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G.R.No.L43082

TodayisWednesday,October21,2015

RepublicofthePhilippines
SUPREMECOURT
Manila
ENBANC
G.R.No.L43082June18,1937
PABLOLORENZO,astrusteeoftheestateofThomasHanley,deceased,plaintiffappellant,
vs.
JUANPOSADAS,JR.,CollectorofInternalRevenue,defendantappellant.
PabloLorenzoandDelfinJovenforplaintiffappellant.
OfficeoftheSolicitorGeneralHiladofordefendantappellant.
LAUREL,J.:
On October 4, 1932, the plaintiff Pablo Lorenzo, in his capacity as trustee of the estate of Thomas Hanley,
deceased,broughtthisactionintheCourtofFirstInstanceofZamboangaagainstthedefendant,JuanPosadas,
Jr., then the Collector of Internal Revenue, for the refund of the amount of P2,052.74, paid by the plaintiff as
inheritancetaxontheestateofthedeceased,andforthecollectionofinterstthereonattherateof6percentper
annum, computed from September 15, 1932, the date when the aforesaid tax was [paid under protest. The
defendantsetupacounterclaimforP1,191.27allegedtobeinterestdueonthetaxinquestionandwhichwasnot
included in the original assessment. From the decision of the Court of First Instance of Zamboanga dismissing
boththeplaintiff'scomplaintandthedefendant'scounterclaim,bothpartiesappealedtothiscourt.
ItappearsthatonMay27,1922,oneThomasHanleydiedinZamboanga,Zamboanga,leavingawill(Exhibit5)
andconsiderableamountofrealandpersonalproperties.Onjune14,1922,proceedingsfortheprobateofhis
willandthesettlementanddistributionofhisestatewerebegunintheCourtofFirstInstanceofZamboanga.The
willwasadmittedtoprobate.Saidwillprovides,amongotherthings,asfollows:
4.IdirectthatanymoneyleftbymebegiventomynephewMatthewHanley.
5.Idirectthatallrealestateownedbymeatthetimeofmydeathbenotsoldorotherwisedisposedoffor
aperiodoften(10)yearsaftermydeath,andthatthesamebehandledandmanagedbytheexecutors,
andproceedsthereoftobegiventomynephew,MatthewHanley,atCastlemore,Ballaghaderine,County
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of Rosecommon, Ireland, and that he be directed that the same be used only for the education of my
brother'schildrenandtheirdescendants.
6.Idirectthatten(10)yearsaftermydeathmypropertybegiventotheabovementionedMatthewHanley
tobedisposedofinthewayhethinksmostadvantageous.
xxxxxxxxx
8. I state at this time I have one brother living, named Malachi Hanley, and that my nephew, Matthew
Hanley,isasonofmysaidbrother,MalachiHanley.
TheCourtofFirstInstanceofZamboangaconsidereditproperforthebestinterestsoftherestatetoappointa
trusteetoadministertherealpropertieswhich,underthewill,weretopasstoMatthewHanleytenyearsafterthe
two executors named in the will, was, on March 8, 1924, appointed trustee. Moore took his oath of office and
gavebondonMarch10,1924.HeactedastrusteeuntilFebruary29,1932,whenheresignedandtheplaintiff
hereinwasappointedinhisstead.
During the incumbency of the plaintiff as trustee, the defendant Collector of Internal Revenue, alleging that the
estateleftbythedeceasedatthetimeofhisdeathconsistedofrealtyvaluedatP27,920andpersonaltyvaluedat
P1,465, and allowing a deduction of P480.81, assessed against the estate an inheritance tax in the amount of
P1,434.24which,togetherwiththepenaltiesfordeliquencyinpaymentconsistingofa1percentmonthlyinterest
fromJuly1,1931tothedateofpaymentandasurchargeof25percentonthetax,amountedtoP2,052.74.On
March15,1932,thedefendantfiledamotioninthetestamentaryproceedingspendingbeforetheCourtofFirst
InstanceofZamboanga(SpecialproceedingsNo.302)prayingthatthetrustee,plaintiffherein,beorderedtopay
totheGovernmentthesaidsumofP2,052.74.Themotionwasgranted.OnSeptember15,1932,theplaintiffpaid
said amount under protest, notifying the defendant at the same time that unless the amount was promptly
refunded suit would be brought for its recovery. The defendant overruled the plaintiff's protest and refused to
refundthesaidamounthausted,plaintiffwenttocourtwiththeresulthereinaboveindicated.
