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[G.R. No. 120880. June 5, 1997]

FERDINAND R. MARCOS II, petitioner, vs. COURT OF APPEALS, THE COMMISSIONER OF THE BUREAU OFINTERNAL REVENUE and HERMINIA D. DE GUZMAN, respondents.D E C I S I O NTORRES, JR., J.:

In this Petition for Review on Certiorari, Government action is once again assailed as precipitate andunfair, suffering the basic and oftly implored requisites of due process of law. Specifically, the petitionassails the Decision[1] of the Court of Appeals dated November 29, 1994 in CA-G.R. SP No. 31363, wherethe said court held:

"In view of all the foregoing, we rule that the deficiency income tax assessments and estate taxassessment, are already final and (u)nappealable -and- the subsequent levy of real properties is a taxremedy resorted to by the government, sanctioned by Section 213 and 218 of the National InternalRevenue Code. This summary tax remedy is distinct and separate from the other tax remedies (such asJudicial Civil actions and Criminal actions), and is not affected or precluded by the pendency of any other

tax remedies instituted by the government.

WHEREFORE, premises considered, judgment is hereby rendered DISMISSING the petition for certiorariwith prayer for Restraining Order and Injunction.

No pronouncements as to costs.

SO ORDERED."

More than seven years since the demise of the late Ferdinand E. Marcos, the former President of theRepublic of the Philippines, the matter of the settlement of his estate, and its dues to the government

in estate taxes, are still unresolved, the latter issue being now before this Court for resolution.Specifically, petitioner Ferdinand R. Marcos II, the eldest son of the decedent, questions the actuationsof the respondent Commissioner of Internal Revenue in assessing, and collecting through the summaryremedy of Levy on Real Properties, estate and income tax delinquencies upon the estate and propertiesof his father, despite the pendency of the proceedings on probate of the will of the late president, whichis docketed as Sp. Proc. No. 10279 in the Regional Trial Court of Pasig, Branch 156.

Petitioner had filed with the respondent Court of Appeals a Petition for Certiorari and Prohibition withan application for writ of preliminary injunction and/or temporary restraining order on June 28, 1993,seeking to -

I. Annul and set aside the Notices of Levy on real property dated February 22, 1993 and May 20, 1993,

issued by respondent Commissioner of Internal Revenue;

II. Annul and set aside the Notices of Sale dated May 26, 1993;

III. Enjoin the Head Revenue Executive Assistant Director II (Collection Service), from proceeding withthe Auction of the real properties covered by Notices of Sale.

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After the parties had pleaded their case, the Court of Appeals rendered its Decision[2] on November 29,1994, ruling that the deficiency assessments for estate and income tax made upon the petitioner andthe estate of the deceased President Marcos have already become final and unappealable, and may thusbe enforced by the summary remedy of levying upon the properties of the late President, as was doneby the respondent Commissioner of Internal Revenue.

"WHEREFORE, premises considered judgment is hereby rendered DISMISSING the petition for Certiorariwith prayer for Restraining Order and Injunction.

No pronouncements as to cost.

SO ORDERED."

Unperturbed, petitioner is now before us assailing the validity of the appellate court's decision,assigning the following as errors:

A. RESPONDENT COURT MANIFESTLY ERRED IN RULING THAT THE SUMMARY TAX REMEDIES RESORTED

TO BY THE GOVERNMENT ARE NOT AFFECTED AND PRECLUDED BY THE PENDENCY OF THE SPECIALPROCEEDING FOR THE ALLOWANCE OF THE LATE PRESIDENT'S ALLEGED WILL. TO THE CONTRARY, THISPROBATE PROCEEDING PRECISELY PLACED ALL PROPERTIES WHICH FORM PART OF THE LATEPRESIDENT'S ESTATE IN CUSTODIA LEGIS OF THE PROBATE COURT TO THE EXCLUSION OF ALL OTHERCOURTS AND ADMINISTRATIVE AGENCIES.

B. RESPONDENT COURT ARBITRARILY ERRED IN SWEEPINGLY DECIDING THAT SINCE THE TAXASSESSMENTS OF PETITIONER AND HIS PARENTS HAD ALREADY BECOME FINAL AND UNAPPEALABLE,THERE WAS NO NEED TO GO INTO THE MERITS OF THE GROUNDS CITED IN THE PETITION.INDEPENDENT OF WHETHER THE TAX ASSESSMENTS HAD ALREADY BECOME FINAL, HOWEVER,PETITIONER HAS THE RIGHT TO QUESTION THE UNLAWFUL MANNER AND METHOD IN WHICH TAX

COLLECTION IS SOUGHT TO BE ENFORCED BY RESPONDENTS COMMISSIONER AND DE GUZMAN. THUS,RESPONDENT COURT SHOULD HAVE FAVORABLY CONSIDERED THE MERITS OF THE FOLLOWINGGROUNDS IN THE PETITION:

(1) The Notices of Levy on Real Property were issued beyond the period provided in the RevenueMemorandum Circular No. 38-68.

(2) [a] The numerous pending court cases questioning the late President's ownership or interests inseveral properties (both personal and real) make the total value of his estate, and the consequent estatetax 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, confiscatory and oppressive.

[b] Petitioner, as one of the late President's compulsory heirs, was never notified, much less served withcopies of the Notices of Levy, contrary to the mandate of Section 213 of the NIRC. As such, petitionerwas never given an opportunity to contest the Notices in violation of his right to due process of law.

C. ON ACCOUNT OF THE CLEAR MERIT OF THE PETITION, RESPONDENT COURT MANIFESTLY ERRED INRULING THAT IT HAD NO POWER TO GRANT INJUNCTIVE RELIEF TO PETITIONER. SECTION 219 OF THENIRC NOTWITHSTANDING, COURTS POSSESS THE POWER TO ISSUE A WRIT OF PRELIMINARY

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INJUNCTION TO RESTRAIN RESPONDENTS COMMISSIONER'S AND DE GUZMAN'S ARBITRARY METHODOF COLLECTING THE ALLEGED DEFICIENCY ESTATE AND INCOME TAXES BY MEANS OF LEVY.

The facts as found by the appellate court are undisputed, and are hereby adopted:

"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 ofthe 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. Theinvestigation disclosed that the Marcoses failed to file a written notice of the death of the decedent, anestate tax returns [sic], as well as several income tax returns covering the years 1982 to 1986, -all inviolation of the National Internal Revenue Code (NIRC).

Subsequently, criminal charges were filed against Mrs. Imelda R. Marcos before the Regional Trial ofQuezon City for violations of Sections 82, 83 and 84 (has penalized under Sections 253 and 254 inrelation to Section 252- a & b) of the National Internal Revenue Code (NIRC).

The Commissioner of Internal Revenue thereby caused the preparation and filing of the Estate TaxReturn for the estate of the late president, the Income Tax Returns of the Spouses Marcos for the years1985 to 1986, and the Income Tax Returns of petitioner Ferdinand 'Bongbong' Marcos II for the years1982 to 1985.

On July 26, 1991, the BIR issued the following: (1) Deficiency estate tax assessment no. FAC-2-89-91-002464 (against the estate of the late president Ferdinand Marcos in the amount of P23,293,607,638.00Pesos); (2) Deficiency income tax assessment no. FAC-1-85-91-002452 and Deficiency income taxassessment no. FAC-1-86-91-002451 (against the Spouses Ferdinand and Imelda Marcos in the amountsof P149,551.70 and P184,009,737.40 representing deficiency income tax for the years 1985 and 1986);

(3) Deficiency income tax assessment nos. FAC-1-82-91-002460 to FAC-1-85-91-002463 (againstpetitioner Ferdinand 'Bongbong' Marcos II in the amounts of P258.70 pesos; P9,386.40 Pesos; P4,388.30Pesos; and P6,376.60 Pesos representing his deficiency income taxes for the years 1982 to 1985).

The Commissioner of Internal Revenue avers that copies of the deficiency estate and income taxassessments were all personally and constructively served on August 26, 1991 and September 12, 1991upon Mrs. Imelda Marcos (through her caretaker Mr. Martinez) at her last known address at No. 204Ortega St., San Juan, M.M. (Annexes 'D' and 'E' of the Petition). Likewise, copies of the deficiency taxassessments issued against petitioner Ferdinand 'Bongbong' Marcos II were also personally andconstructively served upon him (through his caretaker) on September 12, 1991, at his last knownaddress at Don Mariano Marcos St. corner P. Guevarra St., San Juan, M.M. (Annexes 'J' and 'J-1' of thePetition). Thereafter, Formal Assessment notices were served on October 20, 1992, upon Mrs. Marcos

c/o petitioner, at his office, House of Representatives, Batasan Pambansa, Quezon City. Moreover, anotice to Taxpayer inviting Mrs. Marcos (or her duly authorized representative or counsel), to aconference, was furnished the counsel of Mrs. Marcos, Dean Antonio Coronel - but to no avail.

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

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On February 22, 1993, the BIR Commissioner issued twenty-two notices of levy on real property againstcertain parcels of land owned by the Marcoses - to satisfy the alleged estate tax and deficiency incometaxes of Spouses Marcos.

