Del Rosario vs Ferrer

This case pertains to a gift, otherwise denominated as a

donation mortis causa, which in reality is a donation inter vivos made
effective upon its execution by the donors and acceptance thereof by the
donees, and immediately transmitting ownership of the donated property
to the latter, thus precluding a subsequent assignment thereof by one of
the donors.
The Facts and the Case
On August 27, 1968 the spouses Leopoldo and Guadalupe
Gonzales executed a document entitled Donation Mortis Causa[1] in favor
of their two children, Asuncion and Emiliano, and their granddaughter,
Jarabini (daughter of their predeceased son, Zoilo) covering the spouses
126-square meter lot and the house on it in Pandacan, Manila [2] in equal
shares. The deed of donation reads:
It is our will that this Donation Mortis
Causa shall be irrevocable and shall be respected by
the surviving spouse.
It is our will that Jarabini Gonzales-del Rosario
and Emiliano Gonzales will continue to occupy the
portions now occupied by them.
It
is
further
our
will
that
this
DONATION MORTIS CAUSA shall not in any way affect
any other distribution of other properties belonging to
any of us donors whether testate or intestate and
where ever situated.
It is our further will that any one surviving
spouse reserves the right, ownership, possession and
administration of this property herein donated and
accepted and this Disposition and Donation shall be
operative and effective upon the death of the DONORS.
[3]

Although denominated as a donation mortis causa, which in law

is the equivalent of a will, the deed had no attestation clause and was
witnessed by only two persons. The named donees, however, signified
their acceptance of the donation on the face of the document.
Guadalupe, the donor wife, died in September 1968. A few
months later or on December 19, 1968, Leopoldo, the donor husband,
executed a deed of assignment of his rights and interests in subject
property to their daughter Asuncion. Leopoldo died in June 1972.
In 1998 Jarabini filed a petition for the probate of the August 27,
1968 deed of donation mortis causa before the Regional Trial Court (RTC)
of Manila in Sp. Proc. 98-90589.[4] Asuncion opposed the petition, invoking
his father Leopoldos assignment of his rights and interests in the property
to her.
After trial, the RTC rendered a decision dated June 20, 2003,
[5]
finding that the donation was in fact one made inter vivos, the donors
intention being to transfer title over the property to the donees during the
donors lifetime, given its irrevocability. Consequently, said the RTC,
Leopoldos subsequent assignment of his rights and interest in the
property was void since he had nothing to assign. The RTC thus directed
the registration of the property in the name of the donees in equal shares.
[6]

On Asuncions appeal to the Court of Appeals (CA), the latter

rendered a decision on December 23, 2008,[7] reversing that of the
RTC. The CA held that Jarabini cannot, through her petition for the probate
of the deed of donation mortis causa, collaterally attack Leopoldos deed
of assignment in Asuncions favor. The CA further held that, since no
proceeding exists for the allowance of what Jarabini claimed was actually a
donation inter vivos, the RTC erred in deciding the case the way it
did. Finally, the CA held that the donation, being one given mortis causa,
did not comply with the requirements of a notarial will, [8] rendering the
same void. Following the CAs denial of Jarabinis motion for
reconsideration,[9] she filed the present petition with this Court.
Issue Presented
The key issue in this case is whether or not the spouses Leopoldo
and Guadalupes donation to Asuncion, Emiliano, and Jarabini was a
donation mortis causa, as it was denominated, or in fact a donation inter
vivos.
The Courts Ruling
That the document in question in this case was captioned
Donation Mortis Causa is not controlling. This Court has held that, if a
donation by its terms is inter vivos, this character is not altered by the fact
that the donor styles it mortis causa.[10]
In Austria-Magat v. Court of Appeals,[11] the Court held that
irrevocability is a quality absolutely incompatible with the idea of
conveyances mortis causa, where revocability is precisely the essence of
the act. A donation mortis causa has the following characteristics:
1.
It conveys no title or ownership to the
transferee before the death of the transferor; or, what
amounts to the same thing, that the transferor should

retain the ownership (full or naked) and control of the

property while alive;
2.
That before his death, the transfer
should be revocable by the transferor at will, ad nutum;
but revocability may be provided for indirectly by
means of a reserved power in the donor to dispose of
the properties conveyed; and
3.
That the transfer should be void if the
transferor
should
survive
the
transferee.
[12]
(Underscoring supplied)
The Court thus said in Austria-Magat that the express
irrevocability of the donation is the distinctive standard that identifies
the document as a donation inter vivos. Here, the donors plainly said that
it is our will that this Donation Mortis Causa shall be irrevocable and shall
be respected by the surviving spouse. The intent to make the donation
irrevocable becomes even clearer by the proviso that a surviving donor
shall respect the irrevocability of the donation. Consequently, the
donation was in reality a donation inter vivos.
The donors in this case of course reserved the right, ownership,
possession, and administration of the property and made the donation
operative upon their death. But this Court has consistently held that such
reservation (reddendum) in the context of an irrevocable donation simply
means that the donors parted with their naked title, maintaining
only beneficial ownership of the donated property while they lived. [13]
Notably, the three donees signed their acceptance of the
donation, which acceptance the deed required. [14] This Court has held that
an acceptance clause indicates that the donation is inter vivos, since
acceptance
is
a
requirement
only
for
such
kind
of
donations. Donations mortis causa, being in the form of a will, need not
[15]
be accepted by the donee during the donors lifetime.
Finally, as Justice J. B. L. Reyes said in Puig v. Peaflorida,[16] in
case of doubt, the conveyance should be deemed a donation inter
vivos rather than mortis causa, in order to avoid uncertainty as to the
ownership of the property subject of the deed.
Since the donation in this case was one made inter vivos, it was
immediately operative and final. The reason is that such kind of donation
is deemed perfected from the moment the donor learned of the donees
acceptance of the donation. The acceptance makes the donee the
absolute owner of the property donated.[17]
Given that the donation in this case was irrevocable or one
given inter vivos, Leopoldos subsequent assignment of his rights and
interests in the property to Asuncionshould be regarded as void for, by
then, he had no more rights to assign. He could not give what he no
longer had. Nemo dat quod non habet.[18]
The trial court cannot be faulted for passing upon, in a petition
for probate of what was initially supposed to be a donation mortis causa,
the validity of the document as a donation inter vivos and the nullity of
one of the donors subsequent assignment of his rights and interests in the
property. The Court has held before that the rule on probate is not
inflexible and absolute.[19] Moreover, in opposing the petition for probate
and in putting the validity of the deed of assignment squarely in
issue, Asuncion or those who substituted her may not now claim that the
trial court improperly allowed a collateral attack on such assignment.
WHEREFORE, the Court GRANTS the petition, SETS ASIDE the
assailed December 23, 2008 Decision and March 6, 2009 Resolution of the
Court of Appeals in CA-G.R. CV 80549, and REINSTATES in toto the June 20,
2003 Decision of the Regional Trial Court of Manila, Branch 19, in Sp. Proc.
98-90589.
SO ORDERED.
------------------------DEL ROSARIO vs. FERRER
G.R. No. 187056September 20, 2010
Fa c t s :
Spouses Leopoldo and Guadalupe Gonzales executed a document entitled
"Donation
Mortis Causa
" in favor of their two children, Asuncion and Emiliano, and
theirgranddaughter, Jarabini del Rosario
covering the spouses 126
-square meter lot and thehouse on it in equal shares. Few months after the
death of Guadalupe, Leopoldo, thedonor husband, executed a deed of
assignment
of
his
rights
and
interests
in
subject property to their daughter Asuncion. He died in June 1972. In 1998
Jarabini filed a petition for the probate of the deed of donation
mortis causa
. Asuncion opposed the petition, invoking his father
Leopoldos assignment of his rights and interests in the
property to her. After trial, the RTC rendered a decision finding that the
donation was infact one made inter vivos. On As
uncions appeal to the
CA, the latter rendered a decisionreversing that of the RTC. It held that
Jarabini cannot, through her petition for the probateof the deed of
donation
mortis causa
, collaterally attack Leopoldos deed of assignmentin Asuncions favor.
Hence, this instant petition.
Issue:

Whether or not the spouses Leop

oldo and Guadalupes donation to Asuncion, Emiliano,
and Jarabini was a donation
mortis causa,
as it was denominated, or in fact adonation
inter vivos
.
R u l i n g :
It was a donation
inter vivos
. The fact that the document in question was denominated asa donation
mortis causa is not controlling if a donation by its terms is
inter vivos
. In
Austria-Magat v. Court of Appeals
, the Court held that "irrevocability" is a qualityabsolutely incompatible
with the idea of conveyances
mortis causa
, where "revocability"is precisely the essence of the act. In the present
case, the donors plainly said that it is"our will that this Donation Mortis
Causa shall be irrevocable and shall be respected bythe surviving spouse."
The intent to make the donation irrevocable becomes even
clearer by the proviso that a surviving donor shall respect the irrevocabilit
y of the donation.Thus, given that the donation was indeed
inter vivos
, Leopoldos subsequent assignment
of his rights and interests in the property to Asuncion is void.
---------------------Del Rosario v. Ferrer20 Sept 2010
FACTS:
(
Doctrine:
Irrevocabilityof
the
donation
is
the
standard
thati d e n t i fi e s t h e d o n a t i o n a s i n t e r v i v o s . I t
i s a q ua l i ty ab so l u tel y i n c o m p a t i b l e
w i t
h
t h e
i d e a
o f
conveyances
mortis causa.)
S p o u s e s
A
a n d
B
e x e c u t e d
a docu
ment entitled Donation MortisC a u s a i n f a v o r o f t h e i r 2
childrenC
and
D,
and
their
granddaughterE . T h e D e e d o f D o n a t i o n s t a t e d
t h a t ,
i t
i s
o u r
w i l l
t h a t
t h i s
d o n a t i o n m o r t i s c a u s a s h a l l b e irreovocable
and
shall
be
respectedby
the
surviving
spouse. A l t h o u g h
d e n o m i n a t e d
a s
a d o n a t i o n m o r t i s c a u s a , w h i c h i n law is equivalent to a
will, the deedhas no atte st a ti on c la us e and wa s witnessed only by
two
persons.B e f o r e t h e d e a t h o f d o n o r A , h e e x e c u t e
d
a
deed
of
assignment
of h i s
r i g h t s
a n d
i n t e r e s t
i n
t h e s
ubj ec t
prope rty
to
th ei r
daugh ter C. subs equ entl y, gr anddaugh ter E fi l e d
a
petition
f o r t h e p r o b a t e o f the de ed o f dona ti on mo rtis c aus a in the
RTC.
C
opposed
the
petition,i n v o k i n g A s a s s i g n m e n t o f h i s r i g
h t s
t o
h e r .
D e c i s i o n
w a s rend er
e d b y th e RTC , o rd erin g the re gi stra ti on o f th e prop er ty in
the n a m e
o f
t h e
d o n e e s
i n
e q u a l
s h a r e s . T h e c o u r t r u l e d t h a t t h e donation was one made
inter
vivos,t h u s t h e a s s i g n m e n t o f A o f h i s r i g h t s w
a s v o i d . C A r e v e r s e d t h e de ci sion of th e RTC and ru led
tha t t h e
d o n a t i o n ,
b e i n g
o n e given
m or ti s ca us a
, did not c om pl yw i th th e re qui re me nts o f a notar ial will, rendering
the same void.
ISSUE:
W h e t h e r o r n o t t h e d o n a t i o n o f spouses A and B
to their children Ca n d D a n d g r a n d d a u g h t e r E w a s a donation
mortis causa
,
a s
i t
w a s d e n o m i n a t e d ,
o
r
i n
f a c t
a donation
inter vivos
.
DECISION:
T h e
f a c t
t h a t
t h e
d o c u m e n t
i n q u esti
o n wa s d eno mi n a ted a s a D o n a ti o n mo r ti s
ca u sa i s no t c o n t r o l l i n g i f a d o n a t i o n b
y i t s terms is
inter vivos
. I rre v oc ab ili ty of
the
donation
is
the
standard
thati d e n t i fi e s t h e d o n a t i o n a s i n t e r v i v o s . I t
i s a q ua l i ty ab so l u tel y i n c o m p a t i b l e
w i t
h
t h e
i d e a
o f
conveyances
mortis causa.

In
th e
c as e
at
bar,
dono rs
A
and
Bi n t e n d e d t o m a k e t h e d o n a t i o n i r r e v o
c a b l e ,
a s
s t a t e d
i n
t h e provisions
of
t h e D e e d . T h u s , t h e donation was on reality inter vivos.Thu s,
gi ve n th at the don ation w as indeed
in te r vi v os
,
A s
sub se quen t a s s i g n m e n t
o f
h i s
r i g h t s
a
n d i n t e r e s t s i n t h e p r o p e r t y t o C i s void.
--------------------Arangote vs Maglunob
G.R. No. 178906
February 18, 2009
Before this Court is a Petition for Review on Certiorari under Rule 45 of the
1997 Revised Rules of Civil Procedure seeking to reverse and set aside the
Decision[1] dated27 October 2006 and Resolution[2] dated 29 June 2007 of
the Court of Appeals in CA-G.R. SP No. 64970. In its assailed Decision, the
appellate court affirmed the Decision [3]dated 12 September 2000 of the
Regional Trial Court (RTC), 6 th Judicial Region, Branch 1, Kalibo, Aklan, in
Civil Case No. 5511, which reversed the Decision[4] dated 6 April 1998 of
the 7th Municipal Circuit Trial Court (MCTC) of Ibajay-Nabas, Ibajay, Aklan,
in Civil Case No. 156; and declared [5] the herein respondent-Spouses
Martin and Lourdes Maglunob (Spouses Maglunob) and respondent Romeo
Salido (Romeo) as the lawful owners and possessors of Lot 12897 with an
area of 982 square meters, more or less, located in Maloco, Ibajay, Aklan
(subject property). In its assailed Resolution, the appellate court denied
herein petitioner Elvira T. Arangotes Motion for Reconsideration.
Elvira T. Arangote, herein petitioner married to Ray Mars E.
Arangote, is the registered owner of the subject property, as evidenced by
Original Certificate of Title (OCT) No. CLOA-1748. [6] Respondents Martin
(Martin II) and Romeo are first cousins and the grandnephews of
Esperanza Maglunob-Dailisan (Esperanza), from whom petitioner acquired
the subject property.
The Petition stems from a Complaint[7] filed by petitioner and her
husband against the respondents for Quieting of Title, Declaration of
Ownership and Possession, Damages with Preliminary Injunction, and
Issuance of Temporary Restraining Order before the MCTC, docketed as
Civil Case No. 156.
The Complaint alleged that Esperanza inherited the subject property
from her uncle Victorino Sorrosa by virtue of a notarized Partition
Agreement[8] dated 29
April
1985,
executed
by
the
latters
heirs. Thereafter, Esperanza declared the subject property in her name for
real property tax purposes, as evidenced by Tax Declaration No. 16218
(1985).[9]
The Complaint further stated that on 24 June 1985, Esperanza
executed a Last Will and Testament [10] bequeathing the subject property to
petitioner and her husband, but it was never probated. On 9 June 1986,
Esperanza executed another document, an Affidavit, [11] in which she
renounced, relinquished, waived and quitclaimed all her rights, share,
interest and participation whatsoever in the subject property in favor of
petitioner and her husband. On the basis thereof, Tax Declaration No.
16218 in the name of Esperanza was cancelled and Tax Declaration No.
16666[12] (1987) was issued in the name of the petitioner and her husband.
In 1989, petitioner and her husband constructed a house on the
subject property. On 26 March 1993, OCT No. CLOA-1748 was issued by
the Secretary of the Department of Agrarian Reform (DAR) in the name of
petitioner, married to Ray Mars E. Arangote. However, respondents,
together with some hired persons, entered the subject property on3 June
1994 and built a hollow block wall behind and in front of petitioners
house, which effectively blocked the entrance to its main door.
As a consequence thereof, petitioner and her husband were
compelled to institute Civil Case No. 156.
In their Answer with Counterclaim in Civil Case No. 156, respondents
averred
that
they
co-owned
the
subject
property
with
Esperanza. Esperanza and her siblings, Tomas and Inocencia, inherited
the subject property, in equal shares, from their father Martin Maglunob
(Martin I). When Tomas and Inocencia passed away, their shares passed
on
by
inheritance
to
respondents
Martin
II
and
Romeo,
respectively. Hence, the subject property was co-owned by Esperanza,
respondent Martin II (together with his wife Lourdes), and respondent
Romeo, each holding a one-third pro-indiviso share therein. Thus,
Esperanza could not validly waive her rights and interest over the entire
subject property in favor of the petitioner.
Respondents also asserted in their Counterclaim that petitioner
and her husband, by means of fraud, undue influence and deceit were able
to make Esperanza, who was already old and illiterate, affix her
thumbmark to the Affidavit dated 9 June 1986, wherein she renounced all
her rights and interest over the subject property in favor of petitioner and
her husband. Respondents thus prayed that the OCT issued in petitioners

name be declared null and void insofar as their two-thirds shares are
concerned.
After trial, the MCTC rendered its Decision dated 6 April 1998 in Civil
Case No. 156, declaring petitioner and her husband as the true and lawful
owners of the subject property. The decretal portion of the MCTC Decision
reads:
WHEREFORE, judgment is hereby rendered:
A.
Declaring the [herein petitioner and her
husband] the true,
lawful and exclusive owners and entitled
to the possession of the [subject
property] described and
referred to under paragraph 2 of the [C]omplaint
and covered
by Tax Declaration No. 16666 in the names of the
[petitioner
and her husband];
B.
Ordering the [herein respondents] and
anyone hired by, acting or working for them, to cease
and desist from asserting or claiming any right or
interest in, or exercising any act of ownership or
possession over the [subject property];
C.
Ordering the [respondents] to pay the
[petitioner and her husband] the amount of P10,000.00
as attorneys fee. With cost against the [respondents].
[13]

