Cases in Succession Set 1

7/27/2019 Cases in Succession Set 1

1/34

G.R. No. L-770 April 27, 1948

ANGEL T. LIMJOCO, petitioner,

vs.

INTESTATE ESTATE OF PEDRO O. FRAGRANTE, deceased, respondent.

Angel Limjoco, Jr. and Delfin L. Gonzales for petitioner.

Bienvenido A. Tan for respondent.

HILADO,J.:

Under date of May 21, 1946, the Public Service Commission, through Deputy Commissioner Fidel Ibaez,

rendered its decision in case No. 4572 of Pedro O. Fragante, as applicant for a certificate of public convenience

to install, maintain and operate an ice plant in San Juan, Rizal, whereby said commission held that the

evidence therein showed that the public interest and convenience will be promoted in a proper and suitable

manner "by authorizing the operation and maintenance of another ice plant of two and one-half (2-) tons in

the municipality of San Juan; that the original applicant Pedro O. Fragante was a Filipino Citizen at the time of

his death; and that his intestate estate is financially capable of maintaining the proposed service". The

commission, therefore, overruled the opposition filed in the case and ordered "that under the provisions ofsection 15 of Commonwealth Act No. 146, as amended a certificate of public convenience be issued to the

Intestate Estate of the deceased Pedro Fragante, authorizing said Intestate Estate through its Special or

Judicial Administrator, appointed by the proper court of competent jurisdiction, to maintain and operate an

ice plant with a daily productive capacity of two and one-half (2-1/2) tons in the Municipality of San Juan and

to sell the ice produced from said plant in the said Municipality of San Juan and in the Municipality of

Mandaluyong, Rizal, and in Quezon City", subject to the conditions therein set forth in detail (petitioner's

brief, pp. 33-34).

Petitioner makes four assignments of error in his brief as follows:

1. The decision of the Public Service Commission is not in accordance with law.

2. The decision of the Public Service Commission is not reasonably supported by evidence.

3. The Public Service Commission erred in not giving petitioner and the Ice and Cold Storage Industries

of the Philippines, Inc., as existing operators, a reasonable opportunity to meet the increased demand.

4. The decision of the Public Service Commission is an unwarranted departure from its announced

policy with respect to the establishment and operation of ice plant. (Pp. 1-2, petitioner's brief.)

In his argument petitioner contends that it was error on the part of the commission to allow the substitutionof the legal representative of the estate of Pedro O. Fragante for the latter as party applicant in the case then

pending before the commission, and in subsequently granting to said estate the certificate applied for, which

is said to be in contravention of law.

If Pedro O. Fragante had not died, there can be no question that he would have had the right to prosecute his

application before the commission to its final conclusion. No one would have denied him that right. As

declared by the commission in its decision, he had invested in the ice plant in question P 35,000, and from

what the commission said regarding his other properties and business, he would certainly have been

financially able to maintain and operate said plant had he not died. His transportation business alone was


2/34

netting him about P1,440 a month. He was a Filipino citizen and continued to be such till his demise. The

commission declared in its decision, in view of the evidence before it, that his estate was financially able to

maintain and operate the ice plant. The aforesaid right of Pedro O. Fragante to prosecute said application to

its conclusion was one which by its nature did not lapse through his death. Hence, it constitutes a part of the

assets of his estate, for which a right was property despite the possibility that in the end the commission might

have denied application, although under the facts of the case, the commission granted the application in view

of the financial ability of the estate to maintain and operate the ice plant. Petitioner, in his memorandum of

March 19, 1947, admits (page 3) that the certificate of public convenience once granted "as a rule, should

descend to his estate as an asset". Such certificate would certainly be property, and the right to acquire such a

certificate, by complying with the requisites of the law, belonged to the decedent in his lifetime, and survived

to his estate and judicial administrator after his death.

If Pedro O. Fragrante had in his lifetime secured an option to buy a piece of land and during the life of the

option he died, if the option had been given him in the ordinary course of business and not out of special

consideration for his person, there would be no doubt that said option and the right to exercise it would have

survived to his estate and legal representatives. In such a case there would also be the possibility of failure to

acquire the property should he or his estate or legal representative fail to comply with the conditions of the

option. In the case at bar Pedro O. Fragrante's undoubted right to apply for and acquire the desired certificate

of public convenience the evidence established that the public needed the ice plant was under the lawconditioned only upon the requisite citizenship and economic ability to maintain and operate the service. Of

course, such right to acquire or obtain such certificate of public convenience was subject to failure to secure

its objective through nonfulfillment of the legal conditions, but the situation here is no different from the legal

standpoint from that of the option in the illustration just given.

Rule 88, section 2, provides that the executor or administrator may bring or defend actions, among other

cases, for the protection of the property or rights of the deceased which survive, and it says that such actions

may be brought or defended "in the right of the deceased".

Rule 82, section 1, paragraph (a), mentions among the duties of the executor or administrator, the making of

an inventory of all goods, chattels, rights, credits, and estate of the deceased which shall come to his

possession or knowledge, or to the possession of any other person for him.

In his commentaries on the Rules of Court (Volume II, 2nd ed., pages 366, 367) the present chief Justice of this

Court draws the following conclusion from the decisions cited by him:

Therefore, unless otherwise expressly provided by law, any action affecting the property

or rights (emphasis supplied) of a deceased person which may be brought by or against him if he were

alive, may likewise be instituted and prosecuted by or against the administrator, unless the action is for

recovery of money, debt or interest thereon, or unless, by its very nature, it cannot survive, because

death extinguishes the right . . . .

It is true that a proceeding upon the application for a certificate of public convenience before the Public

Service Commission is not an "action". But the foregoing provisions and citations go to prove that the

decedent's rights which by their nature are not extinguished by death go to make up a part and parcel of the

assets of his estate which, being placed under the control and management of the executor or administrator,

can not be exercised but by him in representation of the estate for the benefit of the creditors, devisees or

legatees, if any, and the heirs of the decedent. And if the right involved happens to consist in the prosecution

of an unfinished proceeding upon an application for a certificate of public convenience of the deceased before


3/34

the Public Service Commission, it is but logical that the legal representative be empowered and entitled in

behalf of the estate to make the right effective in that proceeding.

Manresa (Vol. III, 6th ed., p. 11) says that No. 10 of article 334 and article 336 of the Civil Code, respectively,

consider as immovable and movable things rights which are not material. The same eminent commentator

says in the cited volume (p. 45) that article 336 of the Civil Code has been deficiently drafted in that it is not

sufficiently expressive of all incorporeal rights which are also propertyfor juridical purposes.

Corpus Juris (Vol. 50, p. 737) states that in the broad sense of the term, property includes, among other things,

"an option", and "the certificate of the railroad commission permitting the operation of a bus line", and on

page 748 of the same volume we read:

However, these terms (real property, as estate or interest) have also been declared to include every

species of title, inchoate or complete, and embrace rights which lie in contract, whether executory or

executed. (Emphasis supplied.)

Another important question raised by petitioner is whether the estate of Pedro O. Fragrante is a "person"

within the meaning of the Public Service Act.

Words and Phrases, First Series, (Vol. 6, p, 5325), states the following doctrine in the jurisdiction of the State

of Indiana:

As the estate of the decedent is in law regarded as a person, a forgery committed after the death of

the man whose name purports to be signed to the instrument may be prosecuted as with the intent to

defraud the estate. Billings vs. State, 107 Ind., 54, 55, 6 N. E. 914, 7 N. E. 763, 57 Am. Rep. 77.

The Supreme Court of Indiana in the decision cited above had before it a case of forgery committed after the

death of one Morgan for the purpose of defrauding his estate. The objection was urged that the information

did not aver that the forgery was committed with the intent to defraud any person. The Court, per Elliott, J.,

disposed of this objection as follows:

. . . The reason advanced in support of this proposition is that the law does not regard the estate of a

decedent as a person. This intention (contention) cannot prevail. The estate of the decedent is a

person in legal contemplation. "The word "person" says Mr. Abbot, "in its legal signification, is a

generic term, and includes artificial as well as natural persons," 2 Abb. Dict. 271; Douglas vs. Pacific,

etc. Co., 4 Cal. 304; Planters', etc., Bank vs. Andrews, 8 Port. (Ala.) 404. It said in another work that

'persons are of two kinds: natural and artificial. A natural person is a human being. Artificial persons

include (1) a collection or succession of natural persons forming a corporation; (2) a collection of

property to which the law attributes the capacity of having rights and duties. The latter class of

artificial persons is recognized only to a limited extent in our law. "Examples are the estate of abankrupt or deceased person." 2 Rapalje & L. Law Dict. 954. Our own cases inferentially recognize the

correctness of the definition given by the authors from whom we have quoted, for they declare that it

is sufficient, in pleading a claim against a decedent's estate, to designate the defendant as the estate of

the deceased person, naming him. Ginn vs. Collins, 43 Ind. 271. Unless we accept this definition as

correct, there would be a failure of justice in cases where, as here, the forgery is committed after the

death of a person whose name is forged; and this is a result to be avoided if it can be done consistent

with principle. We perceive no difficulty in avoiding such a result; for, to our minds, it seems

reasonable that the estate of a decedent should be regarded as an artificial person. It is the creation of

law for the purpose of enabling a disposition of the assets to be properly made, and, although natural


4/34

persons as heirs, devises, or creditors, have an interest in the property, the artificial creature is a

distinct legal entity. The interest which natural persons have in it is not complete until there has been a

due administration; and one who forges the name of the decedent to an instrument purporting to be a

promissory note must be regarded as having intended to defraud the estate of the decedent, and not

the natural persons having diverse interests in it, since ha cannot be presumed to have known who

those persons were, or what was the nature of their respective interest. The fraudulent intent is

against the artificial person, the estate and not the natural persons who have direct or contingent

interest in it. (107 Ind. 54, 55, 6 N.E. 914-915.)

