G.R. No. L-34937 March 13, 1933

CONCEPCION VIDAL DE ROCES and her husband,

MARCOS ROCES, and ELVIRA VIDAL DE RICHARDS, plaintiff-appellants,

vs.

JUAN POSADAS, JR., Collector of Internal Revenue, defendant-appellee.

Feria and La O for appellants.

Attorney-General Jaranilla for appellee.

IMPERIAL, J.:

The plaintiffs herein brought this action to recover from the defendant, Collector of Internal

Revenue, certain sums of money paid by them under protest as inheritance tax. They appealed

from the judgment rendered by the Court of First Instance of Manila dismissing the action,

without costs.

On March 10 and 12, 1925, Esperanza Tuazon, by means of public documents, donated certain

parcels of land situated in Manila to the plaintiffs herein, who, with their respective husbands,

accepted them in the same public documents, which were duly recorded in the registry of deeds.

By virtue of said donations, the plaintiffs took possession of the said lands, received the fruits

thereof and obtained the corresponding transfer certificates of title.

On January 5, 1926, the donor died in the City of Manila without leaving any forced heir and her

will which was admitted to probate, she bequeathed to each of the donees the sum of P5,000.

After the estate had been distributed among the instituted legatees and before delivery of their

respective shares, the appellee herein, as Collector of Internal Revenue, ruled that the appellants,

as donees and legatees, should pay as inheritance tax the sums of P16,673 and P13,951.45,

respectively. Of these sums P15,191.48 was levied as tax on the donation to Concepcion Vidal

de Roces and P1,481.52 on her legacy, and, likewise, P12,388.95 was imposed upon the

donation made to Elvira Vidal de Richards and P1,462.50 on her legacy. At first the appellants

refused to pay the aforementioned taxes but, at the insistence of the appellee and in order not to

delay the adjudication of the legacies, they agreed at last, to pay them under protest.

The appellee filed a demurrer to the complaint on the ground that the facts alleged therein were

not sufficient to constitute a cause of action. After the legal questions raised therein had been

discussed, the court sustained the demurrer and ordered the amendment of the complaint which

the appellants failed to do, whereupon the trial court dismissed the action on the ground that the

afore- mentioned appellants did not really have a right of action.

In their brief, the appellants assign only one alleged error, to wit: that the demurrer interposed by

the appellee was sustained without sufficient ground.

The judgment appealed from was based on the provisions of section 1540 Administrative Code

which reads as follows:

SEC. 1540. Additions of gifts and advances. — After the aforementioned deductions have

been made, there shall be added to the resulting amount the value of all gifts or advances

made by the predecessor to any those who, after his death, shall prove to be his heirs,

devisees, legatees, or donees mortis causa.

The appellants contend that the above-mentioned legal provision does not include donations inter

vivos and if it does, it is unconstitutional, null and void for the following reasons: first, because it

violates section 3 of the Jones Law which provides that no law should embrace more than one

subject, and that subject should be expressed in the title thereof; second that the Legislature has

no authority to impose inheritance tax on donations inter vivos; and third, because a legal

provision of this character contravenes the fundamental rule of uniformity of taxation. The

appellee, in turn, contends that the words "all gifts" refer clearly to donations inter vivos and, in

support of his theory, cites the doctrine laid in the case of Tuason and Tuason vs. Posadas (54

Phil., 289). After a careful study of the law and the authorities applicable thereto, we are the

opinion that neither theory reflects the true spirit of the aforementioned provision. The gifts

referred to in section 1540 of the Revised Administration Code are, obviously, those donations

inter vivos that take effect immediately or during the lifetime of the donor but are made in

consideration or in contemplation of death. Gifts inter vivos, the transmission of which is not

made in contemplation of the donor's death should not be understood as included within the said

legal provision for the reason that it would amount to imposing a direct tax on property and not

on the transmission thereof, which act does not come within the scope of the provisions

contained in Article XI of Chapter 40 of the Administrative Code which deals expressly with the

tax on inheritances, legacies and other acquisitions mortis causa.

Our interpretation of the law is not in conflict with the rule laid down in the case of Tuason and

Tuason vs. Posadas, supra. We said therein, as we say now, that the expression "all gifts" refers

to gifts inter vivos inasmuch as the law considers them as advances on inheritance, in the sense

that they are gifts inter vivos made in contemplation or in consideration of death. In that case, it

was not held that that kind of gifts consisted in those made completely independent of death or

without regard to it.

