Cases in TAX (Estate tax) Republic of the Philippines SUPREME COURT Manila THIR I!

ISIO" Ap)il *'+ ,''-

Sup)e4e Cou)t 2ustice A)senio P$ i=on (2ustice i=on) an3 petitione)+ Att1$ Rafael A)senio P$ i=on (petitione)) as Special an3 Assistant Special A34inist)ato)+ )especti5el1+ of the Estate of 2ose (Estate)$ In a lette)< 3ate3 Octobe) %*+ %(--+ 2ustice i=on info)4e3 )espon3ent Co44issione) of the 7u)eau of Inte)nal Re5enue (7IR) of the special p)ocee3in;s fo) the Estate$ Petitione) alle;e3 that se5e)al )eAuests fo) extension of the pe)io3 to file the )eAui)e3 estate tax )etu)n 8e)e ;)ante3 b1 the 7IR since the assets of the estate+ as 8ell as the clai4s a;ainst it+ ha3 1et to be collate3+ 3ete)4ine3 an3 i3entifie3$ Thus+ in a lette)- 3ate3 Ma)ch %&+ %(('+ 2ustice i=on autho)i=e3 Att1$ 2esus M$ #on=ales (Att1$ #on=ales) to si;n an3 file on behalf of the Estate the )eAui)e3 estate tax )etu)n an3 to )ep)esent the sa4e in secu)in; a Ce)tificate of Tax Clea)ance$ E5entuall1+ on Ap)il %<+ %(('+ Att1$ #on=ales 8)ote a lette)( a33)esse3 to the 7IR Re;ional i)ecto) fo) San Pablo Cit1 an3 file3 the estate tax )etu)n%' 8ith the sa4e 7IR Re;ional Office+ sho8in; the)ein a "I/ estate tax liabilit1+ co4pute3 as follo8s6 COMPUTATIO" O. TAX ConBu;al Real P)ope)t1 (Sch$ %) P%'+-99+','$'' ConBu;al Pe)sonal P)ope)t1 (Sch$,) *+&?'+9(%$*& Taxable T)ansfe) (Sch$ *)

#$R$ "o$ %&'(&&

RA.AE/ ARSE"IO S$ I0O"+ in his capacit1 as the 2u3icial A34inist)ato) of the Estate of the 3ecease3 2OSE P$ .ER"A" E0+ petitione)+ 5s$ COURT O. TAX APPEA/S an3 COMMISSIO"ER O. I"TER"A/ RE!E"UE+ )espon3ents$ ECISIO" "ACHURA+ 2$6 7efo)e this Cou)t is a Petition fo) Re5ie8 on Ce)tio)a)i% un3e) Rule &9 of the Rules of Ci5il P)oce3u)e see:in; the )e5e)sal of the Cou)t of Appeals (CA) ecision, 3ate3 Ap)il *'+ %((( 8hich affi)4e3 the ecision* of the Cou)t of Tax Appeals (CTA) 3ate3 2une %<+ %((<$& The .acts On "o5e4be) <+ %(-<+ 2ose P$ .e)nan3e= (2ose) 3ie3$ The)eafte)+ a petition fo) the p)obate of his 8ill9 8as file3 8ith 7)anch 9% of the Re;ional T)ial Cou)t (RTC) of Manila (p)obate cou)t)$>?@ The p)obate cou)t then appointe3 )eti)e3

#)oss ConBu;al Estate %&+*%9+?%%$*& /ess6 e3uctions (Sch$ &) %-<+-,,+9<?$'? "et ConBu;al Estate "I/ /ess6 Sha)e of Su)5i5in; Spouse "I/$ "et Sha)e in ConBu;al Estate "I/ xxx "et Taxable Estate "I/$ Estate Tax ue "I/$%% On Ap)il ,<+ %(('+ 7IR Re;ional i)ecto) fo) San Pablo Cit1+ Os4un3o #$ U4ali issue3 Ce)tification "os$ ,'9,>%,@ an3 ,'9*>%*@ statin; that the taxes 3ue on the t)ansfe) of )eal an3

pe)sonal p)ope)ties>%&@ of 2ose ha3 been full1 pai3 an3 sai3 p)ope)ties 4a1 be t)ansfe))e3 to his hei)s$ So4eti4e in Au;ust %(('+ 2ustice i=on passe3 a8a1$ Thus+ on Octobe) ,,+ %(('+ the p)obate cou)t appointe3 petitione) as the a34inist)ato) of the Estate$%9 Petitione) )eAueste3 the p)obate cou)tCs autho)it1 to sell se5e)al p)ope)ties fo)4in; pa)t of the Estate+ fo) the pu)pose of pa1in; its c)e3ito)s+ na4el16 EAuitable 7an:in; Co)po)ation (P%(+<9?+&,-$*%)+ 7anAue 3e /CIn3ochine et$ 3e Sue= (USD&+-,-+('9$(' as of 2anua)1 *%+ %(--)+ Manila 7an:in; Co)po)ation (P-&+%((+%?'$&? as of .eb)ua)1 ,-+ %(-() an3 State In5est4ent House+ Inc$ (P?+,-'+''?$,%)$ Petitione) 4anifeste3 that Manila 7an:+ a 4aBo) c)e3ito) of the Estate 8as not inclu3e3+ as it 3i3 not file a clai4 8ith the p)obate cou)t since it ha3 secu)it1 o5e) se5e)al )eal estate p)ope)ties fo)4in; pa)t of the Estate$%? Ho8e5e)+ on "o5e4be) ,?+ %((%+ the Assistant Co44issione) fo) Collection of the 7IR+ The4istocles Montalban+ issue3 Estate Tax Assess4ent "otice "o$ .ASEEE-<E(%E''*,?(+%< 3e4an3in; the pa14ent of P??+(<*+(-9$&' as 3eficienc1 estate tax+ ite4i=e3 as follo8s6 eficienc1 Estate TaxE %(-< Estate tax P*%+-?-+&%&$&,9F su)cha);eE late filin; <+(?<+%'*$?,

late pa14ent <+(?<+%'*$?, Inte)est %(+%,%+'&-$?Co4p)o4iseEnon filin; ,9+'''$''

is liable fo) the pa14ent of P??+(<*+(-9$&' as 3eficienc1 estate tax$ On Ma1 *+ %((&+ petitione) )ecei5e3 the lette) of 3enial$ On 2une ,+ %((&+ petitione) file3 a petition fo) )e5ie8,% befo)e )espon3ent CTA$ T)ial on the 4e)its ensue3$ As foun3 b1 the CTA+ the )especti5e pa)ties p)esente3 the follo8in; pieces of e5i3ence+ to 8it6 In the hea)in;s con3ucte3+ petitione) 3i3 not p)esent testi4onial e5i3ence but 4e)el1 3ocu4enta)1 e5i3ence consistin; of the follo8in;6 "atu)e of ocu4ent (sic)

non pa14ent Exhibits ,9+'''$'' %$ no notice of 3eath %9$'' no CPA Ce)tificate *''$'' Total a4ount 3ue G collectible P??+(<*+(-9$&'%In his lette)%( 3ate3 ece4be) %,+ %((%+ Att1$ #on=ales 4o5e3 fo) the )econsi3e)ation of the sai3 estate tax assess4ent$ Ho8e5e)+ in he) lette),' 3ate3 Ap)il %,+ %((&+ the 7IR Co44issione) 3enie3 the )eAuest an3 )eite)ate3 that the estate /ette) 3ate3 Octobe) %*+ %(-- f)o4 A)senio P$ i=on a33)esse3 to the Co44issione) of Inte)nal Re5enue info)4in; the latte) of the special p)ocee3in;s fo) the settle4ent of the estate (p$ %,?+ 7IR )eco)3s)H IAI ,$ Petition fo) the p)obate of the 8ill an3 issuance of lette) of a34inist)ation file3 8ith the Re;ional T)ial Cou)t (RTC) of Manila+ 3oc:ete3 as Sp$ P)oc$ "o$ -<E&,(-' (pp$ %'<E%'-+ 7IR )eco)3s)H I7I G I7E%I

<$ *$ Plea3in; entitle3 ICo4plianceI file3 8ith the p)obate Cou)t sub4ittin; the final in5ento)1 of all the p)ope)ties of the 3ecease3 (p$ %'?+ 7IR )eco)3s)H ICI &$ Attach4ent to Exh$ ICI 8hich is the 3etaile3 an3 co4plete listin; of the p)ope)ties of the 3ecease3 (pp$ -(E%'9+ 7IR )ec$)H ICE%I to ICE%<I 9$ Clai4s a;ainst the estate file3 b1 EAuitable 7an:in; Co)p$ 8ith the p)obate Cou)t in the a4ount of P%(+<9?+&,-$*% as of Ma)ch *%+ %(--+ to;ethe) 8ith the Annexes to the clai4 (pp$ ?&E--+ 7IR )eco)3s)H I I to I E,&I ?$ Clai4 file3 b1 7anAue 3e /C In3ochine et 3e Sue= 8ith the p)obate Cou)t in the a4ount of US D&+-,-+('9$(' as of 2anua)1 *%+ %(-- (pp$ ,?,E,?9+ 7IR )eco)3s)H IEI to IEE*I I.I to I.E*I -$ e4an3 lette) of Manila 7an:in; Co)po)ation p)epa)e3 b1 Ase3illo+ Ra4os an3 Associates /a8 Offices a33)esse3 to .e)nan3e= He)4anos+ Inc$+ )ep)esente3 b1 2ose P$ .e)nan3e=+ as 4o)t;a;o)s+ in the total a4ount of P,&'+&<(+?(*$%< as of .eb)ua)1 ,-+ %(-( (pp$ %-?E%-<+ 7IR )eco)3s)H I#I G I#E%I ($ Clai4 of State In5est4ent House+ Inc$ file3 8ith the RTC+ 7)anch !II of Manila+ 3oc:ete3 as Ci5il Case "o$ -?E*-9(( entitle3 IState In5est4ent House+ Inc$+ Plaintiff+ 5e)sus Ma)iti4e Co4pan1 O5e)seas+ Inc$ an3Jo) 2ose P$ .e)nan3e=+ efen3ants+I (pp$ ,''E,%9+ 7IR )eco)3s)H IHI to IHE%?I %'$ Clai4 of the Manila 7an:in; Co)po)ation (M7C) 8hich as of "o5e4be) <+ %(-< a4ounts to P?9+%9-+',*$9&+ but )eco4pute3 as of .eb)ua)1 ,-+ %(-( at a total a4ount of P-&+%((+%?'$&?H to;ethe) 8ith the 3e4an3 lette) f)o4 M7CCs la81e) (pp$ %(&E %(<+ 7IR )eco)3s)H

/ette) 3ate3 Ma)ch %&+ %((' of A)senio P$ i=on a33)esse3 to Att1$ 2esus M$ #on=ales+ (p$ %-&+ 7IR )eco)3s)H III %%$ /ette) 3ate3 Ap)il %<+ %((' f)o4 2$M$ #on=ales a33)esse3 to the Re;ional i)ecto) of 7IR in San Pablo Cit1 (p$ %-*+ 7IR )eco)3s)H I2I %,$

Ce)tification of Pa14ent of estate taxes "os$ ,'9, an3 ,'9*+ both 3ate3 Ap)il ,<+ %(('+ issue3 b1 the Office of the Re;ional i)ecto)+ Re5enue Re;ion "o$ &EC+ San Pablo Cit1+ 8ith attach4ents (pp$ %'*E%'&+ CTA )eco)3s$)$ IMI to IME9I Respon3entCs >7IR@ counsel p)esente3 on 2une ,?+ %((9 one 8itness in the pe)son of Albe)to En)iAue=+ 8ho 8as one of the )e5enue exa4ine)s 8ho con3ucte3 the in5esti;ation on the estate tax case of the late 2ose P$ .e)nan3e=$ In the cou)se of the 3i)ect exa4ination of the 8itness+ he i3entifie3 the follo8in;6 ocu4entsJSi;natu)es

Estate Tax Retu)n file3 b1 the estate of the late 2ose P$ .e)nan3e= th)ou;h its autho)i=e3 )ep)esentati5e+ Att1$ 2esus M$ #on=ales+ fo) A)senio P$ i=on+ 8ith attach4ents (pp$ %<<E %-,+ 7IR )eco)3s)H IKI to IKE9I %*$ Ce)tifie3 t)ue cop1 of the /ette) of A34inist)ation issue3 b1 RTC Manila+ 7)anch 9%+ in Sp$ P)oc$ "o$ -<E&,(-' appointin; Att1$ Rafael S$ i=on as 2u3icial A34inist)ato) of the estate of 2ose P$ .e)nan3e=H (p$ %',+ CTA )eco)3s) an3 I/I %&$

7IR Reco)3 %$ Estate Tax Retu)n p)epa)e3 b1 the 7IRH p$ %*,$ Si;natu)es of Ma$ Anabella Abuloc an3 Albe)to En)iAue=+ 2)$ appea)in; at the lo8e) Po)tion of Exh$ I%IH E3oE *$

Me4o)an3u4 fo) the Co44issione)+ 3ate3 2ul1 %(+ %((%+ p)epa)e3 b1 )e5enue exa4ine)s+ Ma$ Anabella A$ Abuloc+ Albe)to S$ En)iAue= an3 Ra14un3 S$ #alla)3oH Re5ie8e3 b1 Maxi4ino !$ Ta;le pp$ %&*E%&& &$ Si;natu)e of Albe)to S$ En)iAue= appea)in; at the lo8e) po)tion on p$ , of Exh$ I,IH E3oE

E3oE -$ Su44a)1 of )e5enue Enfo)ce4ent Office)s Au3it Repo)t+ 3ate3 2ul1 %(+ %((%H p$ %*( ($ Si;natu)e of Albe)to En)iAue= at the lo8e) po)tion of Exh$ I*IH E3oE

9$ %'$ Si;natu)e of Ma$ Anabella A$ Abuloc appea)in; at the lo8e) po)tion on p$ , of Exh$ I,IH E3oE E3oE ?$ %%$ Si;natu)e of Ra14un3 S$ #alla)3o appea)in; at the /o8e) po)tion on p$ , of Exh$ I,IH E3oE E3oE <$ %,$ Si;natu)e of Maxi4ino !$ Ta;le also appea)in; on p$ , of Exh$ I,IH Si;natu)e of Maxi4ino !$ Ta;le at the lo8e) po)tion of Exh$ I*IH Si;natu)e of Ra14on3 S$ #alla)3o at the lo8e) po)tion of Exh$ I*IH Si;natu)e of Ma$ Anabella A$ Abuloc at the lo8e) po)tion of Exh$ I*IH

E3oE %*$ e4an3 lette) (.ASEEE-<E(%E'')+ si;ne3 b1 the Asst$ Co44issione) fo) Collection fo) the Co44issione) of Inte)nal Re5enue+ 3e4an3in; pa14ent of the a4ount of P??+(<*+(-9$&'H an3 p$ %?(

this case$ 7esi3es+ the 3ocu4ents 4a):e3 as )espon3entCs exhibits fo)4e3 pa)t of the 7IR )eco)3s of the case$,& "e5e)theless+ the CTA 3i3 not full1 a3opt the assess4ent 4a3e b1 the 7IR an3 it ca4e up 8ith its o8n co4putation of the 3eficienc1 estate tax+ to 8it6 ConBu;al Real P)ope)t1 P 9+'?,+'%?$'' ConBu;al Pe)sonal P)op$

%&$ **+',%+((($(* Assess4ent "otice .ASEEE-<E(%E'' #)oss ConBu;al Estate pp$ %?(E%<',, *-+'-&+'%9$(* The CTACs Rulin; /ess6 e3uctions On 2une %<+ %((<+ the CTA 3enie3 the sai3 petition fo) )e5ie8$ Citin; this Cou)tCs )ulin; in !3a$ 3e OLate 5$ Cou)t of Appeals+,* the CTA opine3 that the afo)e4entione3 pieces of e5i3ence int)o3uce3 b1 the 7IR 8e)e a34issible in e5i3ence$ The CTA )atiocinate36 Althou;h the abo5eE4entione3 3ocu4ents 8e)e not fo)4all1 offe)e3 as e5i3ence fo) )espon3ent+ consi3e)in; that )espon3ent has been 3ecla)e3 to ha5e 8ai5e3 the p)esentation the)eof 3u)in; the hea)in; on Ma)ch ,'+ %((?+ still the1 coul3 be consi3e)e3 as e5i3ence fo) )espon3ent since the1 8e)e p)ope)l1 i3entifie3 3u)in; the p)esentation of )espon3entCs 8itness+ 8hose testi4on1 8as 3ul1 )eco)3e3 as pa)t of the )eco)3s of ,?+,9'+'''$'' "et ConBu;al Estate P %%+-*&+'%9$(* /ess6 Sha)e of Su)5i5in; Spouse 9+(%<+''<$(? "et Sha)e in ConBu;al Estate

P 9+(%<+''<$(? A336 CapitalJPa)aphe)nal P)ope)ties M P&&+?9,+-%*$?? /ess6 CapitalJPa)aphe)nal e3uctions &&+?9,+-%*$?? "et Taxable Estate P 9'+9?(+-,%$?, NNNNNNNNNNNN Estate Tax ue P ,(+(*9+*&,$(< SO OR ERE $,? A336 ,9F Su)cha);e fo) /ate .ilin; <+&-*+-*9$<& A336 Penalties fo)E"o notice of 3eath %9$'' "o CPA ce)tificate *''$'' Total 3eficienc1 estate tax P *<+&%(+&(*$<% NNNNNNNNNNNN On Ma1 *%+ %(((+ petitione) file3 a Motion fo) Reconsi3e)ation,( 8hich the CA 3enie3 in its Resolution*' 3ate3 "o5e4be) *+ %((($ A;;)ie5e3+ petitione)+ on Ma)ch ,+ %((-+ 8ent to the CA 5ia a petition fo) )e5ie8$,< The CACs Rulin; On Ap)il *'+ %(((+ the CA affi)4e3 the CTACs )ulin;$ A3optin; in full the CTACs fin3in;s+ the CA )ule3 that the petitione)Cs act of filin; an estate tax )etu)n 8ith the 7IR an3 the issuance of 7IR Ce)tification "os$ ,'9, an3 ,'9* 3i3 not 3ep)i5e the 7IR Co44issione) of he) autho)it1 to )eEexa4ine o) )eEassess the sai3 )etu)n file3 on behalf of the Estate$,exclusi5e of ,'F inte)est f)o4 3ue 3ate of its pa14ent until full pa14ent the)eof >Sec$ ,-* (b)+ Tax Co3e of %(-<@$,9 Thus+ the CTA 3ispose3 of the case in this 8ise6 OHERE.ORE+ 5ie8e3 f)o4 all the fo)e;oin;+ the Cou)t fin3s the petition un4e)ito)ious an3 3enies the sa4e$ Petitione) an3Jo) the hei)s of 2ose P$ .e)nan3e= a)e he)eb1 o)3e)e3 to pa1 to )espon3ent the a4ount of P*<+&%(+&(*$<% plus ,'F inte)est f)o4 the 3ue 3ate of its pa14ent until full pa14ent the)eof as estate tax liabilit1 of the estate of 2ose P$ .e)nan3e= 8ho 3ie3 on "o5e4be) <+ %(-<$

Hence+ the instant Petition )aisin; the follo8in; issues6 %$ Ohethe) o) not the a34ission of e5i3ence 8hich 8e)e not fo)4all1 offe)e3 b1 the )espon3ent 7IR b1 the Cou)t of Tax Appeals 8hich 8as subseAuentl1 uphel3 b1 the Cou)t of Appeals is cont)a)1 to the Rules of Cou)t an3 )ulin;s of this Hono)able Cou)tH ,$ Ohethe) o) not the Cou)t of Tax Appeals an3 the Cou)t of Appeals e))e3 in )eco;ni=in;Jconsi3e)in; the estate tax )etu)n p)epa)e3 an3 file3 b1 )espon3ent 7IR :no8in; that the p)obate cou)t appointe3 a34inist)ato) of the estate of 2ose P$ .e)nan3e= ha3 p)e5iousl1 file3 one as in fact+ 7IR Ce)tification Clea)ance "os$ ,'9, an3 ,'9* ha3 been issue3 in the estateCs fa5o)H *$ Ohethe) o) not the Cou)t of Tax Appeals an3 the Cou)t of Appeals e))e3 in 3isallo8in; the 5ali3 an3 enfo)ceable clai4s of c)e3ito)s a;ainst the estate+ as la8ful 3e3uctions 3espite clea) an3 con5incin; e5i3ence the)eofH an3 &$ Ohethe) o) not the Cou)t of Tax Appeals an3 the Cou)t of Appeals e))e3 in 5ali3atin; e))oneous 3ouble i4putation of 5alues on the 5e)1 sa4e estate p)ope)ties in the estate tax )etu)n it p)epa)e3 an3 file3 8hich effecti5el1 bloate3 the estateCs assets$*% The petitione) clai4s that in as 4uch as the 5ali3 clai4s of c)e3ito)s a;ainst the Estate a)e in excess of the ;)oss estate+ no estate tax 8as 3ueH that the lac: of a fo)4al offe) of e5i3ence is fatal to 7IRCs causeH that the 3oct)ine lai3 3o8n in !3a$ 3e OLate has al)ea31 been aban3one3 in a lon; line of cases in 8hich the Cou)t hel3 that e5i3ence not fo)4all1 offe)e3 is

8ithout an1 8ei;ht o) 5alueH that Section *& of Rule %*, of the Rules on E5i3ence )eAui)in; a fo)4al offe) of e5i3ence is 4an3ato)1 in cha)acte)H that+ 8hile 7IRCs 8itness Albe)to En)iAue= (Albe)to) in his testi4on1 befo)e the CTA i3entifie3 the pieces of e5i3ence afo)e4entione3 such that the sa4e 8e)e 4a):e3+ 7IRCs failu)e to fo)4all1 offe) sai3 pieces of e5i3ence an3 3ep)i5in; petitione) the oppo)tunit1 to c)ossEexa4ine Albe)to+ )en3e) the sa4e ina34issible in e5i3enceH that assu4in; a);uen3o that the )ulin; in !3a$ 3e OLate is still applicable+ 7IR faile3 to co4pl1 8ith the 3oct)ineCs )eAuisites because the 3ocu4ents he)ein )e4aine3 si4pl1 pa)t of the 7IR )eco)3s an3 8e)e not 3ul1 inco)po)ate3 in the cou)t )eco)3sH that the 7IR faile3 to consi3e) that althou;h the actual pa14ents 4a3e to the Estate c)e3ito)s 8e)e lo8e) than thei) )especti5e clai4s+ such 8e)e co4p)o4ise a;)ee4ents )eache3 lon; afte) the EstateCs liabilit1 ha3 been settle3 b1 the filin; of its estate tax )etu)n an3 the issuance of 7IR Ce)tification "os$ ,'9, an3 ,'9*H an3 that the )ec:onin; 3ate of the clai4s a;ainst the Estate an3 the settle4ent of the estate tax 3ue shoul3 be at the ti4e the estate tax )etu)n 8as file3 b1 the Bu3icial a34inist)ato) an3 the issuance of sai3 7IR Ce)tifications an3 not at the ti4e the afo)e4entione3 Co4p)o4ise A;)ee4ents 8e)e ente)e3 into 8ith the EstateCs c)e3ito)s$*, On the othe) han3+ )espon3ent counte)s that the 3ocu4ents+ bein; pa)t of the )eco)3s of the case an3 3ul1 i3entifie3 in a 3ul1 )eco)3e3 testi4on1 a)e consi3e)e3 e5i3ence e5en if the sa4e 8e)e not fo)4all1 offe)e3H that the filin; of the estate tax )etu)n b1 the Estate an3 the issuance of 7IR Ce)tification "os$ ,'9, an3 ,'9* 3i3 not 3ep)i5e the 7IR of its autho)it1 to exa4ine the )etu)n an3 assess the estate taxH an3 that the

factual fin3in;s of the CTA as affi)4e3 b1 the CA 4a1 no lon;e) be )e5ie8e3 b1 this Cou)t 5ia a petition fo) )e5ie8$** The Issues The)e a)e t8o ulti4ate issues 8hich )eAui)e )esolution in this case6 .i)st$ Ohethe) o) not the CTA an3 the CA ;)a5el1 e))e3 in allo8in; the a34ission of the pieces of e5i3ence 8hich 8e)e not fo)4all1 offe)e3 b1 the 7IRH an3 Secon3$ Ohethe) o) not the CA e))e3 in affi)4in; the CTA in the latte)Cs 3ete)4ination of the 3eficienc1 estate tax i4pose3 a;ainst the Estate$ The Cou)tPs Rulin; The Petition is i4p)esse3 8ith 4e)it$ Un3e) Section - of RA %%,9+ the CTA is cate;o)icall1 3esc)ibe3 as a cou)t of )eco)3$ As cases file3 befo)e it a)e liti;ate3 3e no5o+ pa)t1Eliti;ants shall p)o5e e5e)1 4inute aspect of thei) cases$ In3ubitabl1+ no e5i3entia)1 5alue can be ;i5en the pieces of e5i3ence sub4itte3 b1 the 7IR+ as the )ules on 3ocu4enta)1 e5i3ence )eAui)e that these 3ocu4ents 4ust be fo)4all1 offe)e3 befo)e the CTA$*& Pe)tinent is Section *&+ Rule %*, of the Re5ise3 Rules on E5i3ence 8hich )ea3s6 SEC$ *&$ Offe) of e5i3ence$ Q The cou)t shall consi3e) no e5i3ence 8hich has not been fo)4all1 offe)e3$ The pu)pose fo) 8hich the e5i3ence is offe)e3 4ust be specifie3$