In the instant case there would also be a failure of justice unless the estate of Pedro O. Fragrante is considered

a "person", for quashing of the proceedings for no other reason than his death would entail prejudicial results

to his investment amounting to P35,000.00 as found by the commission, not counting the expenses and

disbursements which the proceeding can be presumed to have occasioned him during his lifetime, let alone

those defrayed by the estate thereafter. In this jurisdiction there are ample precedents to show that the

estate of a deceased person is also considered as having legal personality independent of their heirs. Among

the most recent cases may be mentioned that of "Estate of Mota vs. Concepcion, 56 Phil., 712, 717, wherein

the principal plaintiff was the estate of the deceased Lazaro Mota, and this Court gave judgment in favor of

said estate along with the other plaintiffs in these words:

. . . the judgment appealed from must be affirmed so far as it holds that defendants Concepcion and

Whitaker are indebted to he plaintiffs in the amount of P245,804.69 . . . .

Under the regime of the Civil Code and before the enactment of the Code of Civil Procedure, the heirs of a

deceased person were considered in contemplation of law as the continuation of his personality by virtue of

the provision of article 661 of the first Code that the heirs succeed to all the rights and obligations of the

decedent by the mere fact of his death. It was so held by this Court in Barrios vs. Dolor, 2 Phil., 44, 46.

However, after the enactment of the Code of Civil Procedure, article 661 of the Civil Code was abrogated, as

held in Suiliong & Co. vs. Chio-Taysan, 12 Phil., 13, 22. In that case, as well as in many others decided by this

Court after the innovations introduced by the Code of Civil Procedure in the matter of estates of deceased

persons, it has been the constant doctrine that it is the estate or the mass of property, rights and assets left by

the decedent, instead of the heirs directly, that becomes vested and charged with his rights and obligations

which survive after his demise.

The heirs were formerly considered as the continuation of the decedent's personality simply by legal fiction,

for they might not have been flesh and blood the reason was one in the nature of a legal exigency derived

from the principle that the heirs succeeded to the rights and obligations of the decedent. Under the present

legal system, such rights and obligations as survive after death have to be exercised and fulfilled only by the

estate of the deceased. And if the same legal fiction were not indulged, there would be no juridical basis for

the estate, represented by the executor or administrator, to exercise those rights and to fulfill those

obligations of the deceased. The reason and purpose for indulging the fiction is identical and the same in bothcases. This is why according to the Supreme Court of Indiana in Billings vs. State, supra, citing 2 Rapalje & L.

Dictionary, 954, among the artificial persons recognized by law figures "a collection of property to which the

law attributes the capacity of having rights and duties", as for instance, the estate of a bankrupt or deceased

person.

Petitioner raises the decisive question of whether or not the estate of Pedro O. Fragrante can be considered a

"citizen of the Philippines" within the meaning of section 16 of the Public Service Act, as amended, particularly

the proviso thereof expressly and categorically limiting the power of the commission to issue certificates of

public convenience or certificates of public convenience and necessity "only to citizens of the Philippines or of


5/34

the United States or to corporations, copartnerships, associations, or joint-stock companies constituted and

organized under the laws of the Philippines", and the further proviso that sixty per centum of the stock or

paid-up capital of such entities must belong entirely to citizens of the Philippines or of the United States.

Within the Philosophy of the present legal system, the underlying reason for the legal fiction by which, for

certain purposes, the estate of the deceased person is considered a "person" is the avoidance of injustice or

prejudice resulting from the impossibility of exercising such legal rights and fulfilling such legal obligations of

the decedent as survived after his death unless the fiction is indulged. Substantially the same reason is

assigned to support the same rule in the jurisdiction of the State of Indiana, as announced in Billings vs.

State, supra, when the Supreme Court of said State said:

. . . It seems reasonable that the estate of a decedent should be regarded as an artificial person. it is

the creation of law for the purpose of enabling a disposition of the assets to be properly made . . . .

Within the framework and principles of the constitution itself, to cite just one example, under the bill of rights

it seems clear that while the civil rights guaranteed therein in the majority of cases relate to natural persons,

the term "person" used in section 1 (1) and (2) must be deemed to include artificial or juridical persons, for

otherwise these latter would be without the constitutional guarantee against being deprived of property

without due process of law, or the immunity from unreasonable searches and seizures. We take it that it wasthe intendment of the framers to include artificial or juridical, no less than natural, persons in these

constitutional immunities and in others of similar nature. Among these artificial or juridical persons figure

estates of deceased persons. Hence, we hold that within the framework of the Constitution, the estate of

Pedro O. Fragrante should be considered an artificial or juridical person for the purposes of the settlement

and distribution of his estate which, of course, include the exercise during the judicial administration thereof

of those rights and the fulfillment of those obligations of his which survived after his death. One of those

rights was the one involved in his pending application before the Public Service Commission in the instant

case, consisting in the prosecution of said application to its final conclusion. As stated above, an injustice

would ensue from the opposite course.

How about the point of citizenship? If by legal fiction his personality is considered extended so that any debts

or obligations left by, and surviving, him may be paid, and any surviving rights may be exercised for the benefit

of his creditors and heirs, respectively, we find no sound and cogent reason for denying the application of the

same fiction to his citizenship, and for not considering it as likewise extended for the purposes of the aforesaid

unfinished proceeding before the Public Service Commission. The outcome of said proceeding, if successful,

would in the end inure to the benefit of the same creditors and the heirs. Even in that event petitioner could

not allege any prejudice in the legal sense, any more than he could have done if Fragrante had lived longer and

obtained the desired certificate. The fiction of such extension of his citizenship is grounded upon the same

principle, and motivated by the same reason, as the fiction of the extension of personality. The fiction is made

necessary to avoid the injustice of subjecting his estate, creditors and heirs, solely by reason of his death to

the loss of the investment amounting to P35,000, which he has already made in the ice plant, not counting theother expenses occasioned by the instant proceeding, from the Public Service Commission of this Court.

We can perceive no valid reason for holding that within the intent of the constitution (Article IV), its provisions

on Philippine citizenship exclude the legal principle of extension above adverted to. If for reasons already

stated our law indulges the fiction of extension of personality, if for such reasons the estate of Pedro O.

Fragrante should be considered an artificial or juridical person herein, we can find no justification for refusing

to declare a like fiction as to the extension of his citizenship for the purposes of this proceeding.


6/34

Pedro O. Fragrante was a Filipino citizen, and as such, if he had lived, in view of the evidence of record, he

would have obtained from the commission the certificate for which he was applying. The situation has

suffered but one change, and that is, his death. His estate was that of a Filipino citizen. And its economic

ability to appropriately and adequately operate and maintain the service of an ice plant was the same that it

received from the decedent himself. In the absence of a contrary showing, which does not exist here, his heirs

may be assumed to be also Filipino citizens; and if they are not, there is the simple expedient of revoking the

certificate or enjoining them from inheriting it.

Upon the whole, we are of the opinion that for the purposes of the prosecution of said case No. 4572 of the

Public Service Commission to its final conclusion, both the personality and citizenship of Pedro O. Fragrante

must be deemed extended, within the meaning and intent of the Public Service Act, as amended, in harmony

with the constitution: it is so adjudged and decreed.

Decision affirmed, without costs. So ordered.

Moran, C.J., Pablo, Bengzon, Briones, Padilla and Tuason, JJ., concur.

Paras, J., I hereby certify that Mr. Justice Feria voted with the majority.