Inhisappeal,plaintiffcontendsthatthelowercourterred:
I. In holding that the real property of Thomas Hanley, deceased, passed to his instituted heir, Matthew
Hanley,fromthemomentofthedeathoftheformer,andthatfromthetime,thelatterbecametheowner
thereof.
II.Inholding,ineffect,thattherewasdeliquencyinthepaymentofinheritancetaxdueontheestateofsaid
deceased.
III.Inholdingthattheinheritancetaxinquestionbebaseduponthevalueoftheestateuponthedeathof
thetestator,andnot,asitshouldhavebeenheld,uponthevaluethereofattheexpirationoftheperiodof
tenyearsafterwhich,accordingtothetestator'swill,thepropertycouldbeandwastobedeliveredtothe
institutedheir.
IV.Innotallowingaslawfuldeductions,inthedeterminationofthenetamountoftheestatesubjecttosaid
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tax, the amounts allowed by the court as compensation to the "trustees" and paid to them from the
decedent'sestate.
V.Innotrenderingjudgmentinfavoroftheplaintiffandindenyinghismotionfornewtrial.
Thedefendantappellantcontradictsthetheoriesoftheplaintiffandassignsthefollowingerrorbesides:
The lower court erred in not ordering the plaintiff to pay to the defendant the sum of P1,191.27,
representingpartoftheinterestattherateof1percentpermonthfromApril10,1924,toJune30,1931,
whichtheplaintiffhadfailedtopayontheinheritancetaxassessedbythedefendantagainsttheestateof
ThomasHanley.
Thefollowingaretheprincipalquestionstobedecidedbythiscourtinthisappeal:(a)Whendoestheinheritance
taxaccrueandwhenmustitbesatisfied?(b)Shouldtheinheritancetaxbecomputedonthebasisofthevalueof
theestateatthetimeofthetestator'sdeath,oronitsvaluetenyearslater?(c)Indeterminingthenetvalueofthe
estatesubjecttotax,isitpropertodeductthecompensationduetotrustees?(d)Whatlawgovernsthecaseat
bar?ShouldtheprovisionsofActNo.3606favorabletothetaxpayerbegivenretroactiveeffect?(e)Hasthere
been deliquency in the payment of the inheritance tax? If so, should the additional interest claimed by the
defendantinhisappealbepaidbytheestate?Otherpointsofincidentalimportance,raisedbythepartiesintheir
briefs,willbetoucheduponinthecourseofthisopinion.
(a)Theaccrualoftheinheritancetaxisdistinctfromtheobligationtopaythesame.Section1536asamended,of
theAdministrativeCode,imposesthetaxupon"everytransmissionbyvirtueofinheritance,devise,bequest,gift
mortiscausa,oradvanceinanticipationofinheritance,devise,orbequest."Thetaxthereforeisupontransmission
or the transfer or devolution of property of a decedent, made effective by his death. (61 C. J., p. 1592.) It is in
realityanexciseorprivilegetaximposedontherighttosucceedto,receive,ortakepropertybyorunderawillor
theintestacylaw,ordeed,grant,orgifttobecomeoperativeatorafterdeath.Acordingtoarticle657oftheCivil
Code,"therightstothesuccessionofapersonaretransmittedfromthemomentofhisdeath.""Inotherwords",
said Arellano, C. J., ". . . the heirs succeed immediately to all of the property of the deceased ancestor. The
property belongs to the heirs at the moment of the death of the ancestor as completely as if the ancestor had
executedanddeliveredtothemadeedforthesamebeforehisdeath."(Bondadvs.Bondad,34Phil.,232.See
also,Mijaresvs.Nery,3Phil.,195Suilong&Co.,vs.ChioTaysan,12Phil.,13Lubricovs.Arbado,12Phil.,391
Innocenciovs.GatPandan,14Phil.,491Aliasasvs.Alcantara,16Phil.,489Ilustrevs.AlarasFrondosa,17Phil.,
321 Malahacan vs. Ignacio, 19 Phil., 434 Bowa vs. Briones, 38 Phil., 27 Osario vs. Osario & Yuchausti
SteamshipCo.,41Phil.,531Fulevs.Fule,46Phil.,317Daisvs.CourtofFirstInstanceofCapiz,51Phil.,396
Baun vs. Heirs of Baun, 53 Phil., 654.) Plaintiff, however, asserts that while article 657 of the Civil Code is
applicabletotestateaswellasintestatesuccession,itoperatesonlyinsofarasforcedheirsareconcerned.But
thelanguageofarticle657oftheCivilCodeisbroadandmakesnodistinctionbetweendifferentclassesofheirs.