The respondents appealed the aforesaid MCTC Decision to the

RTC. Their appeal was docketed as Civil Case No. 5511.
Respondents argued in their appeal that the MCTC erred in not
dismissing the Complaint filed by the petitioner and her husband for failure
to identify the subject property therein. Respondents further faulted the
MCTC for not declaring Esperanzas Affidavit dated 9 June 1986 -relinquishing all her rights and interest over the subject property in favor
of petitioner and her husband -- as null and void insofar as respondents
two-thirds share in the subject property is concerned.
On 12 September 2000, the RTC rendered its Decision reversing the
MCTC Decision dated 6 April 1998. The RTC adjudged respondents, as well
as the other heirs of Martin Maglunob, as the lawful owners and
possessors of the entire subject property. The RTC decreed:
follows:

WHEREFORE, judgment is hereby rendered as

1) The appealed [D]ecision is REVERSED;

2) [Herein respondents] and the other heirs of
Martin Maglunob are declared the lawful owners and possessors
of the whole [subject property] as described in Paragraph 2 of
the [C]omplaint, as against the [herein petitioner and her
husband].
3) [Petitioner and her husband] are ordered to
immediately turn over possession of the [subject
property] to the [respondents] and the other heirs of
Martin Maglunob; and
4) [Petitioner and her husband] are ordered to
pay [respondents] attorneys fees of P5,000.00, other
litigation expenses of P5,000.00, moral damages
of P10,000.00 and exemplary damages of P5,000.00. [14]
Petitioner and her husband filed before the RTC, on 26 September
2000, a Motion for New Trial or Reconsideration [15] on the ground of newly
discovered evidence consisting of a Deed of Acceptance [16] dated 23
September 2000, and notice[17] of the same, which were both made by the
petitioner, for herself and in behalf of her husband, [18] during the lifetime of
Esperanza. In the RTC Order[19] dated 2 May 2001, however, the RTC
denied the aforesaid Motion for New Trial or Reconsideration.
The petitioner and her husband then filed a Petition for Review,
under Rule 42 of the 1997 Revised Rules of Civil Procedure, before the
Court of Appeals, where the Petition was docketed as CA-G.R. SP No.
64970.
In their Petition before the appellate court, petitioner and her
husband raised the following errors committed by the RTC in its 12
September 2000 Decision:
I.
It erred in reversing the [D]ecision
of the [MCTC];
II.
It erred in declaring the [herein
respondents] and the other heirs of Martin
Maglunob as the lawful owners and
possessors of the whole [subject property];
III.
It erred in declaring [OCT] No. CLOA1748 in the name of [herein petitioner] Elvie
T. Arangote as null and void;
IV.
It erred in denying [petitioner and her
husbands] [M]otion for [N]ew [T]rial or
[R]econsideration dated [26 September 2000;
and
V.
It erred in not declaring the
[petitioner and her husband] as possessors in
good faith.[20]

On 27 October 2006, the Court of Appeals rendered a Decision

denying the Petition for Review of petitioner and her husband and
affirming the RTC Decision dated 12 September 2000. Petitioner and her
husbands subsequent Motion for Reconsideration was similarly denied by
the Court of Appeals in its Resolution dated 29 June 2007.
Hence, petitioner[21] now comes before this Court raising in her
Petition the following issues:
I.
Whether the [RTC] acted with grave
abuse of discretion amounting to lack or
excess of jurisdiction when it declared the
[petitioner and her husbands title to the
subject property] null and void;
II.
Whether the [RTC] acted with grave
abuse of discretion amounting to lack of
jurisdiction when it declared the Affidavit of
Quitclaim null and void; and
III.
Whether the [RTC] and the Honorable
Court of Appeals acted with grave abuse of
discretion amounting to lack or excess of
jurisdiction when it rejected petitioners claim
as possessors (sic) in good faith, hence,
entitled to the rights provided in [Article] 448
and [Article] 546 of the Civil Code.[22]
Petitioner contends that the aforesaid OCT No. CLOA-1748 was
issued in her name on 26 March 1993 and was registered in the Registry of
Deeds of Aklan on 20 April 1993. From 20 April 1993 until the institution
of Civil Case No. 156 on 10 June 1994 before the MCTC, more than one
year had already elapsed. Considering that a Torrens title can only be
attacked within one year after the date of the issuance of the decree of
registration on the ground of fraud and that such attack must be through a
direct proceeding, it was an error on the part of the RTC and the Court of
Appeals to declare OCT No. CLOA-1748 null and void.
Petitioner additionally posits that both the RTC and the Court of
Appeals committed a mistake in declaring null and void the Affidavit
dated 9 June 1986 executed by Esperanza, waiving all her rights and
interest over the subject property in favor of petitioner and her
husband. Esperanzas Affidavit is a valid and binding proof of the transfer
of ownership of the subject property in petitioners name, as it was also
coupled with actual delivery of possession of the subject property to
petitioner and her husband. The Affidavit is also proof of good faith on the
part of petitioner and her husband.
Finally, petitioner argues that, assuming for the sake of argument,
that Esperanzas Affidavit is null and void, petitioner and her husband had
no knowledge of any flaw in Esperanzas title when the latter relinquished
her rights to and interest in the subject property in their favor. Hence,
petitioner and her husband can be considered as possessors in good faith
and entitled to the rights provided under Articles 448 and 546 of the Civil
Code.
This present Petition is devoid of merit.
It is a hornbook doctrine that the findings of fact of the trial court
are entitled to great weight on appeal and should not be disturbed except
for strong and valid reasons, because the trial court is in a better position
to examine the demeanor of the witnesses while testifying. It is not a
function of this Court to analyze and weigh evidence by the parties all over
again. This Courts jurisdiction is, in principle, limited to reviewing errors
of law that might have been committed by the Court of Appeals. [23] This
rule, however, is subject to several exceptions, [24] one of which is present
in this case, i.e., when the factual findings of the Court of Appeals and the
trial court are contradictory.
In this case, the findings of fact of the MCTC as regards the origin of
the subject property are in conflict with the findings of fact of both the RTC
and the Court of Appeals. Hence, this Court will have to examine the
records to determine first the true origin of the subject property and to
settle whether the respondents have the right over the same for being coheirs and co-owners, together with their grand aunt, Esperanza, before
this Court can resolve the issues raised by the petitioner in her Petition.
After a careful scrutiny of the records, this Court affirms the
findings of both the RTC and the Court of Appeals as regards the origin of
the subject property and the fact that respondents, with their grand aunt
Esperanza, were co-heirs and co-owners of the subject property.
The records disclosed that the subject property was part of a
parcel of land[25] situated in Maloco, Ibajay, Aklan, consisting of 7,176
square meters and commonly owned in equal shares by the siblings
Pantaleon
Maglunob
(Pantaleon)
and
Placida
Maglunob-Sorrosa
(Placida). Upon the death of Pantaleon and Placida, their surviving and
legal heirs executed a Deed of Extrajudicial Settlement and Partition of
Estate in July 1981,[26] however, the Deed was not notarized. Considering
that Pantaleon died without issue, his one-half share in the parcel of land
he co-owned with Placida passed on to his four siblings (or their respective
heirs, if already deceased), namely: Placida, Luis, Martin I, and Victoria, in
equal shares.
According to the aforementioned Deed of Extrajudicial
Settlement and Partition of Estate, the surviving and legal heirs of
Pantaleon and Placida agreed to have the parcel of land commonly owned
by the siblings declared for real property tax purposes in the name of
Victorino Sorrosa (Victorino), Placidas husband. Thus, Tax Declarations

No. 5988 (1942),[27] No. 6200 (1945)[28] and No. 7233 (1953)[29] were all
issued in the name of Victorino.
Since Martin I already passed away when the Deed of
Extrajudicial Settlement and Partition of Estate was executed, his
heirs[30] were represented therein by Esperanza. By virtue of the said
Deed, Martin I received as inheritance a portion of the parcel of land
measuring 897 square meters.
After the death of Victorino, his heirs [31] executed another
Partition Agreement on 29 April 1985, which was notarized on the same
date. The Partition Agreement mentioned four parcels of land. The
subject property, consisting of a portion of the consolidated parcels 1, 2,
and 3, and measuring around 982 square meters, was allocated to
Esperanza. In comparison, the property given to Esperanza under the
Partition Agreement is bigger than the one originally allocated to her
earlier under the Deed of Extrajudicial Settlement and Partition of Estate
dated July 1981, which had an area of only 897 square meters. It may be
reasonably assumed, however, that the subject property, measuring 982
square meters, allocated to Esperanza under the Partition Agreement
dated 29 April 1985, is already inclusive of the smaller parcel of 897
square meters assigned to her under the Deed of Extrajudicial Settlement
and Partition of Estate dated July 1981. As explained by the RTC in its 12
September 2000 Decision:
The [subject property] which is claimed by the
[herein petitioner and her husband] and that which is
claimed by the [herein respondents] are one and the
same, the difference in area and technical description
being due to the repartition and re-allocation of the
parcel of land originally co-owned by Pantaleon
Maglunob and his sister Placida Maglunob and
subsequently declared in the name of [Victorino] under
Tax Declaration No. 5988 of 1949.[32]
It is clear from the records that the subject property was not
Esperanzas exclusive share, but also that of the other heirs of her father,
Martin I. Esperanza expressly affixed her thumbmark to the Deed of
Extrajudicial Settlement of July 1981 not only for herself, but also on behalf
of the other heirs of Martin I. Though in the Partition Agreement dated29
April 1985 Esperanza affixed her thumbmark without stating that she was
doing so not only for herself, but also on behalf of the other heirs of Martin
I, this does not mean that Esperanza was already the exclusive owner
thereof. The evidence shows that the subject property is the share of the
heirs of Martin I. This is clear from the sketch [33] attached to the Partition
Agreement dated 29 April 1985, which reveals the proportionate areas
given to the heirs of the two siblings, Pantaleon and Placida, who were the
original owners of the whole parcel of land [34] from which the subject
property was taken.
Further, it bears emphasis that the Partition Agreement was
executed by and among the son, grandsons, granddaughters and cousins
of Victorino. Esperanza was neither the granddaughter nor the cousin of
Victorino, as she was only Victorinos grandniece. The cousin of Victorino
is Martin I, Esperanzas father. In effect, therefore, the subject property
allotted to Esperanza in the Partition Agreement was not her exclusive
share, as she holds the same for and on behalf of the other heirs of Martin
I, who was already deceased at the time the Partition Agreement was
made.
To further bolster the truth that the subject property was not
exclusively owned by Esperanza, the Affidavit she executed in favor of
petitioner and her husband on 6 June 1985 was worded as follows:
That I hereby renounce, relinquish, waive and
quitclaim all my rights, share, interest and participation
whatsoever in the [subject property] unto the said Sps.
Ray Mars Arangote and Elvira T. Arangote, their heirs,
successors, and assigns including the improvement
found thereon;[35]
Logically, if Esperanza fully owned the subject property, she
would have simply waived her rights to and interest in the subject
property, without mentioning her share and participation in the
same. By including such words in her Affidavit, Esperanza was aware of
and was limiting her waiver, renunciation, and quitclaim to her one-third
share and participation in the subject property.
Going to the issues raised by the petitioner in this Petition, this
Court will resolve the same concurrently as they are interrelated.
In this case, the petitioner derived her title to the subject
property from the notarized Affidavit executed by Esperanza, wherein the
latter relinquished her rights, share, interest and participation over the
same in favor of the petitioner and her husband.
A careful perusal of the said Affidavit reveals that it is not what it
purports to be. Esperanzas Affidavit is, in fact, a Donation. Esperanzas
real intent in executing the said Affidavit was to donate her share in the
subject property to petitioner and her husband.
As no onerous undertaking is required of petitioner and her
husband under the said Affidavit, the donation is regarded as a pure
donation of an interest in a real property covered by Article 749 of the Civil
Code.[36]
Article 749 of the Civil Code provides:

Art. 749. In order that the donation of an

immovable may be valid, it must be made in a public
document, specifying therein the property donated and
the value of the charges which the donee must satisfy.
The acceptance may be made in the same
deed of donation or in a separate public document, but
it shall not take effect unless it is done during the
lifetime of the donor.
If the acceptance is made in a separate
instrument, the donor shall be notified thereof in an
authentic form, and this step shall be noted in both
instruments.
From the aforesaid provision, there are three requisites for the
validity of a simple donation of a real property, to wit: (1) it must be made
in a public instrument; (2) it must be accepted, which acceptance may be
made either in the same Deed of Donation or in a separate public
instrument; and (3) if the acceptance is made in a separate instrument,
the donor must be notified in an authentic form, and the same must be
noted in both instruments.
This Court agrees with the RTC and the Court of Appeals that the
Affidavit executed by Esperanza relinquishing her rights, share, interest
and participation over the subject property in favor of the petitioner and
her husband suffered from legal infirmities, as it failed to comply with the
aforesaid requisites of the law.
In Sumipat v. Banga,[37] this Court declared that title to
immovable property does not pass from the donor to the donee by virtue
of a Deed of Donation until and unless it has been accepted in a public
instrument and the donor duly notified thereof. The acceptance may be
made in the very same instrument of donation. If the acceptance does not
appear in the same document, it must be made in another. Where the
Deed of Donation fails to show the acceptance, or where the formal notice
of the acceptance, made in a separate instrument, is either not given to
the donor or else not noted in the Deed of Donation and in the separate
acceptance, the donation is null and void.[38]
In the present case, the said Affidavit, which is tantamount to a
Deed of Donation, met the first requisite, as it was notarized; thus, it
became a public instrument. Nevertheless, it failed to meet the aforesaid
second and third requisites. The acceptance of the said donation was not
made by the petitioner and her husband either in the same Affidavit or in a
separate public instrument. As there was no acceptance made of the said
donation, there was also no notice of the said acceptance given to the
donor, Esperanza. Therefore, the Affidavit executed by Esperanza in favor
of petitioner and her husband is null and void.
The subsequent notarized Deed of Acceptance [39] dated 23
September 2000, as well as the notice [40] of such acceptance, executed by
the petitioner did not cure the defect. Moreover, it was only made by the
petitioner several years after the Complaint was filed in court, or when the
RTC had already rendered its Decision dated 12 September 2000, although
it was still during Esperanzas lifetime. Evidently, its execution was a mere
afterthought, a belated attempt to cure what was a defective donation.
It is true that the acceptance of a donation may be made at any
time during the lifetime of the donor. And granting arguendo that such
acceptance may still be admitted in evidence on appeal, there is still need
for proof that a formal notice of such acceptance was received by the
donor and noted in both the Deed of Donation and the separate
instrument embodying the acceptance.[41] At the very least, this last legal
requisite of annotation in both instruments of donation and acceptance
was not fulfilled by the petitioner. Neither the Affidavit nor the Deed of
Acceptance bears the fact that Esperanza received notice of the
acceptance of the donation by petitioner. For this reason, even
Esperanzas one-third share in the subject property cannot be adjudicated
to the petitioner.
With the foregoing, this Court holds that the RTC and the Court of
Appeals did not err in declaring null and void Esperanzas Affidavit.
The next issue to be resolved then is whether the RTC, as well as
the Court of Appeals, erred in declaring OCT No. CLOA-1748 in the name of
petitioner and her husband null and void.
Again, this Court answers the said issue in the negative.
Section 48 of Presidential decree No. 1529 states:
SEC. 48. Certificate not subject to collateral
attack. - A certificate of title shall not be subject to
collateral attack. It cannot be altered, modified, or
cancelled except in a direct proceeding in accordance
with law.
Such proscription has long been enshrined in Philippine
jurisprudence. The judicial action required to challenge the validity of title
is a direct attack, not a collateral attack. [42]

The attack is considered direct when the object of an action is to

annul or set aside such proceeding, or enjoin its enforcement. Conversely,
an attack is indirect or collateral when, in an action to obtain a different
relief, an attack on the proceeding is nevertheless made as an incident
thereof. Such action to attack a certificate of title may be an original
action or a counterclaim, in which a certificate of title is assailed as void .
[43]