The CTA an3 the CA )el1 solel1 on the case of !3a$ 3e OLate+ 8hich )eite)ate3 this Cou)tCs p)e5ious )ulin;s in People 5$ "apatEa*9 an3 People 5$ Mate*? on the a34ission an3 consi3e)ation of exhibits 8hich 8e)e not fo)4all1 offe)e3 3u)in; the t)ial$ Althou;h in a lon; line of cases 4an1 of 8hich 8e)e 3eci3e3 afte) !3a$ 3e OLate+ 8e hel3 that cou)ts cannot consi3e) e5i3ence 8hich has not been fo)4all1 offe)e3+*< ne5e)theless+ petitione) cannot 5ali3l1 assu4e that the 3oct)ine lai3 3o8n in !3a$ 3e OLate has al)ea31 been aban3one3$ Recentl1+ in Ra4os 5$ i=on+*- this Cou)t+ appl1in; the sai3 3oct)ine+ )ule3 that the t)ial cou)t Bu3;e the)ein co44itte3 no e))o) 8hen he a34itte3 an3 consi3e)e3 the )espon3entsC exhibits in the )esolution of the case+ not8ithstan3in; the fact that the sa4e 8e)e not fo)4all1 offe)e3$ /i:e8ise+ in .a) East 7an: G T)ust Co4pan1 5$ Co44issione) of Inte)nal Re5enue+*( the Cou)t 4a3e )efe)ence to sai3 3oct)ine in )esol5in; the issues the)ein$ In3ubitabl1+ the 3oct)ine lai3 3o8n in !3a$ e OLate still subsists in this Bu)is3iction$ In !3a$ 3e OLate+ 8e hel3 that6 .)o4 the fo)e;oin; p)o5ision+ it is clea) that fo) e5i3ence to be consi3e)e3+ the sa4e 4ust be fo)4all1 offe)e3$ Co)olla)il1+ the 4e)e fact that a pa)ticula) 3ocu4ent is i3entifie3 an3 4a):e3 as an exhibit 3oes not 4ean that it has al)ea31 been offe)e3 as pa)t of the e5i3ence of a pa)t1$ In Inte)pacific T)ansit+ Inc$ 5$ A5iles >%-? SCRA *-9@+ 8e ha3 the occasion to 4a:e a 3istinction bet8een i3entification of 3ocu4enta)1 e5i3ence an3 its fo)4al offe) as an exhibit$ Oe sai3 that the fi)st is 3one in the cou)se of the t)ial an3 is acco4panie3 b1 the 4a):in; of the e5i3ence as an exhibit 8hile the secon3 is 3one onl1 8hen the pa)t1 )ests its case an3 not befo)e$ A pa)t1+ the)efo)e+ 4a1 opt to fo)4all1 offe) his e5i3ence if he belie5es that it 8ill a35ance his cause o) not to 3o so at all$ In the e5ent he chooses to 3o the latte)+

the t)ial cou)t is not autho)i=e3 b1 the Rules to consi3e) the sa4e$ Ho8e5e)+ in People 5$ "apatEa >%<( SCRA &'*@ citin; People 5$ Mate >%'* SCRA &-&@+ 8e )elaxe3 the fo)e;oin; )ule an3 allo8e3 e5i3ence not fo)4all1 offe)e3 to be a34itte3 an3 consi3e)e3 b1 the t)ial cou)t p)o5i3e3 the follo8in; )eAui)e4ents a)e p)esent+ 5i=$6 fi)st+ the sa4e 4ust ha5e been 3ul1 i3entifie3 b1 testi4on1 3ul1 )eco)3e3 an3+ secon3+ the sa4e 4ust ha5e been inco)po)ate3 in the )eco)3s of the case$&' .)o4 the fo)e;oin; 3ecla)ation+ ho8e5e)+ it is clea) that !3a$ 3e OLate is 4e)el1 an exception to the ;ene)al )ule$ 7ein; an exception+ it 4a1 be applie3 onl1 8hen the)e is st)ict co4pliance 8ith the )eAuisites 4entione3 the)einH othe)8ise+ the ;ene)al )ule in Section *& of Rule %*, of the Rules of Cou)t shoul3 p)e5ail$ In this case+ 8e fin3 that these )eAui)e4ents ha5e not been satisfie3$ The assaile3 pieces of e5i3ence 8e)e p)esente3 an3 4a):e3 3u)in; the t)ial pa)ticula)l1 8hen Albe)to too: the 8itness stan3$ Albe)to i3entifie3 these pieces of e5i3ence in his 3i)ect testi4on1$&% He 8as also subBecte3 to c)ossEexa4ination an3 )eEc)oss exa4ination b1 petitione)$&, 7ut Albe)toPs account an3 the exchan;es bet8een Albe)to an3 petitione) 3i3 not sufficientl1 3esc)ibe the contents of the sai3 pieces of e5i3ence p)esente3 b1 the 7IR$ In fact+ petitione) sou;ht that the lea3 exa4ine)+ one Ma$ Anabella A$ Abuloc+ be su44one3 to testif1+ inas4uch as Albe)to 8as inco4petent to ans8e) Auestions )elati5e to the 8o):in; pape)s$&* The lea3 exa4ine) ne5e) testifie3$ Mo)eo5e)+ 8hile Albe)toCs testi4on1 i3entif1in; the 7IRCs e5i3ence 8as 3ul1 )eco)3e3+ the 7IR

3ocu4ents the4sel5es 8e)e not inco)po)ate3 in the )eco)3s of the case$ A co44on fact th)ea3s th)ou;h !3a$ 3e OLate an3 Ra4os that 3oes not exist at all in the instant case$ In the afo)e4entione3 cases+ the exhibits 8e)e 4a):e3 at the p)eEt)ial p)ocee3in;s to 8a))ant the p)onounce4ent that the sa4e 8e)e 3ul1 inco)po)ate3 in the )eco)3s of the case$ Thus+ 8e hel3 in Ra4os6 In this case+ 8e fin3 an3 so )ule that these )eAui)e4ents ha5e been satisfie3$ The exhibits in Auestion 8e)e p)esente3 an3 4a):e3 3u)in; the p)eEt)ial of the case thus+ the1 ha5e been inco)po)ate3 into the )eco)3s$ .u)the)+ Elpi3io hi4self explaine3 the contents of these exhibits 8hen he 8as inte))o;ate3 b1 )espon3entsC counsel$$$ xxxx 7ut 8hat fu)the) 3efeats petitione)Cs cause on this issue is that )espon3entsC exhibits 8e)e 4a):e3 an3 a34itte3 3u)in; the p)eE t)ial sta;e as sho8n b1 the P)eET)ial O)3e) Auote3 ea)lie)$&& Ohile the CTA is not ;o5e)ne3 st)ictl1 b1 technical )ules of e5i3ence+&9 as )ules of p)oce3u)e a)e not en3s in the4sel5es an3 a)e p)i4a)il1 inten3e3 as tools in the a34inist)ation of Bustice+ the p)esentation of the 7IRCs e5i3ence is not a 4e)e p)oce3u)al technicalit1 8hich 4a1 be 3is)e;a)3e3 consi3e)in; that it is the onl1 4eans b1 8hich the CTA 4a1 asce)tain an3 5e)if1 the t)uth of 7IRCs clai4s a;ainst the Estate$&? The 7IRCs failu)e to fo)4all1 offe) these pieces of e5i3ence+ 3espite CTACs 3i)ecti5es+ is fatal to its cause$&< Such failu)e is a;;)a5ate3 b1 the fact that not e5en a sin;le )eason 8as

a35ance3 b1 the 7IR to Bustif1 such fatal o4ission$ This+ 8e ta:e a;ainst the 7IR$ Pe) the )eco)3s of this case+ the 7IR 8as 3i)ecte3 to p)esent its e5i3ence&- in the hea)in; of .eb)ua)1 ,%+ %((?+ but 7IRCs counsel faile3 to appea)$&( The CTA 3enie3 petitione)Cs 4otion to consi3e) 7IRCs p)esentation of e5i3ence as 8ai5e3+ 8ith a 8a)nin; to 7IR that such p)esentation 8oul3 be consi3e)e3 8ai5e3 if 7IRCs e5i3ence 8oul3 not be p)esente3 at the next hea)in;$ A;ain+ in the hea)in; of Ma)ch ,'+ %((?+ 7IRCs counsel faile3 to appea)$9' Thus+ in its Resolution9% 3ate3 Ma)ch ,%+ %((?+ the CTA consi3e)e3 the 7IR to ha5e 8ai5e3 p)esentation of its e5i3ence$ In the sa4e Resolution+ the pa)ties 8e)e 3i)ecte3 to file thei) )especti5e 4e4o)an3u4$ Petitione) co4plie3 but 7IR faile3 to 3o so$9, In all of these p)ocee3in;s+ 7IR 8as 3ul1 notifie3$ Hence+ in this case+ 8e a)e const)aine3 to appl1 ou) )ulin; in Hei)s of Pe3)o Pasa; 5$ Pa)ocha69* A fo)4al offe) is necessa)1 because Bu3;es a)e 4an3ate3 to )est thei) fin3in;s of facts an3 thei) Bu3;4ent onl1 an3 st)ictl1 upon the e5i3ence offe)e3 b1 the pa)ties at the t)ial$ Its function is to enable the t)ial Bu3;e to :no8 the pu)pose o) pu)poses fo) 8hich the p)oponent is p)esentin; the e5i3ence$ On the othe) han3+ this allo8s opposin; pa)ties to exa4ine the e5i3ence an3 obBect to its a34issibilit1$ Mo)eo5e)+ it facilitates )e5ie8 as the appellate cou)t 8ill not be )eAui)e3 to )e5ie8 3ocu4ents not p)e5iousl1 sc)utini=e3 b1 the t)ial cou)t$ St)ict a3he)ence to the sai3 )ule is not a t)i5ial 4atte)$ The Cou)t in Constantino 5$ Cou)t of Appeals )ule3 that the fo)4al offe) of oneCs e5i3ence is 3ee4e3 8ai5e3 afte) failin; to sub4it it 8ithin a consi3e)able pe)io3 of ti4e$ It explaine3 that the cou)t cannot a34it an offe) of e5i3ence 4a3e afte) a lapse of

th)ee (*) 4onths because to 3o so 8oul3 Icon3one an inexcusable laxit1 if not nonEco4pliance 8ith a cou)t o)3e) 8hich+ in effect+ 8oul3 encou)a;e nee3less 3ela1s an3 3e)ail the spee31 a34inist)ation of Bustice$I Appl1in; the afo)e4entione3 p)inciple in this case+ 8e fin3 that the t)ial cou)t ha3 )easonable ;)oun3 to consi3e) that petitione)s ha3 8ai5e3 thei) )i;ht to 4a:e a fo)4al offe) of 3ocu4enta)1 o) obBect e5i3ence$ espite se5e)al extensions of ti4e to 4a:e thei) fo)4al offe)+ petitione)s faile3 to co4pl1 8ith thei) co44it4ent an3 allo8e3 al4ost fi5e 4onths to lapse befo)e finall1 sub4ittin; it$ Petitione)sC failu)e to co4pl1 8ith the )ule on a34issibilit1 of e5i3ence is anathe4a to the efficient+ effecti5e+ an3 expe3itious 3ispensation of Bustice$ Ha5in; 3ispose3 of the fo)e;oin; p)oce3u)al issue+ 8e p)ocee3 to 3iscuss the 4e)its of the case$ O)3ina)il1+ the CTACs fin3in;s+ as affi)4e3 b1 the CA+ a)e entitle3 to the hi;hest )espect an3 8ill not be 3istu)be3 on appeal unless it is sho8n that the lo8e) cou)ts co44itte3 ;)oss e))o) in the app)eciation of facts$9& In this case+ ho8e5e)+ 8e fin3 the 3ecision of the CA affi)4in; that of the CTA tainte3 8ith palpable e))o)$ It is a34itte3 that the clai4s of the EstateCs afo)e4entione3 c)e3ito)s ha5e been con3one3$ As a 4o3e of extin;uishin; an obli;ation+99 con3onation o) )e4ission of 3ebt9? is 3efine3 as6 an act of libe)alit1+ b1 5i)tue of 8hich+ 8ithout )ecei5in; an1 eAui5alent+ the c)e3ito) )enounces the enfo)ce4ent of the obli;ation+ 8hich is extin;uishe3 in its enti)et1 o) in that pa)t o) aspect of the sa4e to 8hich the )e4ission )efe)s$ It is an

essential cha)acte)istic of )e4ission that it be ;)atuitous+ that the)e is no eAui5alent )ecei5e3 fo) the benefit ;i5enH once such eAui5alent exists+ the natu)e of the act chan;es$ It 4a1 beco4e 3ation in pa14ent 8hen the c)e3ito) )ecei5es a thin; 3iffe)ent f)o4 that stipulate3H o) no5ation+ 8hen the obBect o) p)incipal con3itions of the obli;ation shoul3 be chan;e3H o) co4p)o4ise+ 8hen the 4atte) )enounce3 is in liti;ation o) 3ispute an3 in exchan;e of so4e concession 8hich the c)e3ito) )ecei5es$9< !e)il1+ the secon3 issue in this case in5ol5es the const)uction of Section <(9- of the "ational Inte)nal Re5enue Co3e9( (Tax Co3e) 8hich p)o5i3es fo) the allo8able 3e3uctions f)o4 the ;)oss estate of the 3ece3ent$ The specific Auestion is 8hethe) the actual clai4s of the afo)e4entione3 c)e3ito)s 4a1 be full1 allo8e3 as 3e3uctions f)o4 the ;)oss estate of 2ose 3espite the fact that the sai3 clai4s 8e)e )e3uce3 o) con3one3 th)ou;h co4p)o4ise a;)ee4ents ente)e3 into b1 the Estate 8ith its c)e3ito)s$ IClai4s a;ainst the estate+I as allo8able 3e3uctions f)o4 the ;)oss estate un3e) Section <( of the Tax Co3e+ a)e basicall1 a )ep)o3uction of the 3e3uctions allo8e3 un3e) Section -( (a) (%) (C) an3 (E) of Co44on8ealth Act "o$ &?? (CA &??)+ othe)8ise :no8n as the "ational Inte)nal Re5enue Co3e of %(*(+ an3 8hich 8as the fi)st co3ification of Philippine tax la8s$ Philippine tax la8s 8e)e+ in tu)n+ base3 on the fe3e)al tax la8s of the Unite3 States$ Thus+ pu)suant to establishe3 )ules of statuto)1 const)uction+ the 3ecisions of A4e)ican cou)ts const)uin; the fe3e)al tax co3e a)e entitle3 to ;)eat 8ei;ht in the inte)p)etation of ou) o8n tax la8s$?'

It is note8o)th1 that e5en in the Unite3 States+ the)e is so4e 3ispute as to 8hethe) the 3e3uctible a4ount fo) a clai4 a;ainst the estate is fixe3 as of the 3ece3entCs 3eath 8hich is the ;ene)al )ule+ o) the sa4e shoul3 be a3Buste3 to )eflect postE 3eath 3e5elop4ents+ such as 8he)e a settle4ent bet8een the pa)ties )esults in the )e3uction of the a4ount actuall1 pai3$?% On one han3+ the U$S$ cou)t )ule3 that the app)op)iate 3e3uction is the I5alueI that the clai4 ha3 at the 3ate of the 3ece3entCs 3eath$?, Also+ as hel3 in P)opst)a 5$ U$S$+ ?* 8he)e a lien clai4e3 a;ainst the estate 8as ce)tain an3 enfo)ceable on the 3ate of the 3ece3entCs 3eath+ the fact that the clai4ant subseAuentl1 settle3 fo) lesse) a4ount 3i3 not p)eclu3e the estate f)o4 3e3uctin; the enti)e a4ount of the clai4 fo) estate tax pu)poses$ These p)onounce4ents essentiall1 confi)4 the ;ene)al p)inciple that postE3eath 3e5elop4ents a)e not 4ate)ial in 3ete)4inin; the a4ount of the 3e3uction$ On the othe) han3+ the Inte)nal Re5enue Se)5ice (Se)5ice) opines that postE3eath settle4ent shoul3 be ta:en into consi3e)ation an3 the clai4 shoul3 be allo8e3 as a 3e3uction onl1 to the extent of the a4ount actuall1 pai3$?& Reco;ni=in; the 3ispute+ the Se)5ice )elease3 P)opose3 Re;ulations in ,''< 4an3atin; that the 3e3uction 8oul3 be li4ite3 to the actual a4ount pai3$?9 In announcin; its a;)ee4ent 8ith P)opst)a+?? the U$S$ 9th Ci)cuit Cou)t of Appeals hel36 Oe a)e pe)sua3e3 that the "inth Ci)cuitCs 3ecision$$$in P)opst)a co))ectl1 appl1 the Ithaca T)ust 3ateEofE3eath 5aluation p)inciple to enfo)ceable clai4s a;ainst the estate$ As 8e inte)p)et Ithaca T)ust+ 8hen the Sup)e4e Cou)t announce3 the 3ateEofE3eath 5aluation p)inciple+ it 8as 4a:in; a Bu3;4ent

about the natu)e of the fe3e)al estate tax specificall1+ that it is a tax i4pose3 on the act of t)ansfe))in; p)ope)t1 b1 8ill o) intestac1 an3+ because the act on 8hich the tax is le5ie3 occu)s at a 3isc)ete ti4e+ i$e$+ the instance of 3eath+ the net 5alue of the p)ope)t1 t)ansfe))e3 shoul3 be asce)taine3+ as nea)l1 as possible+ as of that ti4e$ This anal1sis suppo)ts b)oa3 application of the 3ateEofE3eath 5aluation )ule$?< Oe exp)ess ou) a;)ee4ent 8ith the 3ateEofE3eath 5aluation )ule+ 4a3e pu)suant to the )ulin; of the U$S$ Sup)e4e Cou)t in Ithaca T)ust Co$ 5$ Unite3 States$?- .i)st$ The)e is no la8+ no) 3o 8e 3isce)n an1 le;islati5e intent in ou) tax la8s+ 8hich 3is)e;a)3s the 3ateEofE3eath 5aluation p)inciple an3 pa)ticula)l1 p)o5i3es that postE3eath 3e5elop4ents 4ust be consi3e)e3 in 3ete)4inin; the net 5alue of the estate$ It bea)s e4phasis that tax bu)3ens a)e not to be i4pose3+ no) p)esu4e3 to be i4pose3+ be1on3 8hat the statute exp)essl1 an3 clea)l1 i4po)ts+ tax statutes bein; const)ue3 st)ictissi4i Bu)is a;ainst the ;o5e)n4ent$?( An1 3oubt on 8hethe) a pe)son+ a)ticle o) acti5it1 is taxable is ;ene)all1 )esol5e3 a;ainst taxation$<' Secon3$ Such const)uction fin3s )ele5ance an3 consistenc1 in ou) Rules on Special P)ocee3in;s 8he)ein the te)4 Iclai4sI )eAui)e3 to be p)esente3 a;ainst a 3ece3entCs estate is ;ene)all1 const)ue3 to 4ean 3ebts o) 3e4an3s of a pecunia)1 natu)e 8hich coul3 ha5e been enfo)ce3 a;ainst the 3ecease3 in his lifeti4e+ o) liabilit1 cont)acte3 b1 the 3ecease3 befo)e his 3eath$<% The)efo)e+ the clai4s existin; at the ti4e of 3eath a)e si;nificant to+ an3 shoul3 be 4a3e the basis of+ the 3ete)4ination of allo8able 3e3uctions$ OHERE.ORE+ the instant Petition is #RA"TE $ Acco)3in;l1+ the assaile3 ecision 3ate3 Ap)il *'+ %((( an3 the Resolution 3ate3 "o5e4be) *+ %((( of the Cou)t of

Appeals in CAE#$R$ S$P$ "o$ &?(&< a)e RE!ERSE an3 SET ASI E$ The 7u)eau of Inte)nal Re5enueCs 3eficienc1 estate tax assess4ent a;ainst the Estate of 2ose P$ .e)nan3e= is he)eb1 "U//I.IE $ "o costs$ SO OR ERE $

Republic of the Philippines SUPREME COURT Manila SECO" I!ISIO" Septe4be) ,'+ ,'%'

#$R$ "o$ %-<'9?

2ARA7I"I #$ E/ ROSARIO+ Petitione)+ 5s$ ASU"CIO" #$ .ERRER+ substitute3 b1 he) hei)s+ !ICE"TE+ PI/AR+ A"#E/ITO+ .E/IX7ERTO+ 2R$+ all su)na4e3 #$ .ERRER+ an3 MI#UE/A .ERRER A/TE0A+ Respon3ents$ ECISIO" A7A + 2$6 This case pe)tains to a ;ift+ othe)8ise 3eno4inate3 as a 3onation 4o)tis causa+ 8hich in )ealit1 is a 3onation inte) 5i5os 4a3e effecti5e upon its execution b1 the 3ono)s an3 acceptance the)eof b1 the 3onees+ an3 i44e3iatel1 t)ans4ittin; o8ne)ship of the 3onate3 p)ope)t1 to the latte)+ thus p)eclu3in; a subseAuent assi;n4ent the)eof b1 one of the 3ono)s$

The .acts an3 the Case On Au;ust ,<+ %(?- the spouses /eopol3o an3 #ua3alupe #on=ales execute3 a 3ocu4ent entitle3 I onation Mo)tis CausaI% in fa5o) of thei) t8o chil3)en+ Asuncion an3 E4iliano+ an3 thei) ;)an33au;hte)+ 2a)abini (3au;hte) of thei) p)e3ecease3 son+ 0oilo) co5e)in; the spousesP %,?EsAua)e 4ete) lot an3 the house on it in Pan3acan+ Manila, in eAual sha)es$ The 3ee3 of 3onation )ea3s6 It is ou) 8ill that this onation Mo)tis Causa shall be i))e5ocable an3 shall be )especte3 b1 the su)5i5in; spouse$ It is ou) 8ill that 2a)abini #on=alesE3el Rosa)io an3 E4iliano #on=ales 8ill continue to occup1 the po)tions no8 occupie3 b1 the4$ It is fu)the) ou) 8ill that this O"ATIO" MORTIS CAUSA shall not in an1 8a1 affect an1 othe) 3ist)ibution of othe) p)ope)ties belon;in; to an1 of us 3ono)s 8hethe) testate o) intestate an3 8he)e e5e) situate3$ It is ou) fu)the) 8ill that an1 one su)5i5in; spouse )ese)5es the )i;ht+ o8ne)ship+ possession an3 a34inist)ation of this p)ope)t1 he)ein 3onate3 an3 accepte3 an3 this isposition an3 onation shall be ope)ati5e an3 effecti5e upon the 3eath of the O"ORS$* Althou;h 3eno4inate3 as a 3onation 4o)tis causa+ 8hich in la8 is the eAui5alent of a 8ill+ the 3ee3 ha3 no attestation clause an3 8as 8itnesse3 b1 onl1 t8o pe)sons$ The na4e3

3onees+ ho8e5e)+ si;nifie3 thei) acceptance of the 3onation on the face of the 3ocu4ent$ #ua3alupe+ the 3ono) 8ife+ 3ie3 in Septe4be) %(?-$ A fe8 4onths late) o) on ece4be) %(+ %(?-+ /eopol3o+ the 3ono) husban3+ execute3 a 3ee3 of assi;n4ent of his )i;hts an3 inte)ests in subBect p)ope)t1 to thei) 3au;hte) Asuncion$ /eopol3o 3ie3 in 2une %(<,$ In %((- 2a)abini file3 a Ipetition fo) the p)obate of the Au;ust ,<+ %(?- 3ee3 of 3onation 4o)tis causaI befo)e the Re;ional T)ial Cou)t (RTC) of Manila in Sp$ P)oc$ (-E('9-($& Asuncion oppose3 the petition+ in5o:in; his fathe) /eopol3oPs assi;n4ent of his )i;hts an3 inte)ests in the p)ope)t1 to he)$ Afte) t)ial+ the RTC )en3e)e3 a 3ecision 3ate3 2une ,'+ ,''*+9 fin3in; that the 3onation 8as in fact one 4a3e inte) 5i5os+ the 3ono)sP intention bein; to t)ansfe) title o5e) the p)ope)t1 to the 3onees 3u)in; the 3ono)sP lifeti4e+ ;i5en its i))e5ocabilit1$ ConseAuentl1+ sai3 the RTC+ /eopol3oPs subseAuent assi;n4ent of his )i;hts an3 inte)est in the p)ope)t1 8as 5oi3 since he ha3 nothin; to assi;n$ The RTC thus 3i)ecte3 the )e;ist)ation of the p)ope)t1 in the na4e of the 3onees in eAual sha)es$? On AsuncionPs appeal to the Cou)t of Appeals (CA)+ the latte) )en3e)e3 a 3ecision on ece4be) ,*+ ,''-+< )e5e)sin; that of the RTC$ The CA hel3 that 2a)abini cannot+ th)ou;h he) petition fo) the p)obate of the 3ee3 of 3onation 4o)tis causa+ collate)all1 attac: /eopol3oPs 3ee3 of assi;n4ent in AsuncionPs fa5o)$ The CA fu)the) hel3 that+ since no p)ocee3in; exists fo) the allo8ance of 8hat 2a)abini clai4e3 8as actuall1 a 3onation inte) 5i5os+ the RTC e))e3 in 3eci3in;

the case the 8a1 it 3i3$ .inall1+ the CA hel3 that the 3onation+ bein; one ;i5en 4o)tis causa+ 3i3 not co4pl1 8ith the )eAui)e4ents of a nota)ial 8ill+- )en3e)in; the sa4e 5oi3$ .ollo8in; the CAPs 3enial of 2a)abiniPs 4otion fo) )econsi3e)ation+( she file3 the p)esent petition 8ith this Cou)t$ Issue P)esente3 The :e1 issue in this case is 8hethe) o) not the spouses /eopol3o an3 #ua3alupePs 3onation to Asuncion+ E4iliano+ an3 2a)abini 8as a 3onation 4o)tis causa+ as it 8as 3eno4inate3+ o) in fact a 3onation inte) 5i5os$ The Cou)tPs Rulin; That the 3ocu4ent in Auestion in this case 8as captione3 I onation Mo)tis CausaI is not cont)ollin;$ This Cou)t has hel3 that+ if a 3onation b1 its te)4s is inte) 5i5os+ this cha)acte) is not alte)e3 b1 the fact that the 3ono) st1les it 4o)tis causa$%' In Aust)iaEMa;at 5$ Cou)t of Appeals+%% the Cou)t hel3 that Ii))e5ocabilit1I is a Aualit1 absolutel1 inco4patible 8ith the i3ea of con5e1ances 4o)tis causa+ 8he)e I)e5ocabilit1I is p)ecisel1 the essence of the act$ A 3onation 4o)tis causa has the follo8in; cha)acte)istics6 %$ It con5e1s no title o) o8ne)ship to the t)ansfe)ee befo)e the 3eath of the t)ansfe)o)H o)+ 8hat a4ounts to the sa4e thin;+ that the t)ansfe)o) shoul3 )etain the o8ne)ship (full o) na:e3) an3 cont)ol of the p)ope)t1 8hile ali5eH ,$ That befo)e his 3eath+ the t)ansfe) shoul3 be )e5ocable b1 the t)ansfe)o) at 8ill+ a3 nutu4H but )e5ocabilit1 4a1 be p)o5i3e3

fo) in3i)ectl1 b1 4eans of a )ese)5e3 po8e) in the 3ono) to 3ispose of the p)ope)ties con5e1e3H an3 *$ That the t)ansfe) shoul3 be 5oi3 if the t)ansfe)o) shoul3 su)5i5e the t)ansfe)ee$%, (Un3e)sco)in; supplie3) The Cou)t thus sai3 in Aust)iaEMa;at that the exp)ess Ii))e5ocabilit1I of the 3onation is the I3istincti5e stan3a)3 that i3entifies the 3ocu4ent as a 3onation inte) 5i5os$I He)e+ the 3ono)s plainl1 sai3 that it is Iou) 8ill that this onation Mo)tis Causa shall be i))e5ocable an3 shall be )especte3 b1 the su)5i5in; spouse$I The intent to 4a:e the 3onation i))e5ocable beco4es e5en clea)e) b1 the p)o5iso that a su)5i5in; 3ono) shall )espect the i))e5ocabilit1 of the 3onation$ ConseAuentl1+ the 3onation 8as in )ealit1 a 3onation inte) 5i5os$ The 3ono)s in this case of cou)se )ese)5e3 the I)i;ht+ o8ne)ship+ possession+ an3 a34inist)ation of the p)ope)t1I an3 4a3e the 3onation ope)ati5e upon thei) 3eath$ 7ut this Cou)t has consistentl1 hel3 that such )ese)5ation ()e33en3u4) in the context of an i))e5ocable 3onation si4pl1 4eans that the 3ono)s pa)te3 8ith thei) na:e3 title+ 4aintainin; onl1 beneficial o8ne)ship of the 3onate3 p)ope)t1 8hile the1 li5e3$%* "otabl1+ the th)ee 3onees si;ne3 thei) acceptance of the 3onation+ 8hich acceptance the 3ee3 )eAui)e3$%& This Cou)t has hel3 that an acceptance clause in3icates that the 3onation is inte) 5i5os+ since acceptance is a )eAui)e4ent onl1 fo) such :in3 of 3onations$%a8phi% onations 4o)tis causa+ bein; in the fo)4 of a 8ill+ nee3 not be accepte3 b1 the 3onee 3u)in; the 3ono)Ps lifeti4e$%9