That article does not speak of forced heirs it does not even use the word "heir". It speaks of the rights of
successionandthetransmissionthereoffromthemomentofdeath.Theprovisionofsection625oftheCodeof
CivilProcedureregardingtheauthenticationandprobateofawillasanecessaryconditiontoeffecttransmission
ofpropertydoesnotaffectthegeneralrulelaiddowninarticle657oftheCivilCode.Theauthenticationofawill
implies its due execution but once probated and allowed the transmission is effective as of the death of the
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testatorinaccordancewitharticle657oftheCivilCode.Whatevermaybethetimewhenactualtransmissionof
theinheritancetakesplace,successiontakesplaceinanyeventatthemomentofthedecedent'sdeath.Thetime
when the heirs legally succeed to the inheritance may differ from the time when the heirs actually receive such
inheritance."Pocoimporta",saysManresacommentingonarticle657oftheCivilCode,"quedesdeelfalleimiento
del causante, hasta que el heredero o legatario entre en posesion de los bienes de la herencia o del legado,
transcurramuchoopocotiempo,pueslaadquisicionhaderetrotraersealmomentodelamuerte,yasiloordena
el articulo 989, que debe considerarse como complemento del presente." (5 Manresa, 305 seealso, art. 440,
par.1,CivilCode.)ThomasHanleyhavingdiedonMay27,1922,theinheritancetaxaccruedasofthedate.
Fromthefact,however,thatThomasHanleydiedonMay27,1922,itdoesnotfollowthattheobligationtopay
thetaxaroseasofthedate.Thetimeforthepaymentoninheritancetaxisclearlyfixedbysection1544ofthe
RevisedAdministrativeCodeasamendedbyActNo.3031,inrelationtosection1543ofthesameCode.Thetwo
sectionsfollow:
SEC.1543.Exemptionofcertainacquisitionsandtransmissions.Thefollowingshallnotbetaxed:
(a)Themergeroftheusufructintheownerofthenakedtitle.
(b) The transmission or delivery of the inheritance or legacy by the fiduciary heir or legatee to the
trustees.
(c) The transmission from the first heir, legatee, or donee in favor of another beneficiary, in
accordancewiththedesireofthepredecessor.
Inthelasttwocases,ifthescaleoftaxationappropriatetothenewbeneficiaryisgreaterthanthatpaidby
thefirst,theformermustpaythedifference.
SEC.1544.Whentaxtobepaid.Thetaxfixedinthisarticleshallbepaid:
(a)Inthesecondandthirdcasesofthenextprecedingsection,beforeentranceintopossessionof
theproperty.
(b)Inothercases,withinthesixmonthssubsequenttothedeathofthepredecessorbutifjudicial
testamentary or intestate proceedings shall be instituted prior to the expiration of said period, the
payment shall be made by the executor or administrator before delivering to each beneficiary his
share.
Ifthetaxisnotpaidwithinthetimehereinbeforeprescribed,interestattherateoftwelvepercentumper
annumshallbeaddedaspartofthetaxandtothetaxandinterestdueandunpaidwithintendaysafter
thedateofnoticeanddemandthereofbythecollector,thereshallbefurtheraddedasurchargeoftwenty
fivepercentum.
AcertifiedofallletterstestamentaryorofadmisitrationshallbefurnishedtheCollectorofInternalRevenue
bytheClerkofCourtwithinthirtydaysaftertheirissuance.
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Itshouldbeobservedinpassingthattheword"trustee",appearinginsubsection(b)ofsection1543,shouldread
"fideicommissary" or "cestui que trust". There was an obvious mistake in translation from the Spanish to the
Englishversion.
Theinstantcasedoesfallundersubsection(a),butundersubsection(b),ofsection1544abovequoted,asthere
is here no fiduciary heirs, first heirs, legatee or donee. Under the subsection, the tax should have been paid
beforethedeliveryofthepropertiesinquestiontoP.J.M.MooreastrusteeonMarch10,1924.
