San Sebastian College – Recoletos, College of Law

DONATION
Real Estate Transactions Class
of Atty. Wilson Legaspi
Summer 2018
6:00 PM – 9:00 PM

Dimer, Aruie – Dumlao, Aristotle – Mendoza

Abigail Sol
Donation is an act of liberality whereby a c. propter nuptias - donation that made by
person disposes gratuitously of a thing or right reason of marriage and before its
if favor of another who accepts it (Art. 725). celebration, in consideration of the same

NOTE: Not enough that the act is gratuitous;

there must be an intent to benefit the donee 2. As to consideration

Example: Commodatum is gratuitous but a. Pure or simple - consideration is the

it is not donation liberality or generosity of the donor

Although the article speaks that donation is an b. Compensatory - given out of gratitude
act, it is really a contract. It falls under the on account of the donee’s services
contract of pure beneficence, where the
c. Modal - donation that carries with it a
consideration being the liberality of the donor
future burden on the donee
Example: stipulation of love and
d. Onerous - consideration is made
affection is sufficient cause for a donation
equivalent or more than that made for
valuable consideration

REQUISITES OF DONATION:

1. Donor must have the capacity to 3. As to effectivity

make the donation of a thing or a
a. Pure - donation not subject to a condition
right
or period
2. He must have the donative intent
(animus donandi) or intent to make the b. Conditional - subject to a condition
donation out of liberality c. With a term - subject to a period
3. The donee must accept or consent to
the donation
4. Acceptance must be made known Parties
actually, or constructively, to the
a. Donor - one giving the donation
donor.
b. Donee - one who receives the donation

Kinds of Donation:
Capacity to Contract
1. As to taking effect
1. Donor’s capacity both to contract and to
a. inter vivos - donation that takes effect
dispose (A735)
during the lifetime of the donor
b. mortis causa - one that takes effect upon Q: Capacity to contract but not to
the death of the donor dispose?