.inall1+ as 2ustice 2$ 7$ /$ Re1es sai3 in Pui; 5$ PeLaflo)i3a+%? in case of 3oubt+ the con5e1ance shoul3 be 3ee4e3 a 3onation inte) 5i5os )athe) than 4o)tis causa+ in o)3e) to a5oi3 unce)taint1 as to the o8ne)ship of the p)ope)t1 subBect of the 3ee3$ Since the 3onation in this case 8as one 4a3e inte) 5i5os+ it 8as i44e3iatel1 ope)ati5e an3 final$ The )eason is that such :in3 of 3onation is 3ee4e3 pe)fecte3 f)o4 the 4o4ent the 3ono) lea)ne3 of the 3oneePs acceptance of the 3onation$ The acceptance 4a:es the 3onee the absolute o8ne) of the p)ope)t1 3onate3$%< #i5en that the 3onation in this case 8as i))e5ocable o) one ;i5en inte) 5i5os+ /eopol3oPs subseAuent assi;n4ent of his )i;hts an3 inte)ests in the p)ope)t1 to Asuncion shoul3 be )e;a)3e3 as 5oi3 fo)+ b1 then+ he ha3 no 4o)e )i;hts to assi;n$ He coul3 not ;i5e 8hat he no lon;e) ha3$ "e4o 3at Auo3 non habet$%The t)ial cou)t cannot be faulte3 fo) passin; upon+ in a petition fo) p)obate of 8hat 8as initiall1 suppose3 to be a 3onation 4o)tis causa+ the 5ali3it1 of the 3ocu4ent as a 3onation inte) 5i5os an3 the nullit1 of one of the 3ono)Ps subseAuent assi;n4ent of his )i;hts an3 inte)ests in the p)ope)t1$ The Cou)t has hel3 befo)e that the )ule on p)obate is not inflexible an3 absolute$%( Mo)eo5e)+ in opposin; the petition fo) p)obate an3 in puttin; the 5ali3it1 of the 3ee3 of assi;n4ent sAua)el1 in issue+ Asuncion o) those 8ho substitute3 he) 4a1 not no8 clai4 that the t)ial cou)t i4p)ope)l1 allo8e3 a collate)al attac: on such assi;n4ent$

OHERE.ORE+ the Cou)t #RA"TS the petition+ SETS ASI E the assaile3 ece4be) ,*+ ,''- ecision an3 Ma)ch ?+ ,''( Resolution of the Cou)t of Appeals in CAE#$R$ C! -'9&(+ an3 REI"STATES in toto the 2une ,'+ ,''* ecision of the Re;ional T)ial Cou)t of Manila+ 7)anch %(+ in Sp$ P)oc$ (-E ('9-($ SO OR ERE $ Republic of the Philippines SUPREME COURT Manila THIR I!ISIO" Ma)ch ,,+ ,'''

#$R$ "o$ %,*,'?

COMMISSIO"ER O. I"TER"A/ RE!E"UE+ petitione)+ 5s$ COURT O. APPEA/S+ COURT O. TAX APPEA/S an3 2OSE.I"A P$ PA2O"AR+ as A34inist)at)ix of the Estate of Pe3)o P$ PaBona)+ )espon3ents$ RESO/UTIO" #O"0A#AERERES+ 2$6 Assaile3 in this petition fo) )e5ie8 on ce)tio)a)i is the ece4be) ,%+ %((9 ecision% of the Cou)t of Appeals, in CAE #$R$ Sp$ "o$ *&*(( affi)4in; the 2une <+ %((& Resolution of the Cou)t of Tax Appeals in CTA Case "o$ &*-% ;)antin; p)i5ate )espon3ent 2osefina P$ PaBona)+ as a34inist)at)ix of the

estate of Pe3)o P$ PaBona)+ a tax )efun3 in the a4ount of P<?+9',$&,+ )ep)esentin; e))oneousl1 pai3 estate taxes fo) the 1ea) %(--$ Pe3)o PaBona)+ a 4e4be) of the Philippine Scout+ 7ataan Contin;ent+ 3u)in; the secon3 Oo)l3 Oa)+ 8as a pa)t of the infa4ous eath Ma)ch b1 )eason of 8hich he suffe)e3 shoc: an3 beca4e insane$ His siste) 2osefina PaBona) beca4e the ;ua)3ian o5e) his pe)son+ 8hile his p)ope)t1 8as place3 un3e) the ;ua)3ianship of the Philippine "ational 7an: (P"7) b1 the Re;ional T)ial Cou)t of u4a;uete Cit1+ 7)anch *%+ in Special P)ocee3in;s "o$ %,9&$ He 3ie3 on 2anua)1 %'+ %(--$ He 8as su)5i5e3 b1 his t8o b)othe)s Isi3)o P$ PaBona) an3 #)e;o)io PaBona)+ his siste) 2osefina PaBona)+ nephe8s Conco)3io 2an3o; an3 Ma)io 2an3o; an3 niece Conchita 2an3o;$ On Ma1 %%+ %(--+ the P"7 file3 an accountin; of the 3ece3entCs p)ope)t1 un3e) ;ua)3ianship 5alue3 at P*+'*<+?<,$'( in Special P)ocee3in;s "o$ %,9&$ Ho8e5e)+ the P"7 3i3 not file an estate tax )etu)n+ instea3 it a35ise3 Pe3)o PaBona)Cs hei)s to execute an ext)aBu3icial settle4ent an3 to pa1 the taxes on his estate$ On Ap)il 9+ %(--+ pu)suant to the assess4ent b1 the 7u)eau of Inte)nal Re5enue (7IR)+ the estate of Pe3)o PaBona) pai3 taxes in the a4ount of P,+99<$ On Ma1 %(+ %(--+ 2osefina PaBona) file3 a petition 8ith the Re;ional T)ial Cou)t of u4a;uete Cit1 fo) the issuance in he) fa5o) of lette)s of a34inist)ation of the estate of he) b)othe)$ The case 8as 3oc:ete3 as Special P)ocee3in;s "o$ ,*(($ On 2ul1 %-+ %(--+ the t)ial cou)t appointe3 2osefina PaBona) as the )e;ula) a34inist)at)ix of Pe3)o PaBona)Cs estate$

On ece4be) %(+ %(--+ pu)suant to a secon3 assess4ent b1 the 7IR fo) 3eficienc1 estate tax+ the estate of Pe3)o PaBona) pai3 estate tax in the a4ount of P%+9,<+<('$(-$ 2osefina PaBona)+ in he) capacit1 as a34inist)at)ix an3 hei) of Pe3)o PaBona)Cs estate+ file3 a p)otest on 2anua)1 %%+ %(-( 8ith the 7IR p)a1in; that the estate tax pa14ent in the a4ount of P%+9,<+<('$(-+ o) at least so4e po)tion of it+ be )etu)ne3 to the hei)s$ * Ho8e5e)+ on Au;ust %9+ %(-(+ 8ithout 8aitin; fo) he) p)otest to be )esol5e3 b1 the 7IR+ 2osefina PaBona) file3 a petition fo) )e5ie8 8ith the Cou)t of Tax Appeals (CTA)+ p)a1in; fo) the )efun3 of P%+9,<+<('$(-+ o) in the alte)nati5e+ P-&'+,',$'?+ as e))oneousl1 pai3 estate tax$ & The case 8as 3oc:ete3 as CTA Case "o$ &*-%$ On Ma1 ?+ %((*+ the CTA o)3e)e3 the Co44issione) of Inte)nal Re5enue to )efun3 2osefina PaBona) the a4ount of P,9,+9-9$9(+ )ep)esentin; e))oneousl1 pai3 estate tax fo) the 1ea) %(--$9 A4on; the 3e3uctions f)o4 the ;)oss estate allo8e3 b1 the CTA 8e)e the a4ounts of P?'+<9* )ep)esentin; the nota)ial fee fo) the Ext)aBu3icial Settle4ent an3 the a4ount of P9'+''' as the atto)ne1Cs fees in Special P)ocee3in;s "o$ %,9& fo) ;ua)3ianship$? On 2une %9+ %((*+ the Co44issione) of Inte)nal Re5enue file3 a 4otion fo) )econsi3e)ation< of the CTACs Ma1 ?+ %((* 3ecision asse)tin;+ a4on; othe)s+ that the nota)ial fee fo) the Ext)aBu3icial Settle4ent an3 the atto)ne1Cs fees in the ;ua)3ianship p)ocee3in;s a)e not 3e3uctible expenses$ On 2une <+ %((&+ the CTA issue3 the assaile3 Resolutiono)3e)in; the Co44issione) of Inte)nal Re5enue to )efun3 2osefina PaBona)+ as a34inist)at)ix of the estate of Pe3)o

PaBona)+ the a4ount of P<?+9',$&, )ep)esentin; e))oneousl1 pai3 estate tax fo) the 1ea) %(--$ Also+ the CTA uphel3 the 5ali3it1 of the 3e3uction of the nota)ial fee fo) the Ext)aBu3icial Settle4ent an3 the atto)ne1Cs fees in the ;ua)3ianship p)ocee3in;s$ On 2ul1 9+ %((&+ the Co44issione) of Inte)nal Re5enue file3 8ith the Cou)t of Appeals a petition fo) )e5ie8 of the CTACs Ma1 ?+ %((* ecision an3 its 2une <+ %((& Resolution+ Auestionin; the 5ali3it1 of the abo5e4entione3 3e3uctions$ On ece4be) ,%+ %((9+ the Cou)t of Appeals 3enie3 the Co44issione)Cs petition$( Hence+ the p)esent appeal b1 the Co44issione) of Inte)nal Re5enue$ The sole issue in this case in5ol5es the const)uction of section <( %' of the "ational Inte)nal Re5enue Co3e %% (Tax Co3e) 8hich p)o5i3es fo) the allo8able 3e3uctions f)o4 the ;)oss estate of the 3ece3ent$ Mo)e pa)ticula)l1+ the Auestion is 8hethe) the nota)ial fee pai3 fo) the ext)aBu3icial settle4ent in the a4ount of P?'+<9* an3 the atto)ne1Cs fees in the ;ua)3ianship p)ocee3in;s in the a4ount of P9'+''' 4a1 be allo8e3 as 3e3uctions f)o4 the ;)oss estate of 3ece3ent in o)3e) to a))i5e at the 5alue of the net estate$ Oe ans8e) this Auestion in the affi)4ati5e+ the)eb1 uphol3in; the 3ecisions of the appellate cou)ts$ In its Ma1 ?+ %((* thus6 ecision+ the Cou)t of Tax Appeals )ule3

Respon3ent 4aintains that onl1 Bu3icial expenses of the testa4enta)1 o) intestate p)ocee3in;s a)e allo8e3 as a 3e3uction to the ;)oss estate$ The a4ount of P?'+<9*$'' is Auite ext)ao)3ina)1 fo) a 4e)e nota)ial fee$ This Cou)t a3opts the 5ie8 un3e) A4e)ican Bu)isp)u3ence that expenses incu))e3 in the ext)aBu3icial settle4ent of the estate shoul3 be allo8e3 as a 3e3uction f)o4 the ;)oss estate$ IThe)e is no )eAui)e4ent of fo)4al a34inist)ation$ It is sufficient that the expense be a necessa)1 cont)ibution to8a)3 the settle4ent of the case$I > *& A4$ 2u)$ ,3+ p$ <?9H "olle3o+ 7a) Re5ie8e) in Taxation+ %'th E3$ (%((')+ p$ &-%@ xxx xxx xxx

The atto)ne1Cs fees of P9'+'''$''+ 8hich 8e)e al)ea31 incu))e3 but not 1et pai3+ )efe)s to the ;ua)3ianship p)ocee3in; file3 b1 P"7+ as ;ua)3ian o5e) the 8a)3 of Pe3)o PaBona)+ 3oc:ete3 as Special P)ocee3in; "o$ %,9& in the RTC (7)anch XXXI) of u4a;uete Cit1$ $ $ $ xxx xxx xxx

The ;ua)3ianship p)ocee3in; ha3 been te)4inate3 upon 3eli5e)1 of the )esi3ua)1 estate to the hei)s entitle3 the)eto$ The)eafte)+ P"7 8as 3ischa);e3 of an1 fu)the) )esponsibilit1$ Atto)ne1Cs fees in o)3e) to be 3e3uctible f)o4 the ;)oss estate 4ust be essential to the collection of assets+ pa14ent of 3ebts o) the 3ist)ibution of the p)ope)t1 to the pe)sons entitle3 to it$ The se)5ices fo) 8hich the fees a)e cha);e3 4ust )elate to the p)ope) settle4ent of the estate$ >*& A4$ 2u)$ ,3 <?<$@ In this case+ the ;ua)3ianship p)ocee3in; 8as necessa)1 fo) the

3ist)ibution of the p)ope)t1 of the late Pe3)o PaBona) to his )i;htful hei)s$ xxx xxx xxx

P"7 8as appointe3 as ;ua)3ian o5e) the assets of the late Pe3)o PaBona)+ 8ho+ e5en at the ti4e of his 3eath+ 8as inco4petent b1 )eason of insanit1$ The expenses incu))e3 in the ;ua)3ianship p)ocee3in; 8as but a necessa)1 expense in the settle4ent of the 3ece3entCs estate$ The)efo)e+ the atto)ne1Cs fee incu))e3 in the ;ua)3ianship p)ocee3in;s a4ountin; to P9'+'''$'' is a )easonable an3 necessa)1 business expense 3e3uctible f)o4 the ;)oss estate of the 3ece3ent$ %, Upon a 4otion fo) )econsi3e)ation file3 b1 the Co44issione) of Inte)nal Re5enue+ the Cou)t of Tax Appeals 4o3ifie3 its p)e5ious )ulin; b1 )e3ucin; the )efun3able a4ount to P<?+9',$&* since it foun3 that a 3eficienc1 inte)est shoul3 be i4pose3 an3 the co4p)o4ise penalt1 exclu3e3$ %* Ho8e5e)+ the tax cou)t uphel3 its p)e5ious )ulin; )e;a)3in; the le;alit1 of the 3e3uctions Q It is si;nificant to note that the inclusion of the estate tax la8 in the co3ification of all ou) national inte)nal )e5enue la8s 8ith the enact4ent of the "ational Inte)nal Re5enue Co3e in %(*( 8e)e copie3 f)o4 the .e3e)al /a8 of the Unite3 States$ > UMA/I+ Re5ie8e) in Taxation (%(-9)+ p$ ,-9 @ The %(<< Tax Co3e+ p)o4ul;ate3 b1 P)esi3ential ec)ee "o$ %%9-+ effecti5e 2une *+ %(<<+ )eenacte3 substantiall1 all the p)o5isions of the ol3 la8 on estate an3 ;ift taxes+ except the sections )elatin; to the 4eanin; of ;)oss estate an3 ;ift$ > Ibi3+ p$ ,-?$ @

In the Unite3 States+ >a@34inist)ati5e expenses+ executo)Cs co44issions an3 atto)ne1Cs fees a)e consi3e)e3 allo8able 3e3uctions f)o4 the #)oss Estate$ A34inist)ati5e expenses a)e li4ite3 to such expenses as a)e actuall1 an3 necessa)il1 incu))e3 in the a34inist)ation of a 3ece3entCs estate$ >PRE"TICEEHA//+ .e3e)al Taxes Estate an3 #ift Taxes (%(*?)+ p$ %,'+ 9**$@ "ecessa)1 expenses of a34inist)ation a)e such expenses as a)e entaile3 fo) the p)ese)5ation an3 p)o3ucti5it1 of the estate an3 fo) its 4ana;e4ent fo) pu)poses of liAui3ation+ pa14ent of 3ebts an3 3ist)ibution of the )esi3ue a4on; the pe)sons entitle3 the)eto$ >/i=a))a;a He)4anos 5s$ Aba3a+ &' Phil$ %,&$@ The1 4ust be incu))e3 fo) the settle4ent of the estate as a 8hole$ >*& A4$ 2u)$ ,3+ p$ <?9$@ Thus+ 8he)e the)e 8e)e no substantial co44unit1 3ebts an3 it 8as unnecessa)1 to con5e)t co44unit1 p)ope)t1 to cash+ the onl1 p)actical pu)pose of a34inist)ation bein; the pa14ent of estate taxes+ full 3e3uction 8as allo8e3 fo) atto)ne1Cs fees an3 4iscellaneous expenses cha);e3 8holl1 to 3ece3entCs estate$ >Ibi3$+ citin; Estate of Helis+ ,? T$C$ %&* (A)$@ Petitione) state3 in he) p)otest file3 8ith the 7IR that Iupon the 3eath of the 8a)3+ the P"7+ 8hich 8as still the ;ua)3ian of the estate+ (Annex I0I)+ 3i3 not file an estate tax )etu)nH ho8e5e)+ it a35ise3 the hei)s to execute an ext)aBu3icial settle4ent+ to pa1 taxes an3 to post a bon3 eAual to the 5alue of the estate+ fo) 8hich the state pai3 P9(+*&%$&' fo) the p)e4iu4s$ (See Annex IKI)$I >p$ %<+ CTA )eco)3$@ The)efo)e+ it 8oul3 appea) f)o4 the )eco)3s of the case that the onl1 p)actical pu)pose of settlin; the estate b1 4eans of an ext)aBu3icial settle4ent pu)suant to Section % of Rule <& of the Rules of Cou)t 8as fo) the pa14ent of taxes an3 the 3ist)ibution of the estate to the hei)s$ A fo)tio)i+ since ou) estate tax la8s a)e of A4e)ican o)i;in+ the inte)p)etation a3opte3 b1 A4e)ican Cou)ts has so4e

pe)suasi5e effect on the inte)p)etation of ou) o8n estate tax la8s on the subBect$ Anent the contention of )espon3ent that the atto)ne1Cs fees of P9'+'''$'' incu))e3 in the ;ua)3ianship p)ocee3in; shoul3 not be 3e3ucte3 f)o4 the #)oss Estate+ Oe consi3e) the sa4e un4e)ito)ious$ Atto)ne1sC an3 ;ua)3iansC fees incu))e3 in a t)usteeCs accountin; of a taxable inte) 5i5os t)ust att)ibutable to the usual issues in5ol5e3 in such an accountin; 8as hel3 to be p)ope) 3e3uctions because these a)e expenses incu))e3 in te)4inatin; an inte) 5i5os t)ust that 8as inclu3ible in the 3ece3entCs estate$ >P)entice Hall+ .e3e)al Taxes on Estate an3 #ift+ p$ %,'+ -?%@ Atto)ne1Cs fees a)e allo8able 3e3uctions if incu))e3 fo) the settle4ent of the estate$ It is note8o)th1 to point that P"7 8as appointe3 the ;ua)3ian o5e) the assets of the 3ecease3$ "ecessa)il1 the assets of the 3ecease3 fo)4e3 pa)t of his ;)oss estate$ Acco)3in;l1+ all expenses incu))e3 in )elation to the estate of the 3ecease3 8ill be 3e3uctible fo) estate tax pu)poses p)o5i3e3 these a)e necessa)1 an3 o)3ina)1 expenses fo) a34inist)ation of the settle4ent of the estate$ %& In uphol3in; the 2une <+ %((& Resolution of the Cou)t of Tax Appeals+ the Cou)t of Appeals hel3 that6 ,$ Althou;h the Tax Co3e specifies IBu3icial expenses of the testa4enta)1 o) intestate p)ocee3in;s+I the)e is no )eason 8h1 expenses incu))e3 in the a34inist)ation an3 settle4ent of an estate in ext)aBu3icial p)ocee3in;s shoul3 not be allo8e3$ Ho8e5e)+ 3e3uction is li4ite3 to such a34inist)ation expenses as a)e actuall1 an3 necessa)il1 incu))e3 in the collection of the assets of the estate+ pa14ent of the 3ebts+ an3 3ist)ibution of the )e4ain3e) a4on; those entitle3 the)eto$ Such expenses 4a1 inclu3e executo)Cs o) a34inist)ato)Cs fees+ atto)ne1Cs fees+ cou)t

fees an3 cha);es+ app)aise)Cs fees+ cle): hi)e+ costs of p)ese)5in; an3 3ist)ibutin; the estate an3 sto)in; o) 4aintainin; it+ b)o:e)a;e fees o) co44issions fo) sellin; o) 3isposin; of the estate+ an3 the li:e$ e3uctible atto)ne1Cs fees a)e those incu))e3 b1 the executo) o) a34inist)ato) in the settle4ent of the estate o) in 3efen3in; o) p)osecutin; clai4s a;ainst o) 3ue the estate$ (Estate an3 #ift Taxation in the Philippines+ T$ P$ Matic+ 2)$+ %(-% E3ition+ p$ %<?)$ xxx xxx xxx

It is clea) then that the ext)aBu3icial settle4ent 8as fo) the pu)pose of pa14ent of taxes an3 the 3ist)ibution of the estate to the hei)s$ The execution of the ext)aBu3icial settle4ent necessitate3 the nota)i=ation of the sa4e$ Hence the Cont)act of /e;al Se)5ices of Ma)ch ,-+ %(-- ente)e3 into bet8een )espon3ent 2osefina PaBona) an3 counsel 8as p)esente3 in e5i3ence fo) the pu)pose of sho8in; that the a4ount of P?'+<9*$'' 8as fo) the nota)i=ation of the Ext)aBu3icial Settle4ent$ It follo8s then that the nota)ial fee of P?'+<9*$'' 8as incu))e3 p)i4a)il1 to settle the estate of the 3ecease3 Pe3)o PaBona)$ Sai3 a4ount shoul3 then be consi3e)e3 an a34inist)ation expenses actuall1 an3 necessa)il1 incu))e3 in the collection of the assets of the estate+ pa14ent of 3ebts an3 3ist)ibution of the )e4ain3e) a4on; those entitle3 the)eto$ Thus+ the nota)ial fee of P?'+<9* incu))e3 fo) the Ext)aBu3icial Settle4ent shoul3 be allo8e3 as a 3e3uction f)o4 the ;)oss estate$ *$ Atto)ne1Cs fees+ on the othe) han3+ in o)3e) to be 3e3uctible f)o4 the ;)oss estate 4ust be essential to the settle4ent of the estate$

