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1 |Specpro Assignment 10-11_Cha Mendoza

Assignment No. 10

V. TRUSTEES RULE 98

RULE 98: TRUSTEES

SECTION 1. Where trustee appointed.A trustee necessary to carry into effect the provisions of a will or

written instrument shall be appointed by the Regional Trial Court in which the will was allowed, if it be a

will allowed in the Philippines, otherwise by the Regional Trial Court of the province in which the

property, or some portion thereof, affected by the trust is situated.

SEC. 2. Appointment and powers of trustee under will.Executor of former trustee need not administer

trust.If a testator has omitted in his will to appoint a trustee in the Philippines, and if such

appointment is necessary to carry into effect the provisions of the will, the proper Regional Trial Court

may, after notice to all persons interested, appoint a trustee who shall have the same rights, powers,and duties, and in whom the estate shall vest, as if he had been appointed by the testator. No person

succeeding to a trust as executor or administrator of a former trustee shall be required to accept such

trust.

SEC. 3. Appointment and powers of new trustee under written instrument.When a trustee under a

written instrument declines, resigns, dies, or is removed before the objects of the trust are

accomplished, and no adequate provision is made in such instrument for supplying the vacancy, the

proper Regional Trial Court may, after due notice to all persons interested, appoint a new trustee to act

alone or jointly with the others, as the case may be. Such new trustee shall have and exercise the same

powers, rights, and duties as if he had been originally appointed, and the trust estate shall vest in him in

like manner as it had vested or would have vested, in the trustee in whose place he is substituted; and

the court may order such conveyance to be made by the former trustee or his representatives, or by the

other remaining trustees, as may be necessary or proper to vest the trust estate in the new trustee,

either alone or jointly with the others.

SEC. 4. Proceedings where trustee- appointed abroad.When land in the Philippines is held in trust forpersons resident here by a trustee who derives his authority from without the Philippines, such trustee

shall, on petition filed in the Regional Trial Court of the province where the land is situated, and after

due notice to all persons interested, be ordered to apply to the court for appointment as trustee; and

upon his neglect or refusal to comply with such order, the court shall declare such trust vacant, and shall

appoint a new trustee in whom the trust estate shall vest in like manner as if he had been originally

appointed by such court.

SEC. 5. Trustee must file bond.Before entering on the duties of his trust, a trustee shall file with the

clerk of the court having jurisdiction of the trust a bond in the amount fixed by the judge of said court,

payable to the Government of the Philippines and sufficient and available for the protection of any party

in interest, and a trustee who neglects to file such bond shall be considered to have declined or resigned

the trust; but the court may, until further order exempt a trustee under a will from giving a bond when

the testator has directed or requested such exemption, and may so exempt any trustee when all persons

beneficially interested in the trust, being of full age, request the exemption. Such exemption may be

cancelled by the court at any time, and the trustee required to forthwith file a bond.SEC. 6. Conditions included in bond.The following conditions shall be deemed to be a part of the bond

whether written therein or not:

(a) That the trustee will make and return to the court, at such time as it may order, a true inventory of

all the real and personal estate belonging to him as trustee, which at the time of the making of such

inventory shall have come to his possession or knowledge;

(b) That he will manage and dispose of all such estate, and faithfully discharge his trust in relation

thereto, according to law and the will of the testator or the provisions of the instrument or order under

which he is appointed;

(c) That he will render upon oath at least once a year until his trust is fulfilled, unless he is excused

therefrom in any year by the court, a true account of the property in his hands and of the management

and disposition thereof, and will render such other accounts as the court may order;

(d) That at the expiration of his trust he will settle his accounts in court and pay over and deliver all the

estate remaining in his hands, or due from him on such settlement, to the person or persons entitled

thereto.

But when the trustee is appointed as a successor to a prior trustee, the court may dispense with the

making and return of an inventory, if one has already been filed, and in such case the condition of the

bond shall be deemed to be altered accordingly.SEC. 7. Appraisal. Compensation of trustee.When an inventory is required to be returned by a trustee,

the estate and effects belonging to the trust shall be appraised and the court may order one or more

inheritance tax appraisers to assist in the appraisement. The compensation of the trustee shall be fixed

by the court, if it be not determined in the instrument creating the trust.

SEC. 8. Removal or resignation of trustee.The proper Regional Trial Court may, upon petition of the

parties beneficially interested and after due notice to the trustee and hearing, remove a trustee if such

removal appears essential in the interests of the petitioners. The court may also, after due notice to all

persons interested, remove a trustee who is insane or otherwise incapable of discharging his trust orevidently unsuitable therefor. A trustee, whether appointed by the court or under a written instrument,

may resign his trust if it appears to the court proper to allow such resignation.

SEC. 9. Proceedings for sale or encumbrance of trust estate.When the sale or encumbrance of any

real or personal estate held in trust is necessary or expedient, the court having jurisdiction of the trust

may, on petition and after due notice and hearing, order such sale or encumbrance to be made, and the

reinvestment and application of the proceeds thereof in such manner as will best effect the objects of

the trust. The petition, notice, hearing, order of sale or encumbrance, and record of proceedings, shall

conform as nearly as may be to the provisions concerning the sale or encumbrance by guardians of the

property of minors or other wards.

LORENZO VS. POSADAS (1937)

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 plaintiff's complaint and the defendant's

counterclaim, both parties appealed to this court.

It appears that on May 27, 1922, one Thomas Hanley died in Zamboanga, Zamboanga, leaving a will(Exhibit 5) and considerable amount of real and personal properties. On june 14, 1922, proceedings 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 brother's children 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

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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 ther estate to

appoint a trustee 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 deliquency in paymentconsisting of a 1 per cent 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 plaintiff's 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 deliquency 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 ten years after which, according to the testator's 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

decedent's estate.

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

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

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

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

1931, which the plaintiff had failed to pay on the inheritance tax assessed by the defendant against 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 testator's 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 deliquency 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. Acording 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 of First

Instance of Capiz, 51 Phil., 396; Baun vs. Heirs of Baun, 53 Phil., 654.) Plaintiff, however, asserts that

while article 657 of the Civil Code is applicable to testate as well as intestate succession, it operates onlyin 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

decedent's 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 comocomplemento 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.

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 admisitration shall be furnished the Collector of Internal

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

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

should read "fideicommissary" or "cestui que trust". There was an obvious mistake in translation 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 testator's death. The plaintiffintroduced evidence tending to show that 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 vlaue of the estate as it stood at the time of the

decedent's 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 tax accrues 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 depriciation is immaterial." (Ross, Inheritance Taxation, p. 72.)