A counterclaim is considered a new suit in which the defendant is

the plaintiff and the plaintiff in the complaint becomes the defendant. It
stands on the same footing as, and is to be tested by the same rules as if
it were, an independent action.[44]
In their Answer to the Complaint for Quieting of Title filed by the
petitioner and her husband before the MCTC, respondents included therein
a Counterclaim wherein they repleaded all the material allegations in their
affirmative defenses, the most essential of which was their claim that
petitioner and her husband -- by means of fraud, undue influence and
deceit -- were able to make their grand aunt, Esperanza, who was already
old and illiterate, affix her thumbmark to the Affidavit, wherein she
renounced, waived, and quitclaimed all her rights and interest over the
subject property in favor of petitioner and her husband. In addition,
respondents maintained in their Answer that as petitioner and her
husband were not tenants either of Esperanza or of the respondents, the
DAR could not have validly issued in favor of petitioner and her husband
OCT No. CLOA-1748. Thus, the respondents prayed, in their counterclaim
in Civil Case No. 156 before the MCTC, that OCT No. CLOA-1748 issued in
the name of petitioner, married to Ray Mars E. Arangote, be declared null
and void, insofar as their two-thirds shares in the subject property are
concerned.
It is clear, thus, that respondents Answer with Counterclaim was
a direct attack on petitioners certificate of title. Furthermore, since all the
essential facts of the case for the determination of the validity of the title
are now before this Court, to require respondents to institute a separate
cancellation proceeding would be pointlessly circuitous and against the
best interest of justice.
Esperanzas Affidavit, which was the sole basis of petitioners
claim to the subject property, has been declared null and void. Moreover,
petitioner and her husband were not tenants of the subject property. In
fact, petitioner herself admitted in her Complaint filed before the MCTC
that her husband is out of the country, rendering it impossible for him to
work on the subject property as a tenant. Instead of cultivating the
subject property, petitioner and her husband possessed the same by
constructing a house thereon. Thus, it is highly suspicious how the
petitioner was able to secure from the DAR a Certificate of Land Ownership
Award (CLOA) over the subject property. The DAR awards such certificates
to the grantees only if they fulfill the requirements of Republic Act No.
6657, otherwise known as the Comprehensive Agrarian Reform Program
(CARP).[45] Hence, the RTC and the Court of Appeals did not err in declaring
null and void OCT No. CLOA-1748 in the name of the petitioner, married
to Ray Mars E. Arangote.
Considering that Esperanza died without any compulsory heirs
and that the supposed donation of her one-third share in the subject
property per her Affidavit dated 9 June 1985 was already declared null and
void, Esperanzas one-third share in the subject property passed on to her
legal heirs, the respondents.
As petitioners last-ditch effort, she claims that she is a possessor in
good faith and, thus, entitled to the rights provided for under Articles 448
and 546 of the Civil Code.
This claim is untenable.
The Civil Code describes a possessor in good faith as follows:
Art. 526. He is deemed a possessor in good
faith who is not aware that there exists in his title or
mode of acquisition any flaw which invalidates it.
He is deemed a possessor in bad faith who
possesses in any case contrary to the foregoing.
Mistake upon a doubtful or difficult question of
law may be the basis of good faith.
Art. 1127. The good faith of the possessor
consists in the reasonable belief that the person from
whom he received the thing was the owner thereof, and
could transmit his ownership.
Possession in good faith ceases from the moment defects in the title
are made known to the possessor by extraneous evidence or by a suit for
recovery of the property by the true owner. Every possessor in good faith

becomes a possessor in bad faith from the moment he becomes aware

that what he believed to be true is not so.[46]
In the present case, when respondents came to know that an OCT
over the subject property was issued and registered in petitioners name
on 26 March 1993, respondents brought a Complaint on 7 August 1993
before the Lupon of Barangay Maloco, Ibajay, Aklan, challenging the title
of petitioner to the subject property on the basis that said property
constitutes the inheritance of respondent, together with their grandaunt
Esperanza, so Esperanza had no authority to relinquish the entire subject
property to petitioner. From that moment, the good faith of the petitioner
had ceased.
Petitioner cannot be entitled to the rights under Articles 448 and
546 of the Civil Code, because the rights mentioned therein are applicable
only to builders in good faith and not to possessors in good faith.
Moreover, the petitioner cannot be considered a builder in good
faith of the house on the subject property. In the context that such term is
used in particular reference to Article 448 of the Civil Code, a builder in
good faith is one who, not being the owner of the land, builds on that land,
believing himself to be its owner and unaware of any defect in his title or
mode of acquisition.[47]
read:

The various provisions of the Civil Code, pertinent to the subject,

Article 448. The owner of the land on which

anything has been built, sown, or planted in good faith,
shall have the right to appropriate as his own the
works, sowing or planting, after payment of the
indemnity provided for in Articles 546 and 548, or to
oblige the one who built or planted to pay the price of
the land, and the one who sowed, the proper
rent. However, the builder or planter cannot be obliged
to buy the land if its value is considerably more than
that of the building or trees. In such a case, he shall
pay reasonable rent, if the owner of the land does not
choose to appropriate the building or trees after proper
indemnity. The parties shall agree upon the terms of
the lease and in case of disagreement, the court shall
fix the terms thereof.
Article 449. He who builds, plants, or sows in
bad faith on the land of another, loses what is built,
planted or sown without right to indemnity.
Article 450. The owner of the land on which
anything has been built, planted or sown in bad faith
may demand the demolition of the work, or that the
planting or sowing be removed, in order to replace
things in their former condition at the expense of the
person who built, planted or sowed; or he may compel
the builder or planter to pay the price of the land, and
the sower the proper rent.
Under the foregoing provisions, the builder in good faith can
compel the landowner to make a choice between appropriating the
building by paying the proper indemnity or obliging the builder to pay the
price of the land. The choice belongs to the owner of the land, a rule that
accords with the principle of accession, i.e., that the accessory follows the
principal and not the other way around. Even as the option lies with the
landowner, the grant to him, nevertheless, is preclusive. He must choose
one. He cannot, for instance, compel the owner of the building to instead
remove it from the land. In order, however, that the builder can invoke
that accruing benefit and enjoy his corresponding right to demand that a
choice be made by the landowner, he should be able to prove good faith
on his part.[48]
Good faith, here understood, is an intangible and abstract quality
with no technical meaning or statutory definition, and it encompasses,
among other things, an honest belief, the absence of malice and the
absence of design to defraud or to seek an unconscionable advantage. An
individuals personal good faith is a concept of his own mind and,
therefore, may not conclusively be determined by his protestations
alone. It implies honesty of intention, and freedom from knowledge of
circumstances which ought to put the holder upon inquiry. The essence of
good faith lies in an honest belief in the validity of ones right, ignorance of
a superior claim, and absence of intention to overreach another. Applied to
possession, one is considered in good faith if he is not aware that there
exists in his title or mode of acquisition any flaw which invalidates it. [49]
In this case, the subject property waived and quitclaimed by
Esperanza to the petitioner and her husband in the Affidavit was only
covered by a tax declaration in the name of Esperanza. Petitioner did not
even bother to look into the origin of the subject property and to probe
into the right of Esperanza to relinquish the same. Thus, when petitioner
and her husband built a house thereon in 1989 they cannot be considered
to have acted in good faith as they were fully aware that when Esperanza
executed an Affidavit relinquishing in their favor the subject property the

only proof of Esperanzas ownership over the same was a mere tax
declaration. This fact or circumstance alone was enough to put the
petitioner and her husband under inquiry. Settled is the rule that a tax
declaration does not prove ownership. It is merely an indicium of a claim
of ownership. Payment of taxes is not proof of ownership; it is, at best,
an indicium of possession in the concept of ownership. Neither tax
receipts nor a declaration of ownership for taxation purposes is evidence
of ownership or of a right to possess realty when not supported by other
effective proofs.[50]
With the foregoing, the petitioner is not entitled to the rights
under Article 448 and 546 as the petitioner is not a builder and possessor
in good faith.
WHEREFORE, premises considered, the instant Petition is
hereby DENIED. The Decision and Resolution of the Court of Appeals in
CA-G.R. SP No. 64970, dated 27 October 2006 and 29 June 2007,
respectively, affirming the RTC Decision dated 12 September 2000 in Civil
Case No. 5511 and declaring the respondents the lawful owners and
possessors of the subject property are hereby AFFIRMED. No costs.
------------------Arangote vs. Sps. MaglunobG.R. 178906, February 18, 2009FACTS:
Elvira Arangote acquired the subject parcel of land from Esperanza
Maglunob, who is grand auntof respondents Martin Maglunob and Romeo
Salido. In June 1986, Esperenza executed an affidavit inwhich she
renounced her rights, share and participation in the land in favor of Elvira
and her husband. Itappears that the lot was not exclusive property of
Esperanza but also of the other heirs of Martin Iwhom she represented in
the partition agreement. Elvira and her husband, Ray constructed a house
onthe land in 1989 and in 1993, OCT was issued in her name by the DAR.
However, respondents with thehelp of hired persons entered the property
and built a wall behind and in front
of Elviras house. Elvira
and Ray sued respondents for quieting of title and declaration of
ownership. Respondents averred thatthey were co-owners of the land with
Esperanza who allegedly inherited the land from Martin 1together with
Tomas and Inocencia
(Martin 2s and
Romeos predecessor in interest). They argued that
Esperanza could not have validly waived her rights in favor of Elvira and
Ray. MCTC ruled for Elvira. RTCreversed MCTC and declared respondents
lawful owners of the land together with the other heirs of Martin I. Elvira
went to the CA but the CA affirmed the RTC decision. Before SC, Elvira
argued that bothRTC and CA erred in declaring the affidavit of Esperanza
void because it is a valid and binding proof of transfer of ownership of the
subject property as it was coupled with actual delivery.
ISSUE:
Whether or not the donation to Elvira and her husband is valid.
RULING:
Supreme Court affirmed the decision of CA. SC ruled that the affidavit
executed by Esperanzawherein she renounced, relinquished and waived all
her rights, share, interest and participation in thesubject property in favor
of Elvira and Ray is in fact a donation.
It is clear from the records that the subject property was not Esperanzas
exclusive share, but also that
of the other heirs of her father, Martin I. Esperanza expressly affixed her
thumbmark to the Deed of Extrajudicial Settlement of July 1981 not only
for herself, but also on behalf of the other heirs of MartinI. Though in the
Partition Agreement dated 29 April 1985 Esperanza affixed her thumbmark
withoutstating that she was doing so not only for herself, but also on
behalf of the other heirs of Martin I, thisdoes not mean that Esperanza was
already the exclusive owner thereof. The evidence shows that thesubject
property is the share of the heirs of Martin I. This is clear from the sketch
attached to thePartition Agreement dated 29 April 1985, which reveals the
proportionate areas given to the heirs of thetwo siblings, Pantaleon and
Placida, who were the original owners of the whole parcel of land
fromwhich the subject property was taken.Further, it bears emphasis that
the Partition Agreement was executed by and among the son,grandsons,
granddaughters and cousins of Victorino. Esperanza was neither the
granddaughter nor the
cousin of Victorino, as she was only Victorinos grandniece. The cousin of
Victorino is Martin I,Esperanzas father. In effect, therefore, the subject
property allotted to Esperanza in the Partition
Agreement was not her exclusive share, as she holds the same for and on
behalf of the other heirs of Martin I, who was already deceased at the time
the Partition Agreement was made.To further bolster the truth that the
subject property was not exclusively owned by Esperanza, theAffidavit she
executed in favor of petitioner and her husband on 6 June 1985 was
worded as follows:
---------------------------------G.R. No. 178906; February 18, 2009 - DigestElvira Arangote vs. Spouses Martin and Lourdes Maglunob and
RomeoSalido;FACTS:
El vi r a Ar an g o te a cqu i red th e su b j ect pa rc
el o f l an d fro m Esp er a n za
M a g l u n o b , wh o i s

gr and aun t o f re spon den ts Ma rtin Ma glunob and Rom eo Sa lid o.

In June 1986 , Esperenza executed an affidavit in which she renounced
her rights, share and participationin th e land in fa v or o f El v ir a and
he r
husb and.
It
app ea rs
tha t
th e
lo t
wa s
no t
excl us iv e property of Esperanza but also of the other heirs of Martin I wh
om sher e p r e s e n t e d
i n
t h e
p a
r t i t i o n
a g r e e m e n t .
E l v i r
a
a n d
h e r
h u s b a n d ,
R a y constructed a house on the land in 1989 and
i n 1 9 9 3 , O C T w a s i s s u e d i n h e r n a m e b y th e DAR. H ow e v
e r, res pond ents w ith th e help o f hired per son s ente re d th e
p rop er ty
and built a wall behind and in front of Elviras house. Elvira and Ray suedr
e s p o n d e n t s
f o r
q u i e t i n g
o f
t i t l e
a n d
d e c l a r a t i o n
o f
o w n e r s h i p .
R e s p o n d e n t s a v e r r e d
t h a t
t h e y
w e r e
c o - o w n e r s
o f
t h e
l a n d
w i t h
E s p e r a n z a
w h o
a l l e g e d l y inh eri ted the land
fro m Ma rtin 1 tog ethe r wi th Tom as and In oc en ci a ( Ma rtin 2s
and Rom eo s prede ce s so r in in te res t). Th ey argue d th at
E sp er anz a
c ould
not
hav e
v al idl y w a i v e d
h e r
r i g h t s
i n
f a v o r
o f
E l v i r a
a n d
R a y .
M C T C
r u l e d
f o r
E l v i r a .
R T C reve
rsed MCTC and declared respondents lawful own
e r s o f t h e l a n d t o g e t h e r w i t h the other heirs of Martin I.
Elvira went to the CA but the CA affirmed the RTC decision.B e f o r e S C ,
E l v i r a a r g u e d t h a t b o t h RTC a n d C A e r r e d i n d e c l a r i n g
t h e a ffi d a v i t o f E s p e r a n z a
v o i d
b e c a u s e
i t
i s
a
v a l i d
a n d b i n d i n g
p r o o f
o f
t r a n s f e r
o f
o w n e r s h i p o f
th e sub j ec t p ro p er ty a s
i t
wa s
co up l ed
w i t h a c t u a l d e l i v e r y . ISSUE: Whether or not the donation to Elvira
and
her
husband
is
valid.H E L D :
S u p r e m e
C o u r t a ffi
r m e d
t h e d e c i s i o n
o f C A .
S C r u l e d
t h a t t h e
a ffi d a v i t e x e c u t e d
b y
E s p e r a n z a
w h e r e i n
s h e
r e n o u n c e d ,
r e l i n q u i s h e d
a n d
w a i v e d a l l
h e r
r i g h t s ,
s h a r e ,
i n t e r e s t
a n d
p a r t i c i p a t i o n
i n
t h e
s u b j e c t
p r o p e r t y
i n favor of
Elvira and Ray is in fact a donation. Thus, it should
h a v e c o m p l i e d w i t h t h e requirements of Article 749 of the Civil Code.
Asimpledonationofrealpropertytobevalid
:1) Must be made in a public instrument;2) It must be accepted, which must be in
the
same
deed of
donation
or
in a
separate
publicinstrument;3 ) I f t h e a c c e p t a n c e i s m a d e i n a s e p a r a t e
i n s t r u m e n t , t h e d o n o r m u s t b e n o t i fi e d i n authentic form and
the same must be noted in both instruments.Th e a ffi d av it exec ute d by
E sp er anz a
rel inquis hing
her
righ ts ,
sh are and pa rtic ip ation o v e r t h e p r o p e r t y i n f a v o r o f
Elvira
s u ff e r e d
from
legal
i n fi r m i t i e s .
In
S u m i p a t v s . Banga, the Court ruled that title to immovable does not
pass from the donor to the done byvirtue of a Deed of Donation until and
unless it has been accepted in a public instrumenta n d t h e d o n o r
d ul y
n o t i fi e d
th ereo f.
In
th i s
ca se,
th e
a ccep ta n ce
o f
th e
d o n a t i o n w as no t m ade by
E lv ir a ei th er in th e sa me a ffi d av i t or in a sep ar ate publi c
in strum en t. Neither was there notice of acceptance given to the donor,
therefore the donation is void.
---------------------------------------G.R. No. 109068 January 10, 1994
GAUDENCIO
GUERRERO, petitioner,
vs.
REGIONAL TRIAL COURT OF ILOCOS NORTE, BR. XVI, JUDGE LUIS B. BELLO,
JR., PRESIDING, and PEDRO G. HERNANDO, respondents.
Juan Jacito for petitioner.
Alipio V. Flores for private respondent.

BELLOSILLO, J.:
Filed by petitioner as an accion publicana 1 against private respondent, this
case assumed another dimension when it was dismissed by respondent
Judge on the ground that the parties being brother-in-law the complaint
should have alleged that earnest efforts were first exerted towards a
compromise.