Page 1 of 14
 Q: Assuming the answer is in the
affirmative, is the donation valid?
2. Power of corporations to make donation.
S36(9) power to make reasonable
donations for eleemosynary purposes
BUT prohibition on donations in aid of
any political party or candidate
3. Guardians and trustees cannot donate
the property entrusted to them (A736)
Reason? They are not the owners of the
property to be donated
Is the prohibition absolute?
No. In cases of onerous donation, the trustee
is permitted to donate provided that it is
approved by the court .
Araneta vs Perez (1966)
In prohibiting the trustee from donating
properties entrusted to him, the law does so for
the protection of the beneficiaries. When the
donation is for the interest of the beneficiaries,
to say that it cannot be done would be contrary
to the intent and spirit of the law.
Q: When is reckoning point in determining the
donor’s capacity to make donation?
It shall be determined as of the time of making
of the donation (A737)
Q: When is as of the time of making of the
donation?
2 views
1. Literal interprepation- Donor’s capacity
is to be determined at the time the donor
executes the instrument of donation
2. Senator Tolentino suggests that the
making of the donation is meant to mean
upon perfection of the donation
 In resolving the conflict, apply A1332.
4. Capacity of the Donee
All those who are not specifically disqualified
by law therefore may accept donations. (A738)
(Relate to A739 ad 740)
Note:
 Law does not require that the donee have
the capacity to act, it is sufficient that he
possess juridical capacity
 As long he is not disqualified, he may
accept donation. Thus donations may be
made to incapacitated persons.
Examples: Minor, conceived and unborn
child
DONATIONS TO MINORS AND OTHER
WITHOUT CAPACITY TO CONTRACT
A. Minors and others who cannot enter into
a contract may become donees but
acceptance shall be done through their
parents or legal representative. (A741)
A741 should apply in case the acceptance is
required to be in a certain form.
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 B. Donations made to conceived and
unborn children may be accepted by
those persons who would legally
represent them if they were already born.
(A742)
A40 Family Code, conceived child is
considered born for all purposes that are
favorable to it.
A739 The following donations shall be void:
1. Those who were guilty of adultery or
concubinage at the time of donation;
NOTE: Conviction is not necessary since
the guilt of the donor and the donee may
be proved in an action for declaration of
nullity of the donation
2. Those made between persons guilty of
the same criminal offense, in
consideration thereof;
NOTE: Par 2 contemplates of a principal
by inducement and a principal by direct
participation
NOTE: Conviction is necessary
3. Those made to a public officer or his
wife, descendant and ascendants, by
reason of his office;
In the case under (1), the action for declaration
of nullity may be brought by the spouse of the
donor or donee, and the guilt of the donor and
the donee may be proved by preponderance of
evidence in the same action.
PERFECTION OF DONATION
How is a donation perfected?
IN GENERAL:
Art. 34, New Civil Code:
The donation is perfected from the
moment the donor knows of the acceptance by
the donee.
IN PARTICULAR:
(1) DONATION OF PERSONALTY
Art. 748, New Civil Code: The donation
of a movable may be made orally or in
writing.
An oral donation requires the
simultaneous delivery of the thing or of the
document representing the right donated.
If the value of the personal property
donated exceeds five thousand pesos, the
donation and the acceptance shall be made in
writing. Otherwise the donation shall be void.
Why is acceptance by the donee necessary?
Acceptance is indispensable because no person
is under obligation to receive a benefit against
his own will. One cannot be compelled to accept
the generosity of another.
Thus, in Art. 745:
The donee must accept the donation
personally, or through an authorized person
with a special power for the purpose, or with a
general and sufficient power; otherwise the
donation shall be void.
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Is the mere acceptance by the donee sufficient to Art. 749, par. 2 :
perfect the donation?
The acceptance may be made in the same deed
No. Perfection takes place, not from the time of of donation or in a separate public document,
acceptance by the donee, but from the time it is but it shall not take effect unless it is done
made known, actually or constructively to the during the lifetime of the donor.
donor. From such time, the wills of the donor
Acceptance in the same Deed of Donation:
and the donee concur, and the donation, as a
mode of transferring ownership, produces legal
effect (Osorio v. Osorio [1921]).

Donation is perfected when the donor first

learns of the acceptance. The perfection of the
donation supposes a demandable juridical
relation; the donor cannot then repent; and he
can be compelled to fulfill his offer, to deliver
what he wished to donate (Manresa).

Art. 34, New Civil Code: c

The donation is perfected from the

moment the donor knows of the acceptance by
the donee.

Art. 746: Acceptance in a separate instrument:

Acceptance must be made during the DEED / AFFIDAVIT OF ACCEPTANCE

lifetime of the donor and the donee.

The dead man cannot be notified. Neither can

he give notification

Therefore if the donor dies before notice is

given, although after the donation has been
accepted, the donation is not efficacious, has not
been perfected, does not obligate the donor's
heirs — there has not been a concurrence of the
two wills; death has separated them forever
(Abellara v. Balanag, et al., G.R. No. L-11970,
March 22, 1918, citing Manresa).

How should the donee’s acceptance be made?

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NOTE Art. 749, par. 3: Revocation after learning of donee’s acceptance

xxx If the donor revokes after learning of the

acceptance, there is already a perfected contract
If the acceptance is made in a separate
of donation, and it cannot be revoked without
instrument, the donor shall be notified thereof
the consent of the donee except on grounds
in an authentic form, and this step shall be
provided by law such as inofficiousness, failure
noted in both instruments.
of the donee to comply with the charges
xxx imposed in the donation or by reason of
This refers to the original or certified true copy ingratitude (Arts. 760, 764, 765).
of the document certifying the acceptance

RULES TO OBSERVE:

