plaintiff-appellant’s share in the produce of the properties dwindled until she no longer received any and learning that the titles to the properties in question were already transferred/made in favor of the defendants- appellees, she filed a complaint for declaration of nullity of titles, contracts, partition, recovery of ownership now the subject of the present appeal.

Defendant-appellee Lydia disclaims participation in the execution of the assailed document, she claiming to have acquired knowledge of its existence only on January 10, 1983 or five days after its execution.

the appellate court held that since Placida was unlettered, 7 the appellees, the petitioners herein, as the parties interested in enforcing the deed, have the burden of proving that the terms thereof were fully explained to her.

Issue: whether the questioned deed by its terms or under the surrounding circumstances has validly transferred title to the disputed properties to the petitioners.

Held: A perusal of the deed reveals that it is actually a gratuitous disposition of property — a donation.

Art. 749. In order that the donation of the immovable may be valid, it must be made in a public document, specifying therein the property donated and the value of the charges which the donee must satisfy.

The acceptance may be made in the same deed of donation or in a separate public document, but it shall not take effect unless it is done during the lifetime of the donor.

If the acceptance is made in a separate instrument, the donor shall be notified thereof in an authentic form, and this step shall be noted in both instruments.

Title to immovable property does not pass from the donor to the donee by virtue of a deed of donation until and unless it has been accepted in a public instrument and the donor duly notified thereof. The acceptance may be made in the very same instrument of donation. If the acceptance does not appear in the same document, it must be made in another. Where the deed of donation fails to show the acceptance, or where the formal notice of the acceptance, made in a separate instrument, is either not given to the donor or else not noted in the deed of donation and in the separate acceptance, the donation is null and void.

We also note the absence of any proof of filing of the necessary return, payment of donor’s taxes on the transfer, or exemption from payment thereof. Under the National Internal Revenue Code of 1977, the tax code in force at the time of the execution of the deed, an individual who makes any transfer by gift shall make a return and file the same within 30 days after the date the gift is made with the Revenue District Officer, Collection Agent or duly authorized Treasurer of the municipality in which the donor was domiciled at the time of

the transfer. 21 The filing of the return and payment of donor’s taxes are mandatory. In fact, the registrar of deeds is mandated not to register in the registry of property any

document transferring real property by way of gifts inter vivos unless a certification that the taxes fixed and actually due on the transfer had been paid or that the transaction is tax exempt from the Commissioner of Internal Revenue, in

either case, is presented. 22

12. Ganuelas vs. Cawed (AMBUT NGANU APIL APILON PANI SA TAX MAKANUMDOM NA NUON KO NA NA WRONG KOS SUCCESSION PISTI YAWA GIATAY!)

Facts: “That, for and in consideration of the love and affection which the DONOR has for the DONEE, and of the faithful services the latter has rendered in the past to the former, the said DONOR does by these presents transfer and convey, by way of DONATION, unto the DONEE the property above, described, to become effective upon the death of the DONOR; but in the event that the DONEE should die before the DONOR, the present donation shall be deemed rescinded and of no further force and effect.”

Issue: Whether the donation is inter vivos or mortis causa

Held: Donation inter vivos differs from donation mortis causa in that in the former, the act is immediately operative even if the actual execution may be deferred until the death of the donor, while in the latter, nothing is conveyed to or acquired by the donee until the death of the donor-testator.

If the donation is made in contemplation of the donor's death, meaning that the full or naked ownership of the donated properties will pass to the donee only because of the donor's death, then it is at that time that the donation takes effect, and it is a donation mortis causa which should be embodied in a last will and testament. But if the donation takes effect during the donor's lifetime or independently of the donor's death, meaning that the full or naked ownership (nuda proprietas) of the donated properties passes to the donee during the donor's lifetime, not by reason of his death but because of the deed of donation, then the donation is inter vivos.

The distinction between a transfer inter vivos and mortis causa is important as the validity or revocation of the donation depends upon its nature. If the donation is inter vivos, it must be executed

and accepted with the formalities prescribed by Articles 748 25

and 749 26 of the Civil Code, except when it is onerous in which case the rules on contracts will apply. If it is mortis causa, the donation must be in the form of a will, with all the formalities for the validity of wills, otherwise it is void and cannot transfer

ownership. 27

The distinguishing characteristics of a donation mortis causa are the following:

1. It conveys no title or ownership to the transferee before the death of the transferor; or, what amounts to the same thing, that the transferor should retain the ownership (full or naked) and control of the property while alive;

2. That before his death, the transfer should be revocable by the transferor at will, ad nutum; but revocability may be provided for indirectly by means of a reserved power in the

donor to dispose of the properties conveyed;

3. That the transfer should be void if the transferor should survive the transferee.

The phrase "to become effective upon the death of the DONOR" admits of no other interpretation but that Celestina intended to transfer the ownership of the properties to Ursulina on her death,

not during her lifetime. 29

More importantly, the provision in the deed stating that if the donee should die before the donor, the donation shall be deemed rescinded and of no further force and effect shows that the donation is a postmortem disposition.