Admittedly, the complaint does not allege that the parties exerted earnest
towards a compromise and that the same failed. However, private
respondent Pedro G. Hernando apparently overlooked this alleged defect
since he did not file any motion to dismiss nor attack the complaint on this
ground in his answer. It was only on 7 December 1992, at the pre-trial
conference, that the relationship of petitioner Gaudencio Guerrero and
respondent Hernando was noted by respondent Judge Luis B. Bello, Jr.,
they being married to half-sisters hence are brothers-in-law, and on the
basis thereof respondent Judge gave petitioner five (5) days "to file his
motion and amended complaint" to allege that the parties were very close
relatives, their respective wives being sisters, and that the complaint to be
maintained should allege that earnest efforts towards a compromise were
exerted but failed. Apparently, respondent Judge considered this
deficiency a jurisdictional defect.
On 11 December 1992, Guerrero moved to reconsider the 7 December
1992 Order claiming that since brothers by affinity are not members of the
same family, he was not required to exert efforts towards a compromise.
Guerrero likewise argued that Hernando was precluded from raising this
issue since he did not file a motion to dismiss nor assert the same as an
affirmative defense in his answer.
On 22 December 1992, respondent Judge denied the motion for
reconsideration holding that "[f]ailure to allege that earnest efforts
towards a compromise is jurisdictional such that for failure to allege same
the court would be deprived of its jurisdiction to take cognizance of the
case." He warned that unless the complaint was amended within five (5)
days the case would be dismissed.
On 29 January 1993, the 5-day period having expired without Guerrero
amending his complaint, respondent Judge dismissed the case, declaring
the dismissal however to be without prejudice.
Guerrero appeals by way of this petition for review the dismissal by the
court a quo. He raises these legal issues: (a) whether brothers by affinity
are considered members of the same family contemplated in Art. 217, par.
(4), and Art. 222 of the New Civil Code, as well as under Sec. 1, par. (j),
Rule 16, of the Rules of Court requiring earnest efforts towards a
compromise before a suit between them may be instituted and
maintained; and, (b) whether the absence of an allegation in the complaint
that earnest efforts towards a compromise were exerted, which efforts
failed, is a ground for dismissal for lack of jurisdiction.
The Constitution protects the sanctity of the family and endeavors to
strengthen it as a basic autonomous social institution. 2 This is also
embodied in Art. 149, 3 and given flesh in Art. 151, of the Family Code,
which provides:
Art. 151. No suit between members of the same family
shall prosper unless it should appear from the verified
complaint or petition that earnest efforts toward a
compromise have been made, but that the same had
failed. If it is shown that no such efforts were in fact
made, the case must be dismissed.
This rule shall not apply to cases which may not be the
subject of compromise under the Civil Code.
Considering that Art. 151 herein-quoted starts with the negative word
"No", the requirement is mandatory 4 that the complaint or petition, which
must be verified, should allege that earnest efforts towards a compromise
have been made but that the same failed, so that "[i]f it is shown that no
such efforts were in fact made, the case must be dismissed."
Further, Art. 151 is contemplated by Sec. 1, par. (j), Rule 16, of the Rules of
Court which provides as a ground for motion to dismiss "(t)hat the suit is
between members of the same family and no earnest efforts towards a
compromise have been made."
The Code Commission, which drafted the precursor provision in the Civil
Code, explains the reason for the requirement that earnest efforts at
compromise be first exerted before a complaint is given due course

This rule is introduced because it is difficult to imagine

a sadder and more tragic spectacle than a litigation
between members of the same family. It is necessary
that every effort should be made toward a compromise
before a litigation is allowed to breed hate and passion
in the family. It is known that a lawsuit between close
relatives generates deeper bitterness than between
strangers . . . A litigation in a family is to be lamented
far more than a lawsuit between strangers . . . 5
But the instant case presents no occasion for the application of the
above-quoted provisions. As early as two decades ago, we already ruled
in Gayon v. Gayon 6 that the enumeration of "brothers and sisters" as
members of the same family does not comprehend "sisters-in-law". In that
case, then Chief Justice Concepcion emphasized that "sisters-in-law"
(hence, also "brothers-in-law") are not listed under Art. 217 of the New
Civil Code as members of the same family. Since Art. 150 of the Family
Code repeats essentially the same enumeration of "members of the
family", we find no reason to alter existing jurisprudence on the matter.
Consequently, the court a quo erred in ruling that petitioner Guerrero,
being a brother-in-law of private respondent Hernando, was required to
exert earnest efforts towards a compromise before filing the present suit.
In his Comment, Hernando argues that ". . . although both wives of the
parties were not impleaded, it remains a truism that being spouses of the
contending parties, and the litigation involves ownership of real property,
the spouses' interest and participation in the land in question cannot be
denied, making the suit still a suit between half-sisters . . ." 7
Finding this argument preposterous, Guerrero counters in his Reply that his
"wife has no actual interest and participation in the land subject of the . . .
suit, which the petitioner bought, according to his complaint, before he
married his wife." 8 This factual controversy however may be best left to
the court a quo to resolve when it resumes hearing the case.
As regards the second issue, we need only reiterate our ruling in
O'Laco v. Co Cho Chit, 9 citing Mendoza v. Court of Appeals, 10 that the
attempt to compromise as well as the inability to succeed is a condition
precedent to the filing of a suit between members of the same family, the
absence of such allegation in the complaint being assailable at any stage
of the proceeding, even on appeal, for lack of cause of action.
It is not therefore correct, as petitioner contends, that private respondent
may be deemed to have waived the aforesaid defect in failing to move or
dismiss or raise the same in the Answer. On the other hand, we cannot
sustain the proposition of private respondent that the case was, after all,
also dismissed pursuant to Sec. 3, Rule 17, of the Rules of Court 11 for
failure of petitioner to comply with the court's order to amend his
complaint.
A review of the assailed orders does not show any directive which Guerrero
supposedly defied. The Order of 7 December 1992 merely gave Guerrero
five (5) days to file his motion and amended complaint with a reminder
that the complaint failed to allege that earnest efforts were exerted
towards a compromise. The Order of 22 December 1992, which denied
Guerrero's motion for reconsideration, simply stated that "Plaintiff if
it (sic) so
desire must
amend the complaint otherwise, the court will have to dismiss the case
(emphasis supplied) . . ." The Order of 29 January 1993 dismissing the
case without prejudice only made reference to an earlier order
"admonishing" counsel for Guerrero to amend the complaint, and an
"admonition" is not synonymous with "order". Moreover, since the assailed
orders do not find support in our jurisprudence but, on the other hand, are
based on an erroneous interpretation and application of the law, petitioner
could not be bound to comply with them. 12
WHEREFORE, the petition is GRANTED and the appealed Orders of
7 December 1992, 22 December 1992 and 29 January 1993 are SET
ASIDE. The Regional Trial Court of Laoag City, Branch 16, or whichever
branch of the court the case may now be assigned, is directed to continue
with
Civil
Case
No. 10084-16 with deliberate dispatch.

SO ORDERED.
---------------11.G.R. No. 109068 January 10, 1994GAUDENCIO GUERRERO,
petitioner,vs.
REGIONAL TRIAL COURT OF ILOCOS NORTE, BR. XVI, JUDGE LUIS B.BELLO,
JR., PRESIDING, and PEDRO G. HERNANDO,
respondents.FACTS:
1.
Pedro G. Hernando apparently overlooked this alleged defectsince he did
not file any motion to dismiss nor attack thecomplaint on this ground in his
answer.
2.
@ PRE-TRIAL: Judge Luis B. Bello, Jr.: NOTED THAT: GUERREROand
HERNANDO were related as brothers-in-law then JUDGEgave petitioner five
(5) days "to file his motion and amendedcomplaint" to allege that the
parties were very close relatives,their respective wives being sisters, and
that the complaint tobe maintained should allege that earnest efforts
towards acompromise were exerted but failed and considered
thisdeficiency a JURISDICTIONAL DEFECT.
3.
MR was filed by GUERRERO: brothers by affinity are notmembers of the
same family, he was not required to exertefforts towards a compromise

DENIED: "[f]ailure to allege thatearnest efforts towards a compromise is

jurisdictional such thatfor failure to allege same the court would be
deprived of its jurisdiction to take cognizance of the case."
4.
Case was dismissed without prejudice: No amendedcomplaint filed
5.
ISSUE: ON APPEAL: GUERRERO:a.
whether brothers by affinity are considered members ofthe same family
contemplated in Art. 217, par. (4), andArt. 222 of the New Civil Code, as
well as under Sec. 1,par. (j), Rule 16, of the Rules of Court requiring
earnestefforts towards a compromise before a suit betweenthem may be
instituted and maintained;b.
whether the absence of an allegation in the complaintthat earnest efforts
towards a compromise wereexerted, which efforts failed, is a ground for
dismissal forlack of jurisdiction.HELD:1.
The Constitution protects the sanctity of the family andendeavors to
strengthen it as a basic autonomous socialinstitution.
This is also embodied in Art. 149, and given flesh inArt. 151, of the Family
Code, which provides:2.
Considering that Art. 151
therequirement is mandatory
4

starts

with

the

negative

word

"No",

that the complaint or petition,which must be verified, should allege that

earnest effortstowards a compromise have been made but that the
samefailed, so that "[i]f it is shown that no such efforts were in factmade,
the case must be dismissed."3.
BUT the instant case presents no occasion for the applicationof the abovequoted provisions. As early as two decades ago,we already ruled in
Gayon v
.
Gayon
6
that the enumeration of"brothers and sisters" as members of the same
family does notcomprehend "sisters-in-law".4.
The requirement that the complaint or petition should allegethat earnest
efforts toward a compromise have been madebut that the same failed is
mandatory5.
The enumeration of brothers and sisters as members of thesame family
does not comprehend sister
-inlaw/ brothers
-inlaw are not listed in Art 217 of the NCC as members of thesame family
and since Art 150 repeats the same members ofthe family court finds no
reason to alter the existing
jurisprudence6.
2
nd
ISSUE: The attempt to compromise as well as the inability tosucceed is a
condition precedent to the filing of a suitbetween members of the same

family, absent such allegationin the complaint being assailable at any

stage of theproceeding, even on appeal, for lack of cause of action.
------------------------G.R. No. 169900

March 18, 2010

MARIO
SIOCHI, Petitioner,
vs.
ALFREDO GOZON, WINIFRED GOZON, GIL TABIJE, INTER-DIMENSIONAL
REALTY, INC., and ELVIRA GOZON, Respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 169977
INTER-DIMENSIONAL
vs.
MARIO SIOCHI, ELVIRA
GOZON, Respondents.

REALTY,
GOZON,

ALFREDO

INC., Petitioner,
GOZON,

and

WINIFRED

RESOLUTION
CARPIO, J.:
This is a consolidation of two separate petitions for review, 1 assailing the 7
July 2005 Decision 2 and the 30 September 2005 Resolution 3 of the Court of
Appeals in CA-G.R. CV No. 74447.
This case involves a 30,000 sq.m. parcel of land (property) covered by TCT
No. 5357.4 The property is situated in Malabon, Metro Manila and is
registered in the name of "Alfredo Gozon (Alfredo), married to Elvira Gozon
(Elvira)."
On 23 December 1991, Elvira filed with the Cavite City Regional Trial Court
(Cavite RTC) a petition for legal separation against her husband Alfredo.
On 2 January 1992, Elvira filed a notice of lis pendens, which was then
annotated on TCT No. 5357.
On 31 August 1993, while the legal separation case was still pending,
Alfredo and Mario Siochi (Mario) entered into an Agreement to Buy and
Sell5 (Agreement) involving the property for the price of P18 million.
Among the stipulations in the Agreement were that Alfredo would: (1)
secure an Affidavit from Elvira that the property is Alfredos exclusive
property and to annotate the Agreement at the back of TCT No. 5357; (2)
secure the approval of the Cavite RTC to exclude the property from the
legal separation case; and (3) secure the removal of the notice of lis
pendens pertaining to the said case and annotated on TCT No. 5357.
However, despite repeated demands from Mario, Alfredo failed to comply
with these stipulations. After paying the P5 million earnest money as
partial payment of the purchase price, Mario took possession of the
property in September 1993. On 6 September 1993, the Agreement was
annotated on TCT No. 5357.
Meanwhile, on 29 June 1994, the Cavite RTC rendered a decision 6 in the
legal separation case, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered decreeing the legal separation
between petitioner and respondent. Accordingly, petitioner Elvira Robles
Gozon is entitled to live separately from respondent Alfredo Gozon without
dissolution of their marriage bond. The conjugal partnership of gains of the
spouses is hereby declared DISSOLVED and LIQUIDATED. Being the
offending spouse, respondent is deprived of his share in the net profits and
the same is awarded to their child Winifred R. Gozon whose custody is
awarded to petitioner.
Furthermore, said parties are required to mutually support their child
Winifred R. Gozon as her needs arises.
SO ORDERED.7

As regards the property, the Cavite RTC held that it is deemed conjugal
property.
On 22 August 1994, Alfredo executed a Deed of Donation over the
property in favor of their daughter, Winifred Gozon (Winifred). The Register
of Deeds of Malabon, Gil Tabije, cancelled TCT No. 5357 and issued TCT No.
M-105088 in the name of Winifred, without annotating the Agreement and
the notice of lis pendens on TCT No. M-10508.
On 26 October 1994, Alfredo, by virtue of a Special Power of
Attorney9 executed in his favor by Winifred, sold the property to InterDimensional Realty, Inc. (IDRI) for P18 million.10 IDRI paid Alfredo P18
million, representing full payment for the property. 11 Subsequently, the
Register of Deeds of Malabon cancelled TCT No. M-10508 and issued TCT
No. M-1097612 to IDRI.
Mario then filed with the Malabon Regional Trial Court (Malabon RTC) a
complaint for Specific Performance and Damages, Annulment of Donation
and Sale, with Preliminary Mandatory and Prohibitory Injunction and/or
Temporary Restraining Order.
On 3 April 2001, the Malabon RTC rendered a decision, 13 the dispositive
portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered as
follows:
01. On the preliminary mandatory and prohibitory injunction:
1.1 The same is hereby made permanent by:
1.1.1 Enjoining defendants Alfredo Gozon,
Winifred Gozon, Inter-Dimensional Realty, Inc.
and Gil Tabije, their agents, representatives
and all persons acting in their behalf from any
attempt of commission or continuance of their
wrongful acts of further alienating or
disposing of the subject property;
1.1.2. Enjoining defendant Inter-Dimensional
Realty, Inc. from entering and fencing the
property;
1.1.3. Enjoining defendants Alfredo Gozon,
Winifred Gozon, Inter-Dimensional Realty, Inc.
to respect plaintiffs possession of the
property.
02. The Agreement to Buy and Sell dated 31 August 1993,
between plaintiff and defendant Alfredo Gozon is hereby
approved, excluding the property and rights of defendant Elvira
Robles-Gozon to the undivided one-half share in the conjugal
property subject of this case.
03. The Deed of Donation dated 22 August 1994, entered into by
and between defendants Alfredo Gozon and Winifred Gozon is
hereby nullified and voided.
04. The Deed of Absolute Sale dated 26 October 1994, executed
by defendant Winifred Gozon, through defendant Alfredo Gozon,
in favor of defendant Inter-Dimensional Realty, Inc. is hereby
nullified and voided.
05. Defendant Inter-Dimensional Realty, Inc. is hereby ordered to
deliver its Transfer Certificate of Title No. M-10976 to the Register
of Deeds of Malabon, Metro Manila.
06. The Register of Deeds of Malabon, Metro Manila is hereby
ordered to cancel Certificate of Title Nos. 10508 "in the name of
Winifred Gozon" and M-10976 "in the name of Inter-Dimensional

Realty, Inc.," and to restore Transfer Certificate of Title No. 5357

"in the name of Alfredo Gozon, married to Elvira Robles" with the
Agreement to Buy and Sell dated 31 August 1993 fully annotated
therein is hereby ordered.
07. Defendant Alfredo Gozon is hereby ordered to deliver a Deed
of Absolute Sale in favor of plaintiff over his one-half undivided
share in the subject property and to comply with all the
requirements for registering such deed.
08. Ordering defendant Elvira Robles-Gozon to sit with plaintiff to
agree on the selling price of her undivided one-half share in the
subject property, thereafter, to execute and deliver a Deed of
Absolute Sale over the same in favor of the plaintiff and to
comply with all the requirements for registering such deed,
within fifteen (15) days from the receipt of this DECISION.
09. Thereafter, plaintiff is hereby ordered to pay defendant
Alfredo Gozon the balance of Four Million Pesos (P4,000,000.00)
in his one-half undivided share in the property to be set off by
the award of damages in plaintiffs favor.
10. Plaintiff is hereby ordered to pay the defendant Elvira RoblesGozon the price they had agreed upon for the sale of her one-half
undivided share in the subject property.
11. Defendants Alfredo Gozon, Winifred Gozon and Gil Tabije are
hereby ordered to pay the plaintiff, jointly and severally, the
following:
11.1 Two Million Pesos (P2,000,000.00) as actual and
compensatory damages;
11.2 One Million Pesos (P1,000,000.00) as moral
damages;
11.3 Five Hundred Thousand Pesos (P500,000.00) as
exemplary damages;
11.4 Four Hundred Thousand Pesos (P400,000.00) as
attorneys fees; and
11.5 One Hundred Thousand Pesos (P100,000.00) as
litigation expenses.
11.6 The above awards are subject to set off of
plaintiffs obligation in paragraph 9 hereof.
12. Defendants Alfredo Gozon and Winifred Gozon are hereby
ordered to pay Inter-Dimensional Realty, Inc. jointly and severally
the following:
12.1 Eighteen Million Pesos (P18,000,000.00) which
constitute the amount the former received from the
latter pursuant to their Deed of Absolute Sale dated 26
October 1994, with legal interest therefrom;
12.2 One Million Pesos (P1,000,000.00) as moral
damages;
12.3 Five Hundred Thousand Pesos (P500,000.00) as
exemplary damages; and
12.4 One Hundred Thousand Pesos (P100,000.00) as
attorneys fees.
13. Defendants Alfredo Gozon and Winifred Gozon are hereby
ordered to pay costs of suit.