Separate Opinions

PERFECTO,J., dissenting:

Commonwealth Act No. 146 reserves to Filipino citizens the right to obtain a certificate of public convenience

to operate an ice plant in San Juan, Rizal. The limitation is in accordance with section 8 of Article XIV of the

Constitution which provides

No franchise, certificate, or any other form of authorization for the operation of a public utility shall be

granted except to citizens of the Philippines or to corporations or other entities organized under the

laws of the Philippines, sixty per centum of the capital of which is owned by citizens of the Philippines,

nor such franchise, certificate or authorization be exclusive in character or for a longer period than fifty

years. No franchise granted to any individual, firm or corporation, except under the condition that it

shall be subject to amendment, alteration, or repeal by Congress when the public interest so requires.

The main question in this case is whether the estate of Pedro O. Fragrante fulfills the citizenship requirement.

To our mind, the question can be restated by asking whether the heirs of Pedro O. Fragrante fulfill the

citizenship requirement of the law.

The estate is an abstract entity. As such, its legal value depends on what it represents. It is a device by which

the law gives a kind of personality and unity to undetermined tangible persons, the heirs. They inherit and

replace the deceased at the very moment of his death. As there are procedural requisites for their

identification and determination that need time for their compliance, a legal fiction has been devised to

represent them. That legal fiction is the estate, a liquid condition in process of solidification.

The estate, therefore, has only a representative value. What the law calls estate is, a matter of fact, intended

to designate the heirs of the deceased. The question, therefore, in this case, boils down to the citizenship of

the heirs of Fragrante.


7/34

There is nothing in the record to show conclusively the citizenship of the heirs of Fragrante. If they are Filipino

citizens, the action taken by the Public Service Commission should be affirmed. If they are not, it should be

reversed.

Petitioner alleges that the estate is just a front or dummy for aliens to go around the citizenship constitutional

provision. It is alleged that Gaw Suy, the special administrator of the estate, is an alien.

We are of the opinion that the citizenship of the heirs of Fragrante should be determined by the Commission

upon evidence that the party should be present. It should also determine the dummy question raised by the

petitioner.

We are of opinion and so vote that the decision of the Public Service Commission of May 21, 1946, be set

aside and that the Commission be instructed to receive evidence of the above factual questions and render a

new decision accordingly.


8/34

G.R. No. L-43082

PABLO LORENZO, as trustee of the estate of Thomas Hanley, deceased, plaintiff-appellant,

vs.

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

Pablo Lorenzo and Delfin Joven for plaintiff-appellant.

Office of the Solicitor-General Hilado for defendant-appellant.

LAUREL,J.:On October 4, 1932, the plaintiff Pablo Lorenzo, in his capacity as trustee of the estate of Thomas Hanley,

deceased, brought this action in the Court of First Instance of Zamboanga against the defendant, Juan

Posadas, Jr., then the Collector of Internal Revenue, for the refund of the amount of P2,052.74, paid by the

plaintiff as inheritance tax on the estate of the deceased, and for the collection of interst thereon at the rate

of 6 per cent per annum, computed from September 15, 1932, the date when the aforesaid tax was [paid

under protest. The defendant set up a counterclaim for P1,191.27 alleged to be interest due on the tax in

question and which was not included in the original assessment. From the decision of the Court of First

Instance of Zamboanga dismissing both the plaintiffs complaint and the defendants counterclaim, both

parties appealed to this court.

It appears that on May 27, 1922, one Thomas Hanley died in Zamboanga, Zamboanga, leaving a will (Exhibit 5)

and considerable amount of real and personal properties. On june 14, 1922, proceedings for the probate of his

will and the settlement and distribution of his estate were begun in the Court of First Instance of Zamboanga.

The will was admitted to probate. Said will provides, among other things, as follows:

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

5. I direct that all real estate owned by me at the time of my death be not sold or otherwise disposed of for a

period of ten (10) years after my death, and that the same be handled and managed by the executors, and

proceeds thereof to be given to my nephew, Matthew Hanley, at Castlemore, Ballaghaderine, County of

Rosecommon, Ireland, and that he be directed that the same be used only for the education of my brotherschildren and their descendants.

6. I direct that ten (10) years after my death my property be given to the above mentioned Matthew Hanley to

be disposed of in the way he thinks most advantageous.

x x x x x x x x x

8. I state at this time I have one brother living, named Malachi Hanley, and that my nephew, Matthew Hanley,

is a son of my said brother, Malachi Hanley.

The Court of First Instance of Zamboanga considered it proper for the best interests of the estate to appoint atrustee to administer the real properties which, under the will, were to pass to Matthew Hanley ten years

after the two executors named in the will, was, on March 8, 1924, appointed trustee. Moore took his oath of

office and gave bond on March 10, 1924. He acted as trustee until February 29, 1932, when he resigned and

the plaintiff herein was appointed in his stead.

During the incumbency of the plaintiff as trustee, the defendant Collector of Internal Revenue, alleging that

the estate left by the deceased at the time of his death consisted of realty valued at P27,920 and personalty

valued at P1,465, and allowing a deduction of P480.81, assessed against the estate an inheritance tax in the

amount of P1,434.24 which, together with the penalties for delinquency in payment consisting of a 1 per cent


9/34

monthly interest from July 1, 1931 to the date of payment and a surcharge of 25 per cent on the tax,

amounted to P2,052.74. On March 15, 1932, the defendant filed a motion in the testamentary proceedings

pending before the Court of First Instance of Zamboanga (Special proceedings No. 302) praying that the

trustee, plaintiff herein, be ordered to pay to the Government the said sum of P2,052.74. The motion was

granted. On September 15, 1932, the plaintiff paid said amount under protest, notifying the defendant at the

same time that unless the amount was promptly refunded suit would be brought for its recovery. The

defendant overruled the plaintiffs protest and refused to refund the said amount hausted, plaintiff went to

court with the result herein above indicated.

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

I. In holding that the real property of Thomas Hanley, deceased, passed to his instituted heir, Matthew Hanley,

from the moment of the death of the former, and that from the time, the latter became the owner thereof.

II. In holding, in effect, that there was delinquency in the payment of inheritance tax due on the estate of said

deceased.

III. In holding that the inheritance tax in question be based upon the value of the estate upon the death of the

testator, and not, as it should have been held, upon the value thereof at the expiration of the period of tenyears after which, according to the testators will, the property could be and was to be delivered to the

instituted heir.

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

tax, the amounts allowed by the court as compensation to the trustees and paid to them from the decedents

estate.

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

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

The lower court erred in not ordering the plaintiff to pay to the defendant the sum of P1,191.27, representing

part of the interest at the rate of 1 per cent per month from April 10, 1924, to June 30, 1931, which the plaintiff

had failed to pay on the inheritance tax assessed by the defendant against the estate of Thomas Hanley.

The following are the principal questions to be decided by this court in this appeal: (a) When does the

inheritance tax accrue and when must it be satisfied? (b) Should the inheritance tax be computed on the basis

of the value of the estate at the time of the testators death, or on its value ten years later? (c) In determining

the net value of the estate subject to tax, is it proper to deduct the compensation due to trustees? (d) What

law governs the case at bar? Should the provisions of Act No. 3606 favorable to the tax-payer be given

retroactive effect? (e) Has there been delinquency in the payment of the inheritance tax? If so, should the

additional interest claimed by the defendant in his appeal be paid by the estate? Other points of incidental

importance, raised by the parties in their briefs, will be touched upon in the course of this opinion.

(a) The accrual of the inheritance tax is distinct from the obligation to pay the same. Section 1536 as amended,

of the Administrative Code, imposes the tax upon every transmission by virtue of inheritance, devise,

bequest, gift mortis causa, or advance in anticipation of inheritance,devise, or bequest. The tax therefore is

upon transmission or the transfer or devolution of property of a decedent, made effective by his death. (61 C.

J., p. 1592.) It is in reality an excise or privilege tax imposed on the right to succeed to, receive, or take

property by or under a will or the intestacy law, or deed, grant, or gift to become operative at or after death.