Said legal provision is not null and void on the alleged ground that the subject matter thereof is

not embraced in the title of the section under which it is enumerated. On the contrary, its

provisions are perfectly summarized in the heading, "Tax on Inheritance, etc." which is the title

of Article XI. Furthermore, the constitutional provision cited should not be strictly construed as

to make it necessary that the title contain a full index to all the contents of the law. It is sufficient

if the language used therein is expressed in such a way that in case of doubt it would afford a

means of determining the legislators intention. (Lewis' Sutherland Statutory Construction, Vol.

II, p. 651.) Lastly, the circumstance that the Administrative Code was prepared and compiled

strictly in accordance with the provisions of the Jones Law on that matter should not be

overlooked and that, in a compilation of laws such as the Administrative Code, it is but natural

and proper that provisions referring to diverse matters should be found. (Ayson and Ignacio vs.

Provincial Board of Rizal and Municipal Council of Navotas, 39 Phil., 931.)

The appellants question the power of the Legislature to impose taxes on the transmission of real

estate that takes effect immediately and during the lifetime of the donor, and allege as their

reason that such tax partakes of the nature of the land tax which the law has already created in

another part of the Administrative Code. Without making express pronouncement on this

question, for it is unnecessary, we wish to state that such is not the case in these instance. The tax

collected by the appellee on the properties donated in 1925 really constitutes an inheritance tax

imposed on the transmission of said properties in contemplation or in consideration of the

donor's death and under the circumstance that the donees were later instituted as the former's

legatees. For this reason, the law considers such transmissions in the form of gifts inter vivos, as

advances on inheritance and nothing therein violates any constitutional provision, inasmuch as

said legislation is within the power of the Legislature.

Property Subject to Inheritance Tax. — The inheritance tax ordinarily applies to all

property within the power of the state to reach passing by will or the laws regulating

intestate succession or by gift inter vivos in the manner designated by statute, whether

such property be real or personal, tangible or intangible, corporeal or incorporeal. (26

R.C.L., p. 208, par. 177.)

In the case of Tuason and Tuason vs. Posadas, supra, it was also held that section 1540 of the

Administrative Code did not violate the constitutional provision regarding uniformity of taxation.

It cannot be null and void on this ground because it equally subjects to the same tax all of those

donees who later become heirs, legatees or donees mortis causa by the will of the donor. There

would be a repugnant and arbitrary exception if the provisions of the law were not applicable to

all donees of the same kind. In the case cited above, it was said: "At any rate the argument

adduced against its constitutionality, which is the lack of Uniformity, does not seem to be well

founded. It was said that under such an interpretation, while a donee inter vivos who, after the

predecessor's death proved to be an heir, a legatee, or a donee mortis causa, would have to pay

the tax, another donee inter vivos who did not prove to he an heir, a legatee, or a donee mortis

causa of the predecessor, would be exempt from such a tax. But as these are two different cases,

the principle of uniformity is inapplicable to them."

The last question of a procedural nature arising from the case at bar, which should be passed

upon, is whether the case, as it now stands, can be decided on the merits or should be remanded

to the court a quo for further proceedings. According to our view of the case, it follows that, if

the gifts received by the appellants would have the right to recover the sums of money claimed

by them. Hence the necessity of ascertaining whether the complaint contains an allegation to that

effect. We have examined said complaint and found nothing of that nature. On the contrary, it be

may be inferred from the allegations contained in paragraphs 2 and 7 thereof that said donations

inter vivos were made in consideration of the donor's death. We refer to the allegations that such

transmissions were effected in the month of March, 1925, that the donor died in January, 1926,

and that the donees were instituted legatees in the donor's will which was admitted to probate. It

is from these allegations, especially the last, that we infer a presumption juris tantum that said

donations were made mortis causa and, as such, are subject to the payment of inheritance tax.

Wherefore, the demurrer interposed by the appellee was well-founded because it appears that the

complaint did not allege fact sufficient to constitute a cause of action. When the appellants

refused to amend the same, spite of the court's order to that effect, they voluntarily waived the

opportunity offered them and they are not now entitled to have the case remanded for further

proceedings, which would serve no purpose altogether in view of the insufficiency of the

complaint.

Wherefore, the judgment appealed from is hereby affirmed, with costs of this instance against the

appellants. So ordered.

Avanceña, C.J., Villamor, Ostrand, Abad Santos, Hull, Vickers and Buttes, JJ., concur.