(b)TheplaintiffcontendsthattheestateofThomasHanley,insofarastherealpropertiesareconcerned,didnot
andcouldnotlegallypasstotheinstitutedheir,MatthewHanley,untilaftertheexpirationoftenyearsfromthe
deathofthetestatoronMay27,1922and,thattheinheritancetaxshouldbebasedonthevalueoftheestatein
1932, or ten years after the testator's death. The plaintiff introduced evidence tending to show that in 1932 the
real properties in question had a reasonable value of only P5,787. This amount added to the value of the
personal property left by the deceased, which the plaintiff admits is P1,465, would generate an inheritance tax
which,excludingdeductions,interestandsurcharge,wouldamountonlytoaboutP169.52.
Ifdeathisthegeneratingsourcefromwhichthepoweroftheestatetoimposeinheritancetaxestakesitsbeing
andif,uponthedeathofthedecedent,successiontakesplaceandtherightoftheestatetotaxvestsinstantly,
thetaxshouldbemeasuredbythevlaueoftheestateasitstoodatthetimeofthedecedent'sdeath,regardless
ofanysubsequentcontingencyvalueofanysubsequentincreaseordecreaseinvalue.(61C.J.,pp.1692,1693
26R.C.L.,p.232BlakemoreandBancroft,InheritanceTaxes,p.137.SeealsoKnowltonvs.Moore,178U.S.,
4120Sup.Ct.Rep.,74744Law.ed.,969.)"Therightofthestatetoaninheritancetaxaccruesatthemoment
of death, and hence is ordinarily measured as to any beneficiary by the value at that time of such property as
passestohim.Subsequentappreciationordepriciationisimmaterial."(Ross,InheritanceTaxation,p.72.)
OurattentionisdirectedtothestatementoftheruleinCyclopediaofLawofandProcedure(vol.37,pp.1574,
1575)that,inthecaseofcontingentremainders,taxationispostponeduntiltheestatevestsinpossessionorthe
contingencyissettled.ThisrulewasformerlyfollowedinNewYorkandhasbeenadoptedinIllinois,Minnesota,
Massachusetts,Ohio,PennsylvaniaandWisconsin.Thisrule,horever,isbynomeansentirelysatisfactoryeither
to the estate or to those interested in the property (26 R. C. L., p. 231.). Realizing, perhaps, the defects of its
anteriorsystem,wefinduponexaminationofcasesandauthoritiesthatNewYorkhasvariedandnowrequires
theimmediateappraisalofthepostponedestateatitsclearmarketvalueandthepaymentforthwithofthetaxon
itsoutofthecorpusoftheestatetransferred.(InreVanderbilt,172N.Y.,6969N.E.,782InreHuber,86N.Y.
App.Div.,45883N.Y.Supp.,769EstateofTracy,179N.Y.,50172N.Y.,519EstateofBrez,172N.Y.,609
64N.E.,958EstateofPost,85App.Div.,61182N.Y.Supp.,1079.Videalso, Saltoun vs. Lord Advocate, 1
Peter.Sc.App.,9703Macq.H.L.,65923Eng.Rul.Cas.,888.)Californiaadherestothisnewrule(Stats.1905,
sec.5,p.343).
But whatever may be the rule in other jurisdictions, we hold that a transmission by inheritance is taxable at the
timeofthepredecessor'sdeath,notwithstandingthepostponementoftheactualpossessionorenjoymentofthe
estatebythebeneficiary,andthetaxmeasuredbythevalueofthepropertytransmittedatthattimeregardlessof
itsappreciationordepreciation.
(c)Certainitemsarerequiredbylawtobedeductedfromtheappraisedgrossinarrivingatthenetvalueofthe
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estateonwhichtheinheritancetaxistobecomputed(sec.1539,RevisedAdministrativeCode).Inthecaseat
bar,thedefendantandthetrialcourtallowedadeductionofonlyP480.81.Thissumrepresentstheexpensesand
disbursementsoftheexecutorsuntilMarch10,1924,amongwhichweretheirfeesandtheprovendebtsofthe
deceased. The plaintiff contends that the compensation and fees of the trustees, which aggregate P1,187.28
(Exhibits C, AA, EE, PP, HH, JJ, LL, NN, OO), should also be deducted under section 1539 of the Revised
AdministrativeCodewhichprovides,inpart,asfollows:"Inordertodeterminethenetsumwhichmustbearthe
tax,whenaninheritanceisconcerned,thereshallbededucted,incaseofaresident,...thejudicialexpensesof
thetestamentaryorintestateproceedings,...."