Our attention is directed to the statement of the rule in Cyclopedia of Law of and Procedure (vol. 37, pp.1574, 1575) that, in the case of contingent remainders, taxation is postponed until the estate vests 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, horever, 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 varied and 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 predecessor's death, notwithstanding the postponement of the actual possession or

enjoyment of the estate by the beneficiary, and the tax measured by the value of the property

transmitted at that time regardless of its appreciation or depreciation.

(c) Certain items are required by law to be deducted from the appraised gross in arriving at the net value

of the estate on which the inheritance tax is to be computed (sec. 1539, Revised Administrative Code). In

the case at bar, the defendant and the trial court allowed a deduction of only P480.81. This sum

represents the expenses and disbursements of the executors until March 10, 1924, among which were

their fees and the proven debts of the deceased. The plaintiff contends that the compensation and fees

of the trustees, which aggregate P1,187.28 (Exhibits C, AA, EE, PP, HH, JJ, LL, NN, OO), should also be

deducted under section 1539 of the Revised Administrative Code which provides, in part, as follows: "In

order to determine the net sum which must bear the tax, when an inheritance is concerned, there shall

be deducted, in case of a resident, . . . the judicial expenses of the testamentary or intestate

proceedings, . . . ."

A trustee, no doubt, is entitled to receive a fair compensation for his services (Barney vs. Saunders, 16

How., 535; 14 Law. ed., 1047). But from this it does not follow that the compensation due him may

lawfully be deducted in arriving at the net value of the estate subject to tax. There is no statute in the

Philippines which requires trustees' commissions to be deducted in determining the net value of the

estate subject to inheritance tax (61 C. J., p. 1705). Furthermore, though a testamentary trust has been

created, it does not appear that the testator intended that the duties of his executors and trustees

should be separated. (Ibid.; In re Vanneck's Estate, 161 N. Y. Supp., 893; 175 App. Div., 363; In reCollard's

Estate, 161 N. Y. Supp., 455.) On the contrary, in paragraph 5 of his will, the testator expressed the desire

that his real estate be handled and managed by his executors until the expiration of the period of ten

years therein provided. Judicial expenses are expenses of administration (61 C. J., p. 1705) but, in State

vs. Hennepin County Probate Court (112 N. W., 878; 101 Minn., 485), it was said: ". . . The compensation

of a trustee, earned, not in the administration of the estate, but in the management thereof for the

benefit of the legatees or devises, does not come properly within the class or reason for exemptingadministration expenses. . . . Service rendered in that behalf have no reference to closing the estate for

the purpose of a distribution thereof to those entitled to it, and are not required or essential to the

perfection of the rights of the heirs or legatees. . . . Trusts . . . of the character of that here before the

court, are created for the the benefit of those to whom the property ultimately passes, are of voluntary

creation, and intended for the preservation of the estate. No sound reason is given to support the

contention that such expenses should be taken into consideration in fixing the value of the estate for the

purpose of this tax."

(d) The defendant levied and assessed the inheritance tax due from the estate of Thomas Hanley under

the provisions of section 1544 of the Revised Administrative Code, as amended by section 3 of Act No.

3606. But Act No. 3606 went into effect on January 1, 1930. It, therefore, was not the law in force when

the testator died on May 27, 1922. The law at the time was section 1544 above-mentioned, as amended

by Act No. 3031, which took effect on March 9, 1922.

It is well-settled that inheritance taxation is governed by the statute in force at the time of the death of

the decedent (26 R. C. L., p. 206; 4 Cooley on Taxation, 4th ed., p. 3461). The taxpayer can not foreseeand ought not to be required to guess the outcome of pending measures. Of course, a tax statute may be

made retroactive in its operation. Liability for taxes under retroactive legislation has been "one of the

incidents of social life." (Seattle vs. Kelleher, 195 U. S., 360; 49 Law. ed., 232 Sup. Ct. Rep., 44.) But

legislative intent that a tax statute should operate retroactively should be perfectly clear. (Scwab vs.

Doyle, 42 Sup. Ct. Rep., 491; Smietanka vs. First Trust & Savings Bank, 257 U. S., 602; Stockdale vs.

Insurance Co., 20 Wall., 323; Lunch vs. Turrish, 247 U. S., 221.) "A statute should be considered as

prospective in its operation, whether it enacts, amends, or repeals an inheritance tax, unless the

language of the statute clearly demands or expresses that it shall have a retroactive effect, . . . ." (61 C. J.,

P. 1602.) Though the last paragraph of section 5 of Regulations No. 65 of the Department of 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 of Act 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 rthe 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 taxes collected by the means ordinarily resorted to for the collection of taxes

are not classed as penal laws, although there are authorities to the contrary. (SeeSutherland, Statutory

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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 one's tax does not

render one delinqent until and unless the entire period has eplased within which the taxpayer is

authorized by law to make such payment without being subjected to the payment of penalties for

fasilure to pay his taxes within the prescribed period." (U. S. vs. Labadan, 26 Phil., 239.)

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

delivery of the decedent's property to the trustee. Stated otherwise, the defendant contends thatdelivery to the trustee was delivery to the cestui que trust, the beneficiery in this case, within 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 ttrust, 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 thetestator intended to create a trust. He ordered in his will that certain of his properties be kept together

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 que trust, the beneficiary in

this case. A trustee is but an instrument or agent for the cestui que trust (Shelton vs. King, 299 U. S., 90;

33 Sup. Ct. Rep., 689; 57 Law. ed., 1086). When Moore accepted the trust and took possesson of 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 testator's 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 petuities. 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 accpetance of

the essential to the very exeistence of government. (Dobbins vs. Erie Country, 16 Pet., 435; 10 Law. ed.,

1022; Kirkland vs. Hotchkiss, 100 U. S., 491; 25 Law. ed., 558; Lane County vs. Oregon, 7 Wall., 71; 19

Law. ed., 101; Union Refrigerator Transit Co. vs. Kentucky, 199 U. S., 194; 26 Sup. Ct. Rep., 36; 50 Law.

ed., 150; Charles River Bridge vs. Warren Bridge, 11 Pet., 420; 9 Law. ed., 773.) 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 government's 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 distictions. (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 statuteshould 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 of Lim Co Chui vs. Posadas (47 Phil.,

461), this court had occassion 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.)

". . . It is of the utmost importance," said the Supreme Court of the United States, ". . . that the modes

adopted to enforce the taxes levied should be interfered with as little as possible. Any delay in the

proceedings of the officers, upon whom the duty is developed of collecting the taxes, may derange theoperations of government, and thereby, cause serious detriment to the public." (Dows vs. Chicago, 11

Wall., 108; 20 Law. ed., 65, 66; Churchill and Tait vs. Rafferty, 32 Phil., 580.)

