Digested Cases in Taxation (on Assessment, Levy and Distraint, and Statute of Limitations)

CIR vs. CA, Atlas Consolidated
242 SCRA 289
GR No. 104151 March 10, 1995
"Assessments are prima facie presumed correct and made in good faith. So that, in the absence of proof of any irregularities in the performance of official duties, an assessment will not be disturbed."

 

FACTS: The Commissioner of Internal Revenue served two notices and demand for payment of the respective deficiency ad valorem and buiness taxes for taxable years 1975 and 1976 against the respondent Atlas Consolidated Mining and Development Corporation (ACMDC). The latter protested both assessments but the same were denied, hence it filed two separate petitions for review in the Court of Tax Appeals. The CTA rendered a consolidated decision holding, inter alia, that ACMDC was not liable for deficiency ad valorem taxes on copper and silver for 1975 and 1976 thereby effectively sustaining the theory of ACMDC that in computing the ad valorem tax on copper mineral, the refining and smelting charges should be deducted, in addition to freight and insurance charges.
    However, the tax court held ACMDC liable for the amount consisting of 25% surcharge for late payment of the ad valorem tax and late filing of notice of removal of silver, gold and pyrite extracted during certain periods, and for alleged deficiency manufacturer's sales tax and such contractor's tax for leasing out of its personal properties. ACDMC elevated the matter to the Supreme Court claiming that the leasing out was a mere isolated transaction, hence should not be subjected to contractor's tax.

 

ISSUE: Is the claim of the private respondent, with respect to the contractor's tax, impressed with merit?

 

HELD: No. It is being held that ACMDC was not a manufacturer subject to the percentage tax imposed by Section 186 of the tax code. However such conclusion cannot be made with respect to the contractor's tax being imposed on ACMDC. It cannot validly claim that the leasing out of its personal properties was merely an isolated transaction. Its book of accounts shows that several distinct payments were made for the use of its personal properties such as its plane, motor boat and dump truck. The series of transactions engaged in by ACMDC for the lease of its aforesaid properties could also be deduced from the fact that during the period there were profits earned and reported therefor. The allegation of ACMDC that it did not realize any profit from the leasing out of its said personal properties, since its income therefrom covered only the costs of operation such as salaries and fuel, is not supported by any documentary or substantial evidence.
    Assessments are prima facie presumed correct and made in good faith. Contrary to the theory of ACMDC, it is the taxpayer and not the BIR who has the duty of proving otherwise. It is an elementary rule that in the absence of proof of any irregularities in the performance of official duties, an assessment will not be disturbed. All presumptions are in favor of tax assessments. Verily, failure to present proof of error in assessments will justify judicial affirmance of said assessment.

REPUBLIC vs. CA, and NIELSON & CO.,INC.
149 SCRA 351
GR No. L-38540 April 30, 1987
"The follow-up letter reiterating demand for payment could be considered a notice of assessment in itself if duly received by the taxpayer."

 

FACTS: The petitioner sought the review on certiorari of the decision of the respondent Court of Appeals reversing the decision of the then Court of First Instance of Manila which ordered private respondent Nielson & Co., Inc. to pay the Government the amount of P11,496.00 as ad valorem tax, occupation fees, additional residence tax and 25% surcharge for late payment, for the years 1949 to 1952. Petitioner claims that the demand letter of 16 July 1955 showed an imprint indicating that the original thereof was released and mailed on 4 August 1955 by the Chief, Records Section of the Bureau of Internal Revenue, and that the original letter was not returned to said Bureau; thus, said demand letter must be considered to have been received by the private respondent. According to petitioner, if service is made by ordinary mail, unless the actual date of receipt is shown, service is deemed complete and effective upon the expiration of five (5) days after mailing. As the letter of demand dated 16 July 1955 was actually mailed to private respondent, there arises the presumption that the letter was received by private respondent in the absence of evidence to the contrary. More so, where private respondent did not offer any evidence, except the self-serving testimony of its witness, that it had not received the original copy of the demand letter dated 16 July 1955.

 

ISSUE: Was notice of assessment or demand properly served to the respondent? Should the receipt by the respondent of the succeeding follow-up demand notices be construed as receipt of the original demand?