It is necessary that formal notice of the When the donation and the acceptance are in
acceptance be given to the donor and the fact the same instrument:
that due notice has been given to him must be
(1) The donation must be in a public
noted in both instruments (that containing the
instrument; and
offer to donate (Deed of Donation) and that
showing acceptance (Affidavit / Deed of (2) The instrument must specify the
Acceptance). Then and only then is the property donated and the charges, if any,
donation perfected (11 Manresa 155-11, cited in which the donee must satisfy (De Leon,
Vol. II, Civil Code of the Philippines by Tolentino; Property, 2011 ed.)
Lagazo v. CA, 287 SCRA 18 [1998]).
When the donation and the acceptance are in
The acceptance should be noted in the Deed of separate instruments:
Donation as required under Art. 749 of the Civil
(1) The donation must be in a public
Code.
instrument;
The notation is one of the requirements of
(2) The instrument must specify the
perfecting a donation. In other words, without
property donated and the charges, if any,
such a notation, the contract is not perfected
which the donee must satisfy;
contract (Manresa).
(3) The acceptance by the donee must be in
a public document;
Revocation before learning of donee’s
(4) It must be done during the lifetime of the
acceptance
donor;
If the donor revokes the donation before
(5) The donor must be notified in authentic
learning of the acceptance by the donee, there is
form of the acceptance of the donation in
NO donation.
a separate instrument; and

Page 5 of 14
 (6) The fact that such notification has been
made must be made in both instruments
(De Leon, Property, 2011 ed.).
Case:
Under Sec. 112 of P.D. 1529 of the Property
Registration Decree, the contracting parties and
their witnesses in a contract of donation should
sign on the left-hand margin of the instrument.
Is this an additional requirement?
No. The specification of the location of the
signatures is merely directory (Quilela v.
Alcantara, 371 SCRA 311 [2001]).
Suppose the donor executed the donation in a
PRIVATE instrument, may the donee validly
compel the donor to put the same in a public
instrument?
NO. A donation of realty in a private instrument
is null and void. The form of the donation of an
immovable under Art. 749 is essential for its
validity. Both the donation and the acceptance
must be made in a public document.
Under Art. 1357, if the law requires a document
or other special form, xxx the contracting
parties may compel each other to observe that
form, once the contract has been perfected.
Art. 1357 applies only when there is a perfected,
valid and enforceable contract. There is no
perfected contract of donation if it is executed in
a private instrument. A donation made in a
private instrument is a void contract. A void
contract cannot be ratified pursuant to Art. 1409
(7).
Art. 1409: The following contracts are inexistent
and void from the beginning:
(1) Those whose cause, object or purpose is
contrary to law, morals, good customs,
public order or public policy;
(2) Those which are absolutely simulated or
fictitious;
(3) Those whose cause or object did not exist
at the time of transaction;
(4) Those whose object is outside the
commerce of man;
(5) Those which contemplate an impossible
service;
(6) Those where the intention of the parties
relative to the principal object of the
contract cannot be ascertained;
(7) Those expressly prohibited or declare
void by law.
These contracts cannot be ratified. Neither can
the right to set up the defense of illegality be
waived.
NOTE:
There is, however, a valid ratification when the
donor or his/her heirs execute a new donation
in a public instrument in favor of the same
donee.
Page 6 of 14
But if this prejudices the creditors of the donor’s
estate then it cannot be done (Abragan v.
Centenera, 46 Phil. 213 [1924]).
previously erected on the donated lot was
dismantled and transferred to the new location.
The donors filed a complaint to annul the
donation claiming that:

When does the donee acquire ownership over (1) there was no valid acceptance made by
the donated property? the donee since the affidavit of
acceptance was not noted at the back of
From the moment the public instrument of
the deed of donation; and
donation is simultaneously executed and
acknowledged by the donor and the donee, the (2) there was a violation of the condition in
latter acquires the ownership of the donated the donation.
property, since the execution of a public
HELD:
instrument of conveyance is one of the
recognized ways in which delivery (traditional) (1) There was an acceptance. Hence, the
of property may be made, unless the contrary is donation is valid. The actual knowledge
expressed or inferrable from the terms of the by respondents of the construction and
deed (Danguilan v. IAC, 168 SCRA 22 [1988]). existence of the school building fulfilled
the legal requirement that the acceptance
of the donation by the donee be
Republic v. Spouses Silim communicated to the donor.