The a4ount of P9'+'''$'' 8as incu))e3 as atto)ne1Cs fees in the ;ua)3ianship p)ocee3in;s in Spec$ P)oc$ "o$ %,9&$ Petitione) conten3s that sai3 a4ount a)e not expenses of the testa4enta)1 o) intestate p)ocee3in;s as the ;ua)3ianship p)ocee3in; 8as institute3 3u)in; the lifeti4e of the 3ece3ent 8hen the)e 8as 1et no estate to be settle3$ A;ain+ this contention 4ust fail$ The ;ua)3ianship p)ocee3in; in this case 8as necessa)1 fo) the 3ist)ibution of the p)ope)t1 of the 3ecease3 Pe3)o PaBona)$ As co))ectl1 pointe3 out b1 )espon3ent CTA+ the P"7 8as appointe3 ;ua)3ian o5e) the assets of the 3ecease3+ an3 that necessa)il1 the assets of the 3ecease3 fo)4e3 pa)t of his ;)oss estate$ $ $ $ xxx xxx xxx

intestate p)ocee3in;sI fo) pu)poses of 3ete)4inin; the 5alue of the net estate$ Philippine tax la8s 8e)e+ in tu)n+ base3 on the fe3e)al tax la8s of the Unite3 States$ %< In acco)3 8ith establishe3 )ules of statuto)1 const)uction+ the 3ecisions of A4e)ican cou)ts const)uin; the fe3e)al tax co3e a)e entitle3 to ;)eat 8ei;ht in the inte)p)etation of ou) o8n tax la8s$ %2u3icial expenses a)e expenses of a34inist)ation$ %( A34inist)ation expenses+ as an allo8able 3e3uction f)o4 the ;)oss estate of the 3ece3ent fo) pu)poses of a))i5in; at the 5alue of the net estate+ ha5e been const)ue3 b1 the fe3e)al an3 state cou)ts of the Unite3 States to inclu3e all expenses Iessential to the collection of the assets+ pa14ent of 3ebts o) the 3ist)ibution of the p)ope)t1 to the pe)sons entitle3 to it$I ,' In othe) 8o)3s+ the expenses 4ust be essential to the p)ope) settle4ent of the estate$ Expen3itu)es incu))e3 fo) the in3i5i3ual benefit of the hei)s+ 3e5isees o) le;atees a)e not 3e3uctible$ ,% This 3istinction has been ca))ie3 o5e) to ou) Bu)is3iction$ Thus+ in /o)en=o 5$ Posa3as ,, the Cou)t const)ue3 the ph)ase IBu3icial expenses of the testa4enta)1 o) intestate p)ocee3in;sI as not inclu3in; the co4pensation pai3 to a t)ustee of the 3ece3entCs estate 8hen it appea)e3 that such t)ustee 8as appointe3 fo) the pu)pose of 4ana;in; the 3ece3entCs )eal estate fo) the benefit of the testa4enta)1 hei)$ In anothe) case+ the Cou)t 3isallo8e3 the p)e4iu4s pai3 on the bon3 file3 b1 the a34inist)ato) as an expense of a34inist)ation since the ;i5in; of a bon3 is in the natu)e of a Aualification fo) the office+ an3 not necessa)1 in the settle4ent of the estate$ ,* "eithe) 4a1 atto)ne1Cs fees inci3ent to liti;ation incu))e3 b1 the hei)s in asse)tin; thei) )especti5e )i;hts be clai4e3 as a 3e3uction f)o4 the ;)oss estate$ ,&%S8phi%

It is clea) the)efo)e that the atto)ne1Cs fees incu))e3 in the ;ua)3ianship p)ocee3in; in Spec$ P)oc$ "o$ %,9& 8e)e essential to the 3ist)ibution of the p)ope)t1 to the pe)sons entitle3 the)eto$ Hence+ the atto)ne1Cs fees incu))e3 in the ;ua)3ianship p)ocee3in;s in the a4ount of P9'+'''$'' shoul3 be allo8e3 as a 3e3uction f)o4 the ;)oss estate of the 3ece3ent$ %9 The 3e3uctions f)o4 the ;)oss estate pe)4itte3 un3e) section <( of the Tax Co3e basicall1 )ep)o3uce3 the 3e3uctions allo8e3 un3e) Co44on8ealth Act "o$ &?? (CA &??)+ othe)8ise :no8n as the "ational Inte)nal Re5enue Co3e of %(*(+ %? an3 8hich 8as the fi)st co3ification of Philippine tax la8s$ Section -( (a) (%) (7) of CA &?? also p)o5i3e3 fo) the 3e3uction of the IBu3icial expenses of the testa4enta)1 o)

Co4in; to the case at ba)+ the nota)ial fee pai3 fo) the ext)aBu3icial settle4ent is clea)l1 a 3e3uctible expense since such settle4ent effecte3 a 3ist)ibution of Pe3)o PaBona)Cs estate to his la8ful hei)s$ Si4ila)l1+ the atto)ne1Cs fees pai3 to P"7 fo) actin; as the ;ua)3ian of Pe3)o PaBona)Cs p)ope)t1 3u)in; his lifeti4e shoul3 also be consi3e)e3 as a 3e3uctible a34inist)ation expense$ P"7 p)o5i3e3 a 3etaile3 accountin; of 3ece3entCs p)ope)t1 an3 ;a5e a35ice as to the p)ope) settle4ent of the latte)Cs estate+ acts 8hich cont)ibute3 to8a)3s the collection of 3ece3entCs assets an3 the subseAuent settle4ent of the estate$ Oe fin3 that the Cou)t of Appeals 3i3 not co44it )e5e)sible e))o) in affi)4in; the Auestione3 )esolution of the Cou)t of Tax Appeals$ OHERE.ORE+ the ece4be) ,%+ %((9 ecision of the Cou)t of Appeals is A..IRME $ The nota)ial fee fo) the ext)aBu3icial settle4ent an3 the atto)ne1Cs fees in the ;ua)3ianship p)ocee3in;s a)e allo8able 3e3uctions f)o4 the ;)oss estate of Pe3)o PaBona)$%S8phi%$nTt SO OR ERE $

R$ .E/ISA /$ ! A$ E SA" A#USTI"+ in substitution of 2OSE R$ .ERIA+ in his capacit1 as Executo) of the Estate of 2OSE SA" A#USTI"+ petitione)+ 5s$ COMMISSIO"ER O. I"TER"A/ RE!E"UE+ )espon3ent$ !ITU#++ 2$6 7efo)e the Cou)t is a petition fo) )e5ie8 see:in; to set asi3e the 3ecision of ,& .eb)ua)1 %((( of the Cou)t of Appeals+ as 8ell as its )esolution of ,< Ap)i%%(((+ in CAE#$R$ SP "o$ *&%9?+ 8hich has )e5e)se3 that of the Cou)t of Tax Appeals in CTA Case "o$&(9?+ entitle3 I2ose !$ .e)ia+ in his capacit1 as Executo) of the Estate of 2ose San A;ustin 5e)sus Co44issione) of Inte)nal Re5enue$I The tax cou)tCs 3ecision has 4o3ifie3 the 3eficienc1 assess4ent of the Co44ission of Inte)nal Re5enue fo) su)cha);e+ inte)ests an3 othe) penalties i4pose3 a;ainst the estate of the late 2ose San A;ustin$ The facts of the case na))ate3 b1 the appellate cou)t 8oul3 appea)+ b1 an3 la);e+ to be uncont)o5e)te3H thus 5i=6 IAtt1$ 2ose San A;ustin of ,('& Ka:a)on; St$+ Ol14pia+ Ma:ati 3ie3 on 2une ,<+ %((' lea5in; his 8ife )a$ .elisa /$ San A;ustin as sole hei)$ He left a holo;)aphic 8ill execute3 on Ap)il ,%+ %(-' ;i5in; all his estate to his 8i3o8+ an3 na4in; )eti)e3 2ustice 2ose R$ .e)ia as Executo) the)eof$ IP)obate p)ocee3in;s 8e)e institute3 on Au;ust ,,+ %(('+ in the Re;ional T)ial Cou)t (RTC) of Ma:ati+ 7)anch %*(+ 3oc:ete3 as Sp$ P)oc$ "o$ ME,99&$ Pu)suantl1+ notice of

Republic of the Philippines SUPREME COURT Manila THIR I!ISIO" Septe4be) %'+ ,''%

#$R$ "o$ %*-&-9

3ece3entCs 3eath 8as sent to the Co44issione) of Inte)nal Re5enue on Au;ust *'+ %(('$%S8phi%$nTt IOn Septe4be) *+ %(('+ an estate tax )etu)n )epo)tin; an estate tax 3ue of P%+?<?+&*,$'' 8as file3 on behalf of the estate+ 8ith a )eAuest fo) an extension of t8o 1ea)s fo) the pa14ent of the tax+ inas4uch as the 3ece3entCs 8i3o8 ( 3i3) not pe)sonall1 ha5e sufficient fun3s+ an3 that the pa14ent (8oul3) ha5e to co4e f)o4 the estate$ IIn his lette)Jans8e)+ 3ate3 Septe4be) &+ %(('+ 7IR eput1 Co44issione) !icto) A$ eofe)io+ 2)$+ ;)ante3 the hei)s an extension of onl1 six (?) 4onths+ subBect to the i4position of penalties an3 inte)ests un3e) Sections ,&- an3 ,&( of the "ational Inte)nal Re5enue Co3e+ as a4en3e3$ IIn the p)obate p)ocee3in;s+ on Octobe) %%+ %((' the RTC allo8e3 the 8ill an3 appointe3 2ose .e)ia as Executo) of the estate$ On ece4be) 9+ %(('+ the executo) sub4itte3 to the p)obate cou)t an in5ento)1 of the estate 8ith a 4otion fo) autho)it1 to 8ith3)a8 fun3s fo) the pa14ent of the estate tax$ Such autho)it1 8as ;)ante3 b1 the p)obate cou)t on Ma)ch 9+ %((% $The)eafte)+ on Ma)ch -+ %((% + the executo) pai3 the estate tax in the a4ount of P%+?<?+&*, as )epo)te3 in the Tax Retu)n file3 8ith the 7IR$ This 8as 8ell 8ithin the six (?) 4onths extension pe)io3 ;)ante3 b1 the 7IR$ IOn Septe4be) ,*+ %((%+ the 8i3o8 of the 3ecease3+ .elisa /$ San A;ustin+ )ecei5e3 a P)eEAssess4ent "otice f)o4 the 7IR+ 3ate3 Au;ust ,(+ %((%+ sho8in; a 3eficienc1 estate tax of P9*-+9'($9'+ 8hich+ inclu3in; su)cha);e+ inte)est an3 penalties+ a4ounte3 to P(<?+9&'$''$

IOn Octobe) %+ %((%+ 8ithin the tenE3a1 pe)io3 ;i5en in the p)eEassess4ent notice+ the executo) file3 a lette) 8ith the petitione) Co44issione) exp)essin; )ea3iness to pa1 the basic 3eficienc1 estate tax of P9*-+9'($9' as soon as the Re;ional T)ial Cou)t app)o5es 8ith3)a8al the)eof+ but+ )eAuestin; that the su)cha);e+ inte)est+ an3 othe) penalties+ a4ountin; to P&*-+'&'$*- be 8ai5e3+ consi3e)in; that the assesse3 3eficienc1 a)ose onl1 on account of the 3iffe)ence in =onal 5aluation use3 b1 the Estate an3 the 7IR+ an3 that the estate tax 3ue pe) )etu)n of P%+?<?+&*,$'' 8as al)ea31 pai3 in 3ue ti4e 8ithin the extension pe)io3$ IOn Octobe) &+ %((%+ the Co44issione) issue3 an Assess4ent "otice )eite)atin; the 3e4an3 in the p)eE assess4ent notice an3 )eAuestin; pa14ent on o) befo)e thi)t1 (*') 3a1s upon )eceipt the)eof$ IIn a lette)+ 3ate3 Octobe) *%+ %((%+ the executo) )eAueste3 the Co44issione) a )econsi3e)ation of the assess4ent of P(<?+9&($'' an3 8ai5e) of the su)cha);e+ inte)est+ etc$ IOn ece4be) %-+ %((%+ the Co44issione) accepte3 pa14ent of the basic 3eficienc1 tax in the a4ount of P9*-+9'($9' th)ou;h its Recei5able Accounts 7illin; i5ision$ IThe )eAuest fo) )econsi3e)ation 8as not acte3 upon until 2anua)1 ,%+ %((*+ 8hen the executo) )ecei5e3 a lette)+ 3ate3 Septe4be) ,%+ %((,+ si;ne3 b1 the Co44issione)+ statin; that the)e is no le;al Bustification fo) the 8ai5e) of the inte)ests+ su)cha);e an3 co4p)o4ise penalt1 in this case+ an3 )eAui)in; full pa14ent of P&*-+'&'$*- )ep)esentin; such cha);es 8ithin ten (%') 3a1s f)o4 )eceipt the)eof$

IIn 5ie8 the)eof+ the )espon3ent estate pai3 the a4ount of P&*-+'&'$*- un3e) p)otest on 2anua)1 ,9+ %((*$ IOn .eb)ua)1 %-+ %((*+ a Petition fo) Re5ie8 8as file3 b1 the executo) 8ith the CT A 8ith the p)a1e) that the Co44issione)Cs lette)J3ecision+ 3ate3 Septe4be) ,%+ %((, be )e5e)se3 an3 that a )efun3 of the a4ount of P&*-+'&'$*- be o)3e)e3 $ IThe Co44issione) oppose3 the sai3 petition+ alle;in; that the CTACs Bu)is3iction 8as not p)ope)l1 in5o:e3 inas4uch as no clai4 fo) a tax )efun3 of the 3eficienc1 tax collecte3 8as file3 8ith the 7u)eau of Inte)nal Re5enue befo)e the petition 8as file3+ in 5iolation of Sections ,'& an3 ,*' of the "ational Inte)nal Re5enue Co3e$ Mo)eo5e)+ the)e is no statuto)1 basis fo) the )efun3 of the 3eficienc1 su)cha);es+ inte)ests an3 penalties cha);e3 b1 the Co44issione) upon the estate of the 3ece3ent$ IUphol3in; its Bu)is3iction o5e) the 3ispute+ the CTA )en3e)e3 its ecision+ 3ate3 Ap)il ,%+ %((&+ 4o3if1in; the CIRCs assess4ent fo) su)cha);e+ inte)ests an3 othe) penalties f)o4 P&*-+'&'$*- to P%*+&?,$<&+ )ep)esentin; inte)est on the 3eficienc1 estate tax+ fo) 8hich )eason the CTA o)3e)e3 the )ei4bu)se4ent to the )espon3ent estate the balance of P&,*+9<<$?&+ to 8it6 IOHERE.ORE+ )espon3entCs 3eficienc1 assess4ent fo) su)cha);e+ inte)ests+ an3 othe) penalties is he)eb1 4o3ifie3 an3 since petitione) has clea)l1 pai3 the full a4ount of P&*-+'&'$*-+ )espon3ent is he)eb1 o)3e)e3 to )efun3 to the

Estate of 2ose San A;ustin the o5e)pa14ent a4ountin; to P&,*+9<<$?&$I% On *' Ma1 %((&+ the 3ecision of the Cou)t of Tax Appeals 8as appeale3 b1 the Co44issione) of Inte)nal Re5enue to the Cou)t of Appeals$ The)e+ the petition fo) )e5ie8 )aise3 the follo8in; issues6 I%$ Ohethe) )espon3ent Tax Cou)t has Bu)is3iction to ta:e co;ni=ance of the case consi3e)in; the failu)e of p)i5ate )espon3ent to co4pl1 8ith the 4an3ato)1 )eAui)e4ents of Sections ,'& an3 ,*' of the "ational Inte)nal Re5enue Co3e$ I,$ Ohethe) o) not )espon3ent Tax Cou)t 8as co))ect in o)3e)in; the )efun3 to the Estate of 2ose San A;ustin the )e3uce3 a4ount of P&,*+9<<$?& as alle;e3 o5e)pai3 su)cha);e+ inte)ests an3 co4p)o4ise penalt1 i4pose3 on the basic 3eficienc1 estate tax of P9*-+9'($9' 3ue on the t)ans4ission of the sai3 Estate to the sole hei) in %(('$I, In its 3ecision of ,& .eb)ua)1 %(((+ the Cou)t of Appeals ;)ante3 the petition of the Co44issione) of Inte)nal Re5enue an3 hel3 that the Cou)t of Tax Appeals 3i3 not acAui)e Bu)is3iction o5e) the subBect 4atte) an3 that+ acco)3in;l1+ its 3ecision 8as null an3 5oi3$ Hence+ the instant petition 8he)e petitione) sub4its that E I%$ The filin; of a clai4 fo) )efun3 >is@ not essential befo)e the filin; of the petition fo) )e5ie8$

I,$ The i4position b1 the )espon3ent of su)cha);e+ inte)est an3 penalties on the 3eficienc1 estate tax is not in acco)3 8ith the la8 an3 the)efo)e ille;al$I* The Cou)t fin3s the petition pa)tl1 4e)ito)ious$ The case has a st)i:in; )ese4blance to the cont)o5e)s1 in Ro4an Catholic A)chbishop of Cebu 5s$ Collecto) of Inte)nal Re5enue$& The petitione) in that case pai3 un3e) p)otest the su4 of P9+,'%$9, b1 8a1 of inco4e tax+ su)cha);e an3 inte)est an3+ fo)th8ith+ file3 a petition fo) )e5ie8 befo)e the Cou)t of Tax Appeals$ Then )espon3ent Collecto) (no8 Co44issione)) of Inte)nal Re5enue set up se5e)al 3efenses+ one of 8hich 8as that petitione) ha3 faile3 to fi)st file a 8)itten clai4 fo) )efun3+ pu)suant to Section *'? of the Tax Co3e+ of the a4ounts pai3$ Con5ince3 that the lac: of a 8)itten clai4 fo) )efun3 8as fatal to petitione)Cs )ecou)se to it+ the Cou)t of Tax Appeals 3is4isse3 the petition fo) lac: of Bu)is3iction$ On appeal to this Cou)t+ the tax cou)tCs )ulin; 8as )e5e)se3H the Cou)t hel36 IOe a;)ee 8ith petitione) that Section < of Republic Act "o$%%,9+ c)eatin; the Cou)t of Tax Appeals+ in p)o5i3in; fo) appeals f)o4 E C(%) ecisions of the Collecto) of Inte)nal Re5enue in cases in5ol5in; 3ispute3 assess4ents+ )efun3s of inte)nal )e5enue taxes+ fees o) othe) cha);es+ penalties i4pose3 in )elation the)eto+ o) othe) 4atte)s a)isin; un3e) the "ational Inte)nal Re5enue Co3e o) othe) la8 o) pa)t of the la8 a34iniste)e3 b1 the 7u)eau of Inte)nal Re5enue E

allo8s an appeal f)o4 a 3ecision of the Collecto) in cases in5ol5in;C 3ispute3 assess4entsC as 3istin;uishe3 f)o4 cases in5ol5in;C )efun3s of inte)nal )e5enue taxes+ fees o) othe) cha);es+ x xCH that the p)esent action in5ol5es a 3ispute3 assess4entCH because f)o4 the ti4e petitione) )ecei5e3 assess4ents "os$ %<EECE''*'%E99 an3 %<EACE?''%'<E9? 3isallo8in; ce)tain 3e3uctions clai4e3 b1 hi4 in his inco4e tax )etu)ns fo) the 1ea)s %(99 an3 %(9?+ he al)ea31 p)oteste3 an3 )efuse3 to pa1 the sa4e+ Auestionin; the co))ectness an3 le;alit1 of such assess4entsH an3 that the petitione) pai3 the 3ispute3 assess4ents un3e) p)otest befo)e filin; his petition fo) )e5ie8 8ith the Cou)t a Auo+ onl1 to fo)estall the sale of his p)ope)ties that ha3 been place3 un3e) 3ist)aint b1 the )espon3ent Collecto) since ece4be) &+ %(9<$ To hol3 that the taxpa1e) has no8 lost the )i;ht to appeal f)o4 the )ulin; on+ the 3ispute3 assess4ent but 4ust p)osecute his appeal un3e) section *'? of the Tax Co3e+ 8hich )eAui)es a taxpa1e) to file a clai4 fo) )efun3 of the taxes pai3 as a con3ition p)ece3ent to his )i;ht to appeal+ 8oul3 in effect )eAui)e of hi4 to ;o th)ou;h a useless an3 nee3less ce)e4on1 that 8oul3 onl1 3ela1 the U 3isposition of the case+ fo) the Collecto) (no8 Co44issione)) 8oul3 ce)%ainl1 3isallo8 the clai4 fo) )efun3 in the sa4e 8a1 as he 3isallo8e3 the p)otest a;ainst the assess4ent$ The la8+ shoul3 not be inte)p)ete3 as to )esult in absu)3ities$I9 The Cou)t sees no co;ent )eason to aban3on the abo5e 3ictu4 an3 to )eAui)e a useless fo)4alit1 that can se)5e the inte)est of neithe) the ;o5e)n4ent no) the taxpa1e)$ The tax cou)t has aptl1 acte3 in ta:in; co;ni=ance of the taxpa1e)Cs appeal to it$ On the secon3 issue+ the "ational Inte)nal Re5enue Co3e+ )elati5e to the i4position of su)cha);es+ inte)ests+ an3 penalties+ p)o5i3es thusl16

ISec$ ,&-$ Ci5il Penalties$ E I(a) The)e shall be i4pose3+ in a33ition to the tax )eAui)e3 to be pai3+ a penalt1 eAui5alent to t8ent1Efi5e pe)cent (,9F ) of the a4ount 3ue+ in the follo8in; cases6 I(%) .ailu)e to file an1 )etu)n an3 pa1 the tax 3ue the)eon as )eAui)e3 un3e) the p)o5isions of this Co3e o) )ules an3 )e;ulations on the 3ate p)esc)ibe3H o) I(,) Unless othe)8ise autho)i=e3 b1 the Co44issione)+ filin; a )etu)n 8ith an inte)nal )e5enue office) othe) than those 8ith 8ho4 the )etu)n is )eAui)e3 to be file3H o) I(*) .ailu)e to pa1 the 3eficienc1 tax 8ithin the ti4e p)esc)ibe3 fo) its pa14ent in the notice of assess4entH o) I(&) .ailu)e to pa1 the full o) pa)t of the a4ount of tax sho8n on an1 )etu)n )eAui)e3 to be file3 un3e) the p)o5isions of this Co3e o) )ules an3 )e;ulations+ o) the full a4ount of tax 3ue fo) 8hich no )etu)n is )eAui)e3 to be file3+ on o) befo)e the 3ate p)esc)ibe3 fo) its pa14ent$I ISec$,&($ Inte)est$ E I(A) In #ene)al$ EThe)e shall be assesse3 an3 collecte3 on an1 unpai3 a4ount of tax+ inte)est at the )ate of t8ent1 pe)cent (,'F) pe) annu4+ o) such hi;he) )ate as 4a1 be p)esc)ibe3 b1 )ules an3 )e;ulations+ f)o4 the 3ate p)esc)ibe3 fo) pa14ent until the a4ount is full1 pai3$

I(7) eficienc1 Inte)est$ E An1 3eficienc1 in the tax 3ue+ as the te)4 is 3efine3 in this Co3e+ shall be subBect to the inte)est p)esc)ibe3 in Subsection (A) he)eof+ 8hich inte)est shall be assesse3 an3 collecte3 f)o4 the 3ate p)esc)ibe3 fo) its pa14ent until the full pa14ent the)eof$ I(C) elinAuenc1 Inte)est$ EIn case of failu)e to pa16 I(%) The a4ount of the tax 3ue on an1 )etu)n to be file3+ o) I(,) The a4ount of the tax 3ue fo) 8hich no )etu)n is )eAui)e3+ o) I(*) A 3eficienc1 tax+ o) an1 su)cha);e o) inte)est the)eon on the 3ue 3ate appea)in; in the notice an3 3e4an3 of the Co44issione)+ the)e shall be assesse3 an3 collecte3 on the unpai3 a4ount+ inte)est at the )ate p)esc)ibe3 in Subsection (A) he)eof until the a4ount is full1 pai3+ 8hich inte)est shall fo)4 pa)t of the tax$ I( ) Inte)est on Exten3e3 Pa14ent$ EIf an1 pe)son )eAui)e3 to pa1 the tax is Aualifie3 an3 elects to pa1 the tax on install4ent un3e) the p)o5isions of this Co3e+ but fails to pa1 the tax o) an1 install4ent he)eof+ o) an1 pa)t of such a4ount o) install4ent on o) befo)e the 3ate p)esc)ibe3 fo) its pa14ent+ o) 8he)e the Co44issione) has autho)i=e3 an extension of ti4e 8ithin 8hich to pa1 a tax o) a 3eficienc1 tax o) an1 pa)t the)eof+ the)e shall be assesse3 an3 collecte3 inte)est at the )ate he)einabo5e p)esc)ibe3 on the tax o) 3eficienc1 tax o) an1 pa)t the)eof unpai3 f)o4 the 3ate of notice an3 3e4an3 until it is pai3$I It 8oul3 appea) that+ as ea)l1 as ,* Septe4be) %((%+ the estate al)ea31 )ecei5e3 a p)eEassess4ent notice in3icatin; a

3eficienc1 estate tax of P9*-+9'($9'$ Oithin the tenE3a1 pe)io3 ;i5en in the p)eEassess4ent notice+ )espon3ent Co44issione) )ecei5e3 a lette) f)o4 petitione) exp)essin; the latte)Cs )ea3iness to pa1 the basic 3eficienc1 estate tax of P9*-+9'($9' as soon as the t)ial cou)t 8oul3 ha5e app)o5e3 the 8ith3)a8al of that su4 f)o4 the estate but )eAuestin; that the su)cha);e+ inte)ests an3 penalties be 8ai5e3$ On '& Octobe) %((%+ ho8e5e)+ petitione) )ecei5e3 f)o4 the Co44issione) notice insistin; pa14ent of the tax 3ue on o) befo)e the lapse of thi)t1 (*') 3a1s f)o4 )eceipt the)eof$ The 3eficienc1 estate tax of P9*-+9'($9' 8as not pai3 until %( ece4be) %((%$? The 3ela1 in the pa14ent of the 3eficienc1 tax 8ithin the ti4e p)esc)ibe3 fo) its pa14ent in the notice of assess4ent Bustifies the i4position of a ,9F su)cha);e in consonance 8ith Section ,&-A(*) of the Tax Co3e$ The basic 3eficienc1 tax in this case bein; P9*-+9'($9'+ the t8ent1Efi5e pe)cent the)eof co4es to P%*&+?,<$*<$ Section ,&( of the Tax Co3e states that an1 3eficienc1 in the tax 3ue 8oul3 be subBect to inte)est at the )ate of t8ent1 pe)cent (,'F) pe) annu4+ 8hich inte)est shall be assesse3 an3 collecte3 f)o4 the 3ate p)esc)ibe3 fo) its pa14ent until full pa14ent is 4a3e$ The co4putation of inte)est b1 the Cou)t of Tax Appeals E I eficienc1 estate tax P9*-+9'($9' x Inte)est Rate ,'F pe) annu4 x