On May 20, 1993, four more Notices of Levy on real property were issued for the purpose of satisfyingthe deficiency income taxes.

On May 26, 1993, additional four (4) notices of Levy on real property were again issued. The foregoingtax remedies were resorted to pursuant to Sections 205 and 213 of the National Internal Revenue Code(NIRC).

In response to a letter dated March 12, 1993 sent by Atty. Loreto Ata (counsel of herein petitioner)calling the attention of the BIR and requesting that they be duly notified of any action taken by the BIRaffecting the interest of their client Ferdinand 'Bongbong Marcos II, as well as the interest of the late

president - copies of the aforesaid notices were served on April 7, 1993 and on June 10, 1993, upon Mrs.Imelda Marcos, the petitioner, and their counsel of record, 'De Borja, Medialdea, Ata, Bello, Guevarraand Serapio Law Office'.

Notices of sale at public auction were posted on May 26, 1993, at the lobby of the City Hall of TaclobanCity. The public auction for the sale of the eleven (11) parcels of land took place on July 5, 1993. Therebeing 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 andprohibition under Rule 65 of the Rules of Court, with prayer for temporary restraining order and/or writof preliminary injunction."

It has been repeatedly observed, and not without merit, that the enforcement of tax laws and thecollection of taxes, is of paramount importance for the sustenance of government. Taxes are the

lifeblood of the government and should be collected without unnecessary hindrance. However, suchcollection should be made in accordance with law as any arbitrariness will negate the very reason forgovernment itself. It is therefore necessary to reconcile the apparently conflicting interests of theauthorities and the taxpayers so that the real purpose of taxation, which is the promotion of thecommon good, may be achieved."[3]

Whether or not the proper avenues of assessment and collection of the said tax obligations were takenby the respondent Bureau is now the subject of the Court's inquiry.

Petitioner posits that notices of levy, notices of sale, and subsequent sale of properties of the latePresident Marcos effected by the BIR are null and void for disregarding the established procedure forthe enforcement of taxes due upon the estate of the deceased. The case of Domingo vs. Garlitos[4] is

specifically cited to bolster the argument that "the ordinary procedure by which to settle claims ofindebtedness against the estate of a deceased, person, as in an inheritance (estate) tax, is for theclaimant to present a claim before the probate court so that said court may order the administrator topay the amount therefor." This remedy is allegedly, exclusive, and cannot be effected through any othermeans.

Petitioner goes further, submitting that the probate court is not precluded from denying a request bythe government for the immediate payment of taxes, and should order the payment of the same only

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within the period fixed by the probate court for the payment of all the debts of the decedent. In thisregard, petitioner cites the case of Collector of Internal Revenue vs. The Administratrix of the Estate ofEcharri (67 Phil 502), where it was held that:

"The case of Pineda vs. Court of First Instance of Tayabas and Collector of Internal Revenue (52 Phil 803),relied upon by the petitioner-appellant is good authority on the proposition that the court havingcontrol over the administration proceedings has jurisdiction to entertain the claim presented by thegovernment for taxes due and to order the administrator to pay the tax should it find that theassessment was proper, and that the tax was legal, due and collectible. And the rule laid down in thatcase must be understood in relation to the case of Collector of Customs vs. Haygood, supra., as to theprocedure to be followed in a given case by the government to effectuate the collection of the tax.Categorically stated, where during the pendency of judicial administration over the estate of a deceasedperson a claim for taxes is presented by the government, the court has the authority to order paymentby the administrator; but, in the same way that it has authority to order payment or satisfaction, it alsohas the negative authority to deny the same. While there are cases where courts are required toperform certain duties mandatory and ministerial in character, the function of the court in a case of thepresent character is not one of them; and here, the court cannot be an organism endowed with latitude

of judgment in one direction, and converted into a mere mechanical contrivance in another direction."

On the other hand, it is argued by the BIR, that the state's authority to collect internal revenue taxes isparamount. Thus, the pendency of probate proceedings over the estate of the deceased does notpreclude the assessment and collection, through summary remedies, of estate taxes over the same.According to the respondent, claims for payment of estate and income taxes due and assessed after thedeath of the decedent need not be presented in the form of a claim against the estate. These can andshould be paid immediately. The probate court is not the government agency to decide whether anestate is liable for payment of estate of income taxes. Well-settled is the rule that the probate court is acourt with special and limited jurisdiction.

Concededly, the authority of the Regional Trial Court, sitting, albeit with limited jurisdiction, as aprobate court over estate of deceased individual, is not a trifling thing. The court's jurisdiction, onceinvoked, and made effective, cannot be treated with indifference nor should it be ignored with impunityby the very parties invoking its authority.

In testament to this, it has been held that it is within the jurisdiction of the probate court to approve thesale of properties of a deceased person by his prospective heirs before final adjudication;[5] todetermine who are the heirs of the decedent;[6] the recognition of a natural child;[7] the status of awoman claiming to be the legal wife of the decedent;[8] the legality of disinheritance of an heir by thetestator;[9] and to pass upon the validity of a waiver of hereditary rights.[10]

The pivotal question the court is tasked to resolve refers to the authority of the Bureau of Internal

Revenue 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 thesupposed will of the deceased.

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 adecedent's estate, although it may be viewed as an incident to the complete settlement of an estate,

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and, under some statutes, it is made the duty of the probate court to make the amount of theinheritance tax a part of the final decree of distribution of the estate. It is not against the property ofdecedent, nor is it a claim against the estate as such, but it is against the interest or property right whichthe heir, legatee, devisee, etc., has in the property formerly held by decedent. Further, under somestatutes, it has been held that it is not a suit or controversy between the parties, nor is it an adversaryproceeding between the state and the person who owes the tax on the inheritance. However, underother statutes it has been held that the hearing and determination of the cash value of the assets andthe determination of the tax are adversary proceedings. The proceeding has been held to be necessarilya proceeding in rem.[11]

In the Philippine experience, the enforcement and collection of estate tax, is executive in character, asthe legislature has seen it fit to ascribe this task to the Bureau of Internal Revenue. Section 3 of theNational Internal Revenue Code attests to this:

"Sec. 3. Powers and duties of the Bureau.-The powers and duties of the Bureau of Internal Revenue shallcomprehend the assessment and collection of all national internal revenue taxes, fees, and charges, andthe enforcement of all forfeitures, penalties, and fines connected therewith, including the execution of

judgments in all cases decided in its favor by the Court of Tax Appeals and the ordinary courts. SaidBureau shall also give effect to and administer the supervisory and police power conferred to it by thisCode or other laws."

Thus, it was in Vera vs. Fernandez[12] that the court recognized the liberal treatment of claims for taxescharged against the estate of the decedent. Such taxes, we said, were exempted from the application ofthe statute of non-claims, and this is justified by the necessity of government funding, immortalized inthe maxim that taxes are the lifeblood of the government. Vectigalia nervi sunt rei publicae - taxes arethe sinews of the state.

"Taxes assessed against the estate of a deceased person, after administration is opened, need not be

submitted to the committee on claims in the ordinary course of administration. In the exercise of itscontrol over the administrator, the court may direct the payment of such taxes upon motion showingthat the taxes have been assessed against the estate."

Such liberal treatment of internal revenue taxes in the probate proceedings extends so far, even toallowing the enforcement of tax obligations against the heirs of the decedent, even after distribution ofthe estate's properties.

"Claims for taxes, whether assessed before or after the death of the deceased, can be collected from theheirs even after the distribution of the properties of the decedent. They are exempted from theapplication of the statute of non-claims. The heirs shall be liable therefor, in proportion to their share inthe inheritance."[13]

"Thus, the Government has two ways of collecting the taxes in question. One, by going after all theheirs and collecting from each one of them the amount of the tax proportionate to the inheritancereceived. Another remedy, pursuant to the lien created by Section 315 of the Tax Code upon allproperty and rights to property belong to the taxpayer for unpaid income tax, is by subjecting saidproperty of the estate which is in the hands of an heir or transferee to the payment of the tax due theestate. (Commissioner of Internal Revenue vs. Pineda, 21 SCRA 105, September 15, 1967.)

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From the foregoing, it is discernible that the approval of the court, sitting in probate, or as a settlementtribunal over the deceased is not a mandatory requirement in the collection of estate taxes. It cannottherefore be argued that the Tax Bureau erred in proceeding with the levying and sale of the propertiesallegedly owned by the late President, on the ground that it was required to seek first the probatecourt's sanction. There is nothing in the Tax Code, and in the pertinent remedial laws that implies thenecessity 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 notto authorize the executor or judicial administrator of the decedent's estate to deliver any distributiveshare to any party interested in the estate, unless it is shown a Certification by the Commissioner ofInternal Revenue that the estate taxes have been paid. This provision disproves the petitioner'scontention that it is the probate court which approves the assessment and collection of the estate tax.

If there is any issue as to the validity of the BIR's decision to assess the estate taxes, this should havebeen pursued through the proper administrative and judicial avenues provided for by law.