Separate Opinions

VILLA-REAL, J., dissenting:

I sustain my concurrence in Justice Street's dissenting opinion in the case of Tuason and Tuason

vs. Posadas (54 Phil., 289).

The majority opinion to distinguish the present case from above-mentioned case of Tuason and

Tuason vs. Posadas, by interpreting section 1540 of the Administrative Code in the sense that it

establishes the legal presumption juris tantum that all gifts inter vivos made to persons who are

not forced heirs but who are instituted legatees in the donor's will, have been made in

contemplation of the donor's death. Presumptions are of two kinds: One determined by law

which is also called presumption of law or of right; and another which is formed by the judge

from circumstances antecedent to, coincident with or subsequent to the principal fact under

investigation, which is also called presumption of man (presuncion de hombre). (Escriche, Vol.

IV, p. 662.) The Civil Code as well as the code of Civil Procedure establishes presumptions juris

et de jure and juris tantum which the courts should take into account in deciding questions of law

submitted to them for decision. The presumption which majority opinion wishes to draw from

said section 1540 of the Administrative Code can neither be found in this Code nor in any of the

aforementioned Civil Code and Code of Civil Procedure. Therefore, said presumption cannot be

called legal or of law. Neither can it be called a presumption of man (presuncion de hombre)

inasmuch as the majority opinion did not infer it from circumstances antecedent to, coincident

with or subsequent to the principal fact with is the donation itself. In view of the nature, mode of

making and effects of donations inter vivos, the contrary presumption would be more reasonable

and logical; in other words, donations inter vivos made to persons who are not forced heirs, but

who are instituted legatees in the donor's will, should be presumed as not made mortis causa,

unless the contrary is proven. In the case under consideration, the burden of the proof rests with

the person who contends that the donation inter vivos has been made mortis causa.

It is therefore, the undersigned's humble opinion that the order appealed from should be reversed

and the demurrer overruled, and the defendant ordered to file his answer to the complaint.

Street, J., concurs.

G.R. No. L-36770 November 4, 1932

LUIS W. DISON, plaintiff-appellant,

vs.

JUAN POSADAS, JR., Collector of Internal Revenue, defendant-appellant.

Marcelino Aguas for plaintiff-appellant.

Attorney-General Jaranilla for defendant-appellant.

BUTTE, J.:

This is an appeal from the decision of the Court of First Instance of Pampanga in favor of the

defendant Juan Posadas, Jr., Collector of Internal Revenue, in a suit filed by the plaintiffs, Luis

W. Dison, for the recovery of an inheritance tax in the sum of P2,808.73 paid under protest. The

petitioner alleged in his complaint that the tax is illegal because he received the property, which

is the basis of the tax, from his father before his death by a deed of gift inter vivos which was

duly accepted and registered before the death of his father. The defendant answered with a

general denial and with a counterdemand for the sum of P1,245.56 which it was alleged is a

balance still due and unpaid on account of said tax. The plaintiff replied to the counterdemand

with a general denial. The court a quo held that the cause of action set up in the counterdemand

was not proven and dismissed the same. Both sides appealed to this court, but the cross-

complaint and appeal of the Collector of Internal Revenue were dismissed by this court on

March 17, 1932, on motion of the Attorney-General.1awphil.net

The only evidence introduced at the trial of this cause was the proof of payment of the tax under

protest, as stated, and the deed of gift executed by Felix Dison on April 9, 1928, in favor of his

sons Luis W. Dison, the plaintiff-appellant. This deed of gift transferred twenty-two tracts of

land to the donee, reserving to the donor for his life the usufruct of three tracts. This deed was

acknowledged by the donor before a notary public on April 16, 1928. Luis W. Dison, on April

17, 1928, formally accepted said gift by an instrument in writing which he acknowledged before

a notary public on April 20, 1928.

At the trial the parties agreed to and filed the following ingenious stipulation of fact:

1. That Don Felix Dison died on April 21, 1928;

2. That Don Felix Dison, before his death, made a gift inter vivos in favor of the plaintiff

Luis W. Dison of all his property according to a deed of gift (Exhibit D) which includes

all the property of Don Felix Dizon;

3. That the plaintiff did not receive property of any kind of Don Felix Dison upon the

death of the latter;

4. That Don Luis W. Dison was the legitimate and only child of Don Felix Dison.

It is inferred from Exhibit D that Felix Dison was a widower at the time of his death.