G.R. No. 140487, April 2, 2001

The donors donated a ½ hectare of land to the • The Court, citing Pajarillo v. IAC (176
Bureau of Public Schools, Zamboanga del Sur SCRA 340) held that cannot in conscience
conditioned that it should “be used exclusively declare the donation ineffective because
and forever for school purposes only.” there is it no notation in the extrajudicial
Subsequently, a school building was settlement of the donee's
constructed on the donated land. However, the acceptance. That would be placing too
appropriation for school building could not be much stress on mere form over
released since the government required that it substance. It would also disregard the
be built upon a one (1) hectare parcel of land. To clear reality of the acceptance of the
remedy this predicament, the School donation xxx by the donor. The donors
Authorities entered into a Deed of Exchange are also guilty of estoppel for raising the
whereby the donated lot was exchanged with issue of validity of the acceptance only
the bigger lot. Consequently, the Bagong after 10 years.
Lipunan school buildings were constructed on
Still, the established rule is that the
the new school site and the school building
acceptance must be noted in the deed of
donation and deed of acceptance.
Page 7 of 14

Donation of a real property is a solemn
contract. It is void when the formalities under
Art. 749 is not followed.
Unlike ordinary contracts (which are
perfected by the concurrence of the requisites
of consent, object and cause pursuant to
Article 1318 of the Civil Code), solemn
contracts like donations are perfected only
upon compliance with the legal formalities
under Articles 748 and 749. Otherwise stated,
absent the solemnity requirements for
validity, the mere intention of the parties does
not give rise to a contract (Abellana v. Ponce,
G.R. No. 160488, September 3, 2004).
(2) The donation was not in any way violated
when the lot donated was exchanged with
another one. The purpose for the donation
remains the same, which is for the
establishment of a school. The exclusivity of the
purpose was not altered or affected. In fact, the
exchange of the lot for a much bigger one was
in furtherance and enhancement of the purpose
of the donation. The acquisition of the bigger lot
paved the way for the release of funds for the
construction of Bagong Lipunan school
building which could not be accommodated by
the limited area of the donated lot.
Sumipat v. Banga
G.R. No. 155810, August 13, 2004
Childless spouses Lauro and Placida Sumipat
own three parcels of land. Lauro, however,
sired five illegitimate children from another
woman. Lauro executed a deed transferring his
share in the conjugal property to his five
children, and this was approved by his wife,
Placida.
Thereafter, Lydia Sumipat, one of the
illegitimate children, also secured the signature
of Placida, but the latter, an unlettered woman
who knows only how to write her name, did not
receive a responsive answer from Lydia when
she asked what the document she will be
signing all about was. Placida just learned after
the death of her husband that she will no longer
be receiving any from the conjugal property and
that titles have already been registered in the
name of the illegitimate children due to her
signing of the document which is duly
notarized. She then filed an action for
reconveyance, recovery of ownership and
possession and damages, and declaration of
nullity of the titles registered in the name of the
illegitimate children.
HELD:
There is no valid donation of the real property
by Placida in favor of the 5 illegitimate children.
Where the deed of donation fails to show the
acceptance, or where the formal notice of the
acceptance, made in a separate instrument, is
either not given to the donor or else not noted
in the deed of donation and in the separate
acceptance, the donation is null and void. In this
case, the donees’ acceptance of the donation is
not manifested either in the deed itself or in a
separate document. Hence, the deed as an
instrument of donation is patently void.
Page 8 of 14
The contention of the petitioners that CA should
have dismissed the case due to prescription is
unmeritorious. Passage of time cannot cure the
fatal flaw in an inexistent and void contract.
The defect of inexistence of a contract is
permanent and incurable; hence, it cannot be
cured either by ratification or by prescription.
It is well-settled that when there is a showing
of illegality, the property registered is deemed
to be simply held in trust for the real owner by
the person in whose name it is registered, and
the former then has the right to sue for the
reconveyance of the property. The action for
the purpose is also imprescriptible. As long as
the land wrongfully registered under the
Torrens system is still in the name of the person
who caused such registration, an action in
personam will lie to compel him to reconvey the
property to the real owner.
Art. 1410: The action or defense for the
declaration of the inexistence of a contract does
not prescribe
When Art. 749 is not applicable:
(1) Art. 749 is not applicable to onerous
donations which are governed by the
rules on obligations and contracts (Art.
733).
(2) Donations propter nuptias need no
express acceptance
REGISTRATION OF DONATION
Is registration of the donation a requisite of its
validity?
No. The validity of the donation is not affected
by its non-registration. HOWEVER, the
donation must be registered in the Registry of
Deeds in order to bind third persons. The
registration creates a constructive notice to the
whole world.
As between the parties to the donation and their
assigns, the registration of the deed of donation
with the Registry of Deeds is not needed for its
validity. Registration is not necessary to make a
donation a binding commitment insofar as the
donor and the donee are concerned (Dolar v.
Brgy. Lublub, 475 SCRA 458 [2005]).
Execute Deed of Donation
Payment of taxes by the parties
- Assessor’s office for tax assessment and the zonal
classification of the land
- Pay real property taxes at the Treasurer’s Office
- Pay donor’s tax at the Bureau of internal Revenue
Register the Deed at the Registry of Deeds
- Inscription at the back of the title of the land
Basic Requirements for Registration
(1) Original of the deed/instrument
If original document cannot be presented, the
duplicate original or certified true copy shall be
presented together with a sworn affidavit
Page 9 of 14
executed by the interested party stating why the meter lot in urban centers and not more than
original document cannot be submitted. 10,000 square meters in rural areas.