As stated in a long line of cases, one of the decisive characteristics of a donation mortis causa is that the transfer should be considered void if the donor should survive the donee.

13. Sps. Gestopa vs. CA

Facts: Spouses Diego and Catalina Danlag were the owners of six parcels of unregistered lands. They executed three deeds of donation mortis causa, in favor of private respondent Mercedes Danlag-Pilapil. 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.

Diego Danlag, with the consent of his wife, Catalina Danlag,

executed a deed of donation inter vivos 5 covering the aforementioned parcels of land plus two other parcels with TD Nos. 11351 and 11343, respectively, again in favor of private respondent 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.

Diego and Catalina Danlag sold parcels 3 and 4 to herein petitioners, Mr. and Mrs. Agripino Gestopa. On September 29,

1979, the Danlags executed a deed of revocation 6 recovering the six parcels of land subject of the aforecited deed of donation inter vivos.

Mercedes Pilapil (herein private respondent) filed with the RTC a petition against the Gestopas and the Danlags, for quieting of title 7 over the above parcels of land. 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.

Gestopas and the Danlags averred that the deed of donation dated January 16, 1973 was null and void because it was obtained by Mercedes through machinations and undue influence.

"That for and in consideration of the love and affection which the Donor inspires in the Donee and as an act of liberality and

generosity, the Donor hereby gives, donates, transfers and conveys by way of donation unto the herein Donee, her heirs, assigns and successors, the above-described parcels of land;

That it is the condition of this donation that the Donor shall continue to enjoy all the fruits of the land during his lifetime and that of his spouse and that the donee cannot sell or otherwise, dispose of the lands without the prior consent and approval by the Donor and her spouse during their lifetime.

xxx xxx xxx

That for the same purpose as hereinbefore stated, the Donor further states that he has reserved for himself sufficient properties in full ownership or in usufruct enough for his maintenance of a decent livelihood in consonance with his standing in society.

That the Donee hereby accepts the donation and expresses her thanks and gratitude for the kindness and generosity of the Donor."

Issue: Whether the donation was inter vivos or mortis causa.

Held: Note first that the granting clause shows that Diego donated the properties out of love and affection for the donee.

This is a mark of a donation inter vivos. 14 Second, 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? 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. 15 Lastly, the donee accepted the donation. 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 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.

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. 16 Prior to the execution of donation inter vivos, the Danlag spouses already executed three donations mortis causa. As correctly observed by the Court of Appeals, the Danlag spouses were aware of the difference between the two donations. If they did not intend to donate inter vivos, they would not again donate the four lots already donated mortis causa.

Was the revocation valid? 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. 19 The donor-spouses did not invoke any of these reasons in the deed of revocation.

13. Be that as it may, the donation is void. There are three essential elements of donations: [1] the reduction of the patrimony of the donor, [2] the increase in the patrimony of the donee, and

[3] the intent to do an act of liberality (animus donandi) . 22

Granting that there is an animus donandi, we find that the alleged donation lacks the first two elements which presuppose the donor's ownership rights over the subject of the donation which he transmits to the donee thereby enlarging the donee's estate. This is in consonance with the rule that a donor cannot

lawfully convey what is not his property. 23 In other words, a donation of a parcel of land the dominical rights of which do not belong to the donor at the time of the donation, is void. This holds true even if the subject of the donation is not the land itself but the possessory and proprietary rights over said

land. 24

In this case, although they allegedly declared Magsaysay Park as their own for taxation purposes, the heirs of Cabalo Kusop did not have any transmissible proprietary rights over the donated property at the time of the donation. In fact, with respect to Lot Y-2, they still had to file a free patents application to obtain an original certificate of title thereon. This is because Proclamation No. 2273 declaring as "open to disposition under the provisions of the Public Land Act" some portions of the Magsaysay Park, is not an operative law which automatically vests rights of ownership on the heirs of Cabalo Kusop over their claimed parcels of land.Cd