It results that the estate which plaintiff represents has been delinquent in the payment of inheritance tax

and, therefore, liable for the payment of interest and surcharge provided by law in such cases.

The delinquency in payment occurred on March 10, 1924, the date when Moore became trustee. The

interest due should be computed from that date and it is error on the part of the defendant to compute

it one month later. The provisions cases is mandatory (see and cf. Lim Co Chui vs. Posadas, supra), and

neither the Collector of Internal Revenuen or this court may remit or decrease such interest, no matter

how heavily it may burden the taxpayer.

To the tax and interest due and unpaid within ten days after the date of notice and demand thereof by

the Collector of Internal Revenue, a surcharge of twenty-five per centum should be added (sec. 1544,

subsec. (b), par. 2, Revised Administrative Code). Demand was made by the Deputy Collector of Internal

Revenue upon Moore in a communiction dated October 16, 1931 (Exhibit 29). The date fixed for the

payment of the tax and interest was November 30, 1931. November 30 being an official holiday, the

tenth day fell on December 1, 1931. As the tax and interest due were not paid on that date, the estate

became liable for the payment of the surcharge.

In view of the foregoing, it becomes unnecessary for us to discuss the fifth error assigned by the plaintiff

in his brief.

We shall now compute the tax, together with the interest and surcharge due from the estate of Thomas

Hanley inaccordance with the conclusions we have reached.

At the time of his death, the deceased left real properties valued at P27,920 and personal properties

worth P1,465, or a total of P29,385. Deducting from this amount the sum of P480.81, representing

allowable deductions under secftion 1539 of the Revised Administrative Code, we have P28,904.19 as

the net value of the estate subject to inheritance tax.

The primary tax, according to section 1536, subsection (c), of the Revised Administrative Code, should be

imposed at the rate of one per centum upon the first ten thousand pesos and two per centum upon the

amount by which the share exceed thirty thousand pesos, plus an additional two hundred per centum.

One per centum of ten thousand pesos is P100. Two per centum of P18,904.19 is P378.08. Adding to

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these two sums an additional two hundred per centum, or P965.16, we have as primary tax, correctly

computed by the defendant, the sum of P1,434.24.

To the primary tax thus computed should be added the sums collectible under section 1544 of the

Revised Administrative Code. First should be added P1,465.31 which stands for interest at the rate of

twelve per centum per annum from March 10, 1924, the date of delinquency, to September 15, 1932,

the date of payment under protest, a period covering 8 years, 6 months and 5 days. To the tax and

interest thus computed should be added the sum of P724.88, representing a surhcarge of 25 per cent on

both the tax and interest, and also P10, the compromise sum fixed by the defendant (Exh. 29), giving a

grand total of P3,634.43.

As the plaintiff has already paid the sum of P2,052.74, only the sums of P1,581.69 is legally due from the

estate. This last sum is P390.42 more than the amount demanded by the defendant in his counterclaim.But, 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.

Avancea, C.J., Abad Santos, Imperial, Diaz and Concepcion, JJ., concur.

Villa-Real, J., concurs.

DE LEON VS. MOLO-PECKSON (1962)

RESURRECCION DE LEON, ET AL., plaintiffs-appellees,

vs.

EMILIANA MOLO-PECKSON, ET AL., respondents-appellants.

Cornelio R. Magsarili for plaintiffs-appellees.

Sycip, Salazar, Luna and Associates for respondents-appellants.

BAUTISTA ANGELO, J.:

Resurreccion De Leon, et al. filed on November 13, 1958 before the Court of First Instance of Rizal a

complaint seeking to compel Emiliana Molo-Peckson, et al. to convey to the former ten parcel of land

located in Pasay City with an area of 1,749 sq. m. upon payment of P1.00 per parcel upon the plea that

said lots were willed or donated in 1948 to the latter by their foster parents Mariano Molo y Legaspi and

Juana Juan with the understanding that they should sell them to the plaintiffs under the terms above-

stated.

Defendants, in their answer, disclaimed any legal obligation on their part to sell the above properties to

the plaintiffs for the nominal consideration of P1.00 per lot alleging that if they executed the document

on which the complaint is predicated it was on the mistaken assumption that their foster parents had

requested them that they executed on August 9, 1956 a document revoking said donation which was

acknowledged before Notary Public Leoncio C. Jimenez.

No testimonial evidence was presented by either party. Instead, both agreed to submit the case upon

the presentation of their respective exhibits which were all admitted by the trial court.

After trial on the merits, the court a quo rendered on September 21, 1960 a decision wherein it heldthat, under the facts established by the evidence, trust has been constituted by the late spouses Mariano

Molo and Juana Juan over the ten parcels of land in question in favor plaintiffs as beneficiaries and, as a

consequence concluded:

Considering all the foregoing, the Court orders:

1. The defendants, jointly and severally to free the said ten (10) parcels of land from the mortgage lien in

favor of the Rehabilitation Finance Corporation (now Development Bank of the Philippines) and Claro

Cortez, and thereafter to sign and execute in favor of the plaintiffs a deed of absolute sale of the said

properties for and in consideration of TEN (P10.00) PESOS already deposited in Court after all conditions

imposed in Exhibit A have been complied with;

2. That in the event the defendants shall refuse to execute and perform the above, they are ordered,

jointly and severally, to pay the plaintiffs the value of said ten (10) parcels of land in question, the

amount to be assessed by the City of Pasay City as the fair market value of the same, upon orders of the

Court to assess said value;

3. The defendants jointly and severally to pay the plaintiffs' Attorney's fees in the amount of P3,000.00,

as defendants acted in gross and evident bad faith in refusing to satisfy the plaintiffs' plainly valid, just

and demandable claim, under Article 2208 sub-paragraph 5 of the New Civil Code;

4. The defendants to render an accounting of the fruits of said ten (10) parcels of land from the time

plaintiffs demanded the conveyance of said parcels of land on August 11, 1956 as per Exhibits B and C, in

accordance with the provisions of Article 1164, New Civil Code which provides that the creditor has a

right to the fruit of the thing from the time the obligation to deliver it arises; and

5. The defendants to pay the costs.

Defendants took the present appeal.

On January 24, 1941, Mariano Molo y Legaspi died leaving a will wherein he bequeathed his entire estate

to his wife, Juana Juan. This will was probated in the Court of First Instance of Pasay City, Rizal, whichwas affirmed by the Supreme Court on November 26, 1956 (G.R. No. L-8774). On May 11, 1948, Juana

Juan in turn executed a will naming therein many devisees and legatees, one of whom is Guillermo San

Rafael, mother of the plaintiffs and defendant Pilar Perez Nable. On June 7, 1948, however, Juana Juan

executed a donation inter vivos in favor of Emiliana Molo-Peckson and Pilar Perez Nable of almost all of

her entire property leaving only about P16,000.00 worth of property for the devisees mentioned in the

will. Among the properties conveyed to the donees are the ten parcels of land subject of the present

action. Juana Juan died on May 28, 1950.