SO ORDERED.14
On appeal, the Court of Appeals affirmed the Malabon RTCs decision with
modification. The dispositive portion of the Court of Appeals Decision
dated 7 July 2005 reads:
WHEREFORE, premises considered, the assailed decision dated April 3,
2001 of the RTC, Branch 74, Malabon is hereby AFFIRMED with
MODIFICATIONS, as follows:
1. The sale of the subject land by defendant Alfredo Gozon to
plaintiff-appellant Siochi is declared null and void for the
following reasons:
a) The conveyance was done without the consent of
defendant-appellee Elvira Gozon;
b) Defendant Alfredo Gozons one-half () undivided
share has been forfeited in favor of his daughter,
defendant Winifred Gozon, by virtue of the decision in
the legal separation case rendered by the RTC, Branch
16, Cavite;
2. Defendant Alfredo Gozon shall return/deliver to plaintiffappellant Siochi the amount of P5 Million which the latter paid as
earnest money in consideration for the sale of the subject land;
3. Defendants Alfredo Gozon, Winifred Gozon and Gil Tabije are
hereby ordered to pay plaintiff-appellant Siochi jointly and
severally, the following:
a) P100,000.00 as moral damages;
b) P100,000.00 as exemplary damages;
c) P50,000.00 as attorneys fees;
d) P20,000.00 as litigation expenses; and
e) The awards of actual and compensatory damages
are hereby ordered deleted for lack of basis.
4. Defendants Alfredo Gozon and Winifred Gozon are hereby
ordered to pay defendant-appellant IDRI jointly and severally the
following:
a) P100,000.00 as moral damages;
b) P100,000.00 as exemplary damages; and
c) P50,000.00 as attorneys fees.
Defendant Winifred Gozon, whom the undivided one-half share of
defendant Alfredo Gozon was awarded, is hereby given the option whether
or not to dispose of her undivided share in the subject land.
The rest of the decision not inconsistent with this ruling stands.
SO ORDERED.15
Only Mario and IDRI appealed the decision of the Court of Appeals. In his
petition, Mario alleges that the Agreement should be treated as a
continuing offer which may be perfected by the acceptance of the other
spouse before the offer is withdrawn. Since Elviras conduct signified her
acquiescence to the sale, Mario prays for the Court to direct Alfredo and
Elvira to execute a Deed of Absolute Sale over the property upon his
payment of P9 million to Elvira.

On the other hand, IDRI alleges that it is a buyer in good faith and for
value. Thus, IDRI prays that the Court should uphold the validity of IDRIs
TCT No. M-10976 over the property.
We find the petitions without merit.
This case involves the conjugal property of Alfredo and Elvira. Since the
disposition of the property occurred after the effectivity of the Family
Code, the applicable law is the Family Code. Article 124 of the Family Code
provides:
Art. 124. The administration and enjoyment of the conjugal partnership
property shall belong to both spouses jointly. In case of disagreement, the
husbands decision shall prevail, subject to the recourse to the court by
the wife for a proper remedy, which must be availed of within five years
from the date of the contract implementing such decision.
In the event that one spouse is incapacitated or otherwise unable to
participate in the administration of the conjugal properties, the other
spouse may assume sole powers of administration. These powers do not
include the powers of disposition or encumbrance which must have the
authority of the court or the written consent of the other spouse. In the
absence of such authority or consent, the disposition or encumbrance shall
be void. However, the transaction shall be construed as a continuing offer
on the part of the consenting spouse and the third person, and may be
perfected as a binding contract upon the acceptance by the other spouse
or authorization by the court before the offer is withdrawn by either or
both offerors. (Emphasis supplied)
In this case, Alfredo was the sole administrator of the property because
Elvira, with whom Alfredo was separated in fact, was unable to participate
in the administration of the conjugal property. However, as sole
administrator of the property, Alfredo still cannot sell the property without
the written consent of Elvira or the authority of the court. Without such
consent or authority, the sale is void. 16 The absence of the consent of one
of the spouse renders the entire sale void, including the portion of the
conjugal property pertaining to the spouse who contracted the sale. 17 Even
if the other spouse actively participated in negotiating for the sale of the
property, that other spouses written consent to the sale is still required by
law for its validity.18 The Agreement entered into by Alfredo and Mario was
without the written consent of Elvira. Thus, the Agreement is entirely void.
As regards Marios contention that the Agreement is a continuing offer
which may be perfected by Elviras acceptance before the offer is
withdrawn, the fact that the property was subsequently donated by
Alfredo to Winifred and then sold to IDRI clearly indicates that the offer
was already withdrawn.
However, we disagree with the finding of the Court of Appeals that the
one-half undivided share of Alfredo in the property was already forfeited in
favor of his daughter Winifred, based on the ruling of the Cavite RTC in the
legal separation case. The Court of Appeals misconstrued the ruling of the
Cavite RTC that Alfredo, being the offending spouse, is deprived of his
share in the net profits and the same is awarded to Winifred.
The Cavite RTC ruling finds support in the following provisions of the
Family Code:
Art. 63. The decree of legal separation shall have the following effects:
(1) The spouses shall be entitled to live separately from each
other, but the marriage bonds shall not be severed;
(2) The absolute community or the conjugal partnership shall be
dissolved and liquidated but the offending spouse shall have no
right to any share of the net profits earned by the absolute
community or the conjugal partnership, which shall be forfeited
in accordance with the provisions of Article 43(2);
(3) The custody of the minor children shall be awarded to the
innocent spouse, subject to the provisions of Article 213 of this
Code; and

The offending spouse shall be disqualified from inheriting from the

innocent spouse by intestate succession. Moreover, provisions in favor of
the offending spouse made in the will of the innocent spouse shall be
revoked by operation of law.
Art. 43. The termination of the subsequent marriage referred to in the
preceding Article shall produce the following effects:
xxx
(2) The absolute community of property or the conjugal partnership, as the
case may be, shall be dissolved and liquidated, but if either spouse
contracted said marriage in bad faith, his or her share of the net profits of
the community property or conjugal partnership property shall be forfeited
in favor of the common children or, if there are none, the children of the
guilty spouse by a previous marriage or, in default of children, the
innocent spouse; (Emphasis supplied)
Thus, among the effects of the decree of legal separation is that the
conjugal partnership is dissolved and liquidated and the offending spouse
would have no right to any share of the net profits earned by the conjugal
partnership. It is only Alfredos share in the net profits which is forfeited in
favor of Winifred. Article 102(4) of the Family Code provides that "[f]or
purposes of computing the net profits subject to forfeiture in accordance
with Article 43, No. (2) and 63, No. (2), the said profits shall be the
increase in value between the market value of the community property at
the time of the celebration of the marriage and the market value at the
time of its dissolution." Clearly, what is forfeited in favor of Winifred is not
Alfredos share in the conjugal partnership property but merely in the net
profits of the conjugal partnership property.
With regard to IDRI, we agree with the Court of Appeals in holding that
IDRI is not a buyer in good faith. As found by the RTC Malabon and the
Court of Appeals, IDRI had actual knowledge of facts and circumstances
which should impel a reasonably cautious person to make further inquiries
about the vendors title to the property. The representative of IDRI testified
that he knew about the existence of the notice of lis pendens on TCT No.
5357 and the legal separation case filed before the Cavite RTC. Thus, IDRI
could not feign ignorance of the Cavite RTC decision declaring the property
as conjugal.
Furthermore, if IDRI made further inquiries, it would have known that the
cancellation of the notice of lis pendens was highly irregular. Under Section
77 of Presidential Decree No. 1529, 19 the notice of lis pendens may be
cancelled (a) upon order of the court, or (b) by the Register of Deeds upon
verified petition of the party who caused the registration of the lis
pendens. In this case, the lis pendens was cancelled by the Register of
Deeds upon the request of Alfredo. There was no court order for the
cancellation of the lis pendens. Neither did Elvira, the party who caused
the registration of the lis pendens, file a verified petition for its
cancellation.
Besides, had IDRI been more prudent before buying the property, it would
have discovered that Alfredos donation of the property to Winifred was
without the consent of Elvira. Under Article 125 20 of the Family Code, a
conjugal property cannot be donated by one spouse without the consent of
the other spouse. Clearly, IDRI was not a buyer in good faith.1avvphi1
Nevertheless, we find it proper to reinstate the order of the Malabon RTC
for the reimbursement of the P18 million paid by IDRI for the property,
which was inadvertently omitted in the dispositive portion of the Court of
Appeals decision.
WHEREFORE, we DENY the petitions. We AFFIRM the 7 July 2005 Decision
of the Court of Appeals in CA-G.R. CV No. 74447 with the
following MODIFICATIONS:
(1) We DELETE the portions regarding the forfeiture of Alfredo
Gozons one-half undivided share in favor of Winifred Gozon and
the grant of option to Winifred Gozon whether or not to dispose
of her undivided share in the property; and

(2) We ORDER Alfredo Gozon and Winifred Gozon to pay InterDimensional Realty, Inc. jointly and severally the Eighteen Million
Pesos (P18,000,000) which was the amount paid by InterDimensional Realty, Inc. for the property, with legal interest
computed from the finality of this Decision.
SO ORDERED.
-------------------------SIOCHI V. GOZON
Facts:This case involves a 30,000 sq.m. parcel of land. The property is
situated in Malabon, Metro Manila and
is registered in the name of Alfredo
Gozon (Alfredo), married to Elvira Gozon (E
lvira).
On 23 December 1991, Elvira filed with the RTC of Cavite City a petition
for
legal
separation
against
herhusband Alfredo. On Jan 2,
1992, Elvira filed a notice of
lis pendens
, which was thenannotated on TCT no. 5357.While the legal separation
case was still pending, Alfredo and Mario Siochi (Mario) entered into
anagreement to buy and sell
(agreement) involving the property for the price of P18 million.However,
despite repeated demands from Mario, Alfredo failed to comply with the
stipulationsprovided in the agreement. After paying the P5 million earnest
money as partial payment of thepurchase price, Mario took possession of
the property. On September 6, 1993, the agreement wasannotated on TCT
no. 5357.Meanwhile, on 29 June 1994, the Cavite RTC rendered a decision
in the legal separation case, whichgranted the same. The RTC ordered
among others that, the conjugal partnership of gains of the spousesis
hereby declared dissolved and liquidated. As regards the property, it held
that it is deemed conjugalproperty.Alfredo executed a deed of donation
over the property in favor of their daughter, Winifred Gozon. Lateron,
Alfredo through an SPA executed by his daughter Winifred, sold the
property to IDRI and the latterpaid the purchase price in full. A new TCT
was issued by the Register of Deeds in favor of IDRI.Mario then filed with
the Malabon RTC a complaint for specific performance and damages,
annulmentof donation and sale, with preliminary mandatory and
prohibitory injunction and/or temporaryrestraining order.RTC: Malabon RTC
upheld original agreement to buy and sell between Mario and Alfredo and
declaredvoidhe sale by Alfredo and Winifred to Inter-Dimensional.CA: Court
of Appeals said agreement between Mario and Alfredo is void because (1)
it was entered intowithout the consent of Elvira,
Alfredos wife; and, (2) Alfredos undivided share has been forfeited in
favour of Winifred by the grant of legal separation by the Cavite
RTC.Issue:Whether or not Alfredo may sell the conjugal property, being
the sole administrator of the same withoutobtaining the consent of Elvira?
Held:NO.This case involves the conjugal property of Alfredo and Elvira.
Since the disposition of the propertyoccurred after the effectivity of the
Family Code, the applicable law is the Family Code. Article 124 of thefamily
code provides:
FACTS: Alfredo and Elvira are married. Winifred is their daughter. The
property involved in this case is a 30,000 sq. m. lot in Malabon which is
registered in the name of Alfredo. The property regime of the couple is
conjugal
partnership
of
gains.
Elvira filed for legal separation. B filed a notice of lis pendens over the title
of
the
lot
in
Malabon.
While the legal separation case was still pending, Alfredo entered into an
agreement with Mario who paid P5 million in earnest moneyand took
possession of the property. Title still with notice of lis pendens.
Cavite RTC granted legal separation. CPG was dissolved and liquidated.
Alfredo, the guilty spouse, did not receive his share in the net profits,
which instead went to their daughter, Winifred. Cavite RTC ruled land in
Malabon
as
conjugal
property.
Alfred executed a Deed of Donation over the property in favour of
Winifred. Malabon RTC issued new TCT in the name of Winifred without
annotating the agreement between Alfredo and Mario Siochi, nor the
notice of lis pendens filed by Elvira, the wife. Then, through an SPA,
Winifred gave authority to her father, Alfred, to sell the lot. Alfred sold it to
Inter-Dimensional Realty for P18 million. A TCT was issued to InterDimensional
Realty.
Mario filed a case with Malabon RTC (property was in Malabon) to Annul
donation to Winifred, Annul the Sale to Inter-Dimensional, and to remove
notice
of
lis
pendens
over
title
of
land.
Malabon RTC upheld original agreement to buy and sell between Mario and
Alfredo and declared void the sale by Alfredo and Winifred to InterDimensional.

However, Court of Appeals said agreement between Mario and Alfredo is

void because (1) it was entered into without the consent of Elvira,
Alfredos wife; and, (2) Alfredos undivided share has been forfeited in
favour of Winifred by the grant of legal separation by the Cavite RTC. (Note
these
reasons
given
by
the
CA.)
ISSUES:
(1) Was the agreement between Mario and Alfredo valid? Mario argues that
even if the sale to Mario was done without the consent of Elvira, the
sale should be treated as a continuing offer which may be perfected by the
acceptance of the other spouse before the offer is withdrawn. Mario
alleges that Elviras conduct showed her acquiescence to the sale.
SC says the CA was right in declaring the sale between Mario and Alfredo
as void. Under Art 124 of the Family Code, if one of the spouses was
incapacitated or otherwise unable to participate in the administration of
the properties, the other spouse may assume sole powers of
administration. These powers, however do not include the power to
dispose or encumber the properties which require a court order or the
written consent of the other spouse. The agreement is void in its entirety,
not just to the share of the husband, Alfredo. The Court however said that
the CA erred in saying that the undivided share of Alfredo was forfeited
in favour of Winifred. As regards Marios contention that the Agreement is
a continuing offer which may be perfected by Elviras acceptance before
the offer is withdrawn, the fact that the property was subsequently
donated by Alfredo to Winifred and then sold to IDRI clearly indicates that
the
offer
was
already
withdrawn.
The Court said the CA erred in saying that Alfredo forfeited his share in
the conjugal property as a result of the grant of legal separation by the
Cavite RTC. Art 63 (Effects of legal separation) in relation to Art 43(2)
(Effects of termination of subsequent marriage) provides that the guilty
spouse in legal separation forfeits his sharein the net profits of the
property. The Court said, Clearly, what is forfeited in favor of Winifred is
not Alfredos share in the conjugal partnership property but merely in the
net profits of the conjugal partnership property. Thus, as regards this
point,
the
CA
erred.

On September 12, 1988, petitioners filed a petition for review with

the CTA, which was decided on October 7, 1991 in favor of the petitioners.
As aforestated, the CTA ordered the Commissioner to desist from collecting
donors taxes from the petitioners.[2]
On appeal, the Court of Appeals reversed and set aside the CTA
decision on April 20, 1994. [3] The appellate Court ordered the petitioners to
pay donors tax amounting to P263,032.66 each, reasoning as follows:
The National Internal Revenue Code, as amended, provides:
Sec. 91. Imposition of Tax. (a) There shall be levied, assessed, collected,
and paid upon the transfer by any person, resident, or non-resident, of the
property by gift, a tax, computed as provided in Section 92. (b) The tax
shall apply whether the transfer is in trust or otherwise, whether the gift is
direct or indirect, and whether the property is real or personal, tangible or
intangible.
Pursuant to the above-quoted provisions of law, the transfer of property by
gift, whether the transfer is in trust or otherwise, whether the gift is direct
or indirect, and whether the property is real or personal, tangible or
intangible, is subject to donors or gift tax.
A gift is generally defined as a voluntary transfer of property by one to
another without any consideration or compensation therefor (28 C.J. 620;
Santos vs. Robledo, 28 Phil. 250).
In the instant case, the contributions are voluntary transfers of property in
the form of money from private respondents to Sen. Angara, without
considerations therefor. Hence, they squarely fall under the definition of
donation or gift.