(2) Certified copy of the latest Tax Declaration Provided further that ownership of this land is
of the property limited for residential use only.

(3) If titled property, owner’s copy of the However, for business and investment
certificate of title, and all issued co-owner’s purposes, a former natural-born Filipino
copy if any citizen, is allowed to own 5,000 sq.m. of urban
land and 3 hectares of rural land.

A transferee who has already acquired urban

 If a document was executed abroad, a
land shall be disqualified from acquiring rural
Certificate of Authentication by the
land and vice versa.
nearest Philippine Consulate is required

 If either party is a corporation, the

following are also required: REQUIREMENTS FOR ISSUANCE OF
TITLE:

i. Secretary’s Certificate/Board Resolution (1) BIR Certificate Authorizing Registration

indicating the authorized signatory(ies) and the (CAR) re: payment of capital gains tax or
scope of authority donor’s tax as the case may be;

ii. Articles of Incorporation (2) Real property tax clearance re: up-to-
date payment of taxes;
iii. Certificate of SEC that the articles of
incorporation has been registered (3) Proof of payment of transfer tax;

(4) If the land is covered by CARP, DAR

clearance and Affidavit of Landholding
NOTE: If the donee is an alien, but formerly a
of transferee
NATURAL-BORN Filipino citizen, he should
furnish the Registry of Deeds an Affidavit of
Land Ownership.

Purpose: To attest that his/her aggregate and

respective land ownerships in the Philippines
does not exceed the limits set forth by law.

THE FOREIGN INVESTMENTS ACT

R.A. 7042, as amended by R.A. 8179

Each former natural born Filipino citizens is

entitled to own not to exceed 1,000 square

Page 10 of 14
Donor’s Tax NIRC:

• is imposed on the transfer by any person,
resident or nonresident, of property by
gift.
• “Gifts” include real and
property, whether tangible or intangible,
or mixed wherever situated. In case of a
nonresident alien, his real and personal
property so transferred but which are
situated outside the Philippines are not
included as part of the gross gift.
The donor’s tax shall be 30% of the net gifts
when the donee or beneficiary is a stranger.
TRAIN:
personal The donor’s tax is fixed at 6% based on annual
total gifts exceeding ₱250,000 (exempt gift),
regardless of whether the donee is a stranger or
not.
MANUEL G. ABELLO, JOSE C.