On December 5, 1950, Emiliana Molo-Peckson and Pilar Perez Nable executed a document which they

called "MUTUAL AGREEMENT" the pertinent provisions of which are:

That the above named parties hereby mutually agree by these presents . . . that the following lots should

be sold at ONE (1) PESO each to the following persons and organization:

TO JUSTA DE LEON and RESURRECCION DE LEON, several parcels of land located at Calle Tolentino

(South of Tenorio and Kapitan Magtibay), Pasay City, share and share alike or half and half of TEN (10)

LOTS described in:Transfer Certificate of Title No. 28157 and allocated as follows:

(a) To JUSTA DE LEON Five (5) Lots.

(b) To RESURRECCION DE LEON, the remaining Five (5) Lots.

That this agreement is made in conformity with the verbal wish of the late Don Mariano Molo y Legaspi

and the late Dona Juana Francisco Juan y Molo. These obligations were repeatedly told to Emiliana Molo

Peckson, before their death and that same should be fulfilled after their death.

On August 9, 1956, however, the same defendants, assisted by their husbands, executed another

document in which they revoked the so-called mutual agreement mentioned above, and another

relating to the same subject matter, stating therein that the parties, "after matured and thorough study,

realized that the above-mentioned public instruments . . . do not represent their true and correct

interpretation of the verbal wishes of the late spouses Don Mariano Molo y Legaspi and Dona Juana

Francisco Juan y Molo." But after the execution of this document, that is, on August 11, 1956, the

beneficiary Resurreccion de Leon and Justa de Leon, thru their counsel demanded the conveyance to

them of the ten parcels of land for the consideration of P1.00 per parcel as stated in the document of

December 5, 1950. And having the defendants refused to do so, said beneficiaries consigned on July 8,

1957 the amount of P10.00 as the consideration of the ten parcels of land.lawphil.net

In this appeal, appellants assign the following errors:

I

THE LOWER COURT ERRED IN HOLDING THAT THE SPOUSES, MARIANO MOLO AND JUANA JUAN,

CONSTITUTED A TRUST OVER THE PROPERTIES IN QUESTION PETITION WITH PLAINTIFFS-APPELLEES AS

BENEFICIARIES.

II

THE LOWER COURT ERRED IN APPLYING ARTICLE 1440, 1441, 1449, 1453 AND 1457 OF THE NEW CIVIL

CODE TO THE CASE AT BAR.

III

THE LOWER COURT ERRED IN HOLDING PLAINTIFFS-APPELLEES' EXHIBIT "A" TO BE A DECLARATION

AGAINST INTEREST AND AN ADMISSION BY DEFENDANTS-APPELLANTS.

IV

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THE LOWER COURT ERRED IN HOLDING THAT DEFENDANTS-APPELLANTS HAD NO RIGHT TO REVOKE

EXHIBIT "A".

V

THE LOWER COURT ERRED, IN ORDERING APPELLANTS TO RENDER AN ACCOUNTING OF THE FRUIT OF

THE PROPERTIES IN QUESTION.

VI

THE LOWER COURT ERRED IN ORDERING APPELLANTS TO FREE THE PROPERTIES FROM THE MORTGAGE

LIENS IN FAVOR OF THE DEVELOPMENT BANK OF THE PHILIPPINES AND CLARO CORTEZ.

VII

THE LOWER COURT ERRED IN AWARDING ATTORNEY'S FEES TO THE APPELLEES.

VIIITHE LOWER COURT ERRED IN NOT DISMISSING THE COMPLAINT.

There is no merit in the claim that the document executed on December 5, 1950 does not represent the

true and correct interpretation by appellants of the verbal wish of their foster parents relative to the

conveyance for a nominal consideration to appellees of the ten parcels of land in question considering

the circumstances obtaining in the present case. To begin with, this document was executed by

appellants on December 5, 1950, or about two years and six months from the time they acquired title to

the lands by virtue of the donation inter vivos executed in their favor by their foster mother Juana Juan

and six months after the death of the donor. There is nobody who could cajole them to execute it, nor is

there any force that could corce them to make the declaration therein expressed, except the

constraining mandat of their conscience to comply with "the obligations repeatedly told to Emiliana

Molo Peckson," one of appellants, before their death, epitomized inthe "verbal wish of the late Don

Mariano Molo y Legaspi and the late Doa Juana Francisco Juan y Molo" to convey after their death said

ten parcelsof land at P1.00 a parcel to appellees. In fact, the acknowledgement appended to the

document they subscribed states that it was "their own free act andvoluntary deed."1awphi1.netIndeed, it is to be supposed that appellants understood and comprehended the legal import of said

documents when they executed it more so when bothof them had studied in reputable centers of

learning, one being a pharmacist and the other a member of the bar. Moreover, they have more than

ample time the six months intervening betwen the death of the donor and the execution of the

document to ponder not only wish of their predecessors-in-interest but also on the propriety of

putting in writing the mandate they have received. It is, therefore, reasonable to presume that that

document represents the real wish of appellants' predecessors-in-interest and that the only thing to be

determinedis its real import and legal implications.

That the document represents a recognition of pre-existing trust or a declaration of an express trust

impressed on the ten parcels of land in question is evident. A declaration of trust has been defined as an

act by which a person acknowledges that the property, title to which he holds, is held by him for the use

of another (Griffith v. Maxfield, 51 S.W. 832, 66Ark. 513, 521). This is precisely the nature of the will of

the donor: to convey the titles of the lands to appellants with the duty to hold them intrust for the

appellees. Appellants oblingly complied with this duty byexecuting the document under consideration.

True it is that to establish a trust the proof must be clear, satisfactory and convincing. It cannot rest on

vague, uncertain evidence, or on a loose,equivocal or indefinite declaration (In re Tuttle's Estate, 200 A.

921, 132 Pa. Super 356); but here the document in question clearly and unequivocallydeclares the

existence of the trust even if the same was executed subsequent to the death of the trustor, Juana Juan,

for it has been held that the right creating or declaring a trust need not be contemporaneous or inter-

parties (Stephenson v. Stephenson, 171 S.W. 2d 265, 351 Mo. 8; In re Corbin's Trust Orhp., 57 York Leg.