The theory of the plaintiff-appellant is that he received and holds the property mentioned by a

consummated gift and that Act No. 2601 (Chapter 40 of the Administrative Code) being the

inheritance tax statute, does not tax gifts. The provision directly here involved is section 1540 of

the Administrative Code which reads as follows:

Additions of Gifts and Advances. — After the aforementioned deductions have been

made, there shall be added to the resulting amount the value of all gifts or advances made

by the predecessor to any of those who, after his death, shall prove to be his heirs,

devises, legatees, or donees mortis causa.

The question to be resolved may be stated thus: Does section 1540 of the Administrative Code

subject the plaintiff-appellant to the payment of an inheritance tax?

The appellant argues that there is no evidence in this case to support a finding that the gift was

simulated and that it was an artifice for evading the payment of the inheritance tax, as is

intimated in the decision of the court below and the brief of the Attorney-General. We see no

reason why the court may not go behind the language in which the transaction is masked in order

to ascertain its true character and purpose. In this case the scanty facts before us may not warrant

the inference that the conveyance, acknowledged by the donor five days before his death and

accepted by the donee one day before the donor's death, was fraudulently made for the purpose

of evading the inheritance tax. But the facts, in our opinion, do warrant the inference that the

transfer was an advancement upon the inheritance which the donee, as the sole and forced heir of

the donor, would be entitled to receive upon the death of the donor.

The argument advanced by the appellant that he is not an heir of his deceased father within the

meaning of section 1540 of the Administrative Code because his father in his lifetime had given

the appellant all his property and left no property to be inherited, is so fallacious that the urging

of it here casts a suspicion upon the appellants reason for completing the legal formalities of the

transfer on the eve of the latter's death. We do not know whether or not the father in this case left

a will; in any event, this appellant could not be deprived of his share of the inheritance because

the Civil Code confers upon him the status of a forced heir. We construe the expression in

section 1540 "any of those who, after his death, shall prove to be his heirs", to include those who,

by our law, are given the status and rights of heirs, regardless of the quantity of property they

may receive as such heirs. That the appellant in this case occupies the status of heir to his

deceased father cannot be questioned. Construing the conveyance here in question, under the

facts presented, as an advance made by Felix Dison to his only child, we hold section 1540 to be

applicable and the tax to have been properly assessed by the Collector of Internal Revenue.

This appeal was originally assigned to a Division of five but referred to the court in banc by

reason of the appellant's attack upon the constitutionality of section 1540. This attack is based on

the sole ground that insofar as section 1540 levies a tax upon gifts inter vivos, it violates that

provision of section 3 of the organic Act of the Philippine Islands (39 Stat. L., 545) which reads

as follows: "That no bill which may be enacted into law shall embraced more than one subject,

and that subject shall be expressed in the title of the bill." Neither the title of Act No. 2601 nor

chapter 40 of the Administrative Code makes any reference to a tax on gifts. Perhaps it is enough

to say of this contention that section 1540 plainly does not tax gifts per se but only when those

gifts are made to those who shall prove to be the heirs, devisees, legatees or donees mortis causa

of the donor. This court said in the case of Tuason and Tuason vs. Posadas 954 Phil.,

289):lawphil.net

When the law says all gifts, it doubtless refers to gifts inter vivos, and not mortis causa.

Both the letter and the spirit of the law leave no room for any other interpretation. Such,

clearly, is the tenor of the language which refers to donations that took effect before the

donor's death, and not to mortis causa donations, which can only be made with the

formalities of a will, and can only take effect after the donor's death. Any other

construction would virtually change this provision into:

". . . there shall be added to the resulting amount the value of all gifts mortis causa . . . made by

the predecessor to those who, after his death, shall prove to be his . . . donees mortis causa." We

cannot give to the law an interpretation that would so vitiate its language. The truth of the matter

is that in this section (1540) the law presumes that such gifts have been made in anticipation of

inheritance, devise, bequest, or gift mortis causa, when the donee, after the death of the donor

proves to be his heir, devisee or donee mortis causa, for the purpose of evading the tax, and it is

to prevent this that it provides that they shall be added to the resulting amount." However much

appellant's argument on this point may fit his preconceived notion that the transaction between

him and his father was a consummated gift with no relation to the inheritance, we hold that there

is not merit in this attack upon the constitutionality of section 1540 under our view of the facts.

No other constitutional questions were raised in this case.

The judgment below is affirmed with costs in this instance against the appellant. So ordered.