NIRC: CONCEPCION, TEODORO D. REGALA,

AVELINO V. CRUZ v. COMMISSIONER OF
The donor’s tax for each calendar year shall be INTERNAL REVENUE and COURT OF
computed on the basis of the total net gifts APPEALS.
made during the calendar year in accordance G.R. No. 120721. February 23, 2005
with the graduated tax table.
FACTS: During the 1987 national elections,
TRAIN: petitioners, who are partners in the Angara,
The donor’s tax is fixed at 6% based on annual Abello, Concepcion, Regala and Cruz (ACCRA)
total gifts exceeding ₱250,000 (exempt gift), law firm, contributed P882,661.31 each to the
regardless of whether the donee is a stranger or campaign funds of Senator Edgardo Angara,
not. then running for the Senate. BIR assessed each
of the petitioners P263,032.66 for their
NET GIFT TAX NET GIFT TAX
contributions. Petitioners questioned the
Not over ₱100,000 Exempt Over ₱1M but not ₱44,000 + 8% of
assessment to the BIR, claiming that political or
Over ₱100,000 2% of the excess over ₱3M the excess over
electoral contributions are not considered gifts
but not over over ₱100,000 ₱1M
under the NIRC so they are not liable for
₱200,000 Over ₱3M but not ₱204,000 + 10%
donor’s tax. The claim for exemption was
over ₱5M of the excess over
Over ₱200,000 ₱2,000 + 4% of denied by the Commissioner. The CTA ruled in
₱3M
but not over the excess over favor of the petitioners, but such ruling was
₱500,000 ₱200,000
Over ₱5M but not ₱404,000 + 12% overturned by the CA, thus this petition for
over ₱10M of the excess over review.
Over ₱500,000 ₱14,000 + 6% of
₱5M
but not over ₱1M the excess over ISSUE: Whether or not electoral contributions
Over ₱10M ₱1,004,000 +
₱500,000 are subject to donor’s tax.
15% of the excess
over ₱10M RULING: Yes, they are. The NIRC does not
define transfer of property by gift. However,
Page 11 of 14
Article 18 of the Civil Code, states: “In matters
which are governed by the Code of Commerce
and special laws, their deficiency shall be
supplied by the provisions of this Code.” Thus,
reference may be made to the definition of a
donation in the Civil Code. Article 725 of said
Code defines donation as: “. . . an act of
liberality whereby a person disposes
gratuitously of a thing or right in favor of
another, who accepts it.”
The present case falls squarely within the
definition of a donation.
Petitioners each gave P882,661.31 to the
campaign funds of Senator Edgardo Angara,
without any material consideration. All three
elements of a donation are present.
• The patrimony of the four petitioners
were reduced by P882,661.31 each.
• Senator Angara’s patrimony
correspondingly increased by
P3,530,645.24.
• There was intent to do an act of liberality
oranimus donandi was present since
each of the petitioners gave their
contributions without any consideration.
Taken together with the Civil Code definition
of donation , Section 91 of the NIRC is clear and
unambiguous, thereby leaving no room for
construction. Hence, electoral contributions are
subject to donor’s tax.
Documentary Stamp Tax
is an excise tax levied on documents,
instruments, loan agreements and papers
evidencing the acceptance, assignment, sale or
transfer of an obligation, rights, or property
incident thereto.
NIRC: No DST
TRAIN: ₱15.00 for the first ₱1,000, plus ₱15.00
for every additional ₱1,000 or fraction thereof
of the consideration to be paid or FMV,
whichever is higher
Transfers exempt from donor’s tax: Exempt
from DST
TRANSFER TAX
Sec. 135 (a) - The province may impose a tax on
the sale , donation, barter, or on any other mode
of transferring ownership or title of real
property at the rate of not more than fifty
percent (50%) of the one percent (1%) of the total
consideration involved in the acquisition of the
property or of the fair market value in case the
monetary consideration involved in the transfer
is not substantial, whichever is higher. The sale,
transfer or other disposition of real property