Section 229 of the NIRC tells us how:

"Sec. 229. Protesting of assessment.-When the Commissioner of Internal Revenue or his duly authorizedrepresentative finds that proper taxes should be assessed, he shall first notify the taxpayer of hisfindings. Within a period to be prescribed by implementing regulations, the taxpayer shall be requiredto respond to said notice. If the taxpayer fails to respond, the Commissioner shall issue an assessmentbased on his findings.

Such assessment may be protested administratively by filing a request for reconsideration orreinvestigation in such form and manner as may be prescribed by implementing regulations within (30)days from receipt of the assessment; otherwise, the assessment shall become final and unappealable.

If the protest is denied in whole or in part, the individual, association or corporation adversely affectedby the decision on the protest may appeal to the Court of Tax Appeals within thirty (30) days fromreceipt of said decision; otherwise, the decision shall become final, executory and demandable. (Asinserted by P.D. 1773)"

Apart from failing to file the required estate tax return within the time required for the filing of thesame, petitioner, and the other heirs never questioned the assessments served upon them, allowing thesame to lapse into finality, and prompting the BIR to collect the said taxes by levying upon theproperties left by President Marcos.

Petitioner submits, however, that "while the assessment of taxes may have been validly undertaken by

the Government, collection thereof may have been done in violation of the law. Thus, the manner andmethod in which the latter is enforced may be questioned separately, and irrespective of the finality ofthe former, because the Government does not have the unbridled discretion to enforce collectionwithout regard to the clear provision of law."[14]

Petitioner specifically points out that applying Memorandum Circular No. 38-68, implementing Sections318 and 324 of the old tax code (Republic Act 5203), the BIR's Notices of Levy on the Marcos properties,were issued beyond the allowed period, and are therefore null and void:

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"...the Notices of Levy on Real Property (Annexes 0 to NN of Annex C of this Petition) in satisfaction ofsaid assessments were still issued by respondents well beyond the period mandated in RevenueMemorandum Circular No. 38-68. These Notices of Levy were issued only on 22 February 1993 and 20May 1993 when at least seventeen (17) months had already lapsed from the last service of taxassessment on 12 September 1991. As no notices of distraint of personal property were first issued byrespondents, the latter should have complied with Revenue Memorandum Circular No. 38-68 and issuedthese Notices of Levy not earlier than three (3) months nor later than six (6) months from 12 September1991. In accordance with the Circular, respondents only had until 12 March 1992 (the last day of thesixth month) within which to issue these Notices of Levy. The Notices of Levy, having been issuedbeyond the period allowed by law, are thus void and of no effect."[15]

We hold otherwise. The Notices of Levy upon real property were issued within the prescriptive periodand in accordance with the provisions of the present Tax Code. The deficiency tax assessment, havingalready become final, executory, and demandable, the same can now be collected through the summaryremedy of distraint or levy pursuant to Section 205 of the NIRC.

The applicable provision in regard to the prescriptive period for the assessment and collection of taxdeficiency in this instance is Article 223 of the NIRC, which pertinently provides:

"Sec. 223. Exceptions as to a period of limitation of assessment and collection of taxes.- (a) In the case ofa false or fraudulent return with intent to evade tax or of a failure to file a return, the tax may beassessed, or a proceeding in court for the collection of such tax may be begun without assessment, atany time within ten (10) years after the discovery of the falsity, fraud, or omission: Provided, That, in afraud assessment which has become final and executory, the fact of fraud shall be judicially takencognizance of in the civil or criminal action for the collection thereof.

xxx

(c) Any internal revenue tax which has been assessed within the period of limitation above prescribed,may be collected by distraint or levy or by a proceeding in court within three years following theassessment of the tax.

xxx

The omission to file an estate tax return, and the subsequent failure to contest or appeal the assessmentmade by the BIR is fatal to the petitioner's cause, as under the above-cited provision, in case of failure tofile a return, the tax may be assessed at any time within ten years after the omission, and any tax soassessed may be collected by levy upon real property within three years following the assessment of thetax. Since the estate tax assessment had become final and unappealable by the petitioner's default as

regards protesting the validity of the said assessment, there is now no reason why the BIR cannotcontinue with the collection of the said tax. Any objection against the assessment should have beenpursued following the avenue paved in Section 229 of the NIRC on protests on assessments of internalrevenue taxes.

Petitioner further argues that "the numerous pending court cases questioning the late president'sownership 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,

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respondents' assessment of the estate tax and their issuance of the Notices of Levy and sale arepremature and oppressive." He points out the pendency of Sandiganbayan Civil Case Nos. 0001-0034and 0141, which were filed by the government to question the ownership and interests of the latePresident 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 taxesupon 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 factthat the decedent has pending cases involving ill-gotten wealth does not affect the enforcement of taxassessments over the properties indubitably included in his estate.

Petitioner also expresses his reservation as to the propriety of the BIR's total assessment ofP23,292,607,638.00, stating that this amount deviates from the findings of the Department of Justice'sPanel of Prosecutors as per its resolution of 20 September 1991. Allegedly, this is clear evidence of theuncertainty on the part of the Government as to the total value of the estate of the late President.

This is, to our mind, the petitioner's last ditch effort to assail the assessment of estate tax which hadalready become final and unappealable.

It is not the Department of Justice which is the government agency tasked to determine the amount oftaxes due upon the subject estate, but the Bureau of Internal Revenue[16] whose determinations andassessments are presumed correct and made in good faith.[17] The taxpayer has the duty of provingotherwise. In the absence of proof of any irregularities in the performance of official duties, anassessment will not be disturbed. Even an assessment based on estimates is prima facie valid and lawfulwhere it does not appear to have been arrived at arbitrarily or capriciously. The burden of proof is uponthe complaining party to show clearly that the assessment is erroneous. Failure to present proof oferror in the assessment will justify the judicial affirmance of said assessment.[18] In this instance,petitioner has not pointed out one single provision in the Memorandum of the Special Audit Teamwhich 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 thetaxes charged. But mere rhetoric cannot supply the basis for the charge of impropriety of theassessments made.

Moreover, these objections to the assessments should have been raised, considering the ampleremedies afforded the taxpayer by the Tax Code, with the Bureau of Internal Revenue and the Court ofTax Appeals, as described earlier, and cannot be raised now via Petition for Certiorari, under the pretextof grave abuse of discretion. The course of action taken by the petitioner reflects his disregard or evenrepugnance of the established institutions for governance in the scheme of a well-ordered society. Thesubject tax assessments having become final, executory and enforceable, the same can no longer becontested by means of a disguised protest. In the main, Certiorari may not be used as a substitute for alost appeal or remedy.[19] This judicial policy becomes more pronounced in view of the absence of

sufficient attack against the actuations of government.

On the matter of sufficiency of service of Notices of Assessment to the petitioner, we find therespondent appellate court's pronouncements sound and resilient to petitioner's attacks.

"Anent grounds 3(b) and (B) - both alleging/claiming lack of notice - We find, after considering the factsand circumstances, as well as evidences, that there was sufficient, constructive and/or actual notice of

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assessments, levy and sale, sent to herein petitioner Ferdinand "Bongbong" Marcos as well as to hismother Mrs. Imelda Marcos.

Even if we are to rule out the notices of assessments personally given to the caretaker of Mrs. Marcos atthe latter's last known address, on August 26, 1991 and September 12, 1991, as well as the notices ofassessment personally given to the caretaker of petitioner also at his last known address on September12, 1991 - the subsequent notices given thereafter could no longer be ignored as they were sent at atime when petitioner was already here in the Philippines, and at a place where said notices would surelybe called to petitioner's attention, and received by responsible persons of sufficient age and discretion.

Thus, on October 20, 1992, formal assessment notices were served upon Mrs. Marcos c/o the petitioner,at his office, House of Representatives, Batasan Pambansa, Q.C. (Annexes "A", "A-1", "A-2", "A-3"; pp.207-210, Comment/Memorandum of OSG). Moreover, a notice to taxpayer dated October 8, 1992inviting Mrs. Marcos to a conference relative to her tax liabilities, was furnished the counsel of Mrs.Marcos - Dean Antonio Coronel (Annex "B", p. 211, ibid). Thereafter, copies of Notices were also servedupon Mrs. Imelda Marcos, the petitioner and their counsel "De Borja, Medialdea, Ata, Bello, Guevarraand Serapio Law Office", on April 7, 1993 and June 10, 1993. Despite all of these Notices, petitioner

never lifted a finger to protest the assessments, (upon which the Levy and sale of properties werebased), nor appealed the same to the Court of Tax Appeals.

There being sufficient service of Notices to herein petitioner (and his mother) and it appearing thatpetitioner continuously ignored said Notices despite several opportunities given him to file a protest andto thereafter appeal to the Court of Tax Appeals, - the tax assessments subject of this case, upon whichthe levy and sale of properties were based, could no longer be contested (directly or indirectly) via thisinstant petition for certiorari."[20]

Petitioner argues that all the questioned Notices of Levy, however, must be nullified for having beenissued 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 propertiesshould have been served upon him.