Te)4s %%J, 4o$J%, 4os (%%J'&J(% to %,J%(J(%) N P%*+&?,$<&I< confo)4s 8ith the la8+ i$e$+ co4pute3 on the 3eficienc1 tax f)o4 the 3ate p)esc)ibe3 fo) its pa14ent until it is pai3$ The Cou)t of Tax Appeals co))ectl1 hel3 that the co4p)o4ise penalt1 of P,'+'''$'' coul3 not be i4pose3 on petitione)+ a co4p)o4ise bein;+ b1 its natu)e+ 4utual in essence$ The pa14ent 4a3e un3e) p)otest b1 petitione) coul3 onl1 si;nif1 that the)e 8as no a;)ee4ent that ha3 effecti5el1 been )eache3 bet8een the pa)ties$ Re;)ettabl1 fo) petitione)+ the nee3 fo) an autho)it1 f)o4 the p)obate cou)t in the pa14ent of the 3eficienc1 estate tax+ o5e) 8hich )espon3ent Co44issione) has ha)3l1 an1 cont)ol+ is not one that can ne;ate the application of the Tax Co3e p)o5isions afo)eAuote3$ Taxes+ the lifebloo3 of the ;o5e)n4ent+ a)e 4eant to be pai3 8ithout 3ela1 an3 often obli5ious to contin;encies o) con3itions$ In$ su4+ the tax liabilit1 of the estate inclu3es a su)cha);e of P%*&+?,<$*< an3 inte)est of P%*+&?,$<& o) a total of P%&-+'('$''$ OHERE.ORE+ the instant petition is pa)tl1 #RA"TE $ The 3eficienc1 assess4ent fo) su)cha);e+ inte)est an3 penalties is 4o3ifie3 an3 )eco4pute3 to be in the a4ount of P%&-+'('$'' su)cha);e of P%*&+?,<$*< an3 inte)est of P%*+&?,$<&$ Petitione)

estate ha5in; since pai3 the su4 of P&*-+'&'$*-+ )espon3ent Co44issione) is he)eb1 o)3e)e3 to )efun3 to the Estate of 2ose San A;ustin the o5e)pai3 a4ount of P,-(+(9'$*-$ "o costs$ SO OR ERE $%S8phi%$nTt Republic of the Philippines SUPREME COURT Manila SECO" I!ISIO"

In 5ie8 of all the fo)e;oin;+ 8e )ule that the 3eficienc1 inco4e tax assess4ents an3 estate tax assess4ent+ a)e al)ea31 final an3 (u)nappealableEan3Ethe subseAuent le51 of )eal p)ope)ties is a tax )e4e31 )eso)te3 to b1 the ;o5e)n4ent+ sanctione3 b1 Section ,%* an3 ,%- of the "ational Inte)nal Re5enue Co3e$ This su44a)1 tax )e4e31 is 3istinct an3 sepa)ate f)o4 the othe) tax )e4e3ies (such as 2u3icial Ci5il actions an3 C)i4inal actions)+ an3 is not affecte3 o) p)eclu3e3 b1 the pen3enc1 of an1 othe) tax )e4e3ies institute3 b1 the ;o5e)n4ent$ OHERE.ORE+ p)e4ises consi3e)e3+ Bu3;4ent is he)eb1 )en3e)e3 ISMISSI"# the petition fo) ce)tio)a)i 8ith p)a1e) fo) Rest)ainin; O)3e) an3 InBunction$

#$R$ "o$ %,'--'

2une 9+ %((<

"o p)onounce4ents as to costs$ SO OR ERE $ Mo)e than se5en 1ea)s since the 3e4ise of the late .e)3inan3 E$ Ma)cos+ the fo)4e) P)esi3ent of the Republic of the Philippines+ the 4atte) of the settle4ent of his estate+ an3 its 3ues to the ;o5e)n4ent in estate taxes+ a)e still un)esol5e3+ the latte) issue bein; no8 befo)e this Cou)t fo) )esolution$ Specificall1+ petitione) .e)3inan3 R$ Ma)cos II+ the el3est son of the 3ece3ent+ Auestions the actuations of the )espon3ent Co44issione) of Inte)nal Re5enue in assessin;+ an3 collectin; th)ou;h the su44a)1 )e4e31 of /e51 on Real P)ope)ties+ estate an3 inco4e tax 3elinAuencies upon the estate an3 p)ope)ties of his fathe)+ 3espite the pen3enc1 of the p)ocee3in;s on p)obate of the 8ill of the late p)esi3ent+ 8hich is 3oc:ete3 as Sp$ P)oc$ "o$ %',<( in the Re;ional T)ial Cou)t of Pasi;+ 7)anch %9?$

.ER I"A" R$ MARCOS II+ petitione)+ 5s$ COURT O. APPEA/S+ THE COMMISSIO"ER O. THE 7UREAU O. I"TER"A/ RE!E"UE an3 HERMI"IA $ E #U0MA"+ )espon3ents$

TORRES+ 2R$+ 2$6 In this Petition fo) Re5ie8 on Ce)tio)a)i+ #o5e)n4ent action is once a;ain assaile3 as p)ecipitate an3 unfai)+ suffe)in; the basic an3 oftl1 i4plo)e3 )eAuisites of 3ue p)ocess of la8$ Specificall1+ the petition assails the ecision % of the Cou)t of Appeals 3ate3 "o5e4be) ,(+ %((& in CAE#$R$ SP "o$ *%*?*+ 8he)e the sai3 cou)t hel36

Petitione) ha3 file3 8ith the )espon3ent Cou)t of Appeals a Petition fo) Ce)tio)a)i an3 P)ohibition 8ith an application fo) 8)it of p)eli4ina)1 inBunction an3Jo) te4po)a)1 )est)ainin; o)3e) on 2une ,-+ %((*+ see:in; to Q I$ Annul an3 set asi3e the "otices of /e51 on )eal p)ope)t1 3ate3 .eb)ua)1 ,,+ %((* an3 Ma1 ,'+ %((*+ issue3 b1 )espon3ent Co44issione) of Inte)nal Re5enueH II$ Annul an3 set asi3e the "otices of Sale 3ate3 Ma1 ,?+ %((*H III$ EnBoin the Hea3 Re5enue Executi5e Assistant i)ecto) II (Collection Se)5ice)+ f)o4 p)ocee3in; 8ith the Auction of the )eal p)ope)ties co5e)e3 b1 "otices of Sale$ Afte) the pa)ties ha3 plea3e3 thei) case+ the Cou)t of Appeals )en3e)e3 its ecision , on "o5e4be) ,(+ %((&+ )ulin; that the 3eficienc1 assess4ents fo) estate an3 inco4e tax 4a3e upon the petitione) an3 the estate of the 3ecease3 P)esi3ent Ma)cos ha5e al)ea31 beco4e final an3 unappealable+ an3 4a1 thus be enfo)ce3 b1 the su44a)1 )e4e31 of le51in; upon the p)ope)ties of the late P)esi3ent+ as 8as 3one b1 the )espon3ent Co44issione) of Inte)nal Re5enue$ OHERE.ORE+ p)e4ises consi3e)e3 Bu3;4ent is he)eb1 )en3e)e3 ISMISSI"# the petition fo) Ce)tio)a)i 8ith p)a1e) fo) Rest)ainin; O)3e) an3 InBunction$ "o p)onounce4ents as to cost$ SO OR ERE $

Unpe)tu)be3+ petitione) is no8 befo)e us assailin; the 5ali3it1 of the appellate cou)tCs 3ecision+ assi;nin; the follo8in; as e))o)s6 A$ RESPO" E"T COURT MA"I.EST/R ERRE I" RU/I"# THAT THE SUMMARR TAX REME IES RESORTE TO 7R THE #O!ER"ME"T ARE "OT A..ECTE A" PREC/U E 7R THE PE" E"CR O. THE SPECIA/ PROCEE I"# .OR THE A//OOA"CE O. THE /ATE PRESI E"TCS A//E#E OI//$ TO THE CO"TRARR+ THIS PRO7ATE PROCEE I"# PRECISE/R P/ACE A// PROPERTIES OHICH .ORM PART O. THE /ATE PRESI E"TCS ESTATE I" CUSTO IA /E#IS O. THE PRO7ATE COURT TO THE EXC/USIO" O. A// OTHER COURTS A" A MI"ISTRATI!E A#E"CIES$ 7$ RESPO" E"T COURT AR7ITRARI/R ERRE I" SOEEPI"#/R ECI I"# THAT SI"CE THE TAX ASSESSME"TS O. PETITIO"ER A" HIS PARE"TS HA A/REA R 7ECOME .I"A/ A" U"APPEA/A7/E+ THERE OAS "O "EE TO #O I"TO THE MERITS O. THE #ROU" S CITE I" THE PETITIO"$ I" EPE" E"T O. OHETHER THE TAX ASSESSME"TS HA A/REA R 7ECOME .I"A/+ HOOE!ER+ PETITIO"ER HAS THE RI#HT TO VUESTIO" THE U"/AO.U/ MA""ER A" METHO I" OHICH TAX CO//ECTIO" IS SOU#HT TO 7E E".ORCE 7R RESPO" E"TS COMMISSIO"ER A" E #U0MA"$ THUS+ RESPO" E"T COURT SHOU/ HA!E .A!ORA7/R CO"SI ERE THE MERITS O. THE .O//OOI"# #ROU" S I" THE PETITIO"6

(%) The "otices of /e51 on Real P)ope)t1 8e)e issue3 be1on3 the pe)io3 p)o5i3e3 in the Re5enue Me4o)an3u4 Ci)cula) "o$ *-E?-$ (,) >a@ The nu4e)ous pen3in; cou)t cases Auestionin; the late P)esi3entCs o8ne)ship o) inte)ests in se5e)al p)ope)ties (both pe)sonal an3 )eal) 4a:e the total 5alue of his estate+ an3 the conseAuent estate tax 3ue+ incapable of exact pecunia)1 3ete)4ination at this ti4e$ Thus+ )espon3entsC assess4ent of the estate tax an3 thei) issuance of the "otices of /e51 an3 Sale a)e p)e4atu)e+ confiscato)1 an3 opp)essi5e$ >b@ Petitione)+ as one of the late P)esi3entCs co4pulso)1 hei)s+ 8as ne5e) notifie3+ 4uch less se)5e3 8ith copies of the "otices of /e51+ cont)a)1 to the 4an3ate of Section ,%* of the "IRC$ As such+ petitione) 8as ne5e) ;i5en an oppo)tunit1 to contest the "otices in 5iolation of his )i;ht to 3ue p)ocess of la8$ C$ O" ACCOU"T O. THE C/EAR MERIT O. THE PETITIO"+ RESPO" E"T COURT MA"I.EST/R ERRE I" RU/I"# THAT IT HA "O POOER TO #RA"T I"2U"CTI!E RE/IE. TO PETITIO"ER$ SECTIO" ,%( O. THE "IRC "OTOITHSTA" I"#+ COURTS POSSESS THE POOER TO ISSUE A ORIT O. PRE/IMI"ARR I"2U"CTIO" TO RESTRAI" RESPO" E"TS COMMISSIO"ERCS A" E #U0MA"CS AR7ITRARR METHO O. CO//ECTI"# THE A//E#E E.ICIE"CR ESTATE A" I"COME TAXES 7R MEA"S O. /E!R$ The facts as foun3 b1 the appellate cou)t a)e un3ispute3+ an3 a)e he)eb1 a3opte36

On Septe4be) ,(+ %(-(+ fo)4e) P)esi3ent .e)3inan3 Ma)cos 3ie3 in Honolulu+ Ha8aii+ USA$ On 2une ,<+ %(('+ a Special Tax Au3it Tea4 8as c)eate3 to con3uct in5esti;ations an3 exa4inations of the tax liabilities an3 obli;ations of the late p)esi3ent+ as 8ell as that of his fa4il1+ associates an3 Ic)oniesI$ Sai3 au3it tea4 conclu3e3 its in5esti;ation 8ith a Me4o)an3u4 3ate3 2ul1 ,?+ %((%$ The in5esti;ation 3isclose3 that the Ma)coses faile3 to file a 8)itten notice of the 3eath of the 3ece3ent+ an estate tax )etu)ns >sic@+ as 8ell as se5e)al inco4e tax )etu)ns co5e)in; the 1ea)s %(-, to %(-?+ Q all in 5iolation of the "ational Inte)nal Re5enue Co3e ("IRC)$ SubseAuentl1+ c)i4inal cha);es 8e)e file3 a;ainst M)s$ I4el3a R$ Ma)cos befo)e the Re;ional T)ial of Vue=on Cit1 fo) 5iolations of Sections -,+ -* an3 -& (has penali=e3 un3e) Sections ,9* an3 ,9& in )elation to Section ,9, Q a G b) of the "ational Inte)nal Re5enue Co3e ("IRC)$ The Co44issione) of Inte)nal Re5enue the)eb1 cause3 the p)epa)ation an3 filin; of the Estate Tax Retu)n fo) the estate of the late p)esi3ent+ the Inco4e Tax Retu)ns of the Spouses Ma)cos fo) the 1ea)s %(-9 to %(-?+ an3 the Inco4e Tax Retu)ns of petitione) .e)3inan3 I7on;bon;I Ma)cos II fo) the 1ea)s %(-, to %(-9$ On 2ul1 ,?+ %((%+ the 7IR issue3 the follo8in;6 (%) eficienc1 estate tax assess4ent no$ .ACE,E-(E(%E'',&?& (a;ainst the estate of the late p)esi3ent .e)3inan3 Ma)cos in the a4ount of P,*+,(*+?'<+?*-$'' Pesos)H (,) eficienc1 inco4e tax assess4ent no$ .ACE%E-9E(%E'',&9, an3 eficienc1 inco4e

tax assess4ent no$ .ACE%E-?E(%E'',&9% (a;ainst the Spouses .e)3inan3 an3 I4el3a Ma)cos in the a4ounts of P%&(+99%$<' an3 P%-&+''(+<*<$&' )ep)esentin; 3eficienc1 inco4e tax fo) the 1ea)s %(-9 an3 %(-?)H (*) eficienc1 inco4e tax assess4ent nos$ .ACE%E-,E(%E'',&?' to .ACE%E-9E(%E'',&?* (a;ainst petitione) .e)3inan3 I7on;bon;I Ma)cos II in the a4ounts of P,9-$<' pesosH P(+*-?$&' PesosH P&+*--$*' PesosH an3 P?+*<?$?' Pesos )ep)esentin; his 3eficienc1 inco4e taxes fo) the 1ea)s %(-, to %(-9)$ The Co44issione) of Inte)nal Re5enue a5e)s that copies of the 3eficienc1 estate an3 inco4e tax assess4ents 8e)e all pe)sonall1 an3 const)ucti5el1 se)5e3 on Au;ust ,?+ %((% an3 Septe4be) %,+ %((% upon M)s$ I4el3a Ma)cos (th)ou;h he) ca)eta:e) M)$ Ma)tine=) at he) last :no8n a33)ess at "o$ ,'& O)te;a St$+ San 2uan+ M$M$ (Annexes I I an3 IEI of the Petition)$ /i:e8ise+ copies of the 3eficienc1 tax assess4ents issue3 a;ainst petitione) .e)3inan3 I7on;bon;I Ma)cos II 8e)e also pe)sonall1 an3 const)ucti5el1 se)5e3 upon hi4 (th)ou;h his ca)eta:e)) on Septe4be) %,+ %((%+ at his last :no8n a33)ess at on Ma)iano Ma)cos St$ co)ne) P$ #ue5a))a St$+ San 2uan+ M$M$ (Annexes I2I an3 I2E%I of the Petition)$ The)eafte)+ .o)4al Assess4ent notices 8e)e se)5e3 on Octobe) ,'+ %((,+ upon M)s$ Ma)cos cJo petitione)+ at his office+ House of Rep)esentati5es+ 7atasan Pa4bansa+ Vue=on Cit1$ Mo)eo5e)+ a notice to Taxpa1e) in5itin; M)s$ Ma)cos (o) he) 3ul1 autho)i=e3 )ep)esentati5e o) counsel)+ to a confe)ence+ 8as fu)nishe3 the counsel of M)s$ Ma)cos+ ean Antonio Co)onel Q but to no a5ail$ The 3eficienc1 tax assess4ents 8e)e not p)oteste3 a34inist)ati5el1+ b1 M)s$ Ma)cos an3 the othe) hei)s of the late p)esi3ent+ 8ithin *' 3a1s f)o4 se)5ice of sai3 assess4ents$

On .eb)ua)1 ,,+ %((*+ the 7IR Co44issione) issue3 t8ent1E t8o notices of le51 on )eal p)ope)t1 a;ainst ce)tain pa)cels of lan3 o8ne3 b1 the Ma)coses Q to satisf1 the alle;e3 estate tax an3 3eficienc1 inco4e taxes of Spouses Ma)cos$ On Ma1 ,'+ %((*+ fou) 4o)e "otices of /e51 on )eal p)ope)t1 8e)e issue3 fo) the pu)pose of satisf1in; the 3eficienc1 inco4e taxes$ On Ma1 ,?+ %((*+ a33itional fou) (&) notices of /e51 on )eal p)ope)t1 8e)e a;ain issue3$ The fo)e;oin; tax )e4e3ies 8e)e )eso)te3 to pu)suant to Sections ,'9 an3 ,%* of the "ational Inte)nal Re5enue Co3e ("IRC)$ In )esponse to a lette) 3ate3 Ma)ch %,+ %((* sent b1 Att1$ /o)eto Ata (counsel of he)ein petitione)) callin; the attention of the 7IR an3 )eAuestin; that the1 be 3ul1 notifie3 of an1 action ta:en b1 the 7IR affectin; the inte)est of thei) client .e)3inan3 I7on;bon;I Ma)cos II+ as 8ell as the inte)est of the late p)esi3ent Q copies of the afo)esai3 notices 8e)e+ se)5e3 on Ap)il <+ %((* an3 on 2une %'+ %((*+ upon M)s$ I4el3a Ma)cos+ the petitione)+ an3 thei) counsel of )eco)3+ I e 7o)Ba+ Me3ial3ea+ Ata+ 7ello+ #ue5a))a an3 Se)apio /a8 OfficeI$ "otices of sale at public auction 8e)e poste3 on Ma1 ,?+ %((*+ at the lobb1 of the Cit1 Hall of Tacloban Cit1$ The public auction fo) the sale of the ele5en (%%) pa)cels of lan3 too: place on 2ul1 9+ %((*$ The)e bein; no bi33e)+ the lots 8e)e 3ecla)e3 fo)feite3 in fa5o) of the ;o5e)n4ent$ On 2une ,9+ %((*+ petitione) .e)3inan3 I7on;bon;I Ma)cos II file3 the instant petition fo) ce)tio)a)i an3 p)ohibition un3e)

Rule ?9 of the Rules of Cou)t+ 8ith p)a1e) fo) te4po)a)1 )est)ainin; o)3e) an3Jo) 8)it of p)eli4ina)1 inBunction$ It has been )epeate3l1 obse)5e3+ an3 not 8ithout 4e)it+ that the enfo)ce4ent of tax la8s an3 the collection of taxes+ is of pa)a4ount i4po)tance fo) the sustenance of ;o5e)n4ent$ Taxes a)e the lifebloo3 of the ;o5e)n4ent an3 shoul3 be collecte3 8ithout unnecessa)1 hin3)ance$ Ho8e5e)+ such collection shoul3 be 4a3e in acco)3ance 8ith la8 as an1 a)bit)a)iness 8ill ne;ate the 5e)1 )eason fo) ;o5e)n4ent itself$ It is the)efo)e necessa)1 to )econcile the appa)entl1 conflictin; inte)ests of the autho)ities an3 the taxpa1e)s so that the )eal pu)pose of taxation+ 8hich is the p)o4otion of the co44on ;oo3+ 4a1 be achie5e3$ * Ohethe) o) not the p)ope) a5enues of assess4ent an3 collection of the sai3 tax obli;ations 8e)e ta:en b1 the )espon3ent 7u)eau is no8 the subBect of the Cou)tCs inAui)1$ Petitione) posits that notices of le51+ notices of sale+ an3 subseAuent sale of p)ope)ties of the late P)esi3ent Ma)cos effecte3 b1 the 7IR a)e null an3 5oi3 fo) 3is)e;a)3in; the establishe3 p)oce3u)e fo) the enfo)ce4ent of taxes 3ue upon the estate of the 3ecease3$ The case of o4in;o 5s$ #a)litos & is specificall1 cite3 to bolste) the a);u4ent that Ithe o)3ina)1 p)oce3u)e b1 8hich to settle clai4s of in3ebte3ness a;ainst the estate of a 3ecease3+ pe)son+ as in an inhe)itance (estate) tax+ is fo) the clai4ant to p)esent a clai4 befo)e the p)obate cou)t so that sai3 cou)t 4a1 o)3e) the a34inist)ato) to pa1 the a4ount the)efo)$I This )e4e31 is alle;e3l1+ exclusi5e+ an3 cannot be effecte3 th)ou;h an1 othe) 4eans$

Petitione) ;oes fu)the)+ sub4ittin; that the p)obate cou)t is not p)eclu3e3 f)o4 3en1in; a )eAuest b1 the ;o5e)n4ent fo) the i44e3iate pa14ent of taxes+ an3 shoul3 o)3e) the pa14ent of the sa4e onl1 8ithin the pe)io3 fixe3 b1 the p)obate cou)t fo) the pa14ent of all the 3ebts of the 3ece3ent$ In this )e;a)3+ petitione) cites the case of Collecto) of Inte)nal Re5enue 5s$ The A34inist)at)ix of the Estate of Echa))i (?< Phil 9',)+ 8he)e it 8as hel3 that6 The case of Pine3a 5s$ Cou)t of .i)st Instance of Ta1abas an3 Collecto) of Inte)nal Re5enue (9, Phil -'*)+ )elie3 upon b1 the petitione)Eappellant is ;oo3 autho)it1 on the p)oposition that the cou)t ha5in; cont)ol o5e) the a34inist)ation p)ocee3in;s has Bu)is3iction to ente)tain the clai4 p)esente3 b1 the ;o5e)n4ent fo) taxes 3ue an3 to o)3e) the a34inist)ato) to pa1 the tax shoul3 it fin3 that the assess4ent 8as p)ope)+ an3 that the tax 8as le;al+ 3ue an3 collectible$ An3 the )ule lai3 3o8n in that case 4ust be un3e)stoo3 in )elation to the case of Collecto) of Custo4s 5s$ Ha1;oo3+ sup)a$+ as to the p)oce3u)e to be follo8e3 in a ;i5en case b1 the ;o5e)n4ent to effectuate the collection of the tax$ Cate;o)icall1 state3+ 8he)e 3u)in; the pen3enc1 of Bu3icial a34inist)ation o5e) the estate of a 3ecease3 pe)son a clai4 fo) taxes is p)esente3 b1 the ;o5e)n4ent+ the cou)t has the autho)it1 to o)3e) pa14ent b1 the a34inist)ato)H but+ in the sa4e 8a1 that it has autho)it1 to o)3e) pa14ent o) satisfaction+ it also has the ne;ati5e autho)it1 to 3en1 the sa4e$ Ohile the)e a)e cases 8he)e cou)ts a)e )eAui)e3 to pe)fo)4 ce)tain 3uties 4an3ato)1 an3 4iniste)ial in cha)acte)+ the function of the cou)t in a case of the p)esent cha)acte) is not one of the4H an3 he)e+ the cou)t cannot be an o);anis4 en3o8e3 8ith latitu3e of Bu3;4ent in one 3i)ection+ an3 con5e)te3 into a 4e)e 4echanical cont)i5ance in anothe) 3i)ection$