Atrustee,nodoubt,isentitledtoreceiveafaircompensationforhisservices(Barneyvs.Saunders,16How.,535
14Law.ed.,1047).Butfromthisitdoesnotfollowthatthecompensationduehimmaylawfullybedeductedin
arrivingatthenetvalueoftheestatesubjecttotax.ThereisnostatuteinthePhilippineswhichrequirestrustees'
commissions to be deducted in determining the net value of the estate subject to inheritance tax (61 C. J., p.
1705).Furthermore,thoughatestamentarytrusthasbeencreated,itdoesnotappearthatthetestatorintended
thatthedutiesofhisexecutorsandtrusteesshouldbeseparated.(Ibid.InreVanneck'sEstate,161N.Y.Supp.,
893175App.Div.,363InreCollard'sEstate,161N.Y.Supp.,455.)Onthecontrary,inparagraph5ofhiswill,
the testator expressed the desire that his real estate be handled and managed by his executors until the
expirationoftheperiodoftenyearsthereinprovided.Judicialexpensesareexpensesofadministration(61C.J.,
p.1705)but,inStatevs.HennepinCountyProbateCourt(112N.W.,878101Minn.,485),itwassaid:"...The
compensationofatrustee,earned,notintheadministrationoftheestate,butinthemanagementthereofforthe
benefitofthelegateesordevises,doesnotcomeproperlywithintheclassorreasonforexemptingadministration
expenses. . . . Service rendered in that behalf have no reference to closing the estate for the purpose of a
distribution thereof to those entitled to it, and are not required or essential to the perfection of the rights of the
heirsorlegatees....Trusts...ofthecharacterofthatherebeforethecourt,arecreatedforthethebenefitof
thosetowhomthepropertyultimatelypasses,areofvoluntarycreation,andintendedforthepreservationofthe
estate.Nosoundreasonisgiventosupportthecontentionthatsuchexpensesshouldbetakenintoconsideration
infixingthevalueoftheestateforthepurposeofthistax."
(d) The defendant levied and assessed the inheritance tax due from the estate of Thomas Hanley under the
provisionsofsection1544oftheRevisedAdministrativeCode,asamendedbysection3ofActNo.3606.ButAct
No.3606wentintoeffectonJanuary1,1930.It,therefore,wasnotthelawinforcewhenthetestatordiedonMay
27,1922.Thelawatthetimewassection1544abovementioned,asamendedbyActNo.3031,whichtookeffect
onMarch9,1922.
It is wellsettled that inheritance taxation is governed by the statute in force at the time of the death of the
decedent(26R.C.L.,p.2064CooleyonTaxation,4thed.,p.3461).Thetaxpayercannotforeseeandought
nottoberequiredtoguesstheoutcomeofpendingmeasures.Ofcourse,ataxstatutemaybemaderetroactive
in its operation. Liability for taxes under retroactive legislation has been "one of the incidents of social life."
(Seattlevs.Kelleher,195U.S.,36049Law.ed.,232Sup.Ct.Rep.,44.)Butlegislativeintentthatataxstatute
should operate retroactively should be perfectly clear. (Scwab vs. Doyle, 42 Sup. Ct. Rep., 491 Smietanka vs.
FirstTrust&SavingsBank,257U.S.,602Stockdalevs.InsuranceCo.,20Wall.,323Lunchvs.Turrish,247U.
S.,221.)"Astatuteshouldbeconsideredasprospectiveinitsoperation,whetheritenacts,amends,orrepealsan
inheritancetax,unlessthelanguageofthestatuteclearlydemandsorexpressesthatitshallhavearetroactive
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effect,...."(61C.J.,P.1602.)Thoughthelastparagraphofsection5ofRegulationsNo.65oftheDepartment
of Finance makes section 3 of Act No. 3606, amending section 1544 of the Revised Administrative Code,
applicabletoallestatestheinheritancetaxesduefromwhichhavenotbeenpaid,ActNo.3606itselfcontainsno
provisions indicating legislative intent to give it retroactive effect. No such effect can begiven the statute by this
court.
ThedefendantCollectorofInternalRevenuemaintains,however,thatcertainprovisionsofActNo.3606aremore
favorable to the taxpayer than those of Act No. 3031, that said provisions are penal in nature and, therefore,
shouldoperateretroactivelyinconformitywiththeprovisionsofarticle22oftheRevisedPenalCode.Thisisthe
reasonwhyheappliedActNo.3606insteadofActNo.3031.Indeed,underActNo.3606,(1)thesurchargeof25
percentisbasedonthetaxonly,insteadofonboththetaxandtheinterest,asprovidedforinActNo.3031,and
(2) the taxpayer is allowed twenty days from notice and demand by rthe Collector of Internal Revenue within
whichtopaythetax,insteadoftendaysonlyasrequiredbytheoldlaw.