10/34

According to article 657 of the Civil Code, the rights to the succession of a person are transmitted from the

moment of his death. In other words, said Arellano, C. J., . . . the heirs succeed immediately to all of the

property of the deceased ancestor. The property belongs to the heirs at the moment of the death of the

ancestor as completely as if the ancestor had executed and delivered to them a deed for the same before his

death. (Bondad vs. Bondad, 34 Phil. 232. See also, Mijares vs. Nery, 3 Phil. 195; Suilong & Co., vs. Chio-Taysan

12 Phil. 13; Lubrico vs. Arbado, 12 Phil. 391; Innocencio vs. Gat-Pandan, 14 Phil. 491; Aliasas vs.Alcantara, 16

Phil. 489; Ilustre vs. Alaras Frondosa, 17 Phil. 321; Malahacan vs. Ignacio, 19 Phil. 434; Bowa vs. Briones, 38

Phil. 27; Osario vs. Osario & Yuchausti Steamship Co., 41 Phil. 531; Fule vs. Fule, 46 Phil. 317; Dais vs. Court ofFirst Instance of Capiz, 51 Phil. 396; Baun vs. Heirs of Baun, 53 Phil. 654.) Plaintiff, however, asserts that while

article 657 of the Civil Code is applicable to testate as well as intestate succession, it operates only in so far as

forced heirs are concerned. But the language of article 657 of the Civil Code is broad and makes no distinction

between different classes of heirs. That article does not speak of forced heirs; it does not even use the word

heir. It speaks of the rights of succession and the transmission thereof from the moment of death. The

provision of section 625 of the Code of Civil Procedure regarding the authentication and probate of a will as a

necessary condition to effect transmission of property does not affect the general rule laid down in article 657

of the Civil Code. The authentication of a will implies its due execution but once probated and allowed the

transmission is effective as of the death of the testator in accordance with article 657 of the Civil Code.

Whatever may be the time when actual transmission of the inheritance takes place, succession takes place in

any event at the moment of the decedents death. The time when the heirs legally succeed to the inheritance

may differ from the time when the heirs actually receive such inheritance. Poco importa, says Manresa

commenting on article 657 of the Civil Code, que desde el falleimiento del causante, hasta que el heredero o

legatario entre en posesion de los bienes de la herencia o del legado, transcurra mucho o poco tiempo, pues la

adquisicion ha de retrotraerse al momento de la muerte, y asi lo ordena el articulo 989, que debe considerarse

como complemento del presente. (5 Manresa, 305; see also, art. 440, par. 1, Civil Code.) Thomas Hanley

having died on May 27, 1922, the inheritance tax accrued as of the date.

From the fact, however, that Thomas Hanley died on May 27, 1922, it does not follow that the obligation to

pay the tax arose as of the date. The time for the payment on inheritance tax is clearly fixed by section 1544 of

the Revised Administrative Code as amended by Act No. 3031, in relation to section 1543 of the same Code.

The two sections follow:

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

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

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

(c) The transmission from the first heir, legatee, or donee in favor of another beneficiary, in accordance with

the desire of the predecessor.

In the last two cases, if the scale of taxation appropriate to the new beneficiary is greater than that paid by the

first, the former must pay the difference.

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

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

(b) In other cases, within the six months subsequent to the death of the predecessor; but if judicial

testamentary or intestate proceedings shall be instituted prior to the expiration of said period, the payment

shall be made by the executor or administrator before delivering to each beneficiary his share.


11/34

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

annum shall be added as part of the tax; and to the tax and interest due and unpaid within ten days after the

date of notice and demand thereof by the collector, there shall be further added a surcharge of twenty-five per

centum.

A certified of all letters testamentary or of administration shall be furnished the Collector of Internal Revenue

by the Clerk of Court within thirty days after their issuance.

It should be observed in passing that the word trustee, appearing in subsection (b) of section 1543, should

read fideicommissary or cestui quetrust. There was an obvious mistake in translation from the Spanish to

the English version.

The instant case does fall under subsection (a), but under subsection (b), of section 1544 above-quoted, as

there is here no fiduciary heirs, first heirs, legatee or donee. Under the subsection, the tax should have been

paid before the delivery of the properties in question to P. J. M. Moore as trustee on March 10, 1924.

(b) The plaintiff contends that the estate of Thomas Hanley, in so far as the real properties are concerned, did

not and could not legally pass to the instituted heir, Matthew Hanley, until after the expiration of ten years

from the death of the testator on May 27, 1922 and, that the inheritance tax should be based on the value of

the estate in 1932, or ten years after the testators death. The plaintiff introduced evidence tending to showthat in 1932 the real properties in question had a reasonable value of only P5,787. This amount added to the

value of the personal property left by the deceased, which the plaintiff admits is P1,465, would generate an

inheritance tax which, excluding deductions, interest and surcharge, would amount only to about P169.52.

If death is the generating source from which the power of the estate to impose inheritance taxes takes its

being and if, upon the death of the decedent, succession takes place and the right of the estate to tax vests

instantly, the tax should be measured by the value of the estate as it stood at the time of the decedents

death, regardless of any subsequent contingency value of any subsequent increase or decrease in value. (61 C.

J., pp. 1692, 1693; 26 R. C. L., p. 232; Blakemore and Bancroft, Inheritance Taxes, p. 137. See also Knowlton vs.

Moore, 178 U.S., 41; 20 Sup. Ct. Rep., 747; 44 Law. ed., 969.) The right of the state to an inheritance taxaccrues at the moment of death, and hence is ordinarily measured as to any beneficiary by the value at that

time of such property as passes to him. Subsequent appreciation or depreciation is immaterial. (Ross,

Inheritance Taxation, p. 72.)

Our attention is directed to the statement of the rule in Cyclopedia of Law of and Procedure (vol. 37, pp. 1574,

1575) that, in the case of contingent remainders, taxation is postponed until the estate vests in possession or

the contingency is settled. This rule was formerly followed in New York and has been adopted in Illinois,

Minnesota, Massachusetts, Ohio, Pennsylvania and Wisconsin. This rule, however, is by no means entirely

satisfactory either to the estate or to those interested in the property (26 R. C. L., p. 231.). Realizing, perhaps,

the defects of its anterior system, we find upon examination of cases and authorities that New York has variedand now requires the immediate appraisal of the postponed estate at its clear market value and the payment

forthwith of the tax on its out of the corpus of the estate transferred. (In re Vanderbilt, 172 N. Y., 69; 69 N. E.,

782; In re Huber, 86 N. Y. App. Div., 458; 83 N. Y. Supp., 769; Estate of Tracy, 179 N. Y., 501; 72 N. Y., 519;

Estate of Brez, 172 N. Y., 609; 64 N. E., 958; Estate of Post, 85 App. Div., 611; 82 N. Y. Supp., 1079. Vide also,

Saltoun vs. Lord Advocate, 1 Peter. Sc. App., 970; 3 Macq. H. L., 659; 23 Eng. Rul. Cas., 888.) California adheres

to this new rule (Stats. 1905, sec. 5, p. 343).

But whatever may be the rule in other jurisdictions, we hold that a transmission by inheritance is taxable at

the time of the predecessors death, notwithstanding the postponement of the actual possession or


12/34


13/34

shall have a retroactive effect, . . . . (61 C. J., P. 1602.) Though the last paragraph of section 5 of Regulations

No. 65 of the Department of Finance makes section 3 of Act No. 3606, amending section 1544 of the Revised

Administrative Code, applicable to all estates the inheritance taxes due from which have not been paid, Act

No. 3606 itself contains no provisions indicating legislative intent to give it retroactive effect. No such effect

can begiven the statute by this court.

The defendant Collector of Internal Revenue maintains, however, that certain provisions of Act No. 3606 are

more favorable to the taxpayer than those ofAct No. 3031, that said provisions are penal in nature and,therefore, should operate retroactively in conformity with the provisions of article 22 of the Revised Penal

Code. This is the reason why he applied Act No. 3606 instead of Act No. 3031. Indeed, under Act No. 3606, (1)

the surcharge of 25 per cent is based on the tax only, instead of on both the tax and the interest, as provided

for in Act No. 3031, and (2) the taxpayer is allowed twenty days from notice and demand by the Collector of

Internal Revenue within which to pay the tax, instead of ten days only as required by the old law.

Properly speaking, a statute is penal when it imposes punishment for an offense committed against the state

which, under the Constitution, the Executive has the power to pardon. In common use, however, this sense

has been enlarged to include within the term penal statutes all status which command or prohibit certain

acts, and establish penalties for their violation, and even those which, without expressly prohibiting certain

acts, impose a penalty upon their commission (59 C. J., p. 1110). Revenue laws, generally, which impose taxescollected by the means ordinarily resorted to for the collection of taxes are not classed as penal laws, although

there are authorities to the contrary. (See Sutherland, Statutory Construction, 361; Twine Co. vs. Worthington,

141 U. S., 468; 12 Sup. Ct., 55; Rice vs. U. S., 4 C. C. A., 104; 53 Fed., 910; Com. vs. Standard Oil Co., 101 Pa. St.,

150; State vs. Wheeler, 44 P., 430; 25 Nev. 143.) Article 22 of the Revised Penal Code is not applicable to the

case at bar, and in the absence of clear legislative intent, we cannot give Act No. 3606 a retroactive effect.