We do not agree. In the case of notices of levy issued to satisfy the delinquent estate tax, thedelinquent taxpayer is the Estate of the decedent, and not necessarily, and exclusively, the petitioner asheir of the deceased. In the same vein, in the matter of income tax delinquency of the late presidentand his spouse, petitioner is not the taxpayer liable. Thus, it follows that service of notices of levy insatisfaction of these tax delinquencies upon the petitioner is not required by law, as under Section 213of the NIRC, which pertinently states:

"xxx

...Levy shall be effected by writing upon said certificate a description of the property upon which levy ismade. At the same time, written notice of the levy shall be mailed to or served upon the Register ofDeeds of the province or city where the property is located and upon the delinquent taxpayer, or if hebe absent from the Philippines, to his agent or the manager of the business in respect to which theliability arose, or if there be none, to the occupant of the property in question.

xxx"

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The foregoing notwithstanding, the record shows that notices of warrants of distraint and levy of salewere furnished the counsel of petitioner on April 7, 1993, and June 10, 1993, and the petitioner himselfon April 12, 1993 at his office at the Batasang Pambansa.[21] We cannot therefore, countenancepetitioner's insistence that he was denied due process. Where there was an opportunity to raiseobjections to government action, and such opportunity was disregarded, for no justifiable reason, theparty claiming oppression then becomes the oppressor of the orderly functions of government. He whocomes to court must come with clean hands. Otherwise, he not only taints his name, but ridicules thevery structure of established authority.

IN VIEW WHEREOF, the Court RESOLVED to DENY the present petition. The Decision of the Court ofAppeals dated November 29, 1994 is hereby AFFIRMED in all respects.

SO ORDERED.MARCOS II vs. CA273 SCRA 47GR No. 120880, June 5, 1997"The approval of the court sitting in probate is not a mandatory requirement in the collection of estate

taxes.""In case of failure to file a return, the tax may be assessed at anytime within 10 years after theomission."

FACTS: Bongbong Marcos sought for the reversal of the ruling of the Court of Appeals to grant CIR'spetition to levy the properties of the late Pres. Marcos to cover the payment of his tax delinquenciesduring the period of his exile in the US. The Marcos family was assessed by the BIR after it failed to fileestate tax returns. However the assessment were not protested administratively by Mrs. Marcos andthe heirs of the late president so that they became final and unappealable after the period for filing ofopposition has prescribed. Marcos contends that the properties could not be levied to cover the taxdues 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.Petitioner also pointed out that applying Memorandum Circular No. 38-68, the BIR's Notices of Levyon the Marcos properties were issued beyond the allowed period, and are therefore null and void.

ISSUE: Are the contentions of Bongbong Marcos correct?

HELD: No. The deficiency income tax assessments and estate tax assessment are already final andunappealable -and-the subsequent levy of real properties is a tax remedy resorted to by thegovernment, sanctioned by Section 213 and 218 of the National Internal Revenue Code. This summarytax remedy is distinct and separate from the other tax remedies (such as Judicial Civil actions andCriminal actions), and is not affected or precluded by the pendency of any other tax remedies institutedby the government.

The approval of the court, sitting in probate, or as a settlement tribunal over the deceased's estate isnot a mandatory requirement in the collection of estate taxes. On the contrary, under Section 87 of theNIRC, it is the probate or settlement court which is bidden not to authorize the executor or judicialadministrator of the decedent's estate to deliver any distributive share to any party interested in theestate, unless it is shown a Certification by the Commissioner of Internal Revenue that the estate taxeshave been paid. This provision disproves the petitioner's contention that it is the probate court whichapproves the assessment and collection of the estate tax.

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On the issue of prescription, the omission to file an estate tax return, and the subsequent failure tocontest or appeal the assessment made by the BIR is fatal to the petitioner's cause, as under Sec.223 ofthe NIRC, in case of failure to file a return, the tax may be assessed at anytime within 10 years after theomission, and any tax so assessed may be collected by levy upon real property within 3 years (now 5years) following the assessment of the tax. Since the estate tax assessment had become final andunappealable by the petitioner's default as regards protesting the validity of the said assessment, thereis no reason why the BIR cannot continue with the collection of the said tax.[G.R. No. 118671. January 29, 1996]

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 ALBERTINERUIZ, MARIA ANGELINE RUIZ and THE PRESIDING JUDGE OF THE REGIONAL TRIAL COURT OF PASIG,BRANCH 156, respondents.D E C I S I O NPUNO, J.:

This petition for review on certiorari seeks to annul and set aside the decision dated November 10, 1994

and the resolution dated January 5, 1995 of the Court of Appeals in CA-G.R. SP No. 33045.

The facts show that on June 27, 1987, Hilario M. Ruiz1 executed a holographic will naming as his heirshis only son, Edmond Ruiz, his adopted daughter, private respondent Maria Pilar Ruiz Montes, and histhree granddaughters, private respondents Maria Cathryn, Candice Albertine and Maria Angeline, allchildren of Edmond Ruiz. The testator bequeathed to his heirs substantial cash, personal and realproperties and named Edmond Ruiz executor of his estate.2

On April 12, 1988, Hilario Ruiz died. Immediately thereafter, the cash component of his estate wasdistributed among Edmond Ruiz and private respondents in accordance with the decedents will. For

unbeknown reasons, Edmond, the named executor, did not take any action for the probate of his

fathers holographic will.

On June 29, 1992, four years after the testators death, it was private respondent Maria Pilar RuizMontes who filed before the Regional Trial Court, Branch 156, Pasig, a petition for the probate andapproval of Hilario Ruizs will and for the issuance of letters testamentary to Edmond Ruiz.3 Surprisingly,Edmond opposed the petition on the ground that the will was executed under undue influence.

On November 2, 1992, one of the properties of the estate - the house and lot at No. 2 Oliva Street, ValleVerde IV, Pasig which the testator bequeathed to Maria Cathryn, Candice Albertine and Maria Angeline4- was leased out by Edmond Ruiz to third persons.

On January 19, 1993, the probate court ordered Edmond to deposit with the Branch Clerk of Court the

rental deposit and payments totalling P540,000.00 representing the one-year lease of the Valle Verdeproperty. In compliance, on January 25, 1993, Edmond turned over the amount of P348,583.56,representing the balance of the rent after deducting P191,416.14 for repair and maintenance expenseson the estate.5

In March 1993, Edmond moved for the release of P50,000.00 to pay the real estate taxes on the realproperties of the estate. The probate court approved the release of P7,722.006

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On May 14, 1993, Edmond withdrew his opposition to the probate of the will. Consequently, theprobate court, on May 18, 1993, admitted the will to probate and ordered the issuance of letterstestamentary to Edmond conditioned upon the filing of a bond in the amount of P50,000.00. The letterstestamentary were issued on June 23, 1993.

On July 28, 1993, petitioner Testate Estate of Hilario Ruiz as executor, filed an Ex-Parte Motion forRelease of Funds. It prayed for the release of the rent payments deposited with the Branch Clerk of

Court. Respondent Montes opposed the motion and concurrently filed a Motion for Release of Fundsto Certain Heirs and Motion for Issuance of Certificate of Allowance of Probate Will. Montes prayed

for the release of the said rent payments to Maria Cathryn, Candice Albertine and Maria Angeline andfor the distribution of the testators properties, specifically the Valle Verde property and the Blue Ridge

apartments, in accordance with the provisions of the holographic will.

On August 26, 1993, the probate court denied petitioners motion for release of funds but grantedrespondent Montes motion in view of petitioners lack of opposition. It thus ordered the release of the

rent payments to the decedents three granddaughters. It further ordered the delivery of the titleds toand possession of the properties bequeathed to the three granddaughters and respondent Montes

upon the filing of a bond of P50,000.00.

Petitioner moved for reconsideration alleging that he actually filed his opposition to respondentMontes motion for release of rent payments which opposition the court failed to consider. Petitioner

likewise reiterated his previous motion for release of funds.

On November 23, 1993, petitioner, through counsel, manifested that he was withdrawing his motion forrelease of funds in view of the fact that the lease contract over Valle Verde property had been renewedfor another year.7

Despite petitioners manifestation, the probate court, on December 22, 1993, ordered the release of the

funds to Edmond but only such amount as may be necessary to cover the espenses of administrationand allowanceas for support of the testators three granddaughters subject to collation and deductiblefrom their share in the inheritance. The court, however, held in abeyance the release of the titles torespondent Montes and the three granddaughters until the lapse of six months from the date of firastpublication of the notice to creditors.8 The Court stated thus:

xxx xxx xxx

After consideration of the arguments set forth thereon by the parties, the court resolves to allowAdministrator Edmond M. Ruiz to take possession of the rental payments deposited with the Clerk ofCourt, Pasig Regional Trial Court, but only such amount as may be necessary to cover the expenses ofadministration and allowances for support of Maria Cathryn Veronique, Candice Albertine and Maria

Angeli, which are subject to collation and deductible from the share in the inheritance of said heirs andinsofar as they exceed the fruits or rents pertaining to them.