(2) Was the donation to Winifred valid? No, the donation was not
valid. Elviras
consent
was
absent.

As correctly pointed out by the Solicitor General:

(3) Was the sale to Inter-Dimensional valid? Inter-Dimensional says it is a

buyer in good faith. SC says no. Inter-Dimensional knew of the notice of lis
pendens.
------------------------------------

The fact that the contributions were given to be used as campaign funds
of Sen. Angara does not affect the character of the fund transfers as
donation or gift. There was thereby no retention of control over the
disposition of the contributions. There was simply an indication of the
purpose for which they were to be used. For as long as the contributions
were used for the purpose for which they were intended, Sen. Angara had
complete and absolute power to dispose of the contributions. He was fully
entitled to the economic benefits of the contributions.

[G.R. No. 120721. February 23, 2005]

MANUEL G. ABELLO, JOSE C. CONCEPCION, TEODORO D. REGALA, AVELINO
V. CRUZ, petitioners, vs. COMMISSIONER OF INTERNAL REVENUE
and COURT OF APPEALS, respondents.
DECISION
AZCUNA, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of
Civil Procedure, assailing the decision of the Court of Appeals in CA G.R.
SP No. 27134, entitled Comissioner of Internal Revenue v. Manuel G.
Abello, Jose C. Concepcion, Teodoro D. Regala, Avelino V. Cruz and Court of
Tax Appeals, which reversed and set aside the decision of the Court of Tax
Appeals (CTA), ordering the Commissioner of Internal Revenue
(Commissioner) to withdraw his letters dated April 21, 1988 and August 4,
1988 assessing donors taxes and to desist from collecting donors taxes
from petitioners.
During the 1987 national elections, petitioners, who are partners in
the Angara, Abello, Concepcion, Regala and Cruz (ACCRA) law firm,
contributed P882,661.31 each to the campaign funds of Senator Edgardo
Angara, then running for the Senate. In letters dated April 21, 1988, the
Bureau
of
Internal
Revenue
(BIR)
assessed
each
of
the
petitioners P263,032.66 for their contributions. On August 2, 1988,
petitioners questioned the assessment through a letter to the BIR. They
claimed that political or electoral contributions are not considered gifts
under the National Internal Revenue Code (NIRC), and that, therefore, they
are not liable for donors tax. The claim for exemption was denied by the
Commissioner.[1]

Section 91 of the Tax Code is very clear. A donors or gift tax is imposed
on the transfer of property by gift.
The Bureau of Internal Revenue issued Ruling No. 344 on July 20, 1988,
which reads:
Political Contributions. For internal revenue purposes, political
contributions in the Philippines are considered taxable gift rather than
taxable income. This is so, because a political contribution is indubitably
not intended by the giver or contributor as a return of value or made
because of any intent to repay another what is his due, but bestowed only
because of motives of philanthropy or charity. His purpose is to give and
to bolster the morals, the winning chance of the candidate and/or his
party, and not to employ or buy. On the other hand, the recipient-donee
does not regard himself as exchanging his services or his product for the
money contributed. But more importantly he receives financial
advantages gratuitously.
When the U.S. gift tax law was adopted in the Philippines (before May 7,
1974), the taxability of political contributions was, admittedly, an
unsettled issue; hence, it cannot be presumed that the Philippine Congress
then had intended to consider or treat political contributions as nontaxable gifts when it adopted the said gift tax law. Moreover, well-settled
is the rule that the Philippines need not necessarily adopt the present rule
or construction in the United States on the matter. Generally, statutes of
different states relating to the same class of persons or things or having
the same purposes are not considered to be in pari materia because it
cannot be justifiably presumed that the legislature had them in mind when

enacting the provision being construed. (5206, Sutherland, Statutory

Construction, p. 546.) Accordingly, in the absence of an express
exempting provision of law, political contributions in the Philippines are
subject to the donors gift tax. (cited in National Internal Revenue Code
Annotated by Hector S. de Leon, 1991 ed., p. 290).
In the light of the above BIR Ruling, it is clear that the political
contributions of the private respondents to Sen. Edgardo Angara are
taxable gifts. The vagueness of the law as to what comprise the gift
subject to tax was made concrete by the above-quoted BIR ruling. Hence,
there is no doubt that political contributions are taxable gifts. [4]
Petitioners filed a motion for reconsideration, which the Court of
Appeals denied in its resolution of June 16, 1995. [5]
Petitioners thereupon filed the instant petition on July 26, 1995.
Raised are the following issues:
1.

DID THE HONORABLE COURT OF APPEALS ERR WHEN IT

FAILED TO CONSIDER IN ITS DECISION THE PURPOSE
BEHIND THE ENACTMENT OF OUR GIFT TAX LAW?

2.

DID THE HONORABLE COURT OF APPEALS ERR IN NOT

CONSIDERING THE INTENTION OF THE GIVERS IN
DETERMINING WHETHER OR NOT THE PETITIONERS
POLITICAL CONTRIBUTIONS WERE GIFTS SUBJECT TO
DONORS TAX?

3.

DID THE HONORABLE COURT OF APPEALS ERR WHEN IT

FAILED TO CONSIDER THE DEFINITION OF AN
ELECTORAL CONTRIBUTION UNDER THE OMNIBUS
ELECTION CODE IN DETERMINING WHETHER OR NOT
POLITICAL CONTRIBUTIONS ARE TAXABLE?

4.

5.

DID THE HONORABLE COURT OF APPEALS ERR IN NOT

CONSIDERING THE ADMINISTRATIVE PRACTICE OF CLOSE
TO HALF A CENTURY OF NOT SUBJECTING POLITICAL
CONTRIBUTIONS TO DONORS TAX?
DID THE HONORABLE COURT OF APPEALS ERR IN NOT
CONSIDERING THE AMERICAN JURISPRUDENCE RELIED
UPON BY THE COURT OF TAX APPEALS AND BY THE
PETITIONERS
TO
THE
EFFECT
THAT
POLITICAL
CONTRIBUTIONS ARE NOT TAXABLE GIFTS?

6.

DID THE HONORABLE COURT OF APPEALS ERR IN NOT

APPLYING AMERICAN JURISPRUDENCE ON THE GROUND
THAT THIS WAS NOT KNOWN AT THE TIME THE
PHILIPPINES GIFT TAX LAW WAS ADOPTED IN 1939?

7.

DID THE HONORABLE COURT OF APPEALS ERR IN

RESOLVING THE CASE MAINLY ON THE BASIS OF A
RULING ISSUED BY THE RESPONDENT ONLY AFTER THE
ASSESSMENTS HAD ALREADY BEEN MADE?

8.

DID THE HONORABLE COURT OF APPEALS ERR WHEN IT

DID NOT CONSTRUE THE GIFT TAX LAW LIBERALLY IN
FAVOR OF THE TAXPAYER AND STRICLTY AGAINST THE
GOVERNMENT IN ACCORDANCE WITH APPLICABLE
PRINCIPLES OF STATUTORY CONSTRUCTION? [6]

First, Fifth and Sixth Issues

Section 91 of the National Internal Revenue Code (NIRC) reads:
(A)

There shall be levied, assessed, collected and paid upon

the transfer by any person, resident or nonresident, of
the property by gift, a tax, computed as provided in
Section 92

(B)

The tax shall apply whether the transfer is in trust or

otherwise, whether the gift is direct or indirect, and
whether the property is real or personal, tangible or
intangible.

The NIRC does not define transfer of property by gift.

Article 18 of the Civil Code, states:

However,

In matters which are governed by the Code of Commerce and special laws,
their deficiency shall be supplied by the provisions of this Code.
Thus, reference may be made to the definition of a donation in the Civil
Code. Article 725 of said Code defines donation as:
. . . an act of liberality whereby a person disposes gratuitously of a thing or
right in favor of another, who accepts it.
Donation has the following elements: (a) the reduction of the patrimony of
the donor; (b) the increase in the patrimony of the donee; and, (c) the
intent to do an act of liberality or animus donandi.[7]
The present case falls squarely within the definition of a donation.
Petitioners, the late Manuel G. Abello[8], Jose C. Concepcion, Teodoro D.
Regala and Avelino V. Cruz, each gaveP882,661.31 to the campaign funds
of Senator Edgardo Angara, without any material consideration. All three
elements of a donation are present. The patrimony of the four petitioners
were reduced by P882,661.31 each. Senator Edgardo Angaras patrimony
correspondingly increased by P3,530,645.24[9]. There was intent to do an
act of liberality or animus donandi was present since each of the
petitioners gave their contributions without any consideration.
Taken together with the Civil Code definition of donation, Section 91
of the NIRC is clear and unambiguous, thereby leaving no room for
construction. In Rizal Commercial Banking Corporation v. Intermediate
Appellate Court[10] the Court enunciated:
It bears stressing that the first and fundamental duty of the Court is to
apply the law. When the law is clear and free from any doubt or ambiguity,
there is no room for construction or interpretation. As has been our
consistent ruling, where the law speaks in clear and categorical language,
there is no occasion for interpretation; there is only room for application
(Cebu Portland Cement Co. v. Municipality of Naga, 24 SCRA 708 [1968])
Where the law is clear and unambiguous, it must be taken to mean exactly
what it says and the court has no choice but to see to it that its mandate is
obeyed (Chartered Bank Employees Association v. Ople, 138 SCRA 273
[1985]; Luzon Surety Co., Inc. v. De Garcia, 30 SCRA 111 [1969]; Quijano
v. Development Bank of the Philippines, 35 SCRA 270 [1970]).
Only when the law is ambiguous or of doubtful meaning may the court
interpret or construe its true intent. Ambiguity is a condition of admitting
two or more meanings, of being understood in more than one way, or of
referring to two or more things at the same time. A statute is ambiguous if
it is admissible of two or more possible meanings, in which case, the Court
is called upon to exercise one of its judicial functions, which is to interpret
the law according to its true intent.
Second Issue
Since animus donandi or the intention to do an act of liberality is an
essential element of a donation, petitioners argue that it is important to
look into the intention of the giver to determine if a political contribution is
a gift. Petitioners argument is not tenable. First of all, donative intent is a
creature of the mind. It cannot be perceived except by the material and
tangible acts which manifest its presence. This being the case, donative
intent is presumed present when one gives a part of ones patrimony to
another without consideration. Second, donative intent is not negated
when the person donating has other intentions, motives or purposes which
do not contradict donative intent. This Court is not convinced that since
the purpose of the contribution was to help elect a candidate, there was
no donative intent. Petitioners contribution of money without any

material consideration evinces animus donandi. The fact that their

purpose for donating was to aid in the election of the donee does not
negate the presence of donative intent.

of Internal Revenue, 90 Phil. 676), and that the Government is never

estopped by mistake or error on the part of its agents (Pineda v. Court of
First Instance of Tayabas, 52 Phil. 803, 807; Benguet Consolidated Mining
Co. v. Pineda, 98 Phil. 711, 724).[13]

Third Issue
Seventh Issue
Petitioners maintain that the definition of an electoral contribution
under the Omnibus Election Code is essential to appreciate how a political
contribution differs from a taxable gift. [11]Section 94(a) of the said Code
defines electoral contribution as follows:
The term "contribution" includes a gift, donation, subscription, loan,
advance or deposit of money or anything of value, or a contract, promise
or agreement to contribute, whether or not legally enforceable, made for
the purpose of influencing the results of the elections but shall not include
services rendered without compensation by individuals volunteering a
portion or all of their time in behalf of a candidate or political party. It shall
also include the use of facilities voluntarily donated by other persons, the
money value of which can be assessed based on the rates prevailing in the
area.
Since the purpose of an electoral contribution is to influence the
results of the election, petitioners again claim that donative intent is not
present. Petitioners attempt to place the barrier of mutual exclusivity
between donative intent and the purpose of political contributions. This
Court reiterates that donative intent is not negated by the presence of
other intentions, motives or purposes which do not contradict donative
intent.
Petitioners would distinguish a gift from a political donation by saying
that the consideration for a gift is the liberality of the donor, while the
consideration for a political contribution is the desire of the giver to
influence the result of an election by supporting candidates who, in the
perception of the giver, would influence the shaping of government
policies that would promote the general welfare and economic well-being
of the electorate, including the giver himself.
Petitioners attempt is strained. The fact that petitioners will
somehow in the future benefit from the election of the candidate to whom
they contribute, in no way amounts to a valuable material consideration so
as to remove political contributions from the purview of a donation.
Senator Angara was under no obligation to benefit the petitioners. The
proper performance of his duties as a legislator is his obligation as an
elected public servant of the Filipino people and not a consideration for the
political contributions he received. In fact, as a public servant, he may
even be called to enact laws that are contrary to the interests of his
benefactors, for the benefit of the greater good.
In fine, the purpose for which the sums of money were given, which
was to fund the campaign of Senator Angara in his bid for a senatorial
seat, cannot be considered as a material consideration so as to negate a
donation.
Fourth Issue
Petitioners raise the fact that since 1939 when the first Tax Code was
enacted, up to 1988 the BIR never attempted to subject political
contributions to donors tax. They argue that:
. . . It is a familiar principle of law that prolonged practice by the
government agency charged with the execution of a statute, acquiesced in
and relied upon by all concerned over an appreciable period of time, is an
authoritative interpretation thereof, entitled to great weight and the
highest respect. . . .[12]
This Court holds that the BIR is not precluded from making a new
interpretation of the law, especially when the old interpretation was
flawed. It is a well-entrenched rule that
. . . erroneous application and enforcement of the law by public officers do
not block subsequent correct application of the statute (PLDT v. Collector

Petitioners question the fact that the Court of Appeals decision is

based on a BIR ruling, namely BIR Ruling No. 88-344, which was issued
after the petitioners were assessed for donors tax. This Court does not
need to delve into this issue. It is immaterial whether or not the Court of
Appeals based its decision on the BIR ruling because it is not pivotal in
deciding this case. As discussed above, Section 91 (now Section 98) of the
NIRC as supplemented by the definition of a donation found in Article 725
of the Civil Code, is clear and unambiguous, and needs no further
elucidation.
Eighth Issue
Petitioners next contend that tax laws are construed liberally in favor
of the taxpayer and strictly against the government. This rule of
construction, however, does not benefit petitioners because, as stated,
there is here no room for construction since the law is clear and
unambiguous.
Finally, this Court takes note of the fact that subsequent to the
donations involved in this case, Congress approved Republic Act No. 7166
on November 25, 1991, providing in Section 13 thereof that
political/electoral contributions, duly reported to the Commission on
Elections, are not subject to the payment of any gift tax. This all the more
shows that the political contributions herein made are subject to the
payment of gift taxes, since the same were made prior to the exempting
legislation, and Republic Act No. 7166 provides no retroactive effect on
this point.
WHEREFORE, the petition is DENIED and the assailed Decision and
Resolution of the Court of Appeals are AFFIRMED.
No costs.
SO ORDERED.
----------------Abello
v.
CIRG.R.
No.
120721February
23,
2 0 0 5 To p i c s :
gift not defined in the Tax Code Civil Code definition on donation applies;
election contributions are subject togift tax they are not exempt even if
such transfers are with intentions, motives or purpose
Facts:
During the 1987 national elections, petitioners, who are partners in the
Angara, Abello, Concepcion, Regala andCruz (ACCRA) law firm, contributed
P882,661.31 each to the campaign funds of Senator Edgardo Angara, then
runningfor the Senate. BIR assessed each of the petitioners
P263,032.66 for their contributions. Petitioners questioned theassessment
to the BIR, claiming that political or electoral contributions are not
considered gifts under the NIRC so theyare not liable for donors tax.
The claim for exemption was denied by the Commissioner. The CTA ruled
in favor of thepetitioners, but such ruling was overturned by the CA, thus
this petition for review.
Issue:
Whether or not electoral contributions are subject to donors tax.
Held:
Yes, they are. The NIRC does not define transfer of property by gift.
However, Article 18 of the Civil Code, states: In matters which are
governed by the Code of Commerce and special laws, their deficiency shall
be supplied by theprovisions of this Code. Thus, reference may be
made to the definition of a donation in the Civil Code. Article 725
of saidCode defines donation as: . . . an act of liberality whereby a person
disposes gratuitously of a thing or right in favor of another, who accepts
it. Donation has the following elements: (a) the reduction of the patrimony
of the donor; (b) the increase in the patrimonyof the donee; and, (c) the
intent to do an act of liberality or
animus donandi
.The present case falls squarely within the definition of a donation.
Petitioners each gave P