(e) The plaintiff correctly states that the liability to pay a tax may arise at a certain time and the tax may be

paid within another given time. As stated by this court, the mere failure to pay ones tax does not render one

delinquent until and unless the entire period has elapsed within which the taxpayer is authorized by law to

make such payment without being subjected to the payment of penalties for failure to pay his taxes within theprescribed period. (U. S. vs. Labadan, 26 Phil. 239.)

The defendant maintains that it was the duty of the executor to pay the inheritance tax before the delivery of

the decedents property to the trustee. Stated otherwise, the defendant contends that delivery to the trustee

was delivery to the cestui que trust, the beneficiary in this case, within the meaning of the first paragraph of

subsection (b) of section 1544 of the Revised Administrative Code. This contention is well taken and is

sustained. The appointment of P. J. M. Moore as trustee was made by the trial court in conformity with the

wishes of the testator as expressed in his will. It is true that the word trust is not mentioned or used in the

will but the intention to create one is clear. No particular or technical words are required to create a

testamentary trust (69 C. J., p. 711). The words trust and trustee, though apt for the purpose, are not

necessary. In fact, the use of these two words is not conclusive on the question that a trust is created (69 C. J.,

p. 714). To create a trust by will the testator must indicate in the will his intention so to do by using language

sufficient to separate the legal from the equitable estate, and with sufficient certainty designate the

beneficiaries, their interest in the trust, the purpose or object of the trust, and the property or subject matter

thereof. Stated otherwise, to constitute a valid testamentary trust there must be a concurrence of three

circumstances: (1) Sufficient words to raise a trust; (2) a definite subject; (3) a certain or ascertain object;

statutes in some jurisdictions expressly or in effect so providing. (69 C. J., pp. 705,706.) There is no doubt that

the testator intended to create a trust. He ordered in his will that certain of his properties be kept together
http://philippinelaw.info/statutes/act3031.htmlhttp://philippinelaw.info/statutes/act3606.htmlhttp://philippinelaw.info/statutes/act3606.htmlhttp://philippinelaw.info/statutes/act3031.html


14/34

undisposed during a fixed period, for a stated purpose. The probate court certainly exercised sound judgment

in appointment a trustee to carry into effect the provisions of the will (see sec. 582, Code of Civil Procedure).

P. J. M. Moore became trustee on March 10, 1924. On that date trust estate vested in him (sec. 582 in relation

to sec. 590, Code of Civil Procedure). The mere fact that the estate of the deceased was placed in trust did not

remove it from the operation of our inheritance tax laws or exempt it from the payment of the inheritance

tax. The corresponding inheritance tax should have been paid on or before March 10, 1924, to escape the

penalties of the laws. This is so for the reason already stated that the delivery of the estate to the trustee

was in esse delivery of the same estate to the cestui quetrust, the beneficiary in this case. A trustee is but aninstrument or agent for the cestui que trust (Shelton vs. King, 299 U. S., 90; 33 Sup. Ct. Rep., 689; 57 Law. ed.,

1086). When Moore accepted the trust and took possession of the trust estate he thereby admitted that the

estate belonged not to him but to his cestui que trust (Tolentino vs. Vitug, 39 Phil.126, cited in 65 C. J., p. 692,

n. 63). He did not acquire any beneficial interest in the estate. He took such legal estate only as the proper

execution of the trust required (65 C. J., p. 528) and, his estate ceased upon the fulfillment of the testators

wishes. The estate then vested absolutely in the beneficiary (65 C. J., p. 542).

The highest considerations of public policy also justify the conclusion we have reached. Were we to hold that

the payment of the tax could be postponed or delayed by the creation of a trust of the type at hand, the result

would be plainly disastrous. Testators may provide, as Thomas Hanley has provided, that their estates be not

delivered to their beneficiaries until after the lapse of a certain period of time. In the case at bar, the period is

ten years. In other cases, the trust may last for fifty years, or for a longer period which does not offend the

rule against perpetuities. The collection of the tax would then be left to the will of a private individual. The

mere suggestion of this result is a sufficient warning against the acceptance of the essential to the very

existence of government. (Dobbins vs. Erie Country, 16 Pet., 435; 10 Law. ed., 1022; Kirkland vs. Hotchkiss, 100

U. S., 491; 25 Law. ed., 558; Lane County vs. Oregon, 7 Wall., 71; 19 Law. ed., 101; Union Refrigerator Transit

Co. vs. Kentucky, 199 U. S., 194; 26 Sup. Ct. Rep., 36; 50 Law. ed., 150; Charles River Bridge vs. Warren Bridge,

11 Pet., 420; 9 Law. ed., 773.) The obligation to pay taxes rests not upon the privileges enjoyed by, or the

protection afforded to, a citizen by the government but upon the necessity of money for the support of the

state (Dobbins vs. Erie Country, supra). For this reason, no one is allowed to object to or resist the payment of

taxes solely because no personal benefit to him can be pointed out. (Thomas vs. Gay, 169 U. S., 264; 18 Sup.

Ct. Rep., 340; 43 Law. ed., 740.) While courts will not enlarge, by construction, the governments power of

taxation (Bromley vs. McCaughn, 280 U. S., 124; 74 Law. ed., 226; 50 Sup. Ct. Rep., 46) they also will not place

upon tax laws so loose a construction as to permit evasions on merely fanciful and insubstantial distinctions.

(U. S. vs. Watts, 1 Bond., 580; Fed. Cas. No. 16,653; U. S. vs. Wigglesirth, 2 Story, 369; Fed. Cas. No. 16,690,

followed in Froelich & Kuttner vs. Collector of Customs, 18 Phil. 461, 481; Castle Bros., Wolf & Sons vs. McCoy,

21 Phil. 300; Muoz & Co. vs. Hord, 12 Phil. 624; Hongkong & Shanghai Banking Corporation vs. Rafferty, 39

Phil. 145; Luzon Stevedoring Co. vs. Trinidad, 43 Phil. 803.) When proper, a tax statute should be construed to

avoid the possibilities of tax evasion. Construed this way, the statute, without resulting in injustice to the

taxpayer, becomes fair to the government.That taxes must be collected promptly is a policy deeply intrenched in our tax system. Thus, no court is

allowed to grant injunction to restrain the collection of any internal revenue tax ( sec. 1578, Revised

Administrative Code; Sarasola vs. Trinidad, 40 Phil. 252). In the case ofLim Co Chui vs. Posadas (47 Phil. 461),

this court had occasion to demonstrate trenchment adherence to this policy of the law. It held that the fact

that on account of riots directed against the Chinese on October 18, 19, and 20, 1924, they were prevented

from praying their internal revenue taxes on time and by mutual agreement closed their homes and stores

and remained therein, does not authorize the Collector of Internal Revenue to extend the time prescribed for

the payment of the taxes or to accept them without the additional penalty of twenty five per cent. (Syllabus,

No. 3.)


15/34


16/34

as we cannot give the defendant more than what he claims, we must hold that the plaintiff is liable only in the

sum of P1,191.27 the amount stated in the counterclaim.

The judgment of the lower court is accordingly modified, with costs against the plaintiff in both instances. So

ordered.


17/34

G.R. No. L-16544

LEONARDO OSORIO, plaintiff-appellee,

vs.

TOMASA OSORIO, administratrix of the estate of Petrona Reyes, and THE YNCHAUSTI STEAMSHIP CO.,

defendants-appellants.

Fernandez and Ansaldo for appellants.

Carlos Ledesma for appellee.Villamor (Ignacio),J.:

The plaintiff seeks to recover 610 shares of stock of YnchaustiSteamship Co. and the dividends

corresponding to them, which were included in the inventory of the properties of the deceased Da. Maria

Petrona Reyes, whose estate is administered by the defendant. The facts of this case are:

D. Antonio Osorio had formed with Ynchausti & Co., a joint account association for the exploitation of the

shipping business, he being the owner of the one-third of the companys capital. This capital amounted to

P500,000, of which P166,666.66, that is, one-third belonged to D. Antonio Osorio. Upon his death, his heirs

agreed to authorize the defendant Da. Tomasa Osorio, then administratrix of the estate of the deceased, to

present a project of partition, and said administratix inserted in the project with the consent of all the heirs,

among the properties which belonged to the widow Da. Petrona Reyes, the sum of P94,000 as her part in the

share of the estate in the shipping business of Ynchausti & Co., that is, a little over P166,666.66, which was

the share in said business of the deceased Osorio during his lifetime. The project of partition was approved on

May 10, 1915, with the consent of the heirs, by the Court of First Instance of Cavite, which had cognizance of

the testamentary and administration proceedings of the state of the deceased Osorio.