pursuant to R.A. No. 6657 shall be exempt from
this tax.
(b) For this purpose, the Register of Deeds of the
province concerned shall, before registering any
deed, require the presentation of the evidence of
payment of this tax. The provincial assessor
shall likewise make the same requirement
before cancelling an old tax declaration and
issuing a new one in place thereof, Notaries
public shall furnish the provincial treasurer
with a copy of any deed transferring ownership
Page 12 of 14
or title to any real property within thirty (30)
days from the date of notarization.
It shall be the duty of the seller, donor,
transferor, executor or administrator to pay the
tax herein imposed within sixty (60) days from
the date of the execution of the deed or from the
date of the decedent's death.
ROMULO D. SAN JUAN vs RICARDO L.
CASTRO, in his capacity as City Treasurer of
Marikina City
G.R. No. 174617 December 27
FACTS: Romulo D. San Juan (petitioner),
registered owner of real properties in Rancho
Estate I, Concepcion II, Marikina City covered
by Transfer Certificates of Title Nos. 160435,
236658, and 233877,with the consent of his wife,
conveyed on August 24, 2004, by Deed of
Assignment,the properties to the Saints and
Angels Realty Corporation (SARC), then under
the process of incorporation, in exchange for
258,434 shares of stock therein with a total par
value of P2,584,340. Two hundred thousand
(200,000) of the said shares of stock with a par
value of P2,000,000 were placed in San Juan’s
name while the remaining 58,434 shares of stock
with a par value of P584,340 were placed in the
name of his wife.
On June 24, 2005, the Securities and Exchange
Commission approved the Articles of
Incorporation of SARC.
Respondents representative thereafter went to
the Office of the Marikina City Treasurer to pay
the transfer tax based on the consideration
stated in the Deed of Assignment. Ricardo L.
Castro (respondent), the City Treasurer,
informed him, however, that the tax due is
based on the fair market value of the property.
Petitioner in writing protested the basis of the
tax, Petitioner thus filed before the Regional
Trial Court (RTC) of Marikina City a Petition for
mandamus and damages against respondent in
his capacity as Marikina City Treasurer praying
that respondent be compelled to perform a
ministerial duty, that is, to accept the payment
of transfer tax based on the actual consideration
of the transfer/assignment.
ISSUE: Whether or not the City Treasurer can
assess the transfer tax on the higher base?
RULING:
Monetary consideration as used in Section 135
of R.A. 7160 does not only pertain to the price or
money involved but likewise, as in the case of
donations or barters, this refers to the value or
monetary equivalent of what is received by the
transferor.
In the case at hand, the monetary consideration
involved is the par value of shares of stocks
acquired by the petitioner in exchange for his
real properties. As admitted by the petitioner
himself, the fair market value of the properties
transferred is more than seven million pesos. It
is undeniable therefore that the actual
consideration for the assignment in the amount
of two million five hundred eighty four
thousand and three hundred forty pesos
(P2,584,340.00) is far less substantial than the
aforesaid fair market value.
That in cases of transfer of real property not
involving monetary consideration, it is certain
Page 13 of 14
that the fair market value or zonal value of the
property is the basis of the tax rate. As provided
for under the Local Government Code, fair
market value is defined as the price at which a
property may be sold by a seller who is not
compelled to sell and bought by the buyer who
is not compelled to buy. Hence, the preliminary
computation based on the fair market value of
the property made by the revenue collector is
correct. Thus, the City Treasurer is constrained
to assess the transfer tax on the higher base.

Page 14 of 14