882,661.31 to the campaignfunds of Senator Edgardo Angara, without any

material consideration. All three elements of a donation are present.
Thepatrimony of the four petitioners were reduced by P
882,661.31 each. Senator Angaras patrimony correspondinglyincreased
by P3,530,645.24. There was intent to do an act of liberality or
animus donandi
was present since each of thepetitioners gave their contributions without
any consideration. Taken together with the Civil Code definition of
donation,Section 91 of the NIRC is clear and unambiguous, thereby leaving
no room for construction.Since
animus donandi
or the intention to do an act of liberality is an essential element of a
donation, petitioners arguethat it is important to look into the intention of
the giver to determine if a political contribution is a gift.
Petitioners argument is not tenable. First of all, donative intent is a
creature of the mind. It cannot be perceived except by thematerial and
tangible acts which manifest its presence. This being the case, donative
intent is presumed present whenone gives a part of ones patrimony to
another without consideration. Second, donative intent is not negated
when theperson donating has other intentions, motives or purposes which
do not contradict donative intent. This Court is notconvinced that since the
purpose of the contribution was to help elect a candidate, there was no
donative intent.Petitioners contribution of money without any material
consideration evinces
animus donandi
.Petitioners claim that since the purpose of electoral contributions is
to influence the results of the elections, donativeintent is not
present. They claim that the purpose of electoral contributions is brought
on by the desire of the giver toinfluence the result of an election by
supporting candidates who would influence the shaping of government
policies thatwould promote the general welfare and economic well-being
of the electorate, including the giver himself. Petitionersattempt to place
the barrier of mutual exclusivity between donative intent and the purpose
of political contributions. ThisCourt reiterates that donative intent is not
negated by the presence of other intentions, motives or purposes which do
notcontradict donative intent. Petitioners attempt is strained. The fact
that petitioners will somehow in the future benefitfrom the election of
the candidate to whom they contribute, in no way amounts to a valuable
material consideration so asto remove political contributions from the
purview of a donation. Senator Angara was under no obligation to benefit
thepetitioners. The proper performance of his duties as a legislator is his
obligation as an elected public servant of theFilipino people and not
a consideration for the political contributions he received. In fact, as a
public servant, he may evenbe called to enact laws that are contrary to
the interests of his benefactors, for the benefit of the greater good.
----------------------G.R. Nos. L-9456 and L-9481
January 6, 1958
THE
COLLECTOR
OF
INTERNAL
REVENUE, petitioner,
vs.
DOMINGO DE LARA, as ancilliary administrator of the estate of HUGO H.
MILLER (Deceased), and the COURT OF TAX APPEALS, respondents.
Allison J. Gibbs, Zafra, De Leon and Veneracion for Domingo E. de Lara.
Assistant Solicitor General Ramon L. Avancena and Cezar L. Kierulf for the
Collector of Internal Revenue.
MONTEMAYOR, J.:
These are two separate appeals, one by the Collector of Internal Revenue,
later on referred to as the Collector, and the other by Domingo de Lara as
Ancilliary Administrator of the estate of Hugo H. Miller, from the decision of
the Court of Tax Appeals of June 25, 1955, with the following dispositive
part:
WHEREFORE,
respondent's
assessment for estate
and
inheritance taxes upon the estate of the decedent Hugo H. Miller
is hereby modified in accordance with the computation attached
as Annex "A" of this decision. Petitioner is hereby ordered to pay
the amount of P2,047.22 representing estate taxes due, together
with the interests and other increments. In case of failure to pay
the amount of P2,047.22 within thirty (30) days from the time
this decision has become final, the 5 per cent surcharge and the
corresponding interest due thereon shall be paid as a part of the
tax.
The facts in the case gathered from the record and as found by the Court
of Tax Appeals may be briefly stated as follows: Hugo H. Miller, an
American citizen, was born in Santa Cruz, California, U.S.A., in 1883. In
1905, he came to the Philippines. From 1906 to 1917, he was connected
with the public school system, first as a teacher and later as a division
superintendent of schools, later retiring under the Osmeiia Retirement Act.
After his retirement, Miller accepted an executive position in the local
branch of Ginn & Co., book publishers with principal offices in New York
and Boston, U.S.A., up to the outbreak of the Pacific War. From 1922 up to
December 7, 1941, he was stationed in the Philippines as Oriental
representative of Ginn & Co., covering not only the Philippines, but also
China and Japan. His principal work was selling books specially written for
Philippine schools. In or about the year 1922, Miller lived at the Manila
Hotel. His wife remained at their home in Ben-Lomond, Santa Cruz,
California, but she used to come to the Philippines for brief visits with
Miller, staying three or four months. Miller also used to visit his wife in

California. He never lived in any residential house in the Philippines. After

the death of his wife in 1931, he transferred from the Manila Hotel to the
Army and Navy Club, where he was staying at the outbreak of the Pacific
War. On January 17, 1941, Miller executed his last will and testament in
Santa Cruz, California, in which he declared that he was "of Santa Cruz,
California". On December 7, 1941, because of the Pacific War, the office of
Ginn & Co. was closed, and Miller joined the Board of Censors of the United
States Navy. During the war, he was taken prisoner by the Japanese forces
in Leyte, and in January, 1944, he was transferred to Catbalogan, Samar,
where he was reported to have been executed by said forces on March 11,
1944, and since then, nothing has been heard from him. At the time of his
death in 1944, Miller owned the following properties:
Real Property situated in Ben-Lomond, Santa Cruz, California P
valued at ......................................................................
5,

Real property situated in Burlingame, San Mateo, California valued 16

at ........................................................................................
0
Tangible Personal property, worth.............................................

2,

Cash in the banks in the United States....................................

21
0

Accounts Receivable from various persons in the United States 36

including notes ...............................................................
4

Stocks in U.S. Corporations and U.S. Savings Bonds, valued 12

at ........................................................................................
16
Shares of stock in Philippine Corporations, valued at ..........
Testate proceedings were instituted before the Court of California in Santa
Cruz County, in the course of which Miller's will of January 17, 1941 was
admitted to probate on May 10, 1946. Said court subsequently issued an
order and decree of settlement of final account and final distribution,
wherein it found that Miller was a "resident of the County of Santa Cruz,
State of California" at the time of his death in 1944. Thereafter ancilliary
proceedings were filed by the executors of the will before the Court of First
Instance of Manila, which court by order of November 21, 1946, admitted
to probate the will of Miller was probated in the California court, also found
that Miller was a resident of Santa Cruz, California, at the time of his
death. On July 29, 1949, the Bank of America, National Trust and Savings
Association of San Francisco California, co-executor named in Miller's will,
filed an estate and inheritance tax return with the Collector, covering only
the shares of stock issued by Philippines corporations, reporting a liability
of P269.43 for taxes and P230.27 for inheritance taxes. After due
investigation, the Collector assessed estate and inheritance taxes, which
was received by the said executor on April 3, 1950. The estate of Miller
protested the assessment of the liability for estate and inheritance taxes,
including penalties and other increments at P77,300.92, as of January 16,
1954. This assessment was appealed by De Lara as Ancilliary
Administrator before the Board of Tax Appeals, which appeal was later
heard and decided by the Court of Tax Appeals.
In determining the "gross estate" of a decedent, under Section 122 in
relation to section 88 of our Tax Code, it is first necessary to decide
whether the decedent was a resident or a non-resident of the Philippines
at the time of his death. The Collector maintains that under the tax laws,
residence and domicile have different meanings; that tax laws on estate
and inheritance taxes only mention resident and non-resident, and no
reference whatsoever is made to domicile except in Section 93 (d) of the
Tax Code; that Miller during his long stay in the Philippines had required a
"residence" in this country, and was a resident thereof at the time of his
death, and consequently, his intangible personal properties situated here
as well as in the United States were subject to said taxes. The Ancilliary
Administrator, however, equally maintains that for estate and inheritance
tax purposes, the term "residence" is synonymous with the term domicile.
We agree with the Court of Tax Appeals that at the time that The National
Internal Revenue Code was promulgated in 1939, the prevailing
construction given by the courts to the "residence" was synonymous with
domicile. and that the two were used intercnangeabiy. Cases were cited in
support of this view, paricularly that of Velilla vs. Posadas, 62 Phil. 624,
wherein this Tribunal used the terms "residence" and "domicile"
interchangeably and without distinction, the case involving the application
of the term residence employed in the inheritance tax law at the time
(section 1536- 1548 of the Revised Administrative Code), and that
consequently, it will be presumed that in using the term residence or
resident in the meaning as construed and interpreted by the Court.
Moreover, there is reason to believe that the Legislature adopted the
American (Federal and State) estate and inheritance tax system (see e.g.
Report to the Tax Commision of the Philippines, Vol. II, pages 122-124,
cited in I Dalupan, National Internal Revenue Code Annotated, p. 469-470).
In the United States, for estate tax purposes, a resident is considered one
who at the time of his death had his domicile in the United States, and in
American jurisprudence, for purposes of estate and taxation, "residence" is
interpreted as synonymous with domicile, and that
The incidence of estate and succession has historically been
determined by domicile and situs and not by the fact of actual
residence. (Bowring vs. Bowers, (1928) 24 F 2d 918, at 921, 6
AFTR 7498, cert. den (1928) 272 U.S.608).

51
5

We also agree with the Court of Tax Appeals that at the time of his death,
Miller had his residence or domicile in Santa Cruz, California. During his
country, Miller never acquired a house for residential purposes for he
stayed at the Manila Hotel and later on at the Army and Navy Club. Except
this wife never stayed in the Philippines. The bulk of his savings and
properties were in the United States. To his home in California, he had
been sending souvenirs, such as carvings, curios and other similar
collections from the Philippines and the Far East. In November, 1940, Miller
took out a property insurance policy and indicated therein his address as
Santa Cruz, California, this aside from the fact that Miller, as already
stated, executed his will in Santa Cruz, California, wherein he stated that
he was "of Santa Cruz, California". From the foregoing, it is clear that as a
non-resident of the Philippines, the only properties of his estate subject to
estate and inheritance taxes are those shares of stock issued by
Philippines corporations, valued at P51,906.45. It is true, as stated by the
Tax Court, that while it may be the general rule that personal property, like
shares of stock in the Philippines, is taxable at the domicile of the owner
(Miller) under the doctrine of mobilia secuuntur persona, nevertheless,
when he during his life time,
. . . extended his activities with respect to his intangibles, so as
to avail himself of the protection and benefits of the laws of the
Philippines, in such a way as to bring his person or property
within the reach of the Philippines, the reason for a single place
of taxation no longer obtains- protection, benefit, and power over
the subject matter are no longer confined to California, but also
to the Philippines (Wells Fargo Bank & Union Trust Co. vs.
Collector (1940), 70 Phil. 325). In the instant case, the actual
situs of the shares of stock is in the Philippines, the corporation
being domiciled herein: and besides, the right to vote the
certificates at stockholders' meetings, the right to collect
dividends, and the right to dispose of the shares including the
transmission and acquisition thereof by succession, all enjoy the
protection of the Philippines, so that the right to collect the
estate and inheritance taxes cannot be questioned (Wells Fargo
Bank & Union Trust Co. vs. Collector supra). It is recognized that
the state may, consistently with due process, impose a tax upon
transfer by death of shares of stock in a domestic corporation
owned by a decedent whose domicile was outside of the state
(Burnett vs. Brooks, 288 U.S. 378; State Commission vs. Aldrich,
(1942) 316 U.S. 174, 86 L. Ed. 1358, 62 ALR 1008)." (Brief for the
Petitioner, p. 79-80).
The Ancilliary Administrator for purposes of exemption invokes the proviso
in Section 122 of the Tax Code, which provides as follows:
. . ."And Provided, however, That no tax shall be collected under
this Title in respect of intangible personal property (a) if the
decedent at the time of his death was a resident of a foreign
country which at the time of his death did not impose a transfer
tax or death tax of any character in respect of intangible
personal property of citizens of the Philippines not residing in
that country, or (b) if the laws of the foreign country of which the
decedent was resident at the tune of his death allow a similar
exemption from transfer taxes or death taxes of every character
in respect of intangible personal property owned by citizen, of
the Philippine not residing in that foreign country.
The Ancilliary Administrator bases his claim of exemption on (a) the
exemption of non-residents from the California inheritance taxes with
respect to intangibles, and (b) the exemption by way of reduction of
P4,000 from the estates of non-residents, under the United States Federal
Estate Tax Law. Section 6 of the California Inheritance Tax Act of 1935, now
reenacted as Section 13851, California Revenue and Taxation Code, reads
as follows:
SEC. 6. The following exemption from the tax are hereby allowed:
xxx
xxx
xxx.
(7) The tax imposed by this act in respect of intangible personal
property shall not be payable if decedent is a resident of a State
or Territory of the United States or a foreign state or country
which at the time of his death imposed a legacy, succession of
death tax in respect of intangible personal property within the
State or Territory or foreign state or country of residents of the
States or Territory or foreign state or country of residence of the
decedent at the time of his death contained a reciprocal
provision under which non-residents were exempted from legacy
or succession taxes or death taxes of every character in respect
of intangible personal property providing the State or Territory or
foreign state or country of residence of such non-residents
allowed a similar exemption to residents of the State, Territory or
foreign state or country of residence of such decedent.
Considering the State of California as a foreign country in relation to
section 122 of Our Tax Code we beleive and hold, as did the Tax Court, that
the Ancilliary Administrator is entitled to exemption from the tax on the
intangible personal property found in the Philippines. Incidentally, this
exemption granted to non-residents under the provision of Section 122 of
our Tax Code, was to reduce the burden of multiple taxation, which
otherwise would subject a decedent's intangible personal property to the
inheritance tax, both in his place of residence and domicile and the place
where those properties are found. As regards the exemption or reduction
of P4,000 based on the reduction under the Federal Tax Law in the amount

of $2,000, we agree with the Tax Court that the amount of $2,000 allowed
under the Federal Estate Tax Law is in the nature of deduction and not of
an exemption. Besides, as the Tax Court observes--.
. . . this exemption is allowed on all gross estate of non-residents
of the United States, who are not citizens thereof, irrespective of
whether there is a corresponding or similar exemption from
transfer or death taxes of non-residents of the Philippines, who
are citizens of the United States; and thirdly, because this
exemption is allowed on all gross estates of non-residents
irrespective of whether it involves tangible or intangible, real or
personal property; so that for these reasons petitioner cannot
claim a reciprocity. . .
Furthermore, in the Philippines, there is already a reduction on gross
estate tax in the amount of P3,000 under section 85 of the Tax Code,
before it was amended, which in part provides as follows:
SEC. 85. Rates of estate tax.There shall be levied, assessed,
collected, and paid upon the transfer of the net estate of every
decedent, whether a resident or non-resident of the Philippines, a
tax equal to the sum of the following percentages of the value of
the net estate determined as provided in sections 88 and 89:
One per centrum of the amount by which the net estate exceeds
three thousand pesos and does not exceed ten thousand
pesos;. . .
It will be noticed from the dispositive part of the appealed decision of the
Tax Court that the Ancilliary Administrator was ordered to pay the amount
of P2,047.22, representing estate taxes due, together with interest and
other increments. Said Ancilliary Administrator invokes the provisions of
Republic Act No. 1253, which was passed for the benefit of veterans,
guerrillas or victims of Japanese atrocities who died during the Japanese
occupation. The provisions of this Act could not be invoked during the
hearing before the Tax Court for the reason that said Republic Act was
approved only on June 10, 1955. We are satisfied that inasmuch as Miller,
not only suffered deprivation of the war, but was killed by the Japanese
military forces, his estate is entitled to the benefits of this Act.
Consequently, the interests and other increments provided in the appealed
judgment should not be paid by his estate.
With the above modification, the appealed decision of the Court of Tax
Appeals is hereby affirmed. We deem it unnecessary to pass upon the
other points raised in the appeal. No costs.
--------------------COLLECTOR V. LARA
(multiplicity of situs)
FACTS:
Hugo H. Miller, an American citizen, was born in SantaCruz, California,
U.S.A., in 1883. In 1905, he came to thePhilippines. From 1906 to 1917, he
was connected with thepublic school system, first as a teacher and later as
a divisionsuperintendent of schools. After his retirement, Miller acceptedan
executive position in the local branch of Ginn & Co., bookpublishers with
principal offices in New York and Boston,U.S.A., up to the outbreak of the
Pacific War. Miller lived at theManila Hotel. He never lived in any
residential house in thePhilippines. After the death of his wife in 1931, he
transferredfrom the Manila Hotel to the Army and Navy Club, where hewas
staying at the outbreak of the Pacific War. On January 17,1941, Miller
executed his last will and testament in Santa Cruz,California, in which he
declared that he was "of Santa Cruz,California". On December 7, 1941,
because of the Pacific War,the office of Ginn & Co. was closed, and Miller
joined theBoard of Censors of the United States Navy. During the war,he
was taken prisoner by the Japanese forces in Leyte, and inJanuary, 1944,
he was transferred to Catbalogan, Samar,where he was reported to have
been executed by said forceson March 11, 1944.Testate proceedings were
instituted before the Courtof California in Santa Cruz County, which
subsequently issuedan order and decree of settlement of final account and
finaldistribution.
The
Bank
of
America,
National
Trust
and
SavingsAssociation of San Francisco California, co-executor named
inMiller's will, filed an estate and inheritance tax return with theCollector,
covering only the shares of stock issued byPhilippine corporations. After
due investigation, the Collector assessed estate and inheritance taxes,
which was received bythe said executor. The estate of Miller protested
saidassessment. This assessment was appealed by De Lara asAncilliary
Administrator before the Board of Tax Appeals, whichappeal was later
heard and decided by the Court of TaxAppeals.In determining the "gross
estate" of a decedent, under Section 122 in relation to section 88 of our
Tax Code, it is firstnecessary to decide whether the decedent was a
resident or anon-resident of the Philippines at the time of his death.
TheCollector maintains that under the tax laws, residence anddomicile
have different meanings; that tax laws on estate andinheritance taxes only
mention resident and non-resident, andno reference whatsoever is made
to domicile except in Section93 (d) of the Tax Code; that Miller during his
long stay in thePhilippines had required a "residence" in this country, and
wasa resident thereof at the time of his death, and consequently,his
intangible personal properties situated here as well as inthe United States
were subject to said taxes. The AncilliaryAdministrator, however, equally
maintains that for estate andinheritance tax purposes, the term
"residence" is synonymouswith the term domicile.
ISSUE:
W/N the estate is liable to file an estate andinheritance tax return besides
those covering shares of stocksissued by Philippine corporations.