Rec. 201). It was even held that an express trust maybe declared by a writing made after the legal estate

has been vested in the trustee (Kurtz v. Robinson, Tex. Civ. App. 256 S.W. 2d 1003). The contention,

therefore, of appellants that the will and the donation executed by their predecessors-in-interest were

absolute for it did not contain a hint that the lots in question will be held in trust by them does not merit

weight because the fact that an express trust was created by a deed which was absolute on its face may

be shown by a writing separate from the deed itself (Mugan v. Wheeler, 145 S.W. 462, 241 Mo. 376).

The fact that the beneficiaries were not notified of the existence of the trust or that the latter have not

been given an opportunity to accept it isof no importance, for it is not essential to the existence of a

valid trustand to the right of the beneficiaries to enforce the same that they had knowledge thereof the

time of its creation (Stoehr v. Miller, 296 F. 414).Neither is it necessary that the beneficiary should

consent to the creation of the trust (Wockwire-Spencer Steel Corporation v. United Spring Mfg. Co.,142

N.E. 758, 247 Mass. 565). In fact it has been held that in case of a voluntary trust the assent of the

beneficiary is not necessary to render itvalid because as a general rule acceptance by the beneficiary is

presumed (Article 1446, new Civil Code; Cristobal v. Gomez, 50 Phil. 810).

It is true, as appellants contend, that the alleged declaration of trust was revoked, and having been

revoked it cannot be accepted, but the attempted revocation did not have any legal effect. The rule is

that in the absence of any reservation of the power to revoke a voluntary trust is irrevocable without the

consent of the beneficiary (Allen v. Safe Deposit and Trust Co.of Baltimore, 7 A. 2d 180, 177 Md. 26). It

cannot be revoked by the creatoralone, nor by the trustee (Fricke v. Weber, C.C.A. Ohio, 145 F. 2d737;Hughes v. C.I.R., C.C.A. 9, 104 F. 2d 144; Ewing v. Shannahan, 20 S.W. 1065,113 Mo. 188). Here,

there is no such reservation.

Appellants contend that the lower court erred in applying the provisions of the new Civil Code on trust.

This is correct. The express trust was constituted during the lifetime of the predecessor-in-interest of

appellants,that is, before the effectivity of the new Civil Code, although the instrumentrecognizing and

declaring such trust was executed on December 5, 1950, afterthe effectivity of said Code. The Civil Code

of 1889 and previous laws andauthorities on the matter, therefore, should govern the herein trust under

the provisions of Article 2253 of the new Civil code.

But the Civil Code of 1889 contains no specific provisions on trust as doesthe new Civil Code. Neither

does the Code of Civil Procedure of 1901 for thesame merely provides for the proceeding to be followed

relative to trustsand trustees (Chapter XVIII). This silence, however, does not mean that thejuridical

institution of trust was then unknown in this jurisdiction, for theprinciples relied upon by the Supreme

Court before the effectivity of thenew Civil Code were those embodied in Anglo-American jurisprudence

as derivedfrom the Roman and Civil Law principles (Government v. Abadilla, 46 Phil. 42).And these arethe same principles on which we predicate our ruling heretoforestated and on which we now rely for the

validity of trust in question.

The trial court ordered appellants to render an accounting of the fruits of the properties in question even

if appellees did not expressly ask for it intheir prayer for relief. We, however, believe that this is covered

by the general prayer "for such other relief just and equitable under the premises."What is important is

to know from what what date the accounting should bemade. The trial court ordered that the

accounting be made from the time appellees demanded the conveyance of the ten parcels of land on

August 11, 1956, in accordance with Article 1164 of the new Civil Code which provides that the creditor

has a right to the fruit of the thing from thetime the obligation to deliver it arises. But this cannot be

done without first submitting proof that the conditions stated in the mutual agreement hadbeen

complied with. And this only happened when the decision of the Supreme Court in G.R. No. L-8774

became final and executory. The ruling of the trialcourt in this respect should therefore be modified in

the sense that the accounting should be made from the date of the finality of the said decision.

We find no error in the directive of the trial court that appellants shouldfree the lands in question from

the encumbrance that was created thereon by them in favor of the Development Bank of the Philippines

and one Claro cortez, for as trustees it is their duty to deliver the properties to the cestui que trust free

from all liens and encumbrances.

To recapitulate, we hold: (1) that the document executed on December 5, 1950 creates an express trust

in favor of appellees; (2) that appellants had no right to revoke it without the consent of the cestui que

trust; (3) that appellants must render an accounting of the fruits of the lands from the datethe

judgement rendered in G.R. No. L-8774 became final and executory; and (4)that appellants should free

said lands from all liens and encumbrances.

WHEREFORE, with the modification as above indicated with regard to accounting,we hereby affirm the

decision appealed from, without pronouncement as to costs.

Labrador, Reyes, J.B.L., Barrera, Paredes, Dizon, Regala and Makalintal, JJ., concur.

Padilla and Concepcion, JJ., took no part.

VI. ADOPTION AND CUSTODY OF MINORS

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RULE 99-100: ADOPTION (NOTE HOWEVER THAT T HIS HAS BEEN EXPRESSLY

REPEALED)

SECTION 1. Venue.A person desiring to adopt another or have the custody of a minor shall present his

petition to the Regional Trial Court of the province, or the city or municipal court of the city or

municipality in which he resides.

In the City of Manila, the proceedings shall be instituted in the Juvenile and Domestic Relations Court.

SEC. 2. Contents of petition.The petition for adoption shall contain the same allegations required in a

petition for guardianship, to wit:

(a) The jurisdictional facts;

(b) The qualifications of the adopter;(c) That the adopter is not disqualified by law;

(d) The name, age, and residence of the person to be adopted and of his relatives or of the persons

who have him under their care;

(e) The probable value and character of the estate of the person to be adopted.

SEC. 3. Consent to adoption.There shall be filed with the petition a written consent to the adoption

signed by the child, if fourteen years of age or over and not incompetent, and by the child's spouse, if

any, and by each of its known living parents who is not insane or hopelessly intemperate or has not

abandoned such child, or if there are no such parents by the general guardian or guardian ad litem of the

child, or if the child is in the custody of an orphan asylum, children's home, or benevolent society or

person, by the proper officer or officers of such asylum, home, or society, or by such person; but if the

child is illegitimate and has not been recognized, the consent of its father to the adoption shall not be

required.

If the person to be adopted is of age, only his or her consent and that of the spouse, if any, shall be

required.

SEC. 4. Order for hearing.If the petition and consent filed are sufficient in form and substance, the

court, by an order reciting the purpose of the petition, shall fix a date and place for the hearing thereof,

which date shall not be more than six (6) months after the entry of the order, and shall direct that a copy

of the order be published before the hearing at least once a week for three (3) successive weeks in some

newspaper of general circulation published in the province, as the court shall deem best.

