LORENZO vs.
POSADAS (3) a certain or ascertain object; statutes
OCTOBER 31, 2011 ~ VBDIAZ
LORENZO vs. POSADAS JR.
G.R. No. L-43082
June 18, 1937
FACTS: Thomas Hanley died, leaving a will and a
considerable amount of real and personal properties.
Proceedings for the probate of his will and the settlement
and distribution of his estate were begun in the CFI of
Zamboanga. The will was admitted to probate.
The CFI considered it proper for the best interests of the
estate to appoint a trustee to administer the real properties
which, under the will, were to pass to nephew Matthew ten
years after the two executors named in the will was
appointed trustee. Moore acted as trustee until he resigned
and the plaintiff Lorenzo herein was appointed in his stead.
During the incumbency of the plaintiff as trustee, the
defendant Collector of Internal Revenue (Posadas) assessed
against the estate an inheritance tax, together with the
penalties for deliquency in payment. Lorenzo paid said
amount under protest, notifying Posadas at the same time
that unless the amount was promptly refunded suit would
be brought for its recovery. Posadas overruled Lorenzos
protest and refused to refund the said amount. Plaintiff
went to court. The CFI dismissed Lorenzos complaint and
Posadas counterclaim. Both parties appealed to this court.
ISSUE:
(e) Has there been delinquency in the payment of the
inheritance tax
HELD: The judgment of the lower court is accordingly
modified, with costs against the plaintiff in both instances
YES
The defendant maintains that it was the duty of the
executor to pay the inheritance tax before the delivery of
the decedents property to the trustee. Stated otherwise,
the defendant contends that delivery to the trustee was
delivery to the cestui que trust, the beneficiary in this case,
within the meaning of the first paragraph of subsection (b)
of section 1544 of the Revised Administrative Code. This
contention is well taken and is sustained. A trustee is but an
instrument or agent for the cestui que trust
The appointment of Moore as trustee was made by the trial
court in conformity with the wishes of the testator as
expressed in his will. It is true that the word trust is not
mentioned or used in the will but the intention to create one
is clear. No particular or technical words are required to
create a testamentary trust. The words trust and
trustee, though apt for the purpose, are not necessary. In
fact, the use of these two words is not conclusive on the
question that a trust is created. To constitute a valid
testamentary trust there must be a concurrence of three
circumstances:
(1) Sufficient words to raise a trust;
(2) a definite subject;
in some
jurisdictions expressly or in effect so providing.
There is no doubt that the testator intended to create a
trust. He ordered in his will that certain of his properties be
kept together undisposed during a fixed period, for a stated
purpose. The probate court certainly exercised sound
judgment in appointmening a trustee to carry into effect the
provisions of the will
As the existence of the trust was already proven, it results
that the estate which plaintiff represents has been
delinquent in the payment of inheritance tax and, therefore,
liable for the payment of interest and surcharge provided by
law in such cases.
The delinquency in payment occurred on March 10, 1924,
the date when Moore became trustee. On that date trust
estate vested in him. The interest due should be computed
from that date.
NOTES: Other issues:
(a) When does the inheritance tax accrue and when must it
be satisfied?
The accrual of the inheritance tax is distinct from the
obligation to pay the same.
Acording to article 657 of the Civil Code, the rights to the
succession of a person are transmitted from the moment of
his death. In other words, said Arellano, C. J., . . . the
heirs succeed immediately to all of the property of the
deceased ancestor. The property belongs to the heirs at the
moment of the death of the ancestor as completely as if the
ancestor had executed and delivered to them a deed for the
same before his death.
Whatever may be the time when actual transmission of the
inheritance takes place, succession takes place in any event
at the moment of the decedents death. The time when the
heirs legally succeed to the inheritance may differ from the
time when the heirs actually receive such inheritance.
Thomas Hanley having died on May 27, 1922, the
inheritance tax accrued as of the date.
From the fact, however, that Thomas Hanley died on May
27, 1922, it does not follow that the obligation to pay the
tax arose as of the date. The time for the payment on
inheritance tax is clearly fixed by section 1544 of the
Revised Administrative Code as amended by Act No. 3031,
in relation to section 1543 of the same Code. The two
sections follow:
SEC. 1543. Exemption of certain acquisitions and
transmissions. The following shall not be taxed:
(a) The merger of the usufruct in the owner of the naked
title.
(b) The transmission or delivery of the inheritance or legacy
by the fiduciary heir or legatee to the trustees.
(c) The transmission from the first heir, legatee, or donee in
favor of another beneficiary, in accordance with the desire
of the predecessor. xx
SEC. 1544. When tax to be paid. The tax fixed in this
article shall be paid:
(a) In the second and third cases of the next preceding
section, before entrance into possession of the property.