As to the release of the titles bequeathed to petitioner Maria Pilar Ruiz-Montes and the above-namedheirs, the same is hereby reconsidered and held in abeyance until the lapse of six (6) months from thedate of first publication of Notice to Creditors.

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WHEREFORE, Administrator Edmond M. Ruiz is hereby ordered to submit an accounting of the expensesnecessary for administration including provisions for the support Of Maria Cathryn Veronique Ruiz,Candice Albertine Ruiz and Maria Angeli Ruiz before the amount required can be withdrawn and causethe publication of the notice to creditors with reasonable dispatch.9

Petitioner assailed this order before the Court of Appeals. Finding no grave abuse of discretion on thepart of respondent judge, the appellate court dismissed the petition and sustained the probate courts

order in a decision dated November 10, 199410 and a resolution dated January 5, 1995.11

Hence, this petition.

Petitioner claims that:

THE PUBLIC RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION

AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN AFFIRMING AND CONFIRMING THE ORDER OFRESPONDENT REGIONAL TRIAL COURT OF PASIG, BRANCH 156, DATED DECEMBER 22, 1993, WHICHWHEN GIVEN DUE COURSE AND IS EFFECTED WOULD: (1) DISALLOW THE EXECUTOR/ADMINISTRATOR

OF THE ESTATE OF THE LATE HILARIO M. RUIZ TO TAKE POSSESSION OF ALL THE REAL AND PERSONALPROPERTIES OF THE ESTATE; (2) GRANT SUPPORT, DURING THE PENDENCY OF THE SETTLEMENT OF ANESTATE, TO CERTAIN PERSONS NOT ENTITLED THERETO; AND (3) PREMATURELY PARTITION ANDDISTRIBUTE THE ESTATE PURSUANT TO THE PROVISIONS OF THE HOLOGRAPHIC WILL EVEN BEFORE ITSINTRINSIC VALIDITY HAS BEEN DETERMINED, AND DESPITE THE EXISTENCE OF UNPAID DEBTS ANDOBLIGATIONS OF THE ESTATE.12

The issue for resolution is whether the probate court, after admitting the will to probate but beforepayment of the estates debts and obligations, has the authority: (1) to grant an allowance from thefunds 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 the Revised Rules of Court provides:

Sec. 3. Allowance to widow and family. - The widow and minor or incapacitated children of a deceasedperson, during the settlement of the estate, shall receive therefrom under the direction of the court,such allowance as are provided by law.

Petitioner alleges that this provision only gives the widow and the minor or incapacitated children of thedeceased the right to receive allowances for support during the settlement of estate proceedings. Hecontends that the testators three granddaughters do not qualify for an allowance because they are not

incapacitated and are no longer minors but of legal age, married and gainfully employed. In addition, theprovision expressly states children of the deceased which excludes the latters grandchildren.

It is settled that allowances for support under Section 3 of Rule 83 should not be limited to the minor

or incapacitated children of the deceased. Article 18813 of the Civil Code of the Philippines, the

substantive law in force at the time of the testators death, 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.14 The law isrooted on the fact that the right and duty to support, especially the right to education, subsist evenbeyond the age of majority.15

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Be that as it may, grandchildren are not entitled to provisional support from the funds of the decedentsestate. The law clearly limits the allowance to widow and children and does not extend it to the

deceaseds grandchildren, regardless of their minority or incapacity.16 It was error, therefore, for the

appellate court to sustain the probate courts order granting an allowance to the grandchildren of thetestator pending settlement of his estate.

Respondent courts also erred when they ordered the release of the titles of the bequeathed propertiesto private respondents six months after the date of first publication of notice to creditors. An orderreleasing titles to properties of the estate amounts to an advance distribution of the estate which isallowed only under the following conditions:

Sec. 2. Advance distribution in special proceedings. - Nothwithstanding a pending controversy or appealin proceedings to settle the estate of a decedent, the court may, in its discretion and upon such terms asit may deem proper and just, permit that such part of the estate as may not be affected by thecontroversy or appeal be distributed among the heirs or legatees, upon compliance with the conditionsset forth in Rule 90 of these Rules.17

And Rule 90 provides that:

Sec. 1. When order for distribution of residue made. - When the debts, funeral charges, and expensesof administration, the allowance to the widow, and inheritance tax, if any, chargeable to the estate inaccordance with law, have been paid, the court, on the application of the executor or administrator, orof a person interested in the estate, and after hearing upon notice, shall assign the residue of the estateto the persons entitled to the same, naming them and the proportions, or parts, to which each isentitled, and such persons may demand and recover their respective shares from the executor oradministrator, or any other person having the same in his possession. If there is a controversy before thecourt as to who are the lawful heirs of the deceased person or as to the distributive shares to which

each person is entitled under the law, the controversy shall be heard and decided as in ordinary cases.

No distribution shall be allowed until the payment of the obligations above-mentioned has been madeor provided for, unless the distributees, 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.18

In settlement of estate proceedings, the distribution of the estate properties can only be made: (1) afterall the debts, funeral charges, expenses of administration, allowance to the widow, and estate tax havebeen paid; or (2) before payment of said obligations only if the distributees or any of them gives a bondin a sum fixed by the court conditioned upon the payment of said obligations within such time as thecourt directs, or when provision is made to meet those obligations.19

In the case at bar, the probate court ordered the release of the titles to the Valle Verde property and theBlue Ridge apartments to the private respondents after the lapse of six months from the date of firstpublication of the notice to creditors. The questioned order 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 hadnot hitherto been paid, much less ascertained. The estate tax is one of those obligations that must bepaid before distribution of the estate. If not yet paid, the rule requires that the distributees post a bondor make such provisions as to meet the said tax obligation in proportion to their respective shares in the

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inheritance.20 Notably, at the time the order was issued the properties of the estate had not yet beeninventoried and appraised.

It was also too early in the day for the probate court to order the release of the titles six months afteradmitting the will to probate. The probate of a will is conclusive as to its due execution and extrinsicvalidity21 and settles only the question of whether the testator, being of sound mind, freely executed itin accordance with the formalities prescribed by law.22 Questions as to the intrinsic validity and efficacyof the provisions of the will, the legality of any devise or legacy may be raised even after the will hasbeen authenticated.23

The intrinsic validity of Hilarios holographic will was controverted by petitioner before the probate

court in his Reply to Montes Opposition to his motion for release of funds24 and his motion for

reconsideration of the August 26, 1993 order of the said court.25 Therein, petitioner assailed thedistributive 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 ifthere is a controversy as to who are the lawful heirs of the decedent and their distributive shares in hisestate, the probate court shall proceed to hear and decide the same as in ordinary cases.26

Still and all, petitioner cannot correctly claim that the assailed order deprived him of his right to takepossession of all the real and personal properties of the estate. The right of an executor or administratorto the possession and management of the real and personal properties of the deceased is not absoluteand can only be exercised so long as it is necessary for the payment of the debts and expenses of

administration,27 Section 3 of Rule 84 of the Revised Rules of Court explicitly provides:

Sec. 3. Executor or administrator to retain whole estate to pay debts, and to administer estate notwilled. - An executor or administrator shall have the right to the possession and management of the realas well as the personal estate of the deceased so long as it is necessary for the payment of the debts andexpenses for administration.28

When petitioner moved for further release of the funds deposited with the clerk of court, he had beenpreviously granted by the probate court certain amounts for repair and maintenance expenses on theproperties of the estate, and payment of the real estate taxes thereon. But petitioner moved again forthe release of additional funds for the same reasons he previously cited. It was correct for the probatecourt to require him to submit an accounting of the necessary expenses for administration beforereleasing any further money in his favor.

It was relevantly noted by the probate court that petitioner had deposited with it only a portion of theone-year rental income from the Valle Verde property. Petitioner did not deposit its succeeding rentsafter renewal of the lease.29 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 merelyinchoate as long as the estate has not been fully settled and partitioned.30 As executor, he is a meretrustee of his fathers 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.31 He cannot unilaterally assign to himselfand 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 hisadministration, the expenses of administration, the amount of the obligations and estate tax, all ofwhich are subject to a determination by the court as to their veracity, propriety and justness.32

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IN VIEW WHEREOF, the decision and resolution of the Court of Appeals in CA-G.R. SP No. 33045affirming the order dated December 22, 1993 of the Regional Trial Court, Branch 156, Pasig in SP Proc.No. 10259 are affirmed with the modification that those portions of the order granting an allowance tothe testators grandchildren and ordering the release of the titles to the private respondents uponnotice to creditors are annulled and set aside.

Respondent judge is ordered to proceed with dispatch in the proceedings below.