Properly speaking, a statute is penal when it imposes punishment for an offense committed against the state
which,undertheConstitution,theExecutivehasthepowertopardon.Incommonuse,however,thissensehas
beenenlargedtoincludewithintheterm"penalstatutes"allstatuswhichcommandorprohibitcertainacts,and
establishpenaltiesfortheirviolation,andeventhosewhich,withoutexpresslyprohibitingcertainacts,imposea
penaltyupontheircommission(59C.J.,p.1110).Revenuelaws,generally,whichimposetaxescollectedbythe
means ordinarily resorted to for the collection of taxes are not classed as penal laws, although there are
authoritiestothecontrary.(SeeSutherland, Statutory Construction, 361 Twine Co. vs. Worthington, 141 U. S.,
46812Sup.Ct.,55Ricevs.U.S.,4C.C.A.,10453Fed.,910Com.vs.StandardOilCo.,101Pa.St.,150
Statevs.Wheeler,44P.,43025Nev.143.)Article22oftheRevisedPenalCodeisnotapplicabletothecaseat
bar,andintheabsenceofclearlegislativeintent,wecannotgiveActNo.3606aretroactiveeffect.
(e)Theplaintiffcorrectlystatesthattheliabilitytopayataxmayariseatacertaintimeandthetaxmaybepaid
withinanothergiventime.Asstatedbythiscourt,"themerefailuretopayone'staxdoesnotrenderonedelinqent
until and unless the entire period has eplased within which the taxpayer is authorized by law to make such
payment without being subjected to the payment of penalties for fasilure to pay his taxes within the prescribed
period."(U.S.vs.Labadan,26Phil.,239.)
Thedefendantmaintainsthatitwasthedutyoftheexecutortopaytheinheritancetaxbeforethedeliveryofthe
decedent's property to the trustee. Stated otherwise, the defendant contends that delivery to the trustee was
deliverytothecestuiquetrust,thebeneficieryinthiscase,withinthemeaningofthefirstparagraphofsubsection
(b) of section 1544 of the Revised Administrative Code. This contention is well taken and is sustained. The
appointmentofP.J.M.Mooreastrusteewasmadebythetrialcourtinconformitywiththewishesofthetestator
as expressed in his will. It is true that the word "trust" is not mentioned or used in the will but the intention to
createoneisclear.Noparticularortechnicalwordsarerequiredtocreateatestamentarytrust(69C.J.,p.711).
Thewords"trust"and"trustee",thoughaptforthepurpose,arenotnecessary.Infact,theuseofthesetwowords
isnotconclusiveonthequestionthatatrustiscreated(69C.J.,p.714)."Tocreateatrustbywillthetestator
mustindicateinthewillhisintentionsotodobyusinglanguagesufficienttoseparatethelegalfromtheequitable
estate,andwithsufficientcertaintydesignatethebeneficiaries,theirinterestinthettrust,thepurposeorobjectof
the trust, and the property or subject matter thereof. Stated otherwise, to constitute a valid testamentary trust
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theremustbeaconcurrenceofthreecircumstances:(1)Sufficientwordstoraiseatrust(2)adefinitesubject(3)
a certain or ascertain object statutes in some jurisdictions expressly or in effect so providing." (69 C. J., pp.
705,706.)Thereisnodoubtthatthetestatorintendedtocreateatrust.Heorderedinhiswillthatcertainofhis
properties be kept together undisposed during a fixed period, for a stated purpose. The probate court certainly
exercised sound judgment in appointment a trustee to carry into effect the provisions of the will (see sec. 582,
CodeofCivilProcedure).