SEC. 5. Hearing and judgment.Upon satisfactory proof in open court on the date fixed in the order

that such order has been published as directed, that the allegations of the petition are true, and that it is

a proper case for adoption and the petitioner or petitioners are able to bring up and educate the child

properly, the court shall adjudge that thenceforth the child is freed from all legal obligations of

obedience and maintenance with respect to its natural parents, except the mother when the child is

adopted by her husband, and is, to all legal intents and purposes, the child of the petitioner or

petitioners, and that its surname is changed to that of the petitioner or petitioners. The adopted person

or child shall thereupon become the legal heir of his parents by adoption and shall also remain the legal

heir of his natural parents. In case of the death of the adopted person or child, his parents and relatives

by nature, and not by adoption, shall be his legal heirs.SEC. 6. Proceedings as to child whose parents are separated. Appeal.When husband and wife are

divorced or living separately and apart from each other, and the question as to the care, custody, and

control of a child or children of their marriage is brought before a Regional Trial Court by petition or as

an incident to any other proceeding, the court, upon hearing the testimony as may be pertinent, shall

award the care, custody, and control of each such child as will be for its best interest, permitting the

child to choose which parent it prefers to live with it be over ten years of age, unless the parent so

chosen be unfit to take charge of the child by reason of moral depravity, habitual drunkenness,

incapacity, or poverty. If, upon such hearing, it appears that both parents are improper persons to have

the care, custody, and control of the child, the court may either designate the paternal or maternal

grandparent of the child, or his oldest brother or sister, or some reputable and discreet person to take

charge of such child, or commit it to any suitable asylum, children's home, or benevolent society. The

court may in conformity with the provisions of the Civil Code order either or both parents to support or

help support said child, irrespective of who may be its custodian, and may make any order that is just

and reasonable permitting the parent who is deprived of its care and custody to visit the child or have

temporary custody thereof. Either parent may appeal from an order made in accordance with the

provisions of this section. No child under seven years of age shall be separated from its mother, unless

the court finds there are compelling reasons therefor.

SEC. 7. Proceedings as to vagrant or abused child.When the parents of any minor child are dead, or by

reason of long absence or legal or physical disability have abandoned it, or cannot support it through

vagrancy, negligence, or misconduct, or neglect or refuse to support it, or treat it with excessive

harshness or give it corrupting orders, counsels, or examples, or cause or allow it to engage in begging,

or to Commit offenses against the law, the proper Regional Trial Court, upon petition filed by some

reputable resident of the province setting forth the facts, may issue an order requiring such parents for

show cause, or, if the parents are dead or cannot be found, requiring the fiscal of the province to show

cause, at a time and place fixed in the order, why the child should not be taken from its parents, if living;and if upon the hearing it appears that the allegations of the petition are true, and that it is for the best

interest of the child, the court may make an order taking it from its parents, if living; and committing it

to any suitable orphan asylum, children's home, or benevolent society or person to be ultimately placed,

by adoption or otherwise, in a home found for it by such asylum, children's home, society, or person.

SEC. 8. Service of judgment.Final orders or judgments under this rule shall be served by the clerk upon

the civil registrar of the city or municipality wherein the court issuing the same is situated.

RULE 100: RESCISSION AND REVOCATION OF ADOPTION

SECTION 1. Who may file petition; grounds.A minor or other incapacitated person may, through a

guardian or guardian ad litem, petition for the rescission or revocation of his or her adoption for the

same causes that authorize the deprivation of parental authority.

The adopter may, likewise petition the court for the rescission or revocation of the adoption in any of

these cases:

(a) If the adopted person has attempted against the life of the adopter;(b) When the adopted minor has abandoned the home of the adopter for more than three (3) years;

(c) When by other acts the adopted person has repudiated the adoption.

SEC. 2. Order to answer.The court in which the petition is filed shall issue and order requiring the

adverse party to answer the petition within fifteen (15) days from receipt of a copy thereof. The order

and a copy of the petition shall be served on the adverse party in such manner as the court may direct.

SEC. 3. Judgment.If upon trial, on the day set therefor, the court finds that the allegations of the

petition are true, it shall render judgment ordering the rescission or revocation of the adoption, with or

without costs, as justice requires.

SEC. 4. Service of judgment.A certified copy of the judg ment rendered in accordance with the next

preceding section shall be served upon the civil registrar concerned; within thirty (30) days from

rendition thereof, who shall forthwith enter the action taken by the court in the register.

SEC. 5. Time within which to file petition.A minor or other incapacitated person must file the petition

for rescission or revocation of adoption within the five (5) years following his majority, or if he was

incompetent at the time of the adoption, within the five (5) years following the recovery from such

incompetency.

The adopter must also file the petition to set aside the adoption within five (5) years from the time the

cause or causes giving rise to the rescission or revocation of the same took place.

[A.M. NO. 02-6-02-SC 2002-08-02]: RULE ON ADOPTION

(just look at Herrera notes)

VII.PROCEEDING FOR HOSPITALIZATION OF INSANE PERSON

RULE 101: PROCEEDINGS FOR HOSPITALIZATION OF INSANE PERSONS

SECTION 1. Venue. Petition for commitment.A petition for the commitment of a person to a hospital

or other place for the insane may be filed with the Regional Trial Court of the province where the person

alleged to be insane is found. The petition shall be filed by the Director of Health in all cases where, in his

opinion, such commitment is for the public welfare, or for the welfare of said person who, in his

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judgment, is insane, and such person or the one having charge of him is opposed to his being taken to a

hospital or other place for the insane.

SEC. 2. Order for hearing.If the petition filed is sufficient in form and substance, the court, by an order

reciting the purpose of the petition, shall fix a date for the hearing thereof, and copy of such order shall

be served on the person alleged to be insane, and to the one having charge of him, or on such of his

relatives residing in the province or city as the judge may deem proper. The court shall furthermore

order the sheriff to produce the alleged insane person, if possible, on the date of the hearing.

SEC. 3. Hearing and judgment.Upon satisfactory proof, in open court on the date fixed in the order,

that the commitment applied for is for the public welfare or for the welfare of the insane person, and

that his relatives are unable for any reason to take proper custody and care of him, the court shall order

his commitment to such hospital or other place for the insane as may be recommended by the Directorof Health. The court shall make proper provisions for the custody of property or money belonging to the

insane until a guardian be properly appointed.

SEC. 4. Discharge of insane.When, in the opinion of the Director of Health, the person ordered to be

committed to a hospital or other place for the insane is temporarily or permanently cured, or may be

released without danger he may file the proper petition with the Regional Trial Court which ordered the

commit ment.