On the othe) han3+ it is a);ue3 b1 the 7IR+ that the stateCs autho)it1 to collect inte)nal )e5enue taxes is pa)a4ount$ Thus+ the pen3enc1 of p)obate p)ocee3in;s o5e) the estate of the 3ecease3 3oes not p)eclu3e the assess4ent an3 collection+ th)ou;h su44a)1 )e4e3ies+ of estate taxes o5e) the sa4e$ Acco)3in; to the )espon3ent+ clai4s fo) pa14ent of estate an3 inco4e taxes 3ue an3 assesse3 afte) the 3eath of the 3ece3ent nee3 not be p)esente3 in the fo)4 of a clai4 a;ainst the estate$ These can an3 shoul3 be pai3 i44e3iatel1$ The p)obate cou)t is not the ;o5e)n4ent a;enc1 to 3eci3e 8hethe) an estate is liable fo) pa14ent of estate of inco4e taxes$ OellEsettle3 is the )ule that the p)obate cou)t is a cou)t 8ith special an3 li4ite3 Bu)is3iction$ Conce3e3l1+ the autho)it1 of the Re;ional T)ial Cou)t+ sittin;+ albeit 8ith li4ite3 Bu)is3iction+ as a p)obate cou)t o5e) estate of 3ecease3 in3i5i3ual+ is not a t)iflin; thin;$ The cou)tCs Bu)is3iction+ once in5o:e3+ an3 4a3e effecti5e+ cannot be t)eate3 8ith in3iffe)ence no) shoul3 it be i;no)e3 8ith i4punit1 b1 the 5e)1 pa)ties in5o:in; its autho)it1$ In testa4ent to this+ it has been hel3 that it is 8ithin the Bu)is3iction of the p)obate cou)t to app)o5e the sale of p)ope)ties of a 3ecease3 pe)son b1 his p)ospecti5e hei)s befo)e final a3Bu3icationH 9 to 3ete)4ine 8ho a)e the hei)s of the 3ece3entH ? the )eco;nition of a natu)al chil3H < the status of a 8o4an clai4in; to be the le;al 8ife of the 3ece3entH - the le;alit1 of 3isinhe)itance of an hei) b1 the testato)H ( an3 to pass upon the 5ali3it1 of a 8ai5e) of he)e3ita)1 )i;hts$ %' The pi5otal Auestion the cou)t is tas:e3 to )esol5e )efe)s to the autho)it1 of the 7u)eau of Inte)nal Re5enue to collect b1 the

su44a)1 )e4e31 of le51in; upon+ an3 sale of )eal p)ope)ties of the 3ece3ent+ estate tax 3eficiencies+ 8ithout the co;nition an3 autho)it1 of the cou)t sittin; in p)obate o5e) the suppose3 8ill of the 3ecease3$ The natu)e of the p)ocess of estate tax collection has been 3esc)ibe3 as follo8s6 St)ictl1 spea:in;+ the assess4ent of an inhe)itance tax 3oes not 3i)ectl1 in5ol5e the a34inist)ation of a 3ece3entCs estate+ althou;h it 4a1 be 5ie8e3 as an inci3ent to the co4plete settle4ent of an estate+ an3+ un3e) so4e statutes+ it is 4a3e the 3ut1 of the p)obate cou)t to 4a:e the a4ount of the inhe)itance tax a pa)t of the final 3ec)ee of 3ist)ibution of the estate$ It is not a;ainst the p)ope)t1 of 3ece3ent+ no) is it a clai4 a;ainst the estate as such+ but it is a;ainst the inte)est o) p)ope)t1 )i;ht 8hich the hei)+ le;atee+ 3e5isee+ etc$+ has in the p)ope)t1 fo)4e)l1 hel3 b1 3ece3ent$ .u)the)+ un3e) so4e statutes+ it has been hel3 that it is not a suit o) cont)o5e)s1 bet8een the pa)ties+ no) is it an a35e)sa)1 p)ocee3in; bet8een the state an3 the pe)son 8ho o8es the tax on the inhe)itance$ Ho8e5e)+ un3e) othe) statutes it has been hel3 that the hea)in; an3 3ete)4ination of the cash 5alue of the assets an3 the 3ete)4ination of the tax a)e a35e)sa)1 p)ocee3in;s$ The p)ocee3in; has been hel3 to be necessa)il1 a p)ocee3in; in )e4$ %% In the Philippine expe)ience+ the enfo)ce4ent an3 collection of estate tax+ is executi5e in cha)acte)+ as the le;islatu)e has seen it fit to asc)ibe this tas: to the 7u)eau of Inte)nal Re5enue$ Section * of the "ational Inte)nal Re5enue Co3e attests to this6

Sec$ *$ Po8e)s an3 3uties of the 7u)eau$ Q The po8e)s an3 3uties of the 7u)eau of Inte)nal Re5enue shall co4p)ehen3 the assess4ent an3 collection of all national inte)nal )e5enue taxes+ fees+ an3 cha);es+ an3 the enfo)ce4ent of all fo)feitu)es+ penalties+ an3 fines connecte3 the)e8ith+ inclu3in; the execution of Bu3;4ents in all cases 3eci3e3 in its fa5o) b1 the Cou)t of Tax Appeals an3 the o)3ina)1 cou)ts$ Sai3 7u)eau shall also ;i5e effect to an3 a34iniste) the supe)5iso)1 an3 police po8e) confe))e3 to it b1 this Co3e o) othe) la8s$ Thus+ it 8as in !e)a 5s$ .e)nan3e= %, that the cou)t )eco;ni=e3 the libe)al t)eat4ent of clai4s fo) taxes cha);e3 a;ainst the estate of the 3ece3ent$ Such taxes+ 8e sai3+ 8e)e exe4pte3 f)o4 the application of the statute of nonEclai4s+ an3 this is Bustifie3 b1 the necessit1 of ;o5e)n4ent fun3in;+ i44o)tali=e3 in the 4axi4 that taxes a)e the lifebloo3 of the ;o5e)n4ent$ !ecti;alia ne)5i sunt )ei publicae Q taxes a)e the sine8s of the state$ Taxes assesse3 a;ainst the estate of a 3ecease3 pe)son+ afte) a34inist)ation is opene3+ nee3 not be sub4itte3 to the co44ittee on clai4s in the o)3ina)1 cou)se of a34inist)ation$ In the exe)cise of its cont)ol o5e) the a34inist)ato)+ the cou)t 4a1 3i)ect the pa14ent of such taxes upon 4otion sho8in; that the taxes ha5e been assesse3 a;ainst the estate$ Such libe)al t)eat4ent of inte)nal )e5enue taxes in the p)obate p)ocee3in;s exten3s so fa)+ e5en to allo8in; the enfo)ce4ent of tax obli;ations a;ainst the hei)s of the 3ece3ent+ e5en afte) 3ist)ibution of the estateCs p)ope)ties$ Clai4s fo) taxes+ 8hethe) assesse3 befo)e o) afte) the 3eath of the 3ecease3+ can be collecte3 f)o4 the hei)s e5en afte) the

3ist)ibution of the p)ope)ties of the 3ece3ent$ The1 a)e exe4pte3 f)o4 the application of the statute of nonEclai4s$ The hei)s shall be liable the)efo)+ in p)opo)tion to thei) sha)e in the inhe)itance$ %* Thus+ the #o5e)n4ent has t8o 8a1s of collectin; the taxes in Auestion$ One+ b1 ;oin; afte) all the hei)s an3 collectin; f)o4 each one of the4 the a4ount of the tax p)opo)tionate to the inhe)itance )ecei5e3$ Anothe) )e4e31+ pu)suant to the lien c)eate3 b1 Section *%9 of the Tax Co3e upon all p)ope)t1 an3 )i;hts to p)ope)t1 belon; to the taxpa1e) fo) unpai3 inco4e tax+ is b1 subBectin; sai3 p)ope)t1 of the estate 8hich is in the han3s of an hei) o) t)ansfe)ee to the pa14ent of the tax 3ue the estate$ (Co44issione) of Inte)nal Re5enue 5s$ Pine3a+ ,% SCRA %'9+ Septe4be) %9+ %(?<$) .)o4 the fo)e;oin;+ it is 3isce)nible that the app)o5al of the cou)t+ sittin; in p)obate+ o) as a settle4ent t)ibunal o5e) the 3ecease3 is not a 4an3ato)1 )eAui)e4ent in the collection of estate taxes$ It cannot the)efo)e be a);ue3 that the Tax 7u)eau e))e3 in p)ocee3in; 8ith the le51in; an3 sale of the p)ope)ties alle;e3l1 o8ne3 b1 the late P)esi3ent+ on the ;)oun3 that it 8as )eAui)e3 to see: fi)st the p)obate cou)tCs sanction$ The)e is nothin; in the Tax Co3e+ an3 in the pe)tinent )e4e3ial la8s that i4plies the necessit1 of the p)obate o) estate settle4ent cou)tCs app)o5al of the stateCs clai4 fo) estate taxes+ befo)e the sa4e can be enfo)ce3 an3 collecte3$ On the cont)a)1+ un3e) Section -< of the "IRC+ it is the p)obate o) settle4ent cou)t 8hich is bi33en not to autho)i=e the executo) o) Bu3icial a34inist)ato) of the 3ece3entCs estate to 3eli5e) an1 3ist)ibuti5e sha)e to an1 pa)t1 inte)este3 in the estate+ unless it is sho8n a Ce)tification b1 the Co44issione)

of Inte)nal Re5enue that the estate taxes ha5e been pai3$ This p)o5ision 3isp)o5es the petitione)Cs contention that it is the p)obate cou)t 8hich app)o5es the assess4ent an3 collection of the estate tax$ If the)e is an1 issue as to the 5ali3it1 of the 7IRCs 3ecision to assess the estate taxes+ this shoul3 ha5e been pu)sue3 th)ou;h the p)ope) a34inist)ati5e an3 Bu3icial a5enues p)o5i3e3 fo) b1 la8$ Section ,,( of the "IRC tells us ho86 Sec$ ,,($ P)otestin; of assess4ent$ Q Ohen the Co44issione) of Inte)nal Re5enue o) his 3ul1 autho)i=e3 )ep)esentati5e fin3s that p)ope) taxes shoul3 be assesse3+ he shall fi)st notif1 the taxpa1e) of his fin3in;s$ Oithin a pe)io3 to be p)esc)ibe3 b1 i4ple4entin; )e;ulations+ the taxpa1e) shall be )eAui)e3 to )espon3 to sai3 notice$ If the taxpa1e) fails to )espon3+ the Co44issione) shall issue an assess4ent base3 on his fin3in;s$ Such assess4ent 4a1 be p)oteste3 a34inist)ati5el1 b1 filin; a )eAuest fo) )econsi3e)ation o) )ein5esti;ation in such fo)4 an3 4anne) as 4a1 be p)esc)ibe3 b1 i4ple4entin; )e;ulations 8ithin (*') 3a1s f)o4 )eceipt of the assess4entH othe)8ise+ the assess4ent shall beco4e final an3 unappealable$ If the p)otest is 3enie3 in 8hole o) in pa)t+ the in3i5i3ual+ association o) co)po)ation a35e)sel1 affecte3 b1 the 3ecision on the p)otest 4a1 appeal to the Cou)t of Tax Appeals 8ithin thi)t1 (*') 3a1s f)o4 )eceipt of sai3 3ecisionH othe)8ise+ the 3ecision shall beco4e final+ executo)1 an3 3e4an3able$ (As inse)te3 b1 P$ $ %<<*)

Apa)t f)o4 failin; to file the )eAui)e3 estate tax )etu)n 8ithin the ti4e )eAui)e3 fo) the filin; of the sa4e+ petitione)+ an3 the othe) hei)s ne5e) Auestione3 the assess4ents se)5e3 upon the4+ allo8in; the sa4e to lapse into finalit1+ an3 p)o4ptin; the 7IR to collect the sai3 taxes b1 le51in; upon the p)ope)ties left b1 P)esi3ent Ma)cos$ Petitione) sub4its+ ho8e5e)+ that I8hile the assess4ent of taxes 4a1 ha5e been 5ali3l1 un3e)ta:en b1 the #o5e)n4ent+ collection the)eof 4a1 ha5e been 3one in 5iolation of the la8$ Thus+ the 4anne) an3 4etho3 in 8hich the latte) is enfo)ce3 4a1 be Auestione3 sepa)atel1+ an3 i))especti5e of the finalit1 of the fo)4e)+ because the #o5e)n4ent 3oes not ha5e the unb)i3le3 3isc)etion to enfo)ce collection 8ithout )e;a)3 to the clea) p)o5ision of la8$I %& Petitione) specificall1 points out that appl1in; Me4o)an3u4 Ci)cula) "o$ *-E?-+ i4ple4entin; Sections *%- an3 *,& of the ol3 tax co3e (Republic Act 9,'*)+ the 7IRCs "otices of /e51 on the Ma)cos p)ope)ties+ 8e)e issue3 be1on3 the allo8e3 pe)io3+ an3 a)e the)efo)e null an3 5oi36 $ $ $ the "otices of /e51 on Real P)ope)t1 (Annexes O to "" of Annex C of this Petition) in satisfaction of sai3 assess4ents 8e)e still issue3 b1 )espon3ents 8ell be1on3 the pe)io3 4an3ate3 in Re5enue Me4o)an3u4 Ci)cula) "o$ *-E?-$ These "otices of /e51 8e)e issue3 onl1 on ,, .eb)ua)1 %((* an3 ,' Ma1 %((* 8hen at least se5enteen (%<) 4onths ha3 al)ea31 lapse3 f)o4 the last se)5ice of tax assess4ent on %, Septe4be) %((%$ As no notices of 3ist)aint of pe)sonal p)ope)t1 8e)e fi)st issue3 b1 )espon3ents+ the latte) shoul3 ha5e co4plie3 8ith Re5enue Me4o)an3u4 Ci)cula) "o$ *-E?- an3 issue3 these

"otices of /e51 not ea)lie) than th)ee (*) 4onths no) late) than six (?) 4onths f)o4 %, Septe4be) %((%$ In acco)3ance 8ith the Ci)cula)+ )espon3ents onl1 ha3 until %, Ma)ch %((, (the last 3a1 of the sixth 4onth) 8ithin 8hich to issue these "otices of /e51$ The "otices of /e51+ ha5in; been issue3 be1on3 the pe)io3 allo8e3 b1 la8+ a)e thus 5oi3 an3 of no effect$ %9 Oe hol3 othe)8ise$ The "otices of /e51 upon )eal p)ope)t1 8e)e issue3 8ithin the p)esc)ipti5e pe)io3 an3 in acco)3ance 8ith the p)o5isions of the p)esent Tax Co3e$ The 3eficienc1 tax assess4ent+ ha5in; al)ea31 beco4e final+ executo)1+ an3 3e4an3able+ the sa4e can no8 be collecte3 th)ou;h the su44a)1 )e4e31 of 3ist)aint o) le51 pu)suant to Section ,'9 of the "IRC$ The applicable p)o5ision in )e;a)3 to the p)esc)ipti5e pe)io3 fo) the assess4ent an3 collection of tax 3eficienc1 in this instance is A)ticle ,,* of the "IRC+ 8hich pe)tinentl1 p)o5i3es6 Sec$ ,,*$ Exceptions as to a pe)io3 of li4itation of assess4ent an3 collection of taxes$ Q (a) In the case of a false o) f)au3ulent )etu)n 8ith intent to e5a3e tax o) of a failu)e to file a )etu)n+ the tax 4a1 be assesse3+ o) a p)ocee3in; in cou)t fo) the collection of such tax 4a1 be be;un 8ithout assess4ent+ at an1 ti4e 8ithin ten (%') 1ea)s afte) the 3isco5e)1 of the falsit1+ f)au3+ o) o4ission6 P)o5i3e3+ That+ in a f)au3 assess4ent 8hich has beco4e final an3 executo)1+ the fact of f)au3 shall be Bu3iciall1 ta:en co;ni=ance of in the ci5il o) c)i4inal action fo) the collection the)eof$ xxx xxx xxx

(c) An1 inte)nal )e5enue tax 8hich has been assesse3 8ithin the pe)io3 of li4itation abo5e p)esc)ibe3+ 4a1 be collecte3 b1 3ist)aint o) le51 o) b1 a p)ocee3in; in cou)t 8ithin th)ee 1ea)s follo8in; the assess4ent of the tax$ xxx xxx xxx

The o4ission to file an estate tax )etu)n+ an3 the subseAuent failu)e to contest o) appeal the assess4ent 4a3e b1 the 7IR is fatal to the petitione)Cs cause+ as un3e) the abo5eEcite3 p)o5ision+ in case of failu)e to file a )etu)n+ the tax 4a1 be assesse3 at an1 ti4e 8ithin ten 1ea)s afte) the o4ission+ an3 an1 tax so assesse3 4a1 be collecte3 b1 le51 upon )eal p)ope)t1 8ithin th)ee 1ea)s follo8in; the assess4ent of the tax$ Since the estate tax assess4ent ha3 beco4e final an3 unappealable b1 the petitione)Cs 3efault as )e;a)3s p)otestin; the 5ali3it1 of the sai3 assess4ent+ the)e is no8 no )eason 8h1 the 7IR cannot continue 8ith the collection of the sai3 tax$ An1 obBection a;ainst the assess4ent shoul3 ha5e been pu)sue3 follo8in; the a5enue pa5e3 in Section ,,( of the "IRC on p)otests on assess4ents of inte)nal )e5enue taxes$ Petitione) fu)the) a);ues that Ithe nu4e)ous pen3in; cou)t cases Auestionin; the late p)esi3entCs o8ne)ship o) inte)ests in se5e)al p)ope)ties (both )eal an3 pe)sonal) 4a:e the total 5alue of his estate+ an3 the conseAuent estate tax 3ue+ incapable of exact pecunia)1 3ete)4ination at this ti4e$ Thus+ )espon3entsC assess4ent of the estate tax an3 thei) issuance of the "otices of /e51 an3 sale a)e p)e4atu)e an3 opp)essi5e$I He points out the pen3enc1 of San3i;anba1an Ci5il Case "os$ '''%E''*& an3 '%&%+ 8hich 8e)e file3 b1 the ;o5e)n4ent to Auestion the o8ne)ship an3 inte)ests of the late P)esi3ent in )eal an3 pe)sonal p)ope)ties locate3 8ithin an3 outsi3e the Philippines$

Petitione)+ ho8e5e)+ o4its to alle;e 8hethe) the p)ope)ties le5ie3 upon b1 the 7IR in the collection of estate taxes upon the 3ece3entCs estate 8e)e a4on; those in5ol5e3 in the sai3 cases pen3in; in the San3i;anba1an$ In3ee3+ the cou)t is at a loss as to ho8 these cases a)e )ele5ant to the 4atte) at issue$ The 4e)e fact that the 3ece3ent has pen3in; cases in5ol5in; illE ;otten 8ealth 3oes not affect the enfo)ce4ent of tax assess4ents o5e) the p)ope)ties in3ubitabl1 inclu3e3 in his estate$ Petitione) also exp)esses his )ese)5ation as to the p)op)iet1 of the 7IRCs total assess4ent of P,*+,(,+?'<+?*-$''+ statin; that this a4ount 3e5iates f)o4 the fin3in;s of the epa)t4ent of 2usticeCs Panel of P)osecuto)s as pe) its )esolution of ,' Septe4be) %((%$ Alle;e3l1+ this is clea) e5i3ence of the unce)taint1 on the pa)t of the #o5e)n4ent as to the total 5alue of the estate of the late P)esi3ent$ This is+ to ou) 4in3+ the petitione)Cs last 3itch effo)t to assail the assess4ent of estate tax 8hich ha3 al)ea31 beco4e final an3 unappealable$ It is not the epa)t4ent of 2ustice 8hich is the ;o5e)n4ent a;enc1 tas:e3 to 3ete)4ine the a4ount of taxes 3ue upon the subBect estate+ but the 7u)eau of Inte)nal Re5enue+ %? 8hose 3ete)4inations an3 assess4ents a)e p)esu4e3 co))ect an3 4a3e in ;oo3 faith$ %< The taxpa1e) has the 3ut1 of p)o5in; othe)8ise$ In the absence of p)oof of an1 i))e;ula)ities in the pe)fo)4ance of official 3uties+ an assess4ent 8ill not be 3istu)be3$ E5en an assess4ent base3 on esti4ates is p)i4a facie 5ali3 an3 la8ful 8he)e it 3oes not appea) to ha5e been a))i5e3 at a)bit)a)il1 o) cap)iciousl1$ The bu)3en of p)oof is upon the co4plainin; pa)t1 to sho8 clea)l1 that the assess4ent

is e))oneous$ .ailu)e to p)esent p)oof of e))o) in the assess4ent 8ill Bustif1 the Bu3icial affi)4ance of sai3 assess4ent$ %- In this instance+ petitione) has not pointe3 out one sin;le p)o5ision in the Me4o)an3u4 of the Special Au3it Tea4 8hich ;a5e )ise to the Auestione3 assess4ent+ 8hich bea)s a t)ace of falsit1$ In3ee3+ the petitione)Cs attac: on the assess4ent bea)s 4ainl1 on the alle;e3 i4p)obable an3 unconscionable a4ount of the taxes cha);e3$ 7ut 4e)e )heto)ic cannot suppl1 the basis fo) the cha);e of i4p)op)iet1 of the assess4ents 4a3e$ Mo)eo5e)+ these obBections to the assess4ents shoul3 ha5e been )aise3+ consi3e)in; the a4ple )e4e3ies affo)3e3 the taxpa1e) b1 the Tax Co3e+ 8ith the 7u)eau of Inte)nal Re5enue an3 the Cou)t of Tax Appeals+ as 3esc)ibe3 ea)lie)+ an3 cannot be )aise3 no8 5ia Petition fo) Ce)tio)a)i+ un3e) the p)etext of ;)a5e abuse of 3isc)etion$ The cou)se of action ta:en b1 the petitione) )eflects his 3is)e;a)3 o) e5en )epu;nance of the establishe3 institutions fo) ;o5e)nance in the sche4e of a 8ellE o)3e)e3 societ1$ The subBect tax assess4ents ha5in; beco4e final+ executo)1 an3 enfo)ceable+ the sa4e can no lon;e) be conteste3 b1 4eans of a 3is;uise3 p)otest$ In the 4ain+ Ce)tio)a)i 4a1 not be use3 as a substitute fo) a lost appeal o) )e4e31$ %( This Bu3icial polic1 beco4es 4o)e p)onounce3 in 5ie8 of the absence of sufficient attac: a;ainst the actuations of ;o5e)n4ent$ On the 4atte) of sufficienc1 of se)5ice of "otices of Assess4ent to the petitione)+ 8e fin3 the )espon3ent appellate cou)tCs p)onounce4ents soun3 an3 )esilient to petitione)Cs attac:s$

Anent ;)oun3s *(b) an3 (7) Q both alle;in;Jclai4in; lac: of notice Q Oe fin3+ afte) consi3e)in; the facts an3 ci)cu4stances+ as 8ell as e5i3ences+ that the)e 8as sufficient+ const)ucti5e an3Jo) actual notice of assess4ents+ le51 an3 sale+ sent to he)ein petitione) .e)3inan3 I7on;bon;I Ma)cos as 8ell as to his 4othe) M)s$ I4el3a Ma)cos$ E5en if 8e a)e to )ule out the notices of assess4ents pe)sonall1 ;i5en to the ca)eta:e) of M)s$ Ma)cos at the latte)Cs last :no8n a33)ess+ on Au;ust ,?+ %((% an3 Septe4be) %,+ %((%+ as 8ell as the notices of assess4ent pe)sonall1 ;i5en to the ca)eta:e) of petitione) also at his last :no8n a33)ess on Septe4be) %,+ %((% Q the subseAuent notices ;i5en the)eafte) coul3 no lon;e) be i;no)e3 as the1 8e)e sent at a ti4e 8hen petitione) 8as al)ea31 he)e in the Philippines+ an3 at a place 8he)e sai3 notices 8oul3 su)el1 be calle3 to petitione)Cs attention+ an3 )ecei5e3 b1 )esponsible pe)sons of sufficient a;e an3 3isc)etion$ Thus+ on Octobe) ,'+ %((,+ fo)4al assess4ent notices 8e)e se)5e3 upon M)s$ Ma)cos cJo the petitione)+ at his office+ House of Rep)esentati5es+ 7atasan Pa4bansa+ V$C$ (Annexes IAI+ IAE%I+ IAE,I+ IAE*IH pp$ ,'<E,%'+ Co44entJMe4o)an3u4 of OS#)$ Mo)eo5e)+ a notice to taxpa1e) 3ate3 Octobe) -+ %((, in5itin; M)s$ Ma)cos to a confe)ence )elati5e to he) tax liabilities+ 8as fu)nishe3 the counsel of M)s$ Ma)cos Q ean Antonio Co)onel (Annex I7I+ p$ ,%%+ ibi3)$ The)eafte)+ copies of "otices 8e)e also se)5e3 upon M)s$ I4el3a Ma)cos+ the petitione) an3 thei) counsel I e 7o)Ba+ Me3ial3ea+ Ata+ 7ello+ #ue5a))a an3 Se)apio /a8 OfficeI+ on Ap)il <+ %((* an3 2une %'+ %((*$ espite all of these "otices+ petitione) ne5e) lifte3 a fin;e) to p)otest the

assess4ents+ (upon 8hich the /e51 an3 sale of p)ope)ties 8e)e base3)+ no) appeale3 the sa4e to the Cou)t of Tax Appeals$ The)e bein; sufficient se)5ice of "otices to he)ein petitione) (an3 his 4othe)) an3 it appea)in; that petitione) continuousl1 i;no)e3 sai3 "otices 3espite se5e)al oppo)tunities ;i5en hi4 to file a p)otest an3 to the)eafte) appeal to the Cou)t of Tax Appeals+ Q the tax assess4ents subBect of this case+ upon 8hich the le51 an3 sale of p)ope)ties 8e)e base3+ coul3 no lon;e) be conteste3 (3i)ectl1 o) in3i)ectl1) 5ia this instant petition fo) ce)tio)a)i$ ,' Petitione) a);ues that all the Auestione3 "otices of /e51+ ho8e5e)+ 4ust be nullifie3 fo) ha5in; been issue3 8ithout 5ali3l1 se)5in; copies the)eof to the petitione)$ As a 4an3ato)1 hei) of the 3ece3ent+ petitione) a5e)s that he has an inte)est in the subBect estate+ an3 notices of le51 upon its p)ope)ties shoul3 ha5e been se)5e3 upon hi4$ Oe 3o not a;)ee$ In the case of notices of le51 issue3 to satisf1 the 3elinAuent estate tax+ the 3elinAuent taxpa1e) is the Estate of the 3ece3ent+ an3 not necessa)il1+ an3 exclusi5el1+ the petitione) as hei) of the 3ecease3$ In the sa4e 5ein+ in the 4atte) of inco4e tax 3elinAuenc1 of the late p)esi3ent an3 his spouse+ petitione) is not the taxpa1e) liable$ Thus+ it follo8s that se)5ice of notices of le51 in satisfaction of these tax 3elinAuencies upon the petitione) is not )eAui)e3 b1 la8+ as un3e) Section ,%* of the "IRC+ 8hich pe)tinentl1 states6 xxx xxx xxx

$ $ $ /e51 shall be effecte3 b1 8)itin; upon sai3 ce)tificate a 3esc)iption of the p)ope)t1 upon 8hich le51 is 4a3e$ At the

sa4e ti4e+ 8)itten notice of the le51 shall be 4aile3 to o) se)5e3 upon the Re;iste) of ee3s of the p)o5ince o) cit1 8he)e the p)ope)t1 is locate3 an3 upon the 3elinAuent taxpa1e)+ o) if he be absent f)o4 the Philippines+ to his a;ent o) the 4ana;e) of the business in )espect to 8hich the liabilit1 a)ose+ o) if the)e be none+ to the occupant of the p)ope)t1 in Auestion$ xxx xxx xxx