P.J.M.MoorebecametrusteeonMarch10,1924.Onthatdatetrustestatevestedinhim(sec.582inrelationto
sec. 590, Code of Civil Procedure). The mere fact that the estate of the deceased was placed in trust did not
removeitfromtheoperationofourinheritancetaxlawsorexemptitfromthepaymentoftheinheritancetax.The
correspondinginheritancetaxshouldhavebeenpaidonorbeforeMarch10,1924,toescapethepenaltiesofthe
laws.Thisissoforthereasonalreadystatedthatthedeliveryoftheestatetothetrusteewasinessedeliveryof
thesameestatetothecestuiquetrust,thebeneficiaryinthiscase.Atrusteeisbutaninstrumentoragentforthe
cestui que trust (Shelton vs. King, 299 U. S., 90 33 Sup. Ct. Rep., 689 57 Law. ed., 1086). When Moore
acceptedthetrustandtookpossessonofthetrustestatehetherebyadmittedthattheestatebelongednottohim
buttohiscestuiquetrust(Tolentinovs.Vitug,39Phil.,126,citedin65C.J.,p.692,n.63).Hedidnotacquireany
beneficialinterestintheestate.Hetooksuchlegalestateonlyastheproperexecutionofthetrustrequired(65C.
J.,p.528)and,hisestateceaseduponthefulfillmentofthetestator'swishes.Theestatethenvestedabsolutely
inthebeneficiary(65C.J.,p.542).
Thehighestconsiderationsofpublicpolicyalsojustifytheconclusionwehavereached.Werewetoholdthatthe
paymentofthetaxcouldbepostponedordelayedbythecreationofatrustofthetypeathand,theresultwould
beplainlydisastrous.Testatorsmayprovide,asThomasHanleyhasprovided,thattheirestatesbenotdelivered
totheirbeneficiariesuntilafterthelapseofacertainperiodoftime.Inthecaseatbar,theperiodistenyears.In
other cases, the trust may last for fifty years, or for a longer period which does not offend the rule against
petuities.Thecollectionofthetaxwouldthenbelefttothewillofaprivateindividual.Themeresuggestionofthis
result is a sufficient warning against the accpetance of the essential to the very exeistence of government.
(Dobbinsvs.ErieCountry,16Pet.,43510Law.ed.,1022Kirklandvs.Hotchkiss,100U.S.,49125Law.ed.,
558LaneCountyvs.Oregon,7Wall.,7119Law.ed.,101UnionRefrigeratorTransitCo.vs.Kentucky,199U.
S.,19426Sup.Ct.Rep.,3650Law.ed.,150CharlesRiverBridgevs.WarrenBridge,11Pet.,4209Law.ed.,
773.)Theobligationtopaytaxesrestsnotupontheprivilegesenjoyedby,ortheprotectionaffordedto,acitizen
bythegovernmentbutuponthenecessityofmoneyforthesupportofthestate(Dobbinsvs.ErieCountry,supra).
Forthisreason,nooneisallowedtoobjecttoorresistthepaymentoftaxessolelybecausenopersonalbenefitto
himcanbepointedout.(Thomasvs.Gay,169U.S.,26418Sup.Ct.Rep.,34043Law.ed.,740.)Whilecourts
willnotenlarge,byconstruction,thegovernment'spoweroftaxation(Bromleyvs.McCaughn,280U.S.,12474
Law.ed.,22650Sup.Ct.Rep.,46)theyalsowillnotplaceupontaxlawssolooseaconstructionastopermit
evasionsonmerelyfancifulandinsubstantialdistictions.(U.S.vs.Watts,1Bond.,580Fed.Cas.No.16,653U.
S.vs.Wigglesirth,2Story,369Fed.Cas.No.16,690,followedinFroelich&Kuttnervs.CollectorofCustoms,18
Phil., 461, 481 Castle Bros., Wolf & Sons vs. McCoy, 21 Phil., 300 Muoz & Co. vs. Hord, 12 Phil., 624
Hongkong & Shanghai Banking Corporation vs. Rafferty, 39 Phil., 145 Luzon Stevedoring Co. vs. Trinidad, 43
Phil.,803.)Whenproper,ataxstatuteshouldbeconstruedtoavoidthepossibilitiesoftaxevasion.Construedthis
way,thestatute,withoutresultingininjusticetothetaxpayer,becomesfairtothegovernment.
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Thattaxesmustbecollectedpromptlyisapolicydeeplyintrenchedinourtaxsystem.Thus,nocourtisallowedto
grant injunction to restrain the collection of any internal revenue tax ( sec. 1578, Revised Administrative Code
Sarasola vs. Trinidad, 40 Phil., 252). In the case of Lim Co Chui vs. Posadas (47 Phil., 461), this court had
occassiontodemonstratetrenchmentadherencetothispolicyofthelaw.Itheldthat"thefactthatonaccountof
riots directed against the Chinese on October 18, 19, and 20, 1924, they were prevented from praying their
internal revenue taxes on time and by mutual agreement closed their homes and stores and remained therein,
doesnotauthorizetheCollectorofInternalRevenuetoextendthetimeprescribedforthepaymentofthetaxesor
toacceptthemwithouttheadditionalpenaltyoftwentyfivepercent."(Syllabus,No.3.)