On February 28, 1914, the widow of D. Antonio Osorio, Da. Petrona Reyes, now also deceased, executed

before the notary D. Florencio Gonzales Diez a document of gift in favor of her son D. Leonardo Osorio, the

plaintiff, giving to him one-half of her share in the one-third part which belonged to her husband in the

shipping business of Ynchausti & Co., a donation which was duly accepted by the donee D. Leonardo Osorio,

who signed said document with the plaintiff. On that date, February 28, 1914, the estate of D. Antonio Osorio

was not yet distributed among his heirs, and the donor Da. Petrona Reyes in order to correct the error in said

document, wherein it was stated that said half was adjudicated to her as part of her conjugal property, when

the partition was yet being effected, executed another document dated July 3, 1915, maintaining said

donation in effect in the sense that she ceded and donated to her son D. Leonardo Osorio, for the same

reasons stated in the document of February 28, 1914, al interest or participation in said shipping business of

Ynchausti & Co., which was adjudicated to her in the division of the estate of D. Antonio Osorio, which division

was approved by the Court of First Instance of Cavite on May 10, 1915.

After the death of D. Antonio Osorio and before the distribution of the estate, Ynchausti & Co. purchased the

steamer Governor Forbes and recognized the heirs of D. Antonio Osorio as having an interest to the extent ofone-third in the ownership and business of said steamer. It was agreed upon by all the interested parties that

the share of Da. Petrona Reyes, widow of Osorio, in the vessel Governor Forbes, at the time of the

incorporation of The Ynchausti Steamship Co. was P61,000, equivalent to 610 shares of stock ofsaid

corporation. Said sum was deposited with the Steamship Co. until the final settlement of the question that

had arisen between the heirs of Da. Petrona Reyes as to the ownership thereof for, while the plaintiff alleges

that, by virtue of the donation made in his favor by Da. Petrona Reyes, he is the owner of said shares and of

their value which is P61,000; the defendant on the other hand contends that said shares are not included in


18/34

the donation in question and belong to the heirs of Da. Petrona Reyes. Such as the facts which gave rise to this

litigation.

The trial court rendered judgment in the case, declaring that the 610 shares of stock in dispute and their

dividends belong to the plaintiff, and ordered the defendant Da. Tomasa Osorio, administratrix of the estate of

Da. Petrona Reyes, to exclude them from the inventory and her accounts, and the other defendant The

Ynchausti Steamship Co. to inscribe them in the name of the plaintiff D. Leonardo Osorio, delivering to him

the dividends corresponding thereto, and denied the counterclaim for the sum of P45,000, on the ground thatsaid sum represents the dividends corresponding to the P94,000 adjudicated to Da. Petrona Reyes, in the

partition of the estate of D. Antonio Osorio, and donated by her to the defendant in the counterclaim.

The case having been appealed to this court, counsel for the defendant and appellant, in summing up their

arguments in support of the errors assigned in their brief, maintain the two following propositions:

1. The donation made by Da. Petrona Reyes in favor of the plaintiff was of no value and effect; and

2. That, supposing said donation valid, the 610 shares of stock, the value of which is P61,000, cannot be

considered as included among them.

The document of donation dated February 28, 1914, attacked by the appellant, is as follows:

Know all me by these presents: That I, Petrona Reyes, of age, widow of D. Antonio Osorio and resident of the

Province of Cavite, Philippine Islands, being in possession of all my senses, freely and voluntarily state:

1. That my husband, the deceased D. Antonio Osorio, was a shareholder to the extent of one-third in the joint

account association Ynchausti & Co. of this place, which is engaged in the business of buying vessels and in

the exploitation of six steam vessels acquired from the Compaia Maritima, the article of association of said

joint account association having been executed in the city of Manila on July 3, 1906, before the notary public

D. Florencio Gonzales Diez.

2. That upon the death of my husband D. Antonio Osorio and upon the partition of his estate, there was

adjudicated to me as conjugal property, one-half of said one-third part in the business referred to, the other

half thereof going to our four surviving children, such being the present condition of our interest in said

company.

3. That in consideration of the continuous services and attention received by me from my son D. Leonardo

Osorio, of age, married and a resident of Cavite also, and because of the affection he has always shown and

still shows me, as well as because of the number of children that he has, I make a free and expressed donation

to my said son D. Leonardo Osorio of all my interest and participation in said company Ynchausti and Co.

which is neither transferred nor burdened in any manner whatever.

4. I also declare that the present donation does not in any way prejudice the right which may accrue to my

other children with respect to inheriting my property and that therefore I can effect this donation, with all

liberty, as I reserve for myself what is sufficient for me to live on in the manner which corresponds to my socia

position and needs.

5. In turn, I, Leonardo Osorio, of age, married and a resident of the Province of Cavite, state my conformity

and acceptance of said donation which my dear mother makes to me, for which I am greatly thankful to her.


19/34

In witness whereof we sign the present document in triplicate at Manila, Philippine Islands, this twenty-eighth

day of February, nineteen hundred and fourteen.

(Sgd.) PETRONA REYES.LEONARDO OSORIO.

Signed in the presence of:(Sgd.) EUSEBIO ALBA.SALVADOR BARRIOS.

Acknowledged before the notary public D. Florencio Gonzales Diez on February 28, 1914.

The document rectifying the ratifying the preceding is literally as follows:

Know all men by these presents: That I, Petrona Reyes, of age, widow of D. Antonio Osorio and resident of the

Province of Cavite, Philippine Islands, being in the full possession of my senses, freely and voluntarily declare:

1. That on February 28, 1914, before the notary public of Manila, D. Florencio Gonzales Diez, I executed a

document of donation in favor of my son D. Leonardo Osorio, of one-half of the one-third part which my

deceased husband had in certain shipping business of the association Ynchausti & Co.

2. That in said document I stated, through error, that said half of one-third part of the business referred to was

adjudicated to me as my part of the conjugal property in the partition of the properties left by my deceased

husband, when the truth was that said partition had not yet been put in proper form or finished.

3. That in order to correct said error, I so state, declaring however in any event that I make said donation

subsisting in the sense that I cede and donate to my side son D. Leonardo Osorio, in consideration of the same

causes mentioned in said document of February 28, 1914, all interest or share in said shipping business of

Ynchausti & Co. which was adjudicated to me in the partition of the estate of my deceased husband, and

approved by the Court of First Instance of Cavite, on May 10, 1915.

In witness whereof I sign the present document in triplicate of Cavite on July 3, 1915.

(Sgd. by):

PETRONA REYES.

Signed in the presence of:

(Sgd.) CARLOS LEDESMA.ISAURO GABALDON.

In support of the first proposition, the appellant invokes as the legal provision violated, article 635 of the Civil

Code, which says:

A donation can not include future property.

By future property is understood that of which the donor can not dispose at the time of making the donation.

Commenting on article 635 of the Civil Code, Manresa says, among other things:

To close these fundamental ideas which the spirit of articles 634 and 635 develops we must fix our attention

to the definition which the Code gives of future properties. They are those of which the donor cannot dispose

at the time of making the donation. This definition in reality includes all properties which belong to others at

the time of the donation, although they may or may not later belong to the donor, thus connecting two ideas

which, although lacking apparently in relation, are merged in reality in the subject which we examine and

which gives assurance to their application. Article 635 refers to the properties of third persons but it may be


20/34

said that id does so in relation to a time to come; there can be properties which may latter belong to the

donor; but these properties cannot be donated, because they are not at present his properties, because he

cannot dispose of them at the moment of making the donation. The usufructuary for life or for a determined

number of years of a vineyard may donate said usufruct to the whole extent that it belongs to him but never

the property itself. The bare owner of said vineyard may donate his right of course; but he may also donate

the usufruct which corresponds to the time that it will go back to him, because the case refers to a vested

right of which he may dispose at the time of the donation.

It is alleged that the donation made by Da. Petrona Reyes is void because she donated on February 28, 1914, a

future property, such as the share in the business of the deceased Osorio, which was adjudicated to her on

May 10, 1915, and because in 1914 she did not have the right to all or part of the share which her deceased

husband had in the shipping business of Ynchausti & Co.

Carefully examining said article 635 of the Civil Code, in relation to the worthy opinion of the commentator

Manresa, we believe that the future properties, the donation of which is prohibited by said article, are those

belonging to other, which, as such, cannot be the object of the disposal by the donor; but the properties of an

existing inheritance as those of the case at bar, cannot be considered as anothers property with relation to

the heirs who through a fiction of law continue the personality of the owner. Nor do they have the character

of future property because the died before 1912, his heirs acquired a right to succeed him from the moment

of his death, because of the principle announced in article 657 and applied by article 661 of the Civil Code,

according to which the heirs succeed the deceased by the mere fact of his death. More of less time may elapse

before the heirs enter into the possession of the hereditary property, but this is not an obstacle, for the

acquisition of said property retroacts in any event to the moment of death, according to article 989 of the Civil

Code. The right is acquired although subject to the adjudication of the corresponding hereditary portion.