SO ORDERED.Lorenzo vs. Posadas (digest)Lorenzo vs. Posadas64 Phil 353Facts:On 27 May 1922, Thomas Hanley died in Zamboanga, leaving a will and considerable amount of real andpersonal properties. Hanleys will provides the following: his money will be given to his nephew,

Matthew Hanley, as well as the real estate owned by him. It further provided that the property will only

be given ten years after Thomas Hanleys death. Thus, in the testamentary proceedings, the Court ofFirst Instance of Zamboanga appointed P.J.M. Moore as trustee of the estate. Moore took oath of officeon March 10, 1924, and resigned on Feb. 29, 1932. Pablo Lorenzo was appointed in his stead. JuanPosadas, Collector of Internal Revenue, assessed inheritance tax against the estate amounting toP2,057.74 which includes penalty and surcharge. He filed a motion in the testamentary proceedings sothat Lorenzo will be ordered to pay the amount due. Lorenzo paid the amount in protest after CFIgranted Posadas motion. He claimed that the inheritance tax should have been assessed after 10 years.

He asked for a refund but Posadas declined to do so. The latter counterclaimed for the additionalamount of P1,191.27 which represents interest due on the tax and which was not included in theoriginal assessment. However, CFI dismissed this counterclaim. It also denied Lorenzos claim for refundagainst Posadas. Hence, both appealed.

Issue: Whether the estate was delinquent in paying the inheritance tax and therefore liable for theP1,191.27 that Posadas is asking for?Held: Yes. It was delinquent because according to Sec. 1544 (b) of the Revised Administrative Code,payment of the inheritance tax shall be made before delivering to each beneficiary his share. Thispayment should have been made before March 10, 1924, the date when P.J.M. Moore formally assumedthe function of trustee.Although the property was only to be given after 10 years from the death of Hanley, the courtconsidered that delivery to the trustee is delivery to cestui que trust, the beneficiary within the meaningof Sec. 1544 (b).Even though there was no express mention of the word trust in the will, the court of first instance was

correct in appointing a trustee because no particular or technical words are required to create atestamentary trust (69 C.J.,p. 711). The requisites of a valid testamentary trust are: 1) sufficient words to

raise a trust, 2) a definite subject, 3) a certain or ascertained object. There is no doubt that Hanleyintended to create a trust since he ordered in his will that certain of his properties be kept togetherundisposed during a fixed period or for a stated purpose.

***this case was assigned in our Agency and Partnership class. I created this file as a reviewer. I decidedto share it with the world, especially law students like me. hope it helped!G.R. No. L-43082 June 18, 1937

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PABLO LORENZO, as trustee of the estate of Thomas Hanley, deceased, plaintiff-appellant,vs.JUAN POSADAS, JR., Collector of Internal Revenue, defendant-appellant.

Pablo Lorenzo and Delfin Joven for plaintiff-appellant.Office of the Solicitor-General Hilado for defendant-appellant.

LAUREL, J.:

On October 4, 1932, the plaintiff Pablo Lorenzo, in his capacity as trustee of the estate of ThomasHanley, deceased, brought this action in the Court of First Instance of Zamboanga against the defendant,Juan Posadas, Jr., then the Collector of Internal Revenue, for the refund of the amount of P2,052.74,paid by the plaintiff as inheritance tax on the estate of the deceased, and for the collection of interstthereon at the rate of 6 per cent per annum, computed from September 15, 1932, the date when theaforesaid tax was [paid under protest. The defendant set up a counterclaim for P1,191.27 alleged to beinterest due on the tax in question and which was not included in the original assessment. From thedecision of the Court of First Instance of Zamboanga dismissing both the plaintiff's complaint and the

defendant's counterclaim, both parties appealed to this court.

It appears that on May 27, 1922, one Thomas Hanley died in Zamboanga, Zamboanga, leaving a will(Exhibit 5) and considerable amount of real and personal properties. On june 14, 1922, proceedings forthe probate of his will and the settlement and distribution of his estate were begun in the Court of FirstInstance of Zamboanga. The will was admitted to probate. Said will provides, among other things, asfollows:

4. I direct that any money left by me be given to my nephew Matthew Hanley.

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 theexecutors, 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 forthe 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 MatthewHanley to be disposed of in the way he thinks most advantageous.

x x x x x x x x x

8. I state at this time I have one brother living, named Malachi Hanley, and that my nephew, MatthewHanley, is a son of my said brother, Malachi Hanley.

The Court of First Instance of Zamboanga considered it proper for the best interests of ther estate toappoint a trustee to administer the real properties which, under the will, were to pass to MatthewHanley ten years after the two executors named in the will, was, on March 8, 1924, appointed trustee.Moore took his oath of office and gave bond on March 10, 1924. He acted as trustee until February 29,1932, when he resigned and the plaintiff herein was appointed in his stead.

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During the incumbency of the plaintiff as trustee, the defendant Collector of Internal Revenue, allegingthat the estate left by the deceased at the time of his death consisted of realty valued at P27,920 andpersonalty valued at P1,465, and allowing a deduction of P480.81, assessed against the estate aninheritance tax in the amount of P1,434.24 which, together with the penalties for deliquency in paymentconsisting of a 1 per cent monthly interest from July 1, 1931 to the date of payment and a surcharge of25 per cent on the tax, amounted to P2,052.74. On March 15, 1932, the defendant filed a motion in thetestamentary proceedings pending before the Court of First Instance of Zamboanga (Special proceedingsNo. 302) praying that the trustee, plaintiff herein, be ordered to pay to the Government the said sum ofP2,052.74. The motion was granted. On September 15, 1932, the plaintiff paid said amount underprotest, notifying the defendant at the same time that unless the amount was promptly refunded suitwould be brought for its recovery. The defendant overruled the plaintiff's protest and refused to refundthe said amount hausted, plaintiff went to court with the result herein above indicated.

In his appeal, plaintiff contends that the lower court erred:

I. In holding that the real property of Thomas Hanley, deceased, passed to his instituted heir, MatthewHanley, from the moment of the death of the former, and that from the time, the latter became the

owner thereof.

II. In holding, in effect, that there was deliquency in the payment of inheritance tax due on the estate ofsaid deceased.

III. In holding that the inheritance tax in question be based upon the value of the estate upon the deathof the testator, and not, as it should have been held, upon the value thereof at the expiration of theperiod of ten years after which, according to the testator's will, the property could be and was to bedelivered to the instituted heir.

IV. In not allowing as lawful deductions, in the determination of the net amount of the estate subject to

said tax, the amounts allowed by the court as compensation to the "trustees" and paid to them from thedecedent's estate.

V. In not rendering judgment in favor of the plaintiff and in denying his motion for new trial.

The defendant-appellant contradicts the theories of the plaintiff and assigns the following error besides:

The lower court erred in not ordering the plaintiff to pay to the defendant the sum of P1,191.27,representing part of the interest at the rate of 1 per cent per month from April 10, 1924, to June 30,1931, which the plaintiff had failed to pay on the inheritance tax assessed by the defendant against theestate of Thomas Hanley.

The following are the principal questions to be decided by this court in this appeal: (a) When does theinheritance tax accrue and when must it be satisfied? (b) Should the inheritance tax be computed on thebasis of the value of the estate at the time of the testator's death, or on its value ten years later? (c) Indetermining the net value of the estate subject to tax, is it proper to deduct the compensation due totrustees? (d) What law governs the case at bar? Should the provisions of Act No. 3606 favorable to thetax-payer be given retroactive effect? (e) Has there been deliquency in the payment of the inheritancetax? If so, should the additional interest claimed by the defendant in his appeal be paid by the estate?

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Other points of incidental importance, raised by the parties in their briefs, will be touched upon in thecourse of this opinion.

(a) The accrual of the inheritance tax is distinct from the obligation to pay the same. Section 1536 asamended, of the Administrative Code, imposes the tax upon "every transmission by virtue ofinheritance, devise, bequest, gift mortis causa, or advance in anticipation of inheritance,devise, orbequest." The tax therefore is upon transmission or the transfer or devolution of property of adecedent, made effective by his death. (61 C. J., p. 1592.) It is in reality an excise or privilege taximposed on the right to succeed to, receive, or take property by or under a will or the intestacy law, ordeed, grant, or gift to become operative at or after death. Acording to article 657 of the Civil Code, "therights to the succession of a person are transmitted from the moment of his death." "In other words",said Arellano, C. J., ". . . the heirs succeed immediately to all of the property of the deceased ancestor.The property belongs to the heirs at the moment of the death of the ancestor as completely as if theancestor had executed and delivered to them a deed for the same before his death." (Bondad vs.Bondad, 34 Phil., 232. See also, Mijares vs. Nery, 3 Phil., 195; Suilong & Co., vs. Chio-Taysan, 12 Phil., 13;Lubrico vs. Arbado, 12 Phil., 391; Innocencio vs. Gat-Pandan, 14 Phil., 491; Aliasas vs.Alcantara, 16 Phil.,489; Ilustre vs. Alaras Frondosa, 17 Phil., 321; Malahacan vs. Ignacio, 19 Phil., 434; Bowa vs. Briones, 38