.IRST I!ISIO" #$R$ "o$ /E?-*-9 Ma1 %,+ %(-(

The fo)e;oin; not8ithstan3in;+ the )eco)3 sho8s that notices of 8a))ants of 3ist)aint an3 le51 of sale 8e)e fu)nishe3 the counsel of petitione) on Ap)il <+ %((*+ an3 2une %'+ %((*+ an3 the petitione) hi4self on Ap)il %,+ %((* at his office at the 7atasan; Pa4bansa$ ,% Oe cannot the)efo)e+ countenance petitione)Cs insistence that he 8as 3enie3 3ue p)ocess$ Ohe)e the)e 8as an oppo)tunit1 to )aise obBections to ;o5e)n4ent action+ an3 such oppo)tunit1 8as 3is)e;a)3e3+ fo) no Bustifiable )eason+ the pa)t1 clai4in; opp)ession then beco4es the opp)esso) of the o)3e)l1 functions of ;o5e)n4ent$ He 8ho co4es to cou)t 4ust co4e 8ith clean han3s$ Othe)8ise+ he not onl1 taints his na4e+ but )i3icules the 5e)1 st)uctu)e of establishe3 autho)it1$ I" !IEO OHEREO.+ the Cou)t RESO/!E to E"R the p)esent petition$ The ecision of the Cou)t of Appeals 3ate3 "o5e4be) ,(+ %((& is he)eb1 A..IRME in all )espects$ SO OR ERE $

I/ E.O"SO O$ E/E#A O+ as Ancilla)1 A34inist)ato) of the Testate Estate of the late OARRE" TAR/OR #RAHAM+ petitione) 5s$ HO"$ COURT O. TAX APPEA/S an3 COMMISSIO"ER O. I"TER"A/ RE!E"UE )espon3ents$ A;)a5a+ /uce)o G #ineta fo) petitione)s$ The Office of the Solicto) #ene)al fo) public )espon3ents$

CRU0+ 2$6 Ohat the petitione) p)esents as a )athe) co4plicate3 p)oble4 is in )ealit1 a 5e)1 si4ple Auestion f)o4 the 5ie8point of the Solicito) #ene)al$ Oe a;)ee 8ith the latte)$ The)e is actuall1 onl1 one issue to be )esol5e3 in this action$ That issue is 8hethe) o) not the )espon3ent Cou)t of Tax Appeals e))e3 in 3is4issin; the petitione)Cs appeal on ;)oun3s of Bu)is3iction an3 lac: of a cause of action$ Appeal f)o4 8hatW That in3ee3 is the Auestion$

Republic of the Philippines SUPREME COURT Manila

7ut fi)st the facts$

On Ma)ch %&+ %(<?+ Oa))en Ta1lo) #)aha4+ an A4e)ican national fo)4e)l1 )esi3ent in the Philippines+ 3ie3 in O)e;on+ U$S$A$ % As he left ce)tain sha)es of stoc: in the Philippines+ his son+ Oa)3 #)aha4+ file3 an estate tax )etu)n on Septe4be) %?+ %(<?+ 8ith the Philippine Re5enue Rep)esentati5e in San .)ancisco+ U$S$A$ , On the basis of this )etu)n+ the )espon3ent Co44issione) of Inte)nal Re5enue assesse3 the 3ece3entCs estate an estate tax in the a4ount of P(?+9'($*9 on .eb)ua)1 (+ %(<-$ * This assess4ent 8as p)oteste3 on Ma)ch <+ %(<-+ b1 the la8 fi)4 of 7u4p+ Roun; an3 Oal:e) on behalf of the estate $ & The p)otest 8as 3enie3 b1 the Co44issione) on 2ul1 <+ %(<-$ 9 "o fu)the) action 8as ta:en b1 the estate in pu)suit of that p)otest$ Mean8hile+ on 2anua)1 %-+ %(<<+ the 3ece3entCs 8ill ha3 been a34itte3 to p)obate in the Ci)cuit Cou)t of O)e;on ? Oa)3 #)aha4+ the 3esi;nate3 executo)+ then appointe3 Il3efonso Ele;a3o+ the he)ein petitione)+ as his atto)ne1EinEfact fo) the allo8ance of the 8ill in the Philippines$ < Pu)suant to such autho)it1+ the petitione) co44ence3 p)obate p)ocee3in;s in the Cou)t of .i)st Instance of Ri=al$ - The 8ill 8as allo8e3 on ece4be) %-+ %(<-+ 8ith the petitione) as ancilla)1 a34inist)ato)$ ( As such+ he file3 a secon3 estate tax )etu)n 8ith the 7u)eau of Inte)nal Re5enue on 2une &+ %(-'$ %' On the basis of this secon3 )etu)n+ the Co44issione) i4pose3 an assess4ent on the estate in the a4ount of P<,+(&-$-<$ %% This 8as p)oteste3 on behalf of the estate b1 the A;)a5a+ /uce)o an3 #ineta /a8 Office on Au;ust %*+ %(-'$ %,

Ohile this p)otest 8as pen3in;+ the Co44issione) file3 in the p)obate p)ocee3in;s a 4otion fo) the allo8ance of the basic estate tax of P(?+9'($*9 as assesse3 on .eb)ua)1 (+ %(<-$ %* He sai3 that this liabilit1 ha3 not 1et been pai3 althou;h the assess4ent ha3 lon; beco4e final an3 executo)1$ The petitione) )e;a)3e3 this 4otion as an i4plie3 3enial of the p)otest file3 on Au;ust %*+ %(-'+ a;ainst the secon3 assess4ent of P<,+(&-$-<$ %& On this un3e)stan3in;+ he file3 on Septe4be) %9+ %(-%+ a petition fo) )e5ie8 8ith the Cou)t of Tax Appeals challen;in; the sai3 assess4ent$ %9 The Co44issione) 3i3 not i44e3iatel1 ans8e) (in fact+ as the petitione) st)esse3+ no ans8e) 8as file3 3u)in; a 3ela1 of %(9 3a1s) an3 in the en3 instea3 cancelle3 the p)oteste3 assess4ent in a lette) to the 3ece3entCs estate 3ate3 Ma)ch *%+ %(-,$ %? This cancellation 8as notifie3 to the Cou)t of Tax Appeals in a 4otion to 3is4iss on the ;)oun3 that the p)otest ha3 beco4e 4oot an3 aca3e4ic$ %< The 4otion 8as ;)ante3 an3 the petition 3is4isse3 on Ap)il ,9+ %(-&$ %- The petitione) then ca4e to this Cou)t on ce)tio)a)i un3e) Rule &9 of the Rules of Cou)t$ The petitione) )aises th)ee basic Auestions+ to 8it+ (%) 8hethe) the sha)es of stoc:s left b1 the 3ece3ent shoul3 be t)eate3 as his exclusi5e+ an3 not conBu;al+ p)ope)t1H (,) 8hethe) the sai3 stoc:s shoul3 be assesse3 as of the ti4e of the o8ne)Cs 3eath o) six 4onths the)eafte)H an3 (*) 8hethe) the appeal file3 8ith the )espon3ent cou)t shoul3 be consi3e)e3 4oot an3 aca3e4ic$ Oe 3eal fi)st 8ith the thi)3 issue as it is 3ecisi5e of this case$

In the lette) to the 3ece3entCs estate 3ate3 Ma)ch *%+ %(-,+ the Co44issione) of Inte)nal Re5enue 8)ote as follo8s6 Estate of OARRE" T$ #RAHAM cJo M)$ I/ E.E"SO O$ E/E#A O Ancilla)1 A34inist)ato) Philex 7uil3in; co)$ 7)ixton G .ai)lane Sts$ Pasi;+ Met)o Manila Si)6 This is 8ith )e;a)3 to the estate of the late OARRE" TAR/OR #RAHAM+ 8ho 3ie3 a )esi3ent of O)e;on+ U$S$A$ on Ma)ch %&+ %(<?$ It appea)s that t8o (,) lette)s of 3e4an3 8e)e issue3 b1 this 7u)eau$ One is fo) the a4ount of P(?+9'($*9 base3 on the fi)st )etu)n file3+ an3 the othe) in the a4ount of P<,+(&-$-<+ base3 on the secon3 )etu)n file3$ It appea)s that the fi)st assess4ent of P(?+9'($*9 8as issue3 on .eb)ua)1 (+ %(<- on the basis of the estate tax )etu)n file3 on Septe4be) %?+ %(<?$ The sai3 assess4ent 8as+ ho8e5e)+ p)oteste3 in a lette) 3ate3 Ma)ch <+ %(<- but 8as 3enie3 on 2ul1 <+ %(<-$ Since no appeal 8as 4a3e 8ithin the )e;ulato)1 pe)io3+ the sa4e has beco4e final$ In 5ie8 the)eof+ it is )eAueste3 that 1ou settle the afo)esai3 assess4ent fo) P(?+9'($*9 8ithin fifteen (%9) 3a1s upon )eceipt he)eof to the Recei5able Accounts i5ision+ this 7u)eau+ 7IR "ational Office 7uil3in;+ ili4an+ Vue=on Cit1$ The assess4ent fo) P<,+(&($9< 3ate3 2ul1 *+ %(-'+ )efe))e3 to abo5e is he)eb1 cancelle3$ !e)1 t)ul1 1ou)s+ (S# $) RU7E" 7$ A"CHETA Actin; Co44issione) %(

It is ob5ious f)o4 the exp)ess cancellation of the secon3 assess4ent fo) P<,+(&-$-< that the petitione) ha3 been 3ep)i5e3 of a cause of action as it 8as p)ecisel1 f)o4 this assess4ent that he 8as appealin;$ In its 3ecision+ the Cou)t of Tax Appeals sai3 that the petition Auestionin; the assess4ent of 2ul1 *+ %(-'+ 8as Ip)e4atu)eI since the p)otest to the assess4ent ha3 not 1et been )esol5e3$ ,' As a 4atte) of fact it ha36 the sai3 assess4ent ha3 been cancelle3 b1 5i)tue of the abo5eEAuote3 lette)$ The )espon3ent cou)t 8as on su)e) ;)oun3+ ho8e5e)+ 8hen it follo8e3 8ith the fin3in; that the sai3 cancellation ha3 )en3e)e3 the petition 4oot an3 aca3e4ic$ The)e 8as )eall1 no 4o)e assess4ent to )e5ie8$ The petitione) a);ues that the issuance of the secon3 assess4ent on 2ul1 *+ %(-'+ ha3 the effect of cancelin; the fi)st assess4ent of .eb)ua)1 (+ %(<-+ an3 that the subseAuent cancellation of the secon3 assess4ent 3i3 not ha5e the effect of auto4aticall1 )e5i5in; the fi)st$ Mo)eo5e)+ the fi)st assess4ent is not bin3in; on hi4 because it 8as base3 on a )etu)n file3 b1 fo)ei;n la81e)s 8ho ha3 no :no8le3;e of ou) tax la8s o) access to the Cou)t of Tax Appeals$ The petitione) is clutchin; at st)a8s$ It is note3 that in the lette) of 2ul1 *+ %(-'+ i4posin; the secon3 assess4ent of P<,+(&-$-<+ the Co44issione) 4a3e it clea) that Ithe afo)esai3 a4ount is consi3e)e3 p)o5isional onl1 base3 on the estate tax )etu)n file3 subBect to in5esti;ation b1 this Office fo) final 3ete)4ination of the co))ect estate tax 3ue f)o4 the estate$ An1 a4ount that 4a1 be foun3 3ue afte) sai3

in5esti;ation 8ill be assesse3 an3 collecte3 late)$I ,% It is illo;ical to su;;est that a p)o5isional assess4ent can supe)se3e an ea)lie) assess4ent 8hich ha3 clea)l1 beco4e final an3 executo)1$ The secon3 contention is no less fli4s1$ The petitione) cannot be se)ious 8hen he a);ues that the fi)st assess4ent 8as in5ali3 because the fo)ei;n la81e)s 8ho file3 the )etu)n on 8hich it 8as base3 8e)e not fa4ilia) 8ith ou) tax la8s an3 p)oce3u)e$ Is the petitione) su;;estin; that the1 a)e excuse3 f)o4 co4pliance the)e8ith because of thei) i;no)anceW If ou) o8n la81e)s an3 taxpa1e)s cannot clai4 a si4ila) p)efe)ence because the1 a)e not allo8e3 to clai4 a li:e i;no)ance+ it stan3s to )eason that fo)ei;ne)s cannot be an1 less boun3 b1 ou) o8n la8s in ou) o8n count)1$ A 4o)e ob5ious an3 shallo8 3isc)i4ination than that su;;este3 b1 the petitione) is in3ee3 3ifficult to fin3$ 7ut the 4ost co4pellin; consi3e)ation in this case is the fact that the fi)st assess4ent is al)ea31 final an3 executo)1 an3 can no lon;e) be Auestione3 at this late hou)$ The assess4ent 8as 4a3e on .eb)ua)1 (+ %(<-$ It 8as p)oteste3 on Ma)ch <+ %(<-$ The p)otest 8as 3enie3 on 2ul1 <+ %(<-$ As no fu)the) action 8as ta:en the)eon b1 the 3ece3entCs estate+ the)e is no Auestion that the assess4ent has beco4e final an3 executo)1$ In fact+ the la8 fi)4 that ha3 lo3;e3 the p)otest appea)s to ha5e accepte3 its 3enial$ In his 4otion 8ith the p)obate cou)t+ the )espon3ent Co44issione) st)esse3 that Iin a lette) 3ate3 2anua)1 ,(+ %(-'+ the Estate of Oa))en Ta1lo) #)aha4 th)u the afo)esai3 fo)ei;n la8 fi)4 info)4e3 clai4ant that the1 ha5e pai3 sai3 tax liabilit1 th)u the A;)a5a+ !ela)3e+ /uce)o an3

Puno+ Philippine la8 fi)4 of *%* 7uen3ia A5enue Ext$+ Ma:ati+ Met)o Manila that initiate3 the instant ancilla)1 p)ocee3in;sI althou;h he a33e3 that such pa14ent ha3 not 1et been )ecei5e3$ ,, This lette) 8as an ac:no8le3;4ent b1 the estate of the 5ali3it1 an3 finalit1 of the fi)st assess4ent$ Si;nificantl1+ it has not been 3enie3 b1 the petitione)$ In 5ie8 of the finalit1 of the fi)st assess4ent+ the petitione) cannot no8 )aise the Auestion of its 5ali3it1 befo)e this Cou)t an1 4o)e than he coul3 ha5e 3one so befo)e the Cou)t of Tax Appeals$ Ohat the estate of the 3ece3ent shoul3 ha5e 3one ea)lie)+ follo8in; the 3enial of its p)otest on 2ul1 <+ %(<-+ 8as to appeal to the Cou)t of Tax Appeals 8ithin the )e;le4enta)1 pe)io3 of *' 3a1s afte) it )ecei5e3 notice of sai3 3enial$ It 8as in such appeal that the petitione) coul3 then ha5e )aise3 the fi)st t8o issues he no8 )aises 8ithout basis in the p)esent petition$ The Auestion of 8hethe) o) not the sha)es of stoc: left b1 the 3ece3ent shoul3 be consi3e)e3 conBu;al p)ope)t1 o) belon;in; to hi4 alone is i44ate)ial in these p)ocee3in;s$ So too is the ti4e at 8hich the assess4ent of these sha)es of stoc: shoul3 ha5e been 4a3e b1 the 7IR$ These Auestions 8e)e not )esol5e3 b1 the Cou)t of Tax Appeals because it ha3 no Bu)is3iction to act on the petitione)Cs appeal f)o4 an assess4ent that ha3 al)ea31 been cancelle3$ The assess4ent bein; no lon;e) cont)o5e)sial o) )e5ie8able+ the)e 8as no Bustification fo) the )espon3ent cou)t to )ule on the petition except to 3is4iss it$ If in3ee3 the Co44issione) of Inte)nal Re5enue co44itte3 an e))o) in the co4putation of the estate tax+ as the petitione) insists+ that e))o) can no lon;e) be )ectifie3 because the o)i;inal assess4ent has lon; beco4e final an3 executo)1$ If that

assess4ent 8as not challen;e3 on ti4e an3 in acco)3ance 8ith the p)esc)ibe3 p)oce3u)e+ that e))o) Q fo) e))o) it 8as Q 8as co44itte3 not b1 the )espon3ents but b1 the 3ece3entCs estate itself 8hich the petitione) )ep)esents$ So ho8 can he no8 co4plain$ OHERE.ORE+ the petition is petitione)$ It is so o)3e)e3+ Republic of the Philippines SUPREME COURT Manila SECO" I!ISIO" .eb)ua)1 %+ ,'', E"IE + 8ith costs a;ainst the

Case "o$ &&,? 8hich is an action fo) annul4ent of title+ )econ5e1ance an3 3a4a;es$ The facts of the case a)e as follo8s6 7asilisa Co4e)ciante is a 4othe) of fi5e (9) chil3)en+ na4el1+ Rosa)io Aust)ia+ Consolacion Aust)ia+ he)ein petitione) Apolina)ia Aust)iaEMa;at+ /eona)3o+ an3 one of he)ein )espon3ents+ .lo)entino /u4ubos$ /eona)3o 3ie3 in a 2apanese concent)ation ca4p at Ta)lac 3u)in; Oo)l3 Oa) II$ In %(9*+ 7asilisa bou;ht a pa)cel of )esi3ential lan3 to;ethe) 8ith the i4p)o5e4ent the)eon co5e)e3 an3 3esc)ibe3 in T)ansfe) Ce)tificate of Title "o$ RTE&'*? (TE*,?-) an3 :no8n as /ot %+ 7loc: %+ Ca5ite 7each Sub3i5ision+ 8ith an a)ea of %9' sAua)e 4ete)s+ locate3 in 7a;on; Poo:+ San Antonio+ Ca5ite Cit1$ On ece4be) %<+ %(<9+ 7asilisa execute3 a 3ocu4ent 3esi;nate3 as IKasulatan sa Kaloobpala ( onation)I$ The sai3 3ocu4ent 8hich 8as nota)i=e3 b1 Att1$ Ca)los !inie;)a+ )ea3s as follo8s6 KASU/ATA"# SA KA/OO7PA/A ( O"ATIO") TA/ASTASI" "# /AHAT AT SI"UMA"6

#$R$ "o$ %'?<99

APO/I"ARIA AUSTRIAEMA#AT+ petitione)+ 5s$ HO"$ COURT O. APPEA/S an3 ./ORE"TI"O /UMU7OS+ OMI"#O COMIA+ TEO ORA CARAMPOT+ ER"ESTO APO/O+ SE#U" A SUMPE/O+ MAMERTO SUMPE/O an3 RICAR O SUMPE/O+ )espon3ents$ ECISIO" E /EO"+ 2R$+ 2$6 7efo)e us is a petition fo) )e5ie8 of the ecision% of the Cou)t of Appeals+, 3ate3 2une *'+ %(-( )e5e)sin; the ecision+* 3ate3 Au;ust %9+ %(-? of the Re;ional T)ial Cou)t (RTC) of Ca5ite+ 7)anch %<$ The ecision of the RTC 3is4isse3 Ci5il

"a a:o+ si 7ASE/ISA COMERCIA"TE+ 4a1 sapat na ;ulan;+ .ilipina+ balo+ at nanini)ahan sa bl;$ -'( /$ 2a5ie) 7a;on; Poo:+ San Antonio+ /un;so3 n; Kabite+ .ilipinas+ sa pa4a4a;itan n; :asulatan; itoP1

"A#SASA/ARSAR "a alan;Ealan; sa 4abutin; pa;lilin;:o3 at pa;tin;in na iniu:ol sa a:in n; apat :on; 4;a tuna1 na ana: na sila6 ROSARIO AUSTRIA+ .ilipina+ 4a1 sapat na ;ulan;+ balo+ nanini)ahan sa -'( /$ 2a5ie)+ 7a;on; Poo:+ San Antonio+ /un;so3 n; KabiteH CO"SO/ACIO" AUSTRIA+ .ilipina+ 4a1 sapat na ;ulan;+ balo nanini)ahan sa -'( /$ 2a5ie)+ 7a;on; Poo:+ San Antonio+ /un;so3 n; KabiteH APO/I"ARIA AUSTRIA+ .ilipina+ 4a1 sapat na ;ulan;+ 4a1 asa8a+ nanini)ahan sa Pason; Ka8a1an+ Hen$ T)ias+ KabiteH ./ORE"TI"O /UMU7OS+ .ilipino+ 4a1 sapat na ;ulan;+ asa8a ni Enca)nacion Ma;sino+ at nanini)ahan 3in sa -'( /$ 2a5ie)+ 7a;on; Poo:+ San Antonio+ /un;so3 n; KabiteH a1 Kusan; loob na ibinibi;a1 :o at ipina;:a:aloob n; ;anap at hin3i na 4ababa8i sa naulit n; apat na ana: :o at sa :anilan; 4;a ta;a4a;4ana (sic)+ an; a:in; isan; lupan; )esi3ential o ti)ahan sa4pu n; a:in; baha1 nahan n; na:ati)i: 3oon na nasa 7a;on; Poo: 3in+ San Antonio+ /un;so3 n; Kabite+ at na:i:ilala bilan; /ote no$ <+ 7loc: no$%+ of Sub3i5ision Plan Ps3E%,,&<H :no8n as Ca5ite 7each Sub3i5ision+ bein; a po)tion of /ot "o$ %'99+ of the Ca3ast)al su)5e1 of Ca5ite+ #/RO Ca3ast)al Rec$ no$ (9*(H 4a1 su:at na %9' 4et)os cua3)a3os+ at na:atala sa pan;alan :o sa Titulo To))ens bilan; TCTETE*,?- (RTE&'*?) n; /un;so3 n; KabiteH

"a an; Kaloob palan; ito a1 4a;:a:abisa la4an; si4ula sa a)a8 na a:oP1 pu4ana8 sa 4un3o+ at sa ilali4 n; :on3ision na6 Ma;bubuhat o baba8asin sa hala;a n; nasabin; lupa at baha1 an; anu4an; 4a;u;ul o ;astos sa a:in; libin; at nicho at an; anu4an; 4atiti)a a1 hahatiin n; APAT na pa)te+ pa)epa)eho isan; pa)te sa ba8at ana: :on; nasasabi sa itaas nito upan; 4ali8anan; (sic) at 8alan; 4a:a:ala4an; sino4an sa :anilaH At :a4in; apat na ana: na na:ala;3a o na:a3iit sa :asulatan; ito a1 TI"ATA"##AP "AMI" an; :aloobEpalan; ito n; a4in; 4a;ulan; na si 7asilisa Co4e)ciante+ at tulo1 pinasasala4atan na4in si1a n; taos sa (sic) puso 3ahil sa :a;an3ahan loo: (sic) ni1an; ito sa a4in$ SA KATU"ARA"+ a1 nila;3aan o 3iniitan na4in ito sa "obeleta+ Kabite+ n;a1on; i:aE%< n; is1e4b)e taon; %(<9$ HER MARK 7ASE/ISA COMERCIA"TE Ta;a:aloobpala HER MARK ROSARIO AUSTRIA (S;3$) APO/I"ARIA AUSTRIA Ta;atan;;apEpala HER MARK CO"SO/ACIO" AUSTRIA (S;3$)./ORE"TI"O /UMU7OS Ta;atan;;apEpala (Ac:no8le3;4ent si;ne3 b1 "ota)1 Public C$T$ !inie;)a is o4itte3)$&

7asilisa an3 he) sai3 chil3)en li:e8ise execute3 anothe) nota)i=e3 3ocu4ent 3eno4inate3 as IKasulatanI 8hich is attache3 to the 3ee3 of 3onation$ The sai3 3ocu4ent states that6 KASU/ATA" TA/ASTASI" "# MA /A6 "a :a4in; 4;a na:ala;3a o na:a3iit sa laba: nito M sila 7asilisa Co4e)ciante at an; :an1an; 4;a ana: na sila6 Rosa)io Aust)ia+ Consolacion Aust)ia+ Apolonio Aust)ia+ at .lo)entino /u4ubos+ pa8an; 4a1 4;a sapat na ;ulan;+ na lu4a;3a o 3u4iit sa :asulatan; :aloob pala+ na sinan;a1unan na4in sa ha)ap n; "ota)io Publico+ Ca)los T$ !inie;)a+ a1 na;papaha1a; n; su4usuno36 "a an; titulo nu4e)o TCTETE,,?' (RTE&'*?) n; /un;so3 n; Kabite+ baha1 sa loten; ti)ahan n; 7a;on; Poo: na nababan;;it sa nasabin; :asulatan+ a1 4ananatili sa po3e) o possession n; Ina+ na si 7asilisa Co4e)ciante haban; si1a a1 nabubuha1 at #a1on 3in an; nasabin; Titulo a1 hin3i 4apapasan;la o 4aipa;bibili an; lupa haban; 4a1buha1 an; nasabin; 7asilisa Co4e)ciante$ Sa :atuna1an an; na;sila;3a :a4in; lahat sa laba: nito sa ha)ap n; abo;a3o Ca)los T$ !inie;)a at 3ala8an; sa:si$ "obeleta+ Kabite$ I:aE%< n; is1e4b)e+ %(<9$9