"...Itisoftheutmostimportance,"saidtheSupremeCourtoftheUnitedStates,"...thatthemodesadoptedto
enforcethetaxesleviedshouldbeinterferedwithaslittleaspossible.Anydelayintheproceedingsoftheofficers,
upon whom the duty is developed of collecting the taxes, may derange the operations of government, and
thereby,causeseriousdetrimenttothepublic."(Dowsvs.Chicago,11Wall.,10820Law.ed.,65,66Churchill
andTaitvs.Rafferty,32Phil.,580.)
It results that the estate which plaintiff represents has been delinquent in the payment of inheritance tax and,
therefore,liableforthepaymentofinterestandsurchargeprovidedbylawinsuchcases.
The delinquency in payment occurred on March 10, 1924, the date when Moore became trustee. The interest
dueshouldbecomputedfromthatdateanditiserroronthepartofthedefendanttocomputeitonemonthlater.
The provisions cases is mandatory (seeand cf. Lim Co Chui vs. Posadas, supra), and neither the Collector of
Internal Revenuen or this court may remit or decrease such interest, no matter how heavily it may burden the
taxpayer.
To the tax and interest due and unpaid within ten days after the date of notice and demand thereof by the
Collector of Internal Revenue, a surcharge of twentyfive per centum should be added (sec. 1544, subsec. (b),
par. 2, Revised Administrative Code). Demand was made by the Deputy Collector of Internal Revenue upon
Moore in a communiction dated October 16, 1931 (Exhibit 29). The date fixed for the payment of the tax and
interestwasNovember30,1931.November30beinganofficialholiday,thetenthdayfellonDecember1,1931.
Asthetaxandinterestduewerenotpaidonthatdate,theestatebecameliableforthepaymentofthesurcharge.
In view of the foregoing, it becomes unnecessary for us to discuss the fifth error assigned by the plaintiff in his
brief.
Weshallnowcomputethetax,togetherwiththeinterestandsurchargeduefromtheestateofThomasHanley
inaccordancewiththeconclusionswehavereached.
At the time of his death, the deceased left real properties valued at P27,920 and personal properties worth
P1,465,oratotalofP29,385.DeductingfromthisamountthesumofP480.81,representingallowabledeductions
under secftion 1539 of the Revised Administrative Code, we have P28,904.19 as the net value of the estate
subjecttoinheritancetax.
The primary tax, according to section 1536, subsection (c), of the Revised Administrative Code, should be
imposedattherateofonepercentumuponthefirsttenthousandpesosandtwopercentumupontheamountby
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whichtheshareexceedthirtythousandpesos,plusanadditionaltwohundredpercentum.Onepercentumoften
thousandpesosisP100.TwopercentumofP18,904.19isP378.08.Addingtothesetwosumsanadditionaltwo
hundred per centum, or P965.16, we have as primary tax, correctly computed by the defendant, the sum of
P1,434.24.
To the primary tax thus computed should be added the sums collectible under section 1544 of the Revised
AdministrativeCode.FirstshouldbeaddedP1,465.31whichstandsforinterestattherateoftwelvepercentum
per annum from March 10, 1924, the date of delinquency, to September 15, 1932, the date of payment under
protest,aperiodcovering8years,6monthsand5days.Tothetaxandinterestthuscomputedshouldbeadded
the sum of P724.88, representing a surhcarge of 25 per cent on both the tax and interest, and also P10, the
compromisesumfixedbythedefendant(Exh.29),givingagrandtotalofP3,634.43.
AstheplaintiffhasalreadypaidthesumofP2,052.74,onlythesumsofP1,581.69islegallyduefromtheestate.
This last sum is P390.42 more than the amount demanded by the defendant in his counterclaim. But, as we
cannot give the defendant more than what he claims, we must hold that the plaintiff is liable only in the sum of
P1,191.27theamountstatedinthecounterclaim.
The judgment of the lower court is accordingly modified, with costs against the plaintiff in both instances. So
ordered.
Avancea,C.J.,AbadSantos,Imperial,DiazandConcepcion,JJ.,concur.
VillaReal,J.,concurs.
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