Phil., 27; Osario vs. Osario & Yuchausti Steamship Co., 41 Phil., 531; Fule vs. Fule, 46 Phil., 317; Dais vs.Court of First Instance of Capiz, 51 Phil., 396; Baun vs. Heirs of Baun, 53 Phil., 654.) Plaintiff, however,asserts that while article 657 of the Civil Code is applicable to testate as well as intestate succession, itoperates only in so far as forced heirs are concerned. But the language of article 657 of the Civil Code isbroad and makes no distinction between different classes of heirs. That article does not speak of forcedheirs; it does not even use the word "heir". It speaks of the rights of succession and the transmissionthereof from the moment of death. The provision of section 625 of the Code of Civil Procedureregarding the authentication and probate of a will as a necessary condition to effect transmission ofproperty does not affect the general rule laid down in article 657 of the Civil Code. The authentication ofa will implies its due execution but once probated and allowed the transmission is effective as of thedeath of the testator in accordance with article 657 of the Civil Code. Whatever may be the time when

actual transmission of the inheritance takes place, succession takes place in any event at the moment ofthe decedent's death. The time when the heirs legally succeed to the inheritance may differ from thetime when the heirs actually receive such inheritance. "Poco importa", says Manresa commenting onarticle 657 of the Civil Code, "que desde el falleimiento del causante, hasta que el heredero o legatarioentre en posesion de los bienes de la herencia o del legado, transcurra mucho o poco tiempo, pues laadquisicion ha de retrotraerse al momento de la muerte, y asi lo ordena el articulo 989, que debeconsiderarse como complemento del presente." (5 Manresa, 305; see also, art. 440, par. 1, Civil Code.)Thomas Hanley having died on May 27, 1922, the inheritance tax accrued as of the date.

From the fact, however, that Thomas Hanley died on May 27, 1922, it does not follow that theobligation to pay the tax arose as of the date. The time for the payment on inheritance tax is clearlyfixed by section 1544 of the Revised Administrative Code as amended by Act No. 3031, in relation to

section 1543 of the same Code. The two sections follow:

SEC. 1543. Exemption of certain acquisitions and transmissions. The following shall not be taxed:

(a) The merger of the usufruct in the owner of the naked title.

(b) The transmission or delivery of the inheritance or legacy by the fiduciary heir or legatee to thetrustees.

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(c) The transmission from the first heir, legatee, or donee in favor of another beneficiary, in accordancewith the desire of the predecessor.

In the last two cases, if the scale of taxation appropriate to the new beneficiary is greater than that paidby the first, the former must pay the difference.

SEC. 1544. When tax to be paid. The tax fixed in this article shall be paid:

(a) In the second and third cases of the next preceding section, before entrance into possession of theproperty.

(b) In other cases, within the six months subsequent to the death of the predecessor; but if judicialtestamentary or intestate proceedings shall be instituted prior to the expiration of said period, thepayment shall be made by the executor or administrator before delivering to each beneficiary his share.

If the tax is not paid within the time hereinbefore prescribed, interest at the rate of twelve per centum

per annum shall be added as part of the tax; and to the tax and interest due and unpaid within ten daysafter the date of notice and demand thereof by the collector, there shall be further added a surcharge oftwenty-five per centum.

A certified of all letters testamentary or of admisitration shall be furnished the Collector of InternalRevenue by the Clerk of Court within thirty days after their issuance.

It should be observed in passing that the word "trustee", appearing in subsection (b) of section 1543,should read "fideicommissary" or "cestui que trust". There was an obvious mistake in translation fromthe Spanish to the English version.

The instant case does fall under subsection (a), but under subsection (b), of section 1544 above-quoted,as there is here no fiduciary heirs, first heirs, legatee or donee. Under the subsection, the tax shouldhave been paid before the delivery of the properties in question to P. J. M. Moore as trustee on March10, 1924.

(b) The plaintiff contends that the estate of Thomas Hanley, in so far as the real properties areconcerned, did not and could not legally pass to the instituted heir, Matthew Hanley, until after theexpiration of ten years from the death of the testator on May 27, 1922 and, that the inheritance taxshould be based on the value of the estate in 1932, or ten years after the testator's death. The plaintiffintroduced evidence tending to show that in 1932 the real properties in question had a reasonable valueof only P5,787. This amount added to the value of the personal property left by the deceased, which theplaintiff admits is P1,465, would generate an inheritance tax which, excluding deductions, interest and

surcharge, would amount only to about P169.52.

If death is the generating source from which the power of the estate to impose inheritance taxes takesits being and if, upon the death of the decedent, succession takes place and the right of the estate to taxvests instantly, the tax should be measured by the vlaue of the estate as it stood at the time of thedecedent's death, regardless of any subsequent contingency value of any subsequent increase ordecrease in value. (61 C. J., pp. 1692, 1693; 26 R. C. L., p. 232; Blakemore and Bancroft, InheritanceTaxes, p. 137. See also Knowlton vs. Moore, 178 U.S., 41; 20 Sup. Ct. Rep., 747; 44 Law. ed., 969.) "The

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right of the state to an inheritance tax accrues at the moment of death, and hence is ordinarilymeasured as to any beneficiary by the value at that time of such property as passes to him. Subsequentappreciation or depriciation is immaterial." (Ross, Inheritance Taxation, p. 72.)

Our attention is directed to the statement of the rule in Cyclopedia of Law of and Procedure (vol. 37, pp.1574, 1575) that, in the case of contingent remainders, taxation is postponed until the estate vests inpossession or the contingency is settled. This rule was formerly followed in New York and has beenadopted in Illinois, Minnesota, Massachusetts, Ohio, Pennsylvania and Wisconsin. This rule, horever, isby no means entirely satisfactory either to the estate or to those interested in the property (26 R. C. L.,p. 231.). Realizing, perhaps, the defects of its anterior system, we find upon examination of cases andauthorities that New York has varied and now requires the immediate appraisal of the postponed estateat its clear market value and the payment forthwith of the tax on its out of the corpus of the estatetransferred. (In re Vanderbilt, 172 N. Y., 69; 69 N. E., 782; In re Huber, 86 N. Y. App. Div., 458; 83 N. Y.Supp., 769; Estate of Tracy, 179 N. Y., 501; 72 N. Y., 519; Estate of Brez, 172 N. Y., 609; 64 N. E., 958;Estate of Post, 85 App. Div., 611; 82 N. Y. Supp., 1079. Vide also, Saltoun vs. Lord Advocate, 1 Peter. Sc.App., 970; 3 Macq. H. L., 659; 23 Eng. Rul. Cas., 888.) California adheres to this new rule (Stats. 1905,sec. 5, p. 343).

But whatever may be the rule in other jurisdictions, we hold that a transmission by inheritance is taxableat the time of the predecessor's death, notwithstanding the postponement of the actual possession orenjoyment of the estate by the beneficiary, and the tax measured by the value of the propertytransmitted at that time regardless of its appreciation or depreciation.

(c) Certain items are required by law to be deducted from the appraised gross in arriving at the net valueof the estate on which the inheritance tax is to be computed (sec. 1539, Revised Administrative Code).In the case at bar, the defendant and the trial court allowed a deduction of only P480.81. This sumrepresents the expenses and disbursements of the executors until March 10, 1924, among which weretheir fees and the proven debts of the deceased. The plaintiff contends that the compensation and fees

of the trustees, which aggregate P1,187.28 (Exhibits C, AA, EE, PP, HH, JJ, LL, NN, OO), should also bededucted under section 1539 of the Revised Administrative Code which provides, in part, as follows: "Inorder to determine the net sum which must bear the tax, when an inheritance is concerned, there shallbe deducted, in case of a resident, . . . the judicial expenses of the testamentary or intestateproceedings, . . . ."

A trustee, no doubt, is entitled to receive a fair compensation for his services (Barney vs. Saunders, 16How., 535; 14 Law. ed., 1047). But from this it does not follow that the compensation due him maylawfully be deducted in arriving at the net value of the estate subject to tax. There is no statute in thePhilippines which requires trustees' commissions to be deducted in determining the net value of theestate subject to inheritance tax (61 C. J., p. 1705). Furthermore, though a testamentary trust has beencreated, it does not appear that the testator intended that the duties of his executors and trustees

should be separated. (Ibid.; In re Vanneck's Estate, 161 N. Y. Supp., 893; 175 App. Div., 363; In reCollard's Estate, 161 N. Y. Supp., 455.) On the contrary, in paragraph 5 of his will, the testator expressedthe desire that his real estate be handled and managed by his executors until the expiration of theperiod of ten years therein provided. Judicial expenses are expenses of administration (61 C. J., p. 1705)but, in State vs. Hennepin County Probate Court (112 N. W., 878; 101 Minn., 485), it was said: ". . . Thecompensation of a trustee, earned, not in the administration of the estate, but in the managementthereof for the benefit of the legatees or devises, does not come properly within the class or reason forexempting administration expenses. . . . Service rendered in that behalf have no reference to closing the

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

(d) The defendant levied and assessed the inheritance tax due from the estate of Thomas Hanley underthe provisions of section 1544 of the Revised Administrative Code, as amended by section 3 of Act No.3606. But Act No. 3606 went into effect on January 1, 1930. It, therefore, was not the law in force whenthe testator died on May 27, 1922. The law at the time was section 1544 above-mentioned, as amendedby Act No. 3031, which took effect on March 9, 1922.