Furthermore the Civil Code does not prohibit absolutely that future inheritance should be the object of

agreement, for there are certain cases (arts. 177, 827, 831, and 1331) in which agreements may be made as to

them, beside that indicated in article 1271, and it may be deduced that an inheritance already existing, which

is no longer future from the moment of death of the predecessor, may legally be the object of contract. A

donation being of a contractual nature, inasmuch as for its efficacy the concurrence of two wills is required,

that of the donor and the donee, we believe that which may be the object of contract may also be the object

of a donation. Ubi eadem est ratio, ibi est eadem legis dispositio. We conclude that the donor Da. Petrona

Reyes, on February 28, 1912, and could legally dispose of her right through an act of liberality, as she had

done.

With respect to the point that Da. Petrona Reyes did not have in 1914 any right to all or part of the share of

her deceased husband in the shipping business of Ynchausti and Co., it must be observed that in the project of

partition of the property of D. Antonio Osorio the following appears:

The widow of the testator, Maria Petrona Reyes, her children Feliza, Tomasa, and Leonardo and her

granddaugther Soledad Encarnacion Osorio y San Agustin are at present all living and are the only heirs of the

deceased.

The testator declares that all property left by him was acquired during his marriage with Petrona Reyes.

The testator institutes as his only and universal heirs his said children and granddaugther, designates the parts

which each of them must receive as legitime, betterment, and legacy, leaves to the disposition of his widow


21/34

and amount equivalent to that set aside by him in payment of one-half part of the conjugal property and

orders that the remainder should be equally distributed among his heirs.

We do not have before us the will of D. Antonio Osorio but supposing that he had left no property but the

share which he had in the shipping business of Ynchausti & Co., can it be denied that the donor by law had the

right to half of said share as her part of the conjugal property? Clearly not. The defendant in her answer says:

That Da. Maria Petrona Reyes did not donate to the plaintiff more that her share in the shipping business of

the firm Ynchausti & Co. which was adjudicated to her in the partition of the property of D. Antonio Osorio

and that said share amounts to P94,000.

This admission of the defendant is conclusive, and makes it unnecessary for us to enter into another

discussion in order to deduce that Da. Petrona Reyes had in 1914 a right to a certain part of the interest of the

deceased Osorio in the shipping business of the firm Ynchausti & Co., and could donate it, as she did, to her

son D. Leonardo Osorio.

The allegation that the document of July 3, 1915, is void, because it does not show the acceptance of the

donee, is of no importance, because of the conclusion we have reached in discussing the document of

donation of February 28, 1914. In the second document, the donor only tried to correct what she believed tobe an error in the first, wherein it is stated that in the partition of the property of her husband there was

adjudicated to her the part of the interest in the shipping business of Ynchausti & Co. which she donated to

her son Leonardo, when in fact said partition was yet pending. After its approval by the Court of First Instance

of Cavite, the donor executed the document of 1915, ratifying and correcting the document of donation. She

did not make a new donation. She executed a personal act which did not require the concurrence of the

donee. It is the duty of the donee, in order that the donation may produce legal effect, to accept to the

donation and notify the donor thereof. The acceptance is necessary because nobody is obliged to receive a

benefit against his will. And all this was complied with in the document of 1914. The wills of the donor and of

the donee having concurred, the donation, as a mode of transferring ownership, becomes perfect, according

to article 623 of the Civil Code.

We will not pass to the second proposition of the appellant, that is, that the 610 shares, which are the subject

matter of the suit, cannot be considered as included in the donation made by Da. Petrona Reyes in favor of the

plaintiff, supposing that said donation was valied. The reasons alleged by the appellant are: (1) That the steam

vessel Governor Forbes was purchased after the death of D. Antonio Osorio, with money borrowed and

furnished by the heirs individually and not by the estate, and (2) that the plaintiff appellee has recognized that

the capital used in the steamer Forbes is distinct from the money used in the purchase of other vessels in

which the deceased Osorio had an interest.

The question whether the streamer Governor Forbes was or was not purchased with money furnished by

Ynchausti and the heirs of Osorio, indepedently of that former partnership in which the deceased Osorio had

an interest, is one of the fact and must be resolved in view of the evidence adduced at the trial.

D. Julio Gonzales, secretary and accountant of the firm Ynchausti, witness for the defendant, states that the

Forbes was purchased with money which the shipping business of Unchaisti & Co. had. The appellant herself

admits that his vessel took part in the general shipping business of Ynchausti & Co. for no new partnership was

constituted for the purchase thereof, and, after its acquisition the Ynchausti firm accounted to the estate of D.

Antonio Osorio for the profits obtained and the dividends to be distributed and no separate account was

made of the earnings of the vessel, but only a general account, including the profits obtained in the shipping


22/34

business, in which the Governor Forbes was but one of several vessels. D. Joaquin Elizalde, manager of the

firm Ynchausti & Co., by agreement of the parties and with the approval of the court, made a deposition

before the notary public D. Florencio Gonzales Diez, stating that when the steamer Forbes was acquired in

1912, the Ynchausti firm did not bring in any new capital, but obtained money for its purchase by mortgaging

the vessel itself and other vesseles of the company; and that the heirs of D. Antonio Osorio did not bring in

any new capital for the purchase of the vessel, but signed jointly with Ynchausti & Co. with the others, except

Da. Soledad Osorio, the guaranty which the bank required.

In our opinion the evidence shows conclusively that the vessel Governor Forbes forms part of the shipping

business of Ynchausti & Co. in which D. Antonio Osorio and his estate had an interest. It is no argument

against this conclusion that the heirs of Osorio signed with Ynchausti & Co. the guaranty required by the bank

where the money used in the purchase of the Forbes was taken: (1) Because the guaranty is for the purpose

only for securing the payment of the amount indebted and not for excluding the estate of Osorio from the

result of that banking operation; (2) because, besides said guaranty, the other vessels of the joint account

association of Osorio and Ynchausti & Co. were mortgage; (3) because no new partnership was formed

between Ynchausti & Co. and the heirs of Osorio for the purchase of the vessel Forbes; and (4) because, when

Unchausti & Co. agreed with the heirs of Osorio in that his share in the steamer Forbes was P108,333.33, this

sum was distributed among said heirs, including Da. Soledad Osorio who did not sign the guaranty, theaccruing to each P11, 833.33 and to the widow Da. Petrona Reyes P61,000, which is the object of this suit.

All of the above shows that the estate of Osorio had a one-third part of the steamer Forbes represented by the

capital which was distributed among the heirs, there accruing to the widow, by agreement of the interested

parties, the sum of P61,000. And this sum being part of the one-half of one-third of the shipping business of

Ynchausti & Co., which one-half part accrued to the widow in the distribution of the properties of Osorio; and

the widow Da. Petrona Reyes having disposed of this half, donating it to her son D. Leonardo Osorio, it clearly

results, in our opinion, that the sum of 61,000, or the corresponding shares of the new corporation The

Ynchausti Steamship Co. are included in said donation, and therefore belong to the plaintiff-appellee.

The other reason alleged by the appellant in support of her contention is that the plaintiff has recognized in

his letter addressed to the defendant corporation, and inserted in the answer presented by the latter that the

Forbes was acquired with money different from that of the joint account association theretofore mentioned.

We have carefully read the letter in question and what appears is that said plaintiff agreed that the P61,000

should be deposited with Ynchausti & Co., as trustee, to be distributed with its accumulated dividends, when

the question between the heirs of Da. Petrona Reyes had already been terminated, that is to say, according to

the result of the present suit. There is nothing in said letter which indicates how the Governor Forbes was

acquired.

With respect to the counterclaim of P45,609,91, we are of the opinion that the evidence justifies the

conclusion of the trial court that they are the profits or dividends accruing to the P94,000, which wereadjudicated to the widow Da. Petrona Reyes in the distribution of the estate of the deceased Osorio and which

were donated by her to the plaintiff, and as such profits they belong to the latter, upon the principle of law

that ownership of property gives right by accession to all that it produces, or is united or incorporated thereto,

naturally or artificially. (Art. 353 of the Civil Code.)

In view of what has been said, the judgment appealed from should be, as it is hereby, affirmed, with costs

against the appellant. So ordered.


23/34

G.R. No. L-4963 January 29, 1953

MARIA USON, plaintiff-appellee,

vs.

MARIA DEL ROSARIO, CONCEPCION NEBREDA, CONRADO NEBREDA, DOMINADOR NEBREDA, AND

FAUSTINO NEBREDA, Jr., defendants-appellants.

Priscilo Evangelista for appellee.

Brigido G. Estrada for appellant.