SEC. 5. Assistance of fiscal in the proceeding.It shall be the duty of the provincial fiscal or in the City of

Manila the fiscal of the city, to prepare the petition for the Director of Health and represent him in court

in all proceedings arising under the provisions of this rule.

CHIN AH FOO V. CONCEPCION (1930)

CHIN AH FOO (alias CHAN FOO WOO) and YEE SHEE (alias YEE SUI YENG), widow of Chin Ah

Kim, petitioners,

vs.

PEDRO CONCEPCION, Judge of First Instance of Manila, and LEE VOO, respondents.

Harvey and O'Brien for petitioners.

Lazaro Pormarejo for respondent Lee Voo.

J. A. Wolfson for respondent judge.

MALCOLM, J.:

The question for decision in this certiorari proceeding concerns the power of a Judge of First Instance,

who has in effect acquitted a man charged with murder on the plea of insanity, and who has ordered the

confinement of the insane person in an asylum, subsequently to permit the insane person to leave the

asylum without the acquiescence of the Director of Health. Otherwise stated, the factor determinative of

the question has to do with the effect, if any, of section 1048 of the Administrative Code on article 8 of

the Penal Code.

On November 15, 1927, one Chan Sam (alias Chin Ah Woo), was charged in the Court of First Instance of

Manila with the murder of Chin Ah Kim. Thereafter, the trial judge rendered judgment declaring the

accused not responsible for the crime, and dismissing the case, but requiring the reclusion of the accusedfor treatment in San Lazaro Hospital, in accordance with article 8 of the Penal Code, with the admonition

that the accused be not permitted to leave the said institution without first obtaining the permission of

the court. In compliance with this order, Chan Sam was confined for approximately two years in San

Lazaro Hospital. During this period, efforts to obtain his release were made induced by the desire of his

wife and father-in-law to have him proceed to Hongkong. Opposition to the allowance of the motions

came from the wife and children of the murdered man, who contended that Chan Sam was still insane,

and that he had made threats that if he ever obtained his liberty he would kill the wife and the children

of the deceased and probably other members of his own family who were living in Hongkong. These

various legal proceedings culminated in Doctors Domingo and De los Angeles being delegated to

examine and certify the mental condition of Chan Sam, which they did. After this report had been

submitted, counsel for the oppositors challenged the jurisdiction of the court. However, the respondent

judge sustained the court's right to make an order in the premises and allowed Chan Sam to leave the

San Lazaro Hospital to be turned over to the attorney-in-fact of his wife so that he might be taken to

Hongkong to join his wife in that city.

Article 8 of the Penal Code, pursuant to which the trial judge purported to act in issuing his order of

release, provides that among those exempt from criminal liability are:

1. An imbecile or lunatic, unless the latter has acted during the lucid interval.

When the imbecile or lunatic has committed an act which the law defines as a grave felony, the court

shall order his confinement in one of the asylums established for persons thus afflicted, which he shall

not be permitted to leave without first obtaining the permission of the same court.

Section 1048 of the Administrative Code, which, it is argued, has superseded or supplemented article 8

of the Penal Code, provides as to the discharge of a patient from custody from a hospital for the insane

the following:

When in the opinion of the Director of Health any patient in any Government hospital or other place for

the insane is temporarily or permanently cured, or may be released without danger, he may dischargesuch patient, and shall notify the Judge of the Court of First Instance who ordered the commitment, in

case the patient is confined by order of the court.

An examination of article 8, paragraph 1, of the Penal Code discloses that the permission of the court

who orders the confinement of one accused of a grave felony in an insane asylum is a prerequisite for

obtaining release from the institution. The respondent judge has based his action in this case on this

provision of the law. On the other hand, section 1048 of the Administrative Code grants to the Director

of Health authority to say when a patient may be discharged from an insane asylum. There is no

pretense that the Director of Health has exercised his authority in this case, or that the head of the

Philippine Health Service has been asked to express his opinion.

Contrasting the two provisions of Philippine law which have been mentioned, it is self-evident that for

section 1048 of the Administrative Code to prevail exclusively it would be necessary to find an implied

repeal of a portion of article 8 of the Penal Code. But it is a well-known rule of statutory construction

that when there is no express repeal none is presumed to be intended. The most reasonable supposition

is that when the Legislature placed the provision, from which section 1048 of the Administrative Codewas derived, on the statute books, it did so without any consideration as to the effect of the new law on

article 8 of the Penal Code. It is likewise a canon of statutory construction that when two portions of the

law can be construed so that both can stand together, this should be done. In this respect, we believe

that the authority of the courts can be sustained in cases where the courts take action, while the

authority of the Director of Health can be sustained in other cases not falling within the jurisdiction of

the courts. This latter construction is reinforced by that portion of section 1048 of the Administrative

Code which requires the Director of Health to notify the Judge of First Instance who ordered the

commitment, in case the patients is confined by order of the court.

In 1916, the Director of Health raised this same question. He then took the view that section 7 of Act No.

2122, now incorporated in the Administrative Code as section 1048, applied to all cases of confinement

of persons adjudged to be insane in any Government hospital or other places for the insane, and that the

entire discretion as to the sanity of any patient whatever was vested by this section exclusively in the

Director of Health. The Attorney-General, who at that time was Honorable Ramon Avancea, ruled

against the Director of Health, saying that "the Legislature could not have intended to vest in the

Director of Health the power to release, without proper judicial authority, any person confined by order

of the court in an asylum pursuant to the provisions of article 8 of the Penal Code."

In at least two cases, United States vs. Guendia ([1917], 37 Phil., 337), and People vs. Bascos ([1922], 44

Phil., 204), this court has relied on article 8, paragraph 1, of the Penal Code. The judgments in the cited

cases concluded with this order: "The defendant shall be kept in confinement in the San Lazaro Hospital,

or such other hospital for the insane as the Director of Health may direct, and shall not be permitted to

depart therefrom without the prior approval of the Court of First Instance of the Province of Iloilo

(Pangasinan)."

Due to differences in statutory provisions, the American authorities on the question are not very helpful.