(b) In other cases, within the six months subsequent to the
death of the predecessor; but if judicial testamentary or
intestate proceedings shall be instituted prior to the
expiration of said period, the payment shall be made by the
executor or administrator before delivering to each
beneficiary his share.
The instant case does[not] fall under subsection (a), but
under subsection (b), of section 1544 above-quoted, as
there is here no fiduciary heirs, first heirs, legatee or donee.
Under the subsection, the tax should have been paid before
the delivery of the properties in question to Moore as
trustee.
(b) Should the inheritance tax be computed on the basis of
the value of the estate at the time of the testators death,
or on its value ten years later?
If death is the generating source from which the power of
the estate to impose inheritance taxes takes its being and
if, upon the death of the decedent, succession takes place
and the right of the estate to tax vests instantly, the tax
should be measured by the value of the estate as it stood at
the time of the decedents death, regardless of any
subsequent contingency value of any subsequent increase
or decrease in value
(c) In determining the net value of the estate subject to
tax, is it proper to deduct the compensation due to
trustees?
A trustee, no doubt, is entitled to receive a fair
compensation for his services. But from this it does not
follow that the compensation due him may lawfully be
deducted in arriving at the net value of the estate subject to
tax. There is no statute in the Philippines which requires
trustees commissions to be deducted in determining the
net value of the estate subject to inheritance tax
(d) What law governs the case at bar? Should the provisions
of Act No. 3606 favorable to the tax-payer be given
retroactive effect?
In 1983, Dr. Rabadilla died. He was survived by Johnny
Rabadilla.
In 1989, Maria Belleza sued Johnny Rabadilla in order to
compel Johnny to reconvey the said land to the estate of
Aleja Belleza because it is alleged that Johnny failed to
comply with the terms of the will; that since 1985, Johnny
failed to deliver the fruits; and that the the land was
mortgaged to the Philippine National Bank, which is a
violation of the will.
In his defense, Johnny avers that the term near
descendants in the will of Aleja pertains to the near
descendants of Aleja and not to the near descendants of Dr.
Rabadilla, hence, since Aleja had no near descendants at
the time of his death, no can substitute Dr. Rabadilla on the
obligation to deliver the fruits of the devised land.
ISSUE: Whether or not Johnny Rabadilla is not obliged to
comply with the terms of the Will left by Aleja Belleza.
HELD: No. The contention of Johnny Rabadilla is bereft of
merit. The near descendants being referred to in the will
are the heirs of Dr. Rabadilla. Ownership over the devised
property was already transferred to Dr. Rabadilla when
Aleja died. Hence, when Dr. Rabadilla himself died,
ownership over the same property was transmitted to
Johnny Rabadilla by virtue of succession.
Under Article 776 of the Civil Code, inheritance includes all
the property, rights and obligations of a person, not
extinguished by his death. Conformably, whatever rights Dr.
Rabadilla had by virtue of the Will were transmitted to his
forced heirs, at the time of his death. And since obligations
not extinguished by death also form part of the estate of
the decedent; corollarily, the obligations imposed by the
Will on the deceased Dr. Jorge Rabadilla, were likewise
transmitted to his compulsory heirs upon his death. It is
clear therefore, that Johnny should have continued
complying with the terms of the Will. His failure to do so
shall give rise to an obligation for him to reconvey the
property to the estate of Aleja.

A statute should be considered as prospective in its

operation, whether it enacts, amends, or repeals an
inheritance tax, unless the language of the statute clearly
demands or expresses that it shall have a retroactive effect,
. . . . Act No. 3606 itself contains no provisions indicating
legislative intent to give it retroactive effect. No such effect
can be given the statute by this court.

334 SCRA 522 Civil Law Succession Transmissible

Obligations

A certain Aleja Belleza died but he instituted in his will Dr.

Jorge Rabadilla as a devisee to a 511, 855 hectare land. A
condition was however imposed to the effect that:

1. the naked ownership shall transfer to Dr. Rabadilla;

2. he shall deliver the fruits of said land to Maria Belleza,

sister of Aleja, during the lifetime of said Maria Belleza;

3. that in case Dr. Rabadilla shall die before Maria Belleza,

the near descendants, shall continue delivering the fruits to
Maria Belleza;

4. that the said land may only be encumbered, mortgaged,

or sold only to a relative of Belleza.