BAUTISTA ANGELO,J.:

This is an action for recovery of the ownership and possession of five (5) parcels of land situated in the

Municipality of Labrador, Province of Pangasinan, filed by Maria Uson against Maria del Rosario and her four

children named Concepcion, Conrado, Dominador, and Faustino, surnamed Nebreda, who are all of minor age,

before the Court of First Instance of Pangasinan.

Maria Uson was the lawful wife of Faustino Nebreda who upon his death in 1945 left the lands involved in this

litigation. Faustino Nebreda left no other heir except his widow Maria Uson. However, plaintiff claims thatwhen Faustino Nebreda died in 1945, his common-law wife Maria del Rosario took possession illegally of said

lands thus depriving her of their possession and enjoyment.

Defendants in their answer set up as special defense that on February 21, 1931, Maria Uson and her husband,

the late Faustino Nebreda, executed a public document whereby they agreed to separate as husband and wife

and, in consideration of their separation, Maria Uson was given a parcel of land by way of alimony and in

return she renounced her right to inherit any other property that may be left by her husband upon his death

(Exhibit 1).

After trial, at which both parties presented their respective evidence, the court rendered decision ordering the

defendants to restore to the plaintiff the ownership and possession of the lands in dispute without special

pronouncement as to costs. Defendants interposed the present appeal.

There is no dispute that Maria Uson, plaintiff-appellee, is the lawful wife of Faustino Nebreda, former owner

of the five parcels of lands litigated in the present case. There is likewise no dispute that Maria del Rosario,

one of the defendants-appellants, was merely a common-law wife of the late Faustino Nebreda with whom

she had four illegitimate children, her now co-defendants. It likewise appears that Faustino Nebreda died in

1945 much prior to the effectivity of the new Civil Code. With this background, it is evident that when Faustino

Nebreda died in 1945 the five parcels of land he was seized of at the time passed from the moment of his

death to his only heir, his widow Maria Uson (Article 657, old Civil Code).As this Court aptly said, "The property

belongs to the heirs at the moment of the death of the ancestor as completely as if the ancestor had executedand delivered to them a deed for the same before his death" (Ilustre vs. Alaras Frondosa, 17 Phil., 321). From

that moment, therefore, the rights of inheritance of Maria Uson over the lands in question became vested.

The claim of the defendants that Maria Uson had relinquished her right over the lands in question because she

expressly renounced to inherit any future property that her husband may acquire and leave upon his death in

the deed of separation they had entered into on February 21, 1931, cannot be entertained for the simple

reason that future inheritance cannot be the subject of a contract nor can it be renounced (1 Manresa, 123,

sixth edition; Tolentino on Civil Code, p. 12; Osorio vs. Osorio and Ynchausti Steamship Co., 41 Phil., 531).


24/34

But defendants contend that, while it is true that the four minor defendants are illegitimate children of the

late Faustino Nebreda and under the old Civil Code are not entitled to any successional rights, however, under

the new Civil Code which became in force in June, 1950, they are given the status and rights of natural

children and are entitled to the successional rights which the law accords to the latter (article 2264 and article

287, new Civil Code), and because these successional rights were declared for the first time in the new code,

they shall be given retroactive effect even though the event which gave rise to them may have occurred under

the prior legislation (Article 2253, new Civil Code).

There is no merit in this claim. Article 2253 above referred to provides indeed that rights which are declared

for the first time shall have retroactive effect even though the event which gave rise to them may have

occurred under the former legislation, but this is so only when the new rights do not prejudice any vested or

acquired right of the same origin. Thus, said article provides that "if a right should be declared for the first

time in this Code, it shall be effective at once, even though the act or event which gives rise thereto may have

been done or may have occurred under the prior legislation, provided said new right does not prejudice or

impair any vested or acquired right, of the same origin." As already stated in the early part of this decision, the

right of ownership of Maria Uson over the lands in question became vested in 1945 upon the death of her late

husband and this is so because of the imperative provision of the law which commands that the rights to

succession are transmitted from the moment of death (Article 657, old Civil Code). The new right recognized

by the new Civil Code in favor of the illegitimate children of the deceased cannot, therefore, be asserted to theimpairment of the vested right of Maria Uson over the lands in dispute.

As regards the claim that Maria Uson, while her deceased husband was lying in state, in a gesture of pity or

compassion, agreed to assign the lands in question to the minor children for the reason that they were

acquired while the deceased was living with their mother and Maria Uson wanted to assuage somewhat the

wrong she has done to them, this much can be said; apart from the fact that this claim is disputed, we are of

the opinion that said assignment, if any, partakes of the nature of a donation of real property, inasmuch as it

involves no material consideration, and in order that it may be valid it shall be made in a public document and

must be accepted either in the same document or in a separate one (Article 633, old Civil Code). Inasmuch as

this essential formality has not been followed, it results that the alleged assignment or donation has no valid

effect.

WHEREFORE, the decision appealed from is affirmed, without costs.


25/34

G.R. No. L-4170 January 31, 1952

Intestate of the late AGUSTIN MONTILLA, SR.; PEDRO LITONJUA, a movant-appellant,

vs.

AGUSTIN B. MONTILLA, JR., administrator-appellee;

CLAUDIO MONTILLA, oppositor-appellee.

Carlos Hilado and Jose V. Corua for the administrator.

Jose M. Estacion for movant. Gaudencio Occeo and Jose Ur. Carbonell for oppositor.

PARAS, C.J.:

In Civil Case No. 868 of the court of First Instance of Negros Occidental, Pedro L. Litonjua obtained a judgment

against Claudio Montilla for the payment of the sum of P4,000 with legal interest, plus costs amounting to

P39.00 In due time, a writ of execution was issued, but no property of Claudio Montilla was found which could

be levied upon.

On June 12, 1950 Pedro L. Litonjua filed in special Proceeding No 32 of the Court of First Instance of Negros

Occidental, Intestate Estate of Agustin Montilla, Sr., deceased, a motion praying that the interest, propertyand participation of Claudio Montilla, one of the heirs of Agustin Montilla, Sr., in the latter's intestate estate

be sold and out of the proceed the judgment debt of Claudio Montilla in favor of Pedro L. Litonjua be paid.

This motion was opposed by Claudio Montilla and by Agustin Montilla, Jr., administrator of the intestate

estate.

On August 7, 1950, the Court of First Instance of Negros Occidental issued an order denying the motion. From

this order Pedro L. Litonjua appealed. In the case ofOrtiga Brothers and Co. vs. Enage and Yap Tico, 18 Phil.

345, it was held that the creditor of the heirs of a deceased person is entitled to collect his claim out of the

property which pertains by inheritance to said heirs, only after the debts of the testate or intestate succession

have been paid and when the net assets that are divisible among the heirs are known, because the debts of

the deceased must first be paid before his heirs can inherit. It was therein also held that a person who is not a

creditor of a deceased, testate or intestate, has no right to intervene either in the proceedings brought in

connection with the estate or in the settlement of the succession. We quote hereunder pertinent passages of

the decision.

A person who, having claim against a deceased person which should be considered by the committee

does not, after publication of the required notice, exhibit his claim to the committee as provided by

law, shall be barred from recovering such demand or from pleading the same as an offset to any

action, under the provisions of section 695 of the Code of Civil Procedure, excepting the case referred

to in section 701 of the same; with still less reason can one who is not a creditor of the said deceased

intervene in the proceedings relative to the latter's intestate estate and to the settlement of hissuccession (article 1034 of the Civil Code), because such creditor has no right or interest that call for

the protection of the law and the courts, except in any remainder which may be found due the heir.

It is true that Yap Tico, as the creditor of the widow and heirs of the deceased Ildefonso, is entitled to

collect what is due him out of the property left by the latter and which was inherited by such widow

and heirs, but it is no less that only after all the debts of the said estate have been paid can it be known

what net remainder will be left for division among the heirs, because the debts of the deceased must

be paid before his heirs can inherit. (Arts. 659 et seq. 1026, 1027, and 1032 of the civil Code, and secs.

734 et seq., Code of Civil Code Procedure.)


26/34

An execution cannot legally be levied upon the property of an intestate succession to pay the debts of

the widow and heirs of the deceased, until the credits held against the latter at the time of his death

shall have been paid can the remaining property that pertains to the said debtors heirs can be attached

(Art. 1034, aforecited, Civil Code.) (pp. 350-251)

The foregoing pronouncements are perfectly applicable to the case at bar, because the appellant is not a

creditor of the deceased Agustin Montilla, Sr. and he seeks to collect his claim out of the inheritance of

Claudio Montilla, an heir, before the net assets of the intestate estate have been determined.

Wherefore, the appealed order is affirmed, and it is so ordered with costs against the appellant.

7/27/2019 Cases in Successi

Cases in Succession Set 1

Documents

Transcript of Cases in Succession Set 1