However, one case has been found where the facts were practically identical with the ones before us,

where the law is much the same as Philippine Law, and where the procedure which should be followed

was outlined by the Supreme Court of the State of Washington. We refer to the case of State vs. Snell

([1908], 49 Wash., 177). In the decision in the cited case, the court, speaking through Justice Rudkin,

said:

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On the 7th day of July, 1906, the relator, Chester Thompson, killed George Meade Emory in the City of

Seattle, and by reason thereof was informed against in the superior court of King county for the crime of

murder. A plea of not guilty was interposed, and the place of trial was changed to the superior court of

Pierce county. The relator was tried in the latter court before the respondent as presiding judge, and the

jury be returned a verdict of not guilty by reason of insanity. On the 3rd day of May, 1907, the

respondent entered an order reciting that the relator was then insane; that he had been acquitted of the

crime of murder by reason of insanity; that his discharge or going at large would be manifestly

dangerous to the peace and safety of the community; and committed him to the county jail of Pierce

county. It was further ordered that, on the 12th day of June, 1907, the relator should be taken from the

county jail of Pierce county and transferred to the state penitentiary at Walla Walla, to be there confined

in the ward set apart for the confinement, custody, and keeping of the criminal insane until the furtherorder of the court and until discharge therefrom by due process of law. The relator was committed to

the county jail and thereafter transferred to the insane ward of the penitentiary in obedience to this

order, and is now confined in the latter institution. On the 19th day of February, 1908, he applied to the

physician in charge of the criminal insane at the state penitentiary for an examination of his mental

condition and fitness to be at large, as provided in section 6 of the act of February 21, 1907, entitled, "An

act relating to the criminal insane, their trial, commitment, and custody." Laws of 1907, page 33. After

such examination, the physician certified to the warden of the penitentiary that he had reasonable cause

to believe that the relator had become sane since his commitment, and was a safe person to be at large.

The warden thereupon granted the relator permission to present a petition to the court that committed

him, setting up the facts leading to his commitment, and that he had become sane and mentally

responsible, and in such condition that he is a safe person to be at large, and praying for his discharge

from custody. A petition in due form was thereupon presented to the respondent judge, after service

thereof upon the prosecuting attorney of Pierce county, but the respondent refused to set the matter

down for hearing or to entertain jurisdiction of the proceeding,. . . . Application was there-upon made tothis court for a writ of mandamus, requiring the respondent to set the petition down for hearing, and the

case is now before us on the return to the alternative writ.

x x x x x x x x x

We are of opinion, therefore, that the procedure adopted by the relator is in conformity with the law,

and the writ will issues as prayed.

The foregoing is our understanding of the law on the subject. The following represents our deductions

and conclusions. Article 8 of the Penal Code has not been impliedly repealed by section 1048 of the

Administrative Code. Article 8 of the Penal Code and section 1048 of the Administrative Code can be

construed so that both can stand together. Considering article 8 of the Penal Code as in force and

construing this article and section 1048 of the Administrative Code, we think that the Attorney-General

was right in expressing the opinion that the Director of Health was without power to release, without

proper judicial authority, any person confined by order of the court in an asylum pursuant to the

provisions of article 8 of the Penal Code. We think also that the converse proposition is equally tenable,

and is that any person confined by order of the court in an asylum in accordance with article 8 of the

Penal Code cannot be discharged from custody in an insane asylum until the views of the Director of

Health have been ascertained as to whether or not the person is temporarily or permanently cured or

may be released without danger. In other words, the powers of the courts and the Director of Health are

complementary each with the other. As a practical observation, it may further be said that it is well to

adopt all reasonable precautions to ascertain if a person confined in an asylum as insane should be

permitted to leave the asylum, and this can best be accomplished through the joint efforts of the courts

and the Director of Health in proper cases.

Various defenses were interposed by the respondents to the petition, but we have not been impressed

with any of them except the ones which go to the merits. After thorough discussion, our view is that

while the respondent Judge acted patiently and cautiously in the matters which came before him, yet he

exceeded his authority when he issued his orders of December 26, 1929, and March 17, 1930, without

first having before him the opinion of the Director of Health.

The writ prayed for will issue and the temporary restraining order will be made permanent, without

costs.

Villamor, Ostrand, Johns, Romualdez and Villa-Real, JJ., concur.

VII. HABEAS CORPUS RULE 102, SECTION 1-19

RULE 102: HABEAS CORPUS

SECTION 1. To what habeas corpus extends.Except as otherwise expressly provided by law, the writ

of habeas corpus shall extend to all cases of illegal confinement or detention by which any person is

deprived of his liberty, or by which the rightful custody of any person is withheld from the person

entitled thereto.

SEC. 2. Who may grant the writ.The writ of habeas corpus may be granted by the Supreme Court, or

any member thereof, on any day and at any time, or by the Court of Appeals or any member thereof inthe instances authorized by law, and if so granted it shall be enforceable anywhere in the Philippines;

and may be made returnable before the court or any member thereof, or before a Regional Trial Court,

or any judge thereof for hearing and decision on the merits. It may also be granted by a Regional Trial

Court, or a judge thereof, on any day and at any time, and returnable before himself, enforceable only

within his judicial district.

SEC. 3. Requisites of application therefor.Application for the writ shall be by petition signed and

verified either by the party for whose relief it is intended, or by some person on his behalf, and shall set

forth:

(a) That the person in whose behalf the application is made is imprisoned or restrained of his liberty;

(b) The officer or name of the person by whom he is so imprisoned or restrained; or, if both are

unknown or uncertain, such officer or person may be described by an assumed appellation, and the

person who is served with the writ shall be deemed the person intended;

(c) The place where he is so imprisoned or restrained, if known;

(d) A copy of the commitment or cause of detention of such person, if it can be procured without

impairing the efficiency of the remedy; or, if the imprisonment or restraint is without any legal authority,

such fact shall appear.

SEC. 4. When writ not allowed or discharge authorized.If it appears that the person alleged to be

restrained of his liberty is in the custody of an officer under process issued by a court or judge or by

virtue of a judgment or order of a court of record, and that the court or judge had jurisdiction to issue

the process, render the judgment, or make the order, the writ shall not be allowed; or if the jurisdiction

appears after the writ is allowed, the person shall not be discharged by reason of any informality or

defect in the process, judgment, or order. Nor shall anything in this rule be held to authorize the

discharge of a person charged with or convicted of an offense in the Philippines, or of a person suffering

imprisonment under lawful judgment.

SEC. 5. When the writ must be granted and issued.A court or judge authorized to grant the writ must,

when a petition therefor is presented and it appears that the writ ought to issue, grant the same

forthwith, and immediately thereupon the clerk of the court shall issue the writ under the seal of the

court; or in case of emergency, the judge may issue the writ under his own hand, and may depute any

officer or person to serve it.SEC. 6. To whom writ directed, and what to require.In case of imprisonment or restraint by an officer,

the writ shall be directed to him, and shall command him to have the body of the person restrained of

his liberty before the court or judge designated in the writ at the time and place therein specified. In case

of imprisonment or restraint by a person not an officer, the writ shall be directed to an officer, and shall

command him to take and have the body of the person restrained of his liberty before the court or judge

designated in the writ at the time and pla

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