It is well-settled that inheritance taxation is governed by the statute in force at the time of the death ofthe decedent (26 R. C. L., p. 206; 4 Cooley on Taxation, 4th ed., p. 3461). The taxpayer can not foreseeand ought not to be required to guess the outcome of pending measures. Of course, a tax statute maybe made retroactive in its operation. Liability for taxes under retroactive legislation has been "one of the

incidents of social life." (Seattle vs. Kelleher, 195 U. S., 360; 49 Law. ed., 232 Sup. Ct. Rep., 44.) Butlegislative intent that a tax statute should operate retroactively should be perfectly clear. (Scwab vs.Doyle, 42 Sup. Ct. Rep., 491; Smietanka vs. First Trust & Savings Bank, 257 U. S., 602; Stockdale vs.Insurance Co., 20 Wall., 323; Lunch vs. Turrish, 247 U. S., 221.) "A statute should be considered asprospective in its operation, whether it enacts, amends, or repeals an inheritance tax, unless thelanguage of the statute clearly demands or expresses that it shall have a retroactive effect, . . . ." (61 C.J., P. 1602.) Though the last paragraph of section 5 of Regulations No. 65 of the Department of Financemakes section 3 of Act No. 3606, amending section 1544 of the Revised Administrative Code, applicableto all estates the inheritance taxes due from which have not been paid, Act No. 3606 itself contains noprovisions indicating legislative intent to give it retroactive effect. No such effect can begiven the statuteby this court.

The defendant Collector of Internal Revenue maintains, however, that certain provisions of Act No. 3606are more favorable to the taxpayer than those of Act No. 3031, that said provisions are penal in natureand, therefore, should operate retroactively in conformity with the provisions of article 22 of theRevised Penal Code. This is the reason why he applied Act No. 3606 instead of Act No. 3031. Indeed,under Act No. 3606, (1) the surcharge of 25 per cent is based on the tax only, instead of on both the taxand the interest, as provided for in Act No. 3031, and (2) the taxpayer is allowed twenty days fromnotice and demand by rthe Collector of Internal Revenue within which to pay the tax, instead of tendays only as required by the old law.

Properly speaking, a statute is penal when it imposes punishment for an offense committed against thestate which, under the Constitution, the Executive has the power to pardon. In common use, however,

this sense has been enlarged to include within the term "penal statutes" all status which command orprohibit certain acts, and establish penalties for their violation, and even those which, without expresslyprohibiting certain acts, impose a penalty upon their commission (59 C. J., p. 1110). Revenue laws,generally, which impose taxes collected by the means ordinarily resorted to for the collection of taxesare not classed as penal laws, although there are authorities to the contrary. (See Sutherland, StatutoryConstruction, 361; Twine Co. vs. Worthington, 141 U. S., 468; 12 Sup. Ct., 55; Rice vs. U. S., 4 C. C. A.,104; 53 Fed., 910; Com. vs. Standard Oil Co., 101 Pa. St., 150; State vs. Wheeler, 44 P., 430; 25 Nev. 143.)

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Article 22 of the Revised Penal Code is not applicable to the case at bar, and in the absence of clearlegislative intent, we cannot give Act No. 3606 a retroactive effect.

(e) The plaintiff correctly states that the liability to pay a tax may arise at a certain time and the tax maybe paid within another given time. As stated by this court, "the mere failure to pay one's tax does notrender one delinqent until and unless the entire period has eplased within which the taxpayer isauthorized by law to make such payment without being subjected to the payment of penalties forfasilure to pay his taxes within the prescribed period." (U. S. vs. Labadan, 26 Phil., 239.)

The defendant maintains that it was the duty of the executor to pay the inheritance tax before thedelivery of the decedent's property to the trustee. Stated otherwise, the defendant contends thatdelivery to the trustee was delivery to the cestui que trust, the beneficiery in this case, within themeaning of the first paragraph of subsection (b) of section 1544 of the Revised Administrative Code. Thiscontention is well taken and is sustained. The appointment of P. J. M. Moore as trustee was made by thetrial court in conformity with the wishes of the testator as expressed in his will. It is true that the word"trust" is not mentioned or used in the will but the intention to create one is clear. No particular ortechnical words are required to create a testamentary trust (69 C. J., p. 711). The words "trust" and

"trustee", though apt for the purpose, are not necessary. In fact, the use of these two words is notconclusive on the question that a trust is created (69 C. J., p. 714). "To create a trust by will the testatormust indicate in the will his intention so to do by using language sufficient to separate the legal from theequitable estate, and with sufficient certainty designate the beneficiaries, their interest in the ttrust, thepurpose or object of the trust, and the property or subject matter thereof. Stated otherwise, toconstitute a valid testamentary trust there must be a concurrence of three circumstances: (1) Sufficientwords to raise a trust; (2) a definite subject; (3) a certain or ascertain object; statutes in somejurisdictions expressly or in effect so providing." (69 C. J., pp. 705,706.) There is no doubt that thetestator intended to create a trust. He ordered in his will that certain of his properties be kept togetherundisposed during a fixed period, for a stated purpose. The probate court certainly exercised soundjudgment in appointment a trustee to carry into effect the provisions of the will (see sec. 582, Code of

Civil Procedure).

P. J. M. Moore became trustee on March 10, 1924. On that date trust estate vested in him (sec. 582 inrelation to sec. 590, Code of Civil Procedure). The mere fact that the estate of the deceased was placedin trust did not remove it from the operation of our inheritance tax laws or exempt it from the paymentof the inheritance tax. The corresponding inheritance tax should have been paid on or before March 10,1924, to escape the penalties of the laws. This is so for the reason already stated that the delivery of theestate to the trustee was in esse delivery of the same estate to the cestui que trust, the beneficiary inthis case. A trustee is but an instrument or agent for the cestui que trust (Shelton vs. King, 299 U. S., 90;33 Sup. Ct. Rep., 689; 57 Law. ed., 1086). When Moore accepted the trust and took possesson of thetrust estate he thereby admitted that the estate belonged not to him but to his cestui que trust(Tolentino vs. Vitug, 39 Phil.,126, cited in 65 C. J., p. 692, n. 63). He did not acquire any beneficial

interest in the estate. He took such legal estate only as the proper execution of the trust required (65 C.J., p. 528) and, his estate ceased upon the fulfillment of the testator's wishes. The estate then vestedabsolutely in the beneficiary (65 C. J., p. 542).

The highest considerations of public policy also justify the conclusion we have reached. Were we to holdthat the payment of the tax could be postponed or delayed by the creation of a trust of the type athand, the result would be plainly disastrous. Testators may provide, as Thomas Hanley has provided,that their estates be not delivered to their beneficiaries until after the lapse of a certain period of time.

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In the case at bar, the period is ten years. In other cases, the trust may last for fifty years, or for a longerperiod which does not offend the rule against petuities. The collection of the tax would then be left tothe will of a private individual. The mere suggestion of this result is a sufficient warning against theaccpetance of the essential to the very exeistence of government. (Dobbins vs. Erie Country, 16 Pet.,435; 10 Law. ed., 1022; Kirkland vs. Hotchkiss, 100 U. S., 491; 25 Law. ed., 558; Lane County vs. Oregon,7 Wall., 71; 19 Law. ed., 101; Union Refrigerator Transit Co. vs. Kentucky, 199 U. S., 194; 26 Sup. Ct. Rep.,36; 50 Law. ed., 150; Charles River Bridge vs. Warren Bridge, 11 Pet., 420; 9 Law. ed., 773.) Theobligation to pay taxes rests not upon the privileges enjoyed by, or the protection afforded to, a citizenby the government but upon the necessity of money for the support of the state (Dobbins vs. ErieCountry, supra). For this reason, no one is allowed to object to or resist the payment of taxes solelybecause no personal benefit to him can be pointed out. (Thomas vs. Gay, 169 U. S., 264; 18 Sup. Ct.Rep., 340; 43 Law. ed., 740.) While courts will not enlarge, by construction, the government's power oftaxation (Bromley vs. McCaughn, 280 U. S., 124; 74 Law. ed., 226; 50 Sup. Ct. Rep., 46) they also will notplace upon tax laws so loose a construction as to permit evasions on merely fanciful and insubstantialdistictions. (U. S. vs. Watts, 1 Bond., 580; Fed. Cas. No. 16,653; U. S. vs. Wigglesirth, 2 Story, 369; Fed.Cas. No. 16,690, followed in Froelich & Kuttner vs. Collector of Customs, 18 Phil., 461, 481; Castle Bros.,Wolf & Sons vs. McCoy, 21 Phil., 300; Muoz & Co. vs. Hord, 12 Phil., 624; Hongkong & Shanghai Banking

Corporation vs. Rafferty, 39 Phil., 145; Luzon Stevedoring Co. vs. Trinidad, 43 Phil., 803.) When proper, atax statute should be construed to avoid the possibilities of tax evasion. Construed this way, the statute,without resulting in injustice to the taxpayer, becomes fair to the government.

That taxes must be collected promptly is a policy deeply intrenched in our tax system. Thus