On .eb)ua)1 ?+ %(<(+ 7asilisa execute3 a ee3 of Absolute Sale of the subBect house an3 lot in fa5o) of he)ein petitione) Apolina)ia Aust)iaEMa;at fo) .i5e Thousan3 Pesos (P9+'''$'')$ As the )esult of the )e;ist)ation of that sale+ T)ansfe) Ce)tificate of Title (TCT fo) b)e5it1) "o$ RTE&'*? in the na4e of the 3ono) 8as cancelle3 an3 in lieu the)eof TCT "o$ TE%'&*& 8as issue3 b1 the Re;iste) of ee3s of Ca5ite Cit1 in fa5o) of petitione) Apolina)ia Aust)iaEMa;at on .eb)ua)1 -+ %(<($ On Septe4be) ,%+ %(-*+ he)ein )espon3ents Teo3o)a Ca)a4pot+ o4in;o Co4ia+ an3 E)nesto Apolo ()ep)esentin; thei) 3ecease3 4othe) Consolacion Aust)ia)+ Rica)3o+ Ma4e)to an3 Se;un3a+ all su)na4e3 Su4pelo ()ep)esentin; thei) 3ecease3 4othe) Rosa)io Aust)ia) an3 .lo)entino /u4ubos file3 befo)e the Re;ional T)ial Cou)t of Ca5ite an action+ 3oc:ete3 as Ci5il Case "o$ &&,? a;ainst the petitione) fo) annul4ent of TCT "o$ TE%'&*& an3 othe) )ele5ant 3ocu4ents+ an3 fo) )econ5e1ance an3 3a4a;es$ On Au;ust %9+%(-?+ the t)ial cou)t 3is4isse3 Ci5il Case "o$ &&,? pe) its ecision+ the 3ispositi5e po)tion of 8hich )ea3s6 OHERE.ORE+ in 5ie8 of the fo)e;oin;+ this Cou)t he)eb1 )en3e)s Bu3;4ent fo) 3efen3ant 3is4issin; this case an3 o)3e)in; plaintiffs to pa1 the a4ount of P*+'''$'' as atto)ne1Ps fees an3 the costs of suit$ SO OR ERE $? Acco)3in; to the t)ial cou)t+ the 3onation is a 3onation 4o)tis causa pu)suant to A)ticle <,- of the "e8 Ci5il Co3e inas4uch as the sa4e exp)essl1 p)o5i3es that it 8oul3 ta:e effect upon

the 3eath of the 3ono)H that the p)o5ision statin; that the 3ono) )ese)5e3 the )i;ht to )e5o:e the 3onation is a featu)e of a 3onation 4o)tis causa 8hich 4ust co4pl1 8ith the fo)4alities of a 8illH an3 that inas4uch as the 3onation 3i3 not follo8 the fo)4alities pe)tainin; to 8ills+ the sa4e is 5oi3 an3 p)o3uce3 no effect 8hatsoe5e)$ Hence+ the sale b1 the 3ono) of the sai3 p)ope)t1 8as 5ali3 since she )e4aine3 to be the absolute o8ne) the)eof 3u)in; the ti4e of the sai3 t)ansaction$ On appeal+ the 3ecision of the t)ial cou)t 8as )e5e)se3 b1 the Cou)t of Appeals in its subBect 3ecision+ the 3ispositi5e po)tion of 8hich )ea3s+ to 8it6 OHERE.ORE+ in 5ie8 of the fo)e;oin;+ the appeale3 3ecision is he)eb1 SET ASI E an3 a ne8 one )en3e)e36 %$ 3ecla)in; null an3 5oi3 the ee3 of Sale of Re;iste)e3 /an3 (Annex 7) an3 T)ansfe) Ce)tificate of Title "o$ TE%'&*& of the Re;ist)1 of ee3s of Ca5ite Cit1 (Annex E) an3 o)3e)in; the cancellation the)eofH an3 ,$ 3ecla)in; appellants an3 appellee coEo8ne)s of the house an3 lot in Auestion in acco)3ance 8ith the 3ee3 of 3onation execute3 b1 7asilisa Co4e)ciante on ece4be) %<+ %(<9$ "o p)onounce4ent as to costs$ SO OR ERE $< The appellate cou)t 3ecla)e3 in its 3ecision that6 In the case at ba)+ the 3ecisi5e p)oof that the 3ee3 is a 3onation inte) 5i5os is in the p)o5ision that 6

Ibinibi;a1 :o at ipina;:a:aloob n; ;anap at hin3i 4ababa8i sa naulit na apat na ana: :o at sa :anilan; 4;a ta;apa;4ana+ an; a:in; lupan; )esi3ential o ti)ahan sa4pu n; a:in; baha1 na:ati)i: 3oon xxx$ (e4phasis supplie3) This is a clea) exp)ession of the i))e5ocabilit1 of the con5e1ance$ The i))e5ocabilit1 of the 3onation is a cha)acte)istic of a 3onation inte) 5i5os$ 71 the 8o)3s Ihin3i 4ababa8iI+ the 3ono) exp)essl1 )enounce3 the )i;ht to f)eel1 3ispose of the house an3 lot in Auestion$ The )i;ht to 3ispose of a p)ope)t1 is a )i;ht essential to full o8ne)ship$ Hence+ o8ne)ship of the house an3 lot 8as al)ea31 8ith the 3onees e5en 3u)in; the 3ono)Ps lifeti4e$ xxx xxx xxx xxx

In the attache3 3ocu4ent to the 3ee3 of 3onation+ the 3ono) an3 he) chil3)en stipulate3 that6 #a1on 3in an; nasabin; titulo a1 hin3i 4apapasan;la o 4aipa;bibili an; lupa haban; 4a1 buha1 an; nasabin; 7asilisa Co4e)ciante$I The stipulation is a )eite)ation of the i))e5ocabilit1 of the 3ispossession on the pa)t of the 3ono)$ On the othe) han3+ the p)ohibition to encu4be)+ alienate o) sell the p)ope)t1 3u)in; the lifeti4e of the 3ono) is a )eco;nition of the o8ne)ship o5e) the house an3 lot in issue of the 3onees fo) onl1 in the concept of an o8ne) can one encu4be) o) 3ispose a p)ope)t1$Hence this appeal ;)oun3e3 on the follo8in; assi;n4ent of e))o)s6

I THE RESPO" E"T COURT O. APPEA/S+ OITH UE RESPECT+ I#"ORE THE RU/ES O. I"TERPRETATIO" O. CO"TRACTS OHE" IT CO"SI ERE THE O"ATIO" I" VUESTIO" AS I"TER !I!OS$ II THE RESPO" E"T COURT O. APPEA/S+ A#AI" OITH UE RESPECT+ ERRE I" "OT HO/ I"# THAT THE PRESE"T ACTIO" HAS PRESCRI7E U" ER THE STATUTE O. /IMITATIO"S$( Anent the fi)st assi;n4ent of e))o)+ the petitione) a);ues that the Cou)t of Appeals e))e3 in )ulin; that the 3onation 8as a 3onation inte) 5i5os$ She clai4s that in inte)p)etin; a 3ocu4ent+ the othe) )ele5ant p)o5isions the)ein 4ust be )ea3 in conBunction 8ith the )est$ Ohile the 3ocu4ent in3ee3 state3 that the 3onation 8as i))e5ocable+ that 4ust be inte)p)ete3 in the li;ht of the p)o5isions p)o5i3in; that the 3onation cannot be encu4be)e3+ alienate3 o) sol3 b1 an1one+ that the p)ope)t1 3onate3 shall )e4ain in the possession of the 3ono) 8hile she is ali5e+ an3 that the 3onation shall ta:e effect onl1 8hen she 3ies$ Also+ the petitione) clai4s that the 3onation is 4o)tis causa fo) the )eason that the conte4po)aneous an3 subseAuent acts of the 3ono)+ 7asilisa Co4e)ciante+ sho8e3 such intention$ Petitione) cites the testi4on1 of Att1$ !inie;)a+ 8ho nota)i=e3 the 3ee3 of 3onation+ that it 8as the intent of the 3ono) to 4aintain cont)ol o5e) the p)ope)t1 8hile she 8as ali5eH that such intent 8as sho8n 8hen she actuall1 sol3 the lot to he)ein petitione)$

Oe affi)4 the appellate cou)tPs 3ecision$ The p)o5isions in the subBect 3ee3 of 3onation that a)e c)ucial fo) the 3ete)4ination of the class to 8hich the 3onation belon;s a)e+ as follo8s6 xxx xxx xxx

xxx(I)binibi;a1 :o at ipina;:a:aloob n; ;anap at hin3i 4ababa8i sa naulit na apat na ana: :o at sa :anilan; 4;a ta;apa;4ana+ an; a:in; lupan; )esi3ential o ti)ahan sa4pu n; a:in; baha1 na:ati)i: 3oon na nasa 7a;on; Poo: 3in+ San Antonio+ /un;so3 n; Kabite xxx xxx xxx

"a an; Kaloob palan; ito a1 4a;:a:abisa la4an; si4ula sa a)a8 na a:oP1 pu4ana8 sa 4un3o+ xxx$ xxx xxx xxx

"a an; titulo nu4e)o TCTETE,,?' (RTE&'*?) n; /un;so3 n; Kabite+ baha1 sa loten; ti)ahan n; 7a;on; Poo: na nababan;;it sa nasabin; :asulatan+ a1 4ananatili sa po3e) o possesion n; Ina+ na si 7asilisa Co4e)ciante haban; si1a a1 nabubuha1 at #a1on 3in an; nasabin; Titulo a1 hin3i 4apapasan;la o 4aipa;bibili an; lupa haban; 4a1buha1 an; nasabin; 7asilisa Co4e)ciante xxx$

It has been hel3 that 8hethe) the 3onation is inte) 5i5os o) 4o)tis causa 3epen3s on 8hethe) the 3ono) inten3e3 to t)ansfe) o8ne)ship o5e) the p)ope)ties upon the execution of the 3ee3$%' In 7onsato 5$ Cou)t of Appeals+%% this Cou)t enu4e)ate3 the cha)acte)istics of a 3onation 4o)tis causa+ to 8it6 (%) It con5e1s no title o) o8ne)ship to the t)ansfe)ee befo)e the 3eath of the t)ansfe)o)H o)+ 8hat a4ounts to the sa4e thin;+ that the t)ansfe)o) shoul3 )etain the o8ne)ship (full o) na:e3) an3 cont)ol of the p)ope)t1 8hile ali5eH (,) That befo)e his 3eath+ the t)ansfe) shoul3 be )e5ocable b1 the t)ansfe)o) at 8ill+ a3 nutu4H but )e5ocabilit1 4a1 be p)o5i3e3 fo) in3i)ectl1 b1 4eans of a )ese)5e3 po8e) in the 3ono) to 3ispose of the p)ope)ties con5e1e3H (*) That the t)ansfe) shoul3 be 5oi3 if the t)ansfe)o) shoul3 su)5i5e the t)ansfe)ee$ Si;nificant to the )esolution of this issue is the i))e5ocable cha)acte) of the 3onation in the case at ba)$ In Cue5as 5$ Cue5as+%, 8e )ule3 that 8hen the 3ee3 of 3onation p)o5i3es that the 3ono) 8ill not 3ispose o) ta:e a8a1 the p)ope)t1 3onate3 (thus 4a:in; the 3onation i))e5ocable)+ he in effect is 4a:in; a 3onation inte) 5i5os$ He pa)ts a8a1 8ith his na:e3 title but 4aintains beneficial o8ne)ship 8hile he li5es$ It )e4ains to be a 3onation inte) 5i5os 3espite an exp)ess p)o5ision that the 3ono) continues to be in possession an3 enBo14ent of the 3onate3 p)ope)t1 8hile he is ali5e$ In the 7onsato case+ 8e hel3 that6

(O)hat is 4ost si;nificant >in 3ete)4inin; the t1pe of 3onation@ is the absence of stipulation that the 3ono) coul3 )e5o:e the 3onationsH on the cont)a)1+ the 3ee3s exp)essl1 3ecla)e the4 to be Ii))e5ocableI+ a Aualit1 absolutel1 inco4patible 8ith the i3ea of con5e1ances 4o)tis causa 8he)e )e5ocabilit1 is of the essence of the act+ to the extent that a testato) can not la8full1 8ai5e o) )est)ict his )i;ht of )e5ocation (Ol3 Ci5il Co3e+ A)t$<*<H "e8 Ci5il Co3e+ A)t$ -,-)$%* Const)uin; to;ethe) the p)o5isions of the 3ee3 of 3onation+ 8e fin3 an3 so hol3 that in the case at ba) the 3onation is inte) 5i5os$ The exp)ess i))e5ocabilit1 of the sa4e (Ihin3i na 4ababa8iI) is the 3istincti5e stan3a)3 that i3entifies that 3ocu4ent as a 3onation inte) 5i5os$ The othe) p)o5isions the)ein 8hich see4in;l1 4a:e the 3onation 4o)tis causa 3o not ;o a;ainst the i))e5ocable cha)acte) of the subBect 3onation$ Acco)3in; to the petitione)+ the p)o5isions 8hich state that the sa4e 8ill onl1 ta:e effect upon the 3eath of the 3ono) an3 that the)e is a p)ohibition to alienate+ encu4be)+ 3ispose+ o) sell the sa4e+ a)e p)oofs that the 3onation is 4o)tis causa$ Oe 3isa;)ee$ The sai3 p)o5isions shoul3 be ha)4oni=e3 8ith its exp)ess i))e5ocabilit1$ In 7onsato 8he)e the 3onation pe) the 3ee3 of 3onation 8oul3 also ta:e effect upon the 3eath of the 3ono) 8ith )ese)5ation fo) the 3ono) to enBo1 the f)uits of the lan3+ the Cou)t hel3 that the sai3 state4ents onl1 4ean that Iafte) the 3ono)Ps 3eath+ the 3onation 8ill ta:e effect so as to 4a:e the 3onees the absolute o8ne)s of the 3onate3 p)ope)t1+ f)ee f)o4 all liens an3 encu4b)ancesH fo) it 4ust be )e4e4be)e3 that the 3ono) )ese)5e3 fo) hi4self a sha)e of the f)uits of the lan3 3onate3$I%& In #estopa 5$ Cou)t of Appeals+%9 this Cou)t hel3 that the p)ohibition to alienate 3oes not necessa)il1 3efeat the inte)

5i5os cha)acte) of the 3onation$ It e5en hi;hli;hts the fact that 8hat )e4ains 8ith the 3ono) is the )i;ht of usuf)uct an3 not an14o)e the na:e3 title of o8ne)ship o5e) the p)ope)t1 3onate3$ In the case at ba)+ the p)o5ision in the 3ee3 of 3onation that the 3onate3 p)ope)t1 8ill )e4ain in the possession of the 3ono) Bust ;oes to sho8 that the 3ono) has ;i5en up his na:e3 title of o8ne)ship the)eto an3 has 4aintaine3 onl1 the )i;ht to use (Bus uten3i) an3 possess (Bus possi3en3i) the subBect 3onate3 p)ope)t1$ Thus+ 8e a))i5e at no othe) conclusion in that the petitione)Ps cite3 p)o5isions a)e onl1 necessa)1 assu)ances that 3u)in; the 3ono)Ps lifeti4e+ the latte) 8oul3 still enBo1 the )i;ht of possession o5e) the p)ope)t1H but+ his na:e3 title of o8ne)ship has been passe3 on to the 3oneesH an3 that upon the 3ono)Ps 3eath+ the 3onees 8oul3 ;et all the )i;hts of o8ne)ship o5e) the sa4e inclu3in; the )i;ht to use an3 possess the sa4e$ .u)the)4o)e+ it also appea)e3 that the p)o5ision in the 3ee3 of 3onation )e;a)3in; the p)ohibition to alienate the subBect p)ope)t1 is couche3 in ;ene)al te)4s such that e5en the 3ono) is 3ee4e3 inclu3e3 in the sai3 p)ohibition (I#a1on 3in an; nasabin; Titulo a1 hin3i 4apapasan;la o 4aipa;bibili an; lupa haban; 4a1buha1 an; nasabin; 7asilisa Co4e)cianteI)$ 7oth the 3ono) an3 the 3onees 8e)e p)ohibite3 f)o4 alienatin; an3 encu4be)in; the p)ope)t1 3u)in; the lifeti4e of the 3ono)$ If the 3ono) inten3e3 to 4aintain full o8ne)ship o5e) the sai3 p)ope)t1 until he) 3eath+ she coul3 ha5e exp)essl1 state3 the)ein a )ese)5ation of he) )i;ht to 3ispose of the sa4e$ The p)ohibition on the 3ono) to alienate the sai3 p)ope)t1 3u)in; he) lifeti4e is p)oof that na:e3 o8ne)ship o5e) the p)ope)t1 has been t)ansfe))e3 to the 3onees$ It also suppo)ts the i))e5ocable natu)e of the 3onation consi3e)in; that the 3ono) has al)ea31

3i5este3 he)self of the )i;ht to 3ispose of the 3onate3 p)ope)t1$ On the othe) han3+ the p)ohibition on the 3onees onl1 4eant that the1 4a1 not 4o)t;a;e o) 3ispose the 3onate3 p)ope)t1 8hile the 3ono) enBo1s an3 possesses the p)ope)t1 3u)in; he) lifeti4e$ Ho8e5e)+ it is clea) that the 3onees 8e)e al)ea31 the o8ne)s of the subBect p)ope)t1 3ue to the i))e5ocable cha)acte) of the 3onation$ The petitione) a);ues that the subseAuent an3 conte4po)aneous acts of the 3ono) 8oul3 sho8 that he) intention 8as to 4aintain cont)ol o5e) he) p)ope)ties 8hile she 8as still li5in;$ Oe 3isa;)ee$ Respon3ent o4in;o Co4ia testifie3 that so4eti4e in %(<< o) p)io) to the sale of the subBect house an3 lot+ his ;)an34othe)+ the 3ono) in the case at ba)+ 3eli5e)e3 the title of the sai3 p)ope)t1 to hi4H an3 that the act of the 3ono) 8as a 4anifestation that she 8as ac:no8le3;in; the o8ne)ship of the 3onees o5e) the p)ope)t1 3onate3$%? Mo)eo5e)+ Att1$ !inie;)a testifie3 that 8hen the 3ono) sol3 the lot to the petitione) he)ein+ she 8as not 3oin; so in acco)3ance 8ith the a;)ee4ent an3 intent of the pa)ties in the 3ee3 of 3onationH that she 8as 3is)e;a)3in; the p)o5ision in the 3ee3 of 3onation p)ohibitin; the alienation of the subBect p)ope)t1H an3 that she :ne8 that the p)ohibition co5e)s he) as 8ell as the 3onees$%< Anothe) in3ication in the 3ee3 of 3onation that the 3onation is inte) 5i5os is the acceptance clause the)ein of the 3onees$ Oe ha5e )ule3 that an acceptance clause is a 4a): that the 3onation is inte) 5i5os$ Acceptance is a )eAui)e4ent fo) 3onations inte) 5i5os$ On the othe) han3+ 3onations 4o)tis causa+ bein; in the fo)4 of a 8ill+ a)e not )eAui)e3 to be accepte3 b1 the 3onees 3u)in; the 3ono)Ps lifeti4e$%-

Oe no8 )ule on 8hethe) the 3ono) 5ali3l1 )e5o:e3 the 3onation 8hen one of he) 3au;hte)s an3 3onees+ Consolacion Aust)ia+ 5iolate3 the p)ohibition to encu4be) the p)ope)t1$ Ohen Consolacion Aust)ia 4o)t;a;e3 the subBect p)ope)t1 to a ce)tain 7ab1 Santos+ the 3ono)+ 7asilisa Co4e)ciante+ as:e3 one of the )espon3ents he)ein+ o4in;o Co4ia+ to )e3ee4 the p)ope)t1+ 8hich the latte) 3i3$ Afte) the petitione) in tu)n )e3ee4e3 the p)ope)t1 f)o4 )espon3ent o4in;o+ the 3ono)+ 7asilisa+ sol3 the p)ope)t1 to the petitione) 8ho is one of the 3onees$ The act of sellin; the subBect p)ope)t1 to the petitione) he)ein cannot be consi3e)e3 as a 5ali3 act of )e5ocation of the 3ee3 of 3onation fo) the )eason that a fo)4al case to )e5o:e the 3onation 4ust be file3 pu)suant to A)ticle <?& of the Ci5il Co3e%( 8hich spea:s of an action that has a p)esc)ipti5e pe)io3 of fou) (&) 1ea)s f)o4 nonEco4pliance 8ith the con3ition state3 in the 3ee3 of 3onation$ The )ule that the)e can be auto4atic )e5ocation 8ithout benefit of a cou)t action 3oes not appl1 to the case at ba) fo) the )eason that the subBect 3ee3 of 3onation is 3e5oi3 of an1 p)o5ision p)o5i3in; fo) auto4atic )e5ocation in e5ent of nonEco4pliance 8ith the an1 of the con3itions set fo)th the)ein$ Thus+ a cou)t action is necessa)1 to be file3 8ithin fou) (&) 1ea)s f)o4 the nonEco4pliance of the con3ition 5iolate3$ As )e;a)3s the ;)oun3 of estoppel+ the 3ono)+ 7asilisa+ cannot in5o:e the 5iolation of the p)o5ision on the p)ohibition to encu4be) the subBect p)ope)t1 as a basis to )e5o:e the 3onation the)eof inas4uch as she ac:no8le3;e3 the 5ali3it1 of the 4o)t;a;e execute3 b1 the 3onee+ Consolacion Aust)ia+ 8hen the sai3 3ono) as:e3 )espon3ent o4in;o Co4ia to )e3ee4 the sa4e$ The)eafte)+ the 3ono)+ 7asilisa li:e8ise as:e3 )espon3ent .lo)entino /u4ubos an3 the petitione) he)ein to )e3ee4 the sa4e$,' Those acts i4plie3 that

the 3onees ha5e the )i;ht of cont)ol an3 na:e3 title of o8ne)ship o5e) the p)ope)t1 consi3e)in; that the 3ono)+ 7asilisa con3one3 an3 ac:no8le3;e3 the 5ali3it1 of the 4o)t;a;e execute3 b1 one of the 3onees+ Consolacion Aust)ia$ Anent the secon3 issue+ the petitione) asse)ts that the action+ a;ainst the petitione)+ fo) annul4ent of TCT "o$ TE%'&*& an3 othe) )ele5ant 3ocu4ents+ fo) )econ5e1ance an3 3a4a;es+ file3 b1 the )espon3ents on Septe4be) ,%+ %(-* on the ;)oun3 of f)au3 an3Jo) i4plie3 t)ust has al)ea31 p)esc)ibe3$ The sale happene3 on .eb)ua)1 ?+ %(<( an3 its )e;ist)ation 8as 4a3e on .eb)ua)1 -+ %(<( 8hen TCT "o$ RTE&'*? in the na4e of the 3ono) 8as cancelle3 an3 in lieu the)eof TCT "o$ TE%'&*& in the na4e of the petitione) 8as issue3$%S8phi% Thus+ 4o)e than fou) (&) 1ea)s ha5e passe3 since the sale of the subBect )eal estate p)ope)t1 8as )e;iste)e3 an3 the sai3 ne8 title the)eto 8as issue3 to the petitione)$ The petitione) conten3s that an action fo) )econ5e1ance of p)ope)t1 on the ;)oun3 of alle;e3 f)au3 4ust be file3 8ithin fou) (&) 1ea)s f)o4 the 3isco5e)1 of f)au3 8hich is f)o4 the 3ate of )e;ist)ation of the 3ee3 of sale on .eb)ua)1 -+ %(<(H an3 that the sa4e p)esc)ipti5e pe)io3 also applies to a suit p)e3icate3 on a t)ust )elationship that is )oote3 on f)au3 of b)each of t)ust$ Ohen onePs p)ope)t1 is )e;iste)e3 in anothe)Ps na4e 8ithout the fo)4e)Ps consent+ an i4plie3 t)ust is c)eate3 b1 la8 in fa5o) of the t)ue o8ne)$ A)ticle %%&& of the "e8 Ci5il Co3e p)o5i3es6 A)t$ %%&&$ The follo8in; actions 4ust be b)ou;ht 8ithin ten 1ea)s f)o4 the ti4e the )i;ht of action acc)ues6 (%) Upon a 8)itten cont)actH

(,) Upon an obli;ation c)eate3 b1 la8H (*) Upon a Bu3;4ent$ (n)

OHERE.ORE+ the appeale3 ecision 3ate3 2une *'+ %(-( of the Cou)t of Appeals is he)eb1 A..IRME $ "o p)onounce4ent as to costs$ SO OR ERE $

Thus+ an action fo) )econ5e1ance of the title to the )i;htful o8ne) p)esc)ibes in ten (%') 1ea)s f)o4 the issuance of the title$,% It is onl1 8hen f)au3 has been co44itte3 that the action 8ill be ba))e3 afte) fou) (&) 1ea)s$,, Ho8e5e)+ the fou)E1ea) p)esc)ipti5e pe)io3 is not applicable to the case at ba) fo) the )eason that the)e is no f)au3 in this case$ The fin3in;s of fact of the appellate cou)t 8hich a)e entitle3 to ;)eat )espect+ a)e 3e5oi3 of an1 fin3in; of f)au3$ The )eco)3s 3o not sho8 that the 3ono)+ 7asilisa+ an3 the petitione) e5e) inten3e3 to 3ef)au3 the )espon3ents he)ein 8ith )espect to the sale an3 o8ne)ship of the sai3 p)ope)t1$ On the othe) han3+ the sale 8as ;)oun3e3 upon thei) honest but e))oneous inte)p)etation of the 3ee3 of 3onation that it is 4o)tis causa+ not inte) 5i5osH an3 that the 3ono) still ha3 the )i;hts to sell o) 3ispose of the 3onate3 p)ope)t1 an3 to )e5o:e the 3onation$ The)e bein; no f)au3 in the t)ust )elationship bet8een the 3ono) an3 the 3onees inclu3in; the he)ein petitione)+ the action fo) )econ5e1ance p)esc)ibes in ten (%') 1ea)s$ Consi3e)in; that TCT "o$ TE%'&*& in the na4e of the petitione) an3 co5e)in; the subBect p)ope)t1 8as issue3 onl1 on .eb)ua)1 -+ %(<(+ the filin; of the co4plaint in the case at ba) in %(-* 8as 8ell 8ithin the tenE1ea) p)esc)ipti5e pe)io3$ The Cou)t of Appeals+ the)efo)e+ co44itte3 no )e5e)sible e))o) in its appeale3 ecision$%S8phi%