HELD: No
. The Court agrees with the Court of Tax Appealsthat at the time that The
National Internal Revenue Code waspromulgated in 1939, the prevailing
construction given by thecourts to the "residence" was synonymous with
domicile. andthat the two were used intercnangeabiy. Moreover, there
isreason to believe that the Legislature adopted the American(Federal and
State) estate and inheritance tax system (see e.g.Report to the Tax
Commision of the Philippines, Vol. II, pages122-124, cited in I Dalupan,
National Internal Revenue CodeAnnotated, p. 469-470). In the United
States, for estate taxpurposes, a resident is considered one who at the
time of hisdeath had his domicile in the United States, and in
American jurisprudence, for purposes of estate and taxation, "residence"is
interpreted as synonymous with domicile, and that
The incidence of estate and succession hashistorically been determined by
domicile andsitus and not by the fact of actual residence.
(Bowring vs. Bowers)At the time of his death, Miller had his residence
or domicile in Santa Cruz, California. During his stay in thecountry, Miller
never acquired a house for residential purposesfor he stayed at the Manila
Hotel and later on at the Army andNavy Club. The bulk of his savings and
properties were in theUnited States. To his home in California, he had been
sendingsouvenirs. In November, 1940, Miller took out a propertyinsurance
policy and indicated therein his address as SantaCruz, California, this aside
from the fact that Miller, as alreadystated, executed his will in Santa Cruz,
California, wherein hestated that he was "of Santa Cruz, California".*** As
to the shares of stocks issued by Philippinecorporations, an exemption was
granted to the estate by virtueof Section 122 of the Tax Code, which
provides as follows:. . ."And Provided, however, That no tax shall
becollected under this Title in respect of intangiblepersonal property (a) if
the decedent at the time of hisdeath was a resident of a foreign country
which at thetime of his death did not impose a transfer tax or death tax of
any character in respect of intangiblepersonal property of citizens of the
Philippines notresiding in that country, or (b) if the laws of the
foreigncountry of which the decedent was resident at thetune of his death
allow a similar exemption fromtransfer taxes or death taxes of every
character inrespect of intangible personal property owned bycitizen, of the
Philippine not residing in that foreigncountry.
----------------------G.R. No. L-13250 October 29, 1971
THE
COLLECTOR
OF
INTERNAL
vs.
ANTONIO CAMPOS RUEDA, respondent..

REVENUE, petitioner,

Assistant Solicitor General Jose P. Alejandro and Special Attorney Jose G.

Azurin, (O.S.G.) for petitioner.
Ramirez and Ortigas for respondent.

FERNANDO, J.:
The basic issue posed by petitioner Collector of Internal Revenue in this
appeal from a decision of the Court of Tax Appeals as to whether or not the
requisites of statehood, or at least so much thereof as may be necessary
for the acquisition of an international personality, must be satisfied for a
"foreign country" to fall within the exemption of Section 122 of the
National Internal Revenue Code 1 is now ripe for adjudication. The Court of
Tax Appeals answered the question in the negative, and thus reversed the
action taken by petitioner Collector, who would hold respondent Antonio
Campos Rueda, as administrator of the estate of the late Estrella Soriano
Vda. de Cerdeira, liable for the sum of P161,874.95 as deficiency estate
and inheritance taxes for the transfer of intangible personal properties in
the Philippines, the deceased, a Spanish national having been a resident of
Tangier, Morocco from 1931 up to the time of her death in 1955. In an
earlier resolution promulgated May 30, 1962, this Court on the assumption
that the need for resolving the principal question would be obviated,
referred the matter back to the Court of Tax Appeals to determine whether
the alleged law of Tangier did grant the reciprocal tax exemption required
by the aforesaid Section 122. Then came an order from the Court of Tax
Appeals submitting copies of legislation of Tangier that would manifest
that the element of reciprocity was not lacking. It was not until July 29,
1969 that the case was deemed submitted for decision. When the petition
for review was filed on January 2, 1958, the basic issue raised was
impressed with an element of novelty. Four days thereafter, however, on
January 6, 1958, it was held by this Court that the aforesaid provision does

not require that the "foreign country" possess an international personality

to come within its terms. 2 Accordingly, we have to affirm.
The decision of the Court of Tax Appeals, now under review, sets forth the
background facts as follows: "This is an appeal interposed by petitioner
Antonio Campos Rueda as administrator of the estate of the deceased
Doa Maria de la Estrella Soriano Vda. de Cerdeira, from the decision of
the respondent Collector of Internal Revenue, assessing against and
demanding from the former the sum P161,874.95 as deficiency estate and
inheritance taxes, including interest and penalties, on the transfer of
intangible personal properties situated in the Philippines and belonging to
said Maria de la Estrella Soriano Vda. de Cerdeira. Maria de la Estrella
Soriano Vda. de Cerdeira (Maria Cerdeira for short) is a Spanish national,
by reason of her marriage to a Spanish citizen and was a resident of
Tangier, Morocco from 1931 up to her death on January 2, 1955. At the
time of her demise she left, among others, intangible personal properties
in the Philippines." 3 Then came this portion: "On September 29, 1955,
petitioner filed a provisional estate and inheritance tax return on all the
properties of the late Maria Cerdeira. On the same date, respondent,
pending investigation, issued an assessment for state and inheritance
taxes in the respective amounts of P111,592.48 and P157,791.48, or a
total of P369,383.96 which tax liabilities were paid by petitioner ... . On
November 17, 1955, an amended return was filed ... wherein intangible
personal properties with the value of P396,308.90 were claimed as
exempted from taxes. On November 23, 1955, respondent, pending
investigation, issued another assessment for estate and inheritance taxes
in the amounts of P202,262.40 and P267,402.84, respectively, or a total of
P469,665.24 ... . In a letter dated January 11, 1956, respondent denied the
request for exemption on the ground that the law of Tangier is not
reciprocal to Section 122 of the National Internal Revenue Code. Hence,
respondent demanded the payment of the sums of P239,439.49
representing deficiency estate and inheritance taxes including ad
valorem penalties, surcharges, interests and compromise penalties ... . In a
letter dated February 8, 1956, and received by respondent on the
following day, petitioner requested for the reconsideration of the decision
denying the claim for tax exemption of the intangible personal properties
and the imposition of the 25% and 5% ad valorem penalties ... . However,
respondent denied request, in his letter dated May 5, 1956 ... and received
by petitioner on May 21, 1956. Respondent premised the denial on the
grounds that there was no reciprocity [with Tangier, which was moreover]
a mere principality, not a foreign country. Consequently, respondent
demanded the payment of the sums of P73,851.21 and P88,023.74
respectively, or a total of P161,874.95 as deficiency estate and inheritance
taxes including surcharges, interests and compromise penalties." 4
The matter was then elevated to the Court of Tax Appeals. As there was no
dispute between the parties regarding the values of the properties and the
mathematical correctness of the deficiency assessments, the principal
question as noted dealt with the reciprocity aspect as well as the insisting
by the Collector of Internal Revenue that Tangier was not a foreign country
within the meaning of Section 122. In ruling against the contention of the
Collector of Internal Revenue, the appealed decision states: "In fine, we
believe, and so hold, that the expression "foreign country", used in the last
proviso of Section 122 of the National Internal Revenue Code, refers to a
government of that foreign power which, although not an international
person in the sense of international law, does not impose transfer or death
upon intangible person properties of our citizens not residing therein, or
whose law allows a similar exemption from such taxes. It is, therefore, not
necessary that Tangier should have been recognized by our Government
order to entitle the petitioner to the exemption benefits of the proviso of
Section 122 of our Tax. Code." 5
Hence appeal to this court by petitioner. The respective briefs of the
parties duly submitted, but as above indicated, instead of ruling definitely
on the question, this Court, on May 30, 1962, resolve to inquire further into
the question of reciprocity and sent back the case to the Court of Tax
Appeals for the motion of evidence thereon. The dispositive portion of such
resolution reads as follows: "While section 122 of the Philippine Tax Code
aforequoted speaks of 'intangible personal property' in both subdivisions
(a) and (b); the alleged laws of Tangier refer to 'bienes muebles situados
en Tanger', 'bienes muebles radicantes en Tanger', 'movables' and
'movable property'. In order that this Court may be able to determine
whether the alleged laws of Tangier grant the reciprocal tax exemptions
required by Section 122 of the Tax Code, and without, for the time being,
going into the merits of the issues raised by the petitioner-appellant, the

case is [remanded] to the Court of Tax Appeals for the reception of

evidence or proof on whether or not the words `bienes muebles',
'movables' and 'movable properties as used in the Tangier laws, include or
embrace 'intangible person property', as used in the Tax Code." 6 In line
with the above resolution, the Court of Tax Appeals admitted evidence
submitted by the administrator petitioner Antonio Campos Rueda,
consisting of exhibits of laws of Tangier to the effect that "the transfers by
reason of death of movable properties, corporeal or incorporeal, including
furniture and personal effects as well as of securities, bonds, shares, ...,
were not subject, on that date and in said zone, to the payment of any
death tax, whatever might have been the nationality of the deceased or
his heirs and legatees." It was further noted in an order of such Court
referring the matter back to us that such were duly admitted in evidence
during the hearing of the case on September 9, 1963. Respondent
presented no evidence." 7
The controlling legal provision as noted is a proviso in Section 122 of the
National Internal Revenue Code. It reads thus: "That no tax shall be
collected under this Title in respect of intangible personal property (a) if
the decedent at the time of his death was a resident of a foreign country
which at the time of his death did not impose a transfer tax or death tax of
any character in respect of intangible person property of the Philippines
not residing in that foreign country, or (b) if the laws of the foreign country
of which the decedent was a resident at the time of his death allow a
similar exemption from transfer taxes or death taxes of every character in
respect of intangible personal property owned by citizens of the Philippines
not residing in that foreign country." 8 The only obstacle therefore to a
definitive ruling is whether or not as vigorously insisted upon by petitioner
the acquisition of internal personality is a condition sine qua non to Tangier
being considered a "foreign country". Deference to the De Lara ruling, as
was made clear in the opening paragraph of this opinion, calls for an
affirmance of the decision of the Court of Tax Appeals.
It does not admit of doubt that if a foreign country is to be identified with a
state, it is required in line with Pound's formulation that it be a politically
organized sovereign community independent of outside control bound by
penalties of nationhood, legally supreme within its territory, acting through
a
government
functioning
under
a
regime
of
law. 9 It is thus a sovereign person with the people composing it viewed as
an organized corporate society under a government with the legal
competence to exact obedience to its commands. 10 It has been referred to
as a body-politic organized by common consent for mutual defense and
mutual safety and to promote the general welfare. 11 Correctly has it been
described by Esmein as "the juridical personification of the nation." 12 This
is to view it in the light of its historical development. The stress is on its
being a nation, its people occupying a definite territory, politically
organized, exercising by means of its government its sovereign will over
the individuals within it and maintaining its separate international
personality. Laski could speak of it then as a territorial society divided into
government and subjects, claiming within its allotted area a supremacy
over all other institutions. 13 McIver similarly would point to the power
entrusted to its government to maintain within its territory the conditions
of a legal order and to enter into international relations. 14 With the latter
requisite satisfied, international law do not exact independence as a
condition of statehood. So Hyde did opine. 15
Even on the assumption then that Tangier is bereft of international
personality, petitioner has not successfully made out a case. It bears
repeating that four days after the filing of this petition on January 6, 1958
in Collector of Internal Revenue v. De Lara, 16 it was specifically held by us:
"Considering the State of California as a foreign country in relation to
section 122 of our Tax Code we believe and hold, as did the Tax Court, that
the Ancilliary Administrator is entitled the exemption from the inheritance
tax on the intangible personal property found in the Philippines." 17 There
can be no doubt that California as a state in the American Union was in the
alleged requisite of international personality. Nonetheless, it was held to
be a foreign country within the meaning of Section 122 of the National
Internal Revenue Code. 18
What is undeniable is that even prior to the De Lara ruling, this Court did
commit itself to the doctrine that even a tiny principality, that of
Liechtenstein, hardly an international personality in the sense, did fall
under this exempt category. So it appears in an opinion of the Court by the
then Acting Chief Justicem Bengson who thereafter assumed that position

in a permanent capacity, in Kiene v. Collector of Internal Revenue. 19 As

was therein noted: 'The Board found from the documents submitted to it
proof of the laws of Liechtenstein that said country does not impose
estate, inheritance and gift taxes on intangible property of Filipino citizens
not residing in that country. Wherefore, the Board declared that pursuant
to the exemption above established, no estate or inheritance taxes were
collectible, Ludwig Kiene being a resident of Liechtestein when he passed
away." 20 Then came this definitive ruling: "The Collector hereafter
named the respondent cites decisions of the United States Supreme
Court and of this Court, holding that intangible personal property in the
Philippines belonging to a non-resident foreigner, who died outside of this
country is subject to the estate tax, in disregard of the principle 'mobilia
sequuntur personam'. Such property is admittedly taxable here. Without
the proviso above quoted, the shares of stock owned here by the Ludwig
Kiene would be concededly subject to estate and inheritance taxes.
Nevertheless our Congress chose to make an exemption where conditions
are such that demand reciprocity as in this case. And the exemption
must be honored." 21
WHEREFORE, the decision of the respondent Court of Tax Appeals of
October 30, 1957 is affirmed. Without pronouncement as to costs.
-----------------In January 1955, Maria Cerdeira died in Tangier, Morocco (an international
zone [foreign country] in North Africa). At the time of her death, she was a
Spanish citizen and was a resident of Tangier. She however left some
personal properties (shares of stocks and other intangibles) in the
Philippines. The designated administrator of her estate here is Antonio
Campos Rueda.
In the same year, the Collector of Internal Revenue (CIR) assessed the
estate for deficiency tax amounting to about P161k. Campos Rueda
refused to pay the assessed tax as he claimed that the estate is exempt
from the payment of said taxes pursuant to section 122 of the Tax
Code which provides:
That no tax shall be collected under this Title in respect of intangible
personal property (a) if the decedent at the time of his death was a
resident of a foreign country which at the time of his death did not impose
a transfer tax or death tax of any character in respect of intangible person
property of the Philippines not residing in that foreign country, or (b) if the
laws of the foreign country of which the decedent was a resident at the
time of his death allow a similar exemption from transfer taxes or death
taxes of every character in respect of intangible personal property owned
by citizens of the Philippines not residing in that foreign country.
Campos Rueda was able to prove that there is reciprocity between Tangier
and the Philippines.
However, the CIR still denied any tax exemption in favor of the estate as it
averred that Tangier is not a state as contemplated by Section 22 of the
Tax Code and that the Philippines does not recognize Tangier as a foreign
country.
ISSUE: Whether or not Tangier is a state.
HELD: Yes. For purposes of the Tax Code, Tangier is a foreign country.
A foreign country to be identified as a state must be a politically organized
sovereign community independent of outside control bound by penalties of
nationhood, legally supreme within its territory, acting through a
government functioning under a regime of law. The stress is on its being a
nation, its people occupying a definite territory, politically organized,
exercising by means of its government its sovereign will over the
individuals within it and maintaining its separate international personality.
Further, the Supreme Court noted that there is already an existing
jurisprudence (Collector vs De Lara) which provides that even a tiny
principality, that of Liechtenstein, hardly an international personality in the
sense, did fall under the exempt category provided for in Section 22 of the
Tax Code. Thus, recognition is not necessary. Hence, since it was proven

that Tangier provides such exemption to personal properties of

Filipinos found therein so must the Philippines honor the exemption as
provided for by our tax law with respect to the doctrine of reciprocity.

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