 

HELD: As to the first issue, no. As correctly observed by the respondent court in its appealed decision, while the contention of petitioner is correct that a mailed letter is deemed received by the addressee in the ordinary course of mail, still this is merely a disputable presumption, subject to controversion, and a direct denial of the receipt thereof shifts the burden upon the party favored by the presumption to prove that the mailed letter was indeed received by the addressee. Since petitioner has not adduced proof that private respondent had in fact received the demand letter of 16 July 1955, it can not be assumed that private respondent received said letter.       As to the second issue, Yes. Records show that petitioner wrote private respondent a follow-up letter dated 19 September 1956, reiterating its demand for the payment of taxes as originally demanded in petitioner's letter dated 16 July 1955. This follow-up letter is considered a notice of assessment in itself which was duly received by private respondent in accordance with its own admission. And consequently, under Section 7 of Republic Act No. 1125, the assessment is appealable to the Court of Tax Appeals within thirty (30) days from receipt of the letter. The taxpayer's failure to appeal in due time, as in the case at bar, makes the assessment in question final, executory and demandable. Thus, private respondent is now barred from disputing the correctness of the assessment or from invoking any defense that would reopen the question of its liability on the merits.

COLLECTOR OF INTERNAL REVENUE vs. VDA. DE CODIÑERA
102 PHIL 1165
GR No. L-9675, September 28, 1957
"The property levied by a competent court may, with the consent thereof, be distrained, subject to the prior lien of the attachment creditor."

 

FACTS: The Collector of Internal Revenue sent a warrant of distraint and levy against the properties of Restituto Codiñera for collection of certain deficiency specific tax. However, it could not be effected in view of the attachment of the said properties of the CFI-Manila of another case. After seven years, the Collector of Internal Revenue issued a warrant of distraint and levy commanding the City Treasurer of Cebu City to distrain the goods, chattels, or effects and other personal property of whatever character, and levy upon the real property and interest in or rights to real property of the estate of the deceased. The heirs of the deceased filed the action with the CTA barring the government to collect said deficiency on the ground of prescription therefore praying to declare null and void, and of no legal force and effect the warrant of distraint and levy which the respondent issued on March 7, 1955.

 

ISSUE: Does the attachment made by a court in a civil case over certain properties of a taxpayer bar the government from enforcing a warrant of distraint and levy over the aforesaid properties in order to collect the taxes due?

 

HELD: No. There may be a valid reason for non-distraint of the property which was due to the attachment of the CFI-Manila in another case. However, such property levied by a competent court may, with the consent thereof, be subsequently distrained, subject to the prior lien of the attachment creditor. The attachment merely deprives the Collector of Internal Revenue the power to divest the Court of its jurisdiction over said property but it does not impair such rights as the Government may have for the collection of taxes.

 

CABRERA vs. THE PROVINCIAL TREASURER OF TAYABAS
GR No. 502, January 29, 1946
"The taxpayer should at least be apprised of the exact date of the proceeding by which she is to lose her property. Failure of the taxpayer to accordingly correct or change name in the assessment record cannot supplant such absence of notice."

 

FACTS: The Provincial Treasurer of Tayabas issued a notice for the sale at public auction of the real properties of Nemesio Cabrera forfeited for tax delinquency on December 15, 1940. The letter sent to Nemesio Cabrera was returned marked “Unclaimed” for the latter was already dead in 1935. The land was actually sold in a rescheduled public auction sale on May 1941 to Catigbac and was finalized in May 1942. Basilia Cabrera, the registered owner of the land subject to attachment, filed a complaint with the CFI-Tayabas against the Provincial Treasurer and Catigbac attacking the validity of the sale on the grounds that she was not notified, even though the property had remained in the assessment book in the name of Nemesio Cabrera, because she became the registered owner thereof since 1934 when a Torrens Title was issued to her by the Register of Deeds of Tayabas.

 

ISSUE: Is there a need for new notices if the land was not sold on the date specified in the previous notice?

 

HELD: Yes. Under the law, even if the notice state that the sale would take place on a specified date and every day thereafter, it is a general and indefinite notice. In order to protect the taxpayer’s rights, the taxpayer should at least be apprised of the exact date of the proceeding by which she is to lose her property. Besides, the appellee admittedly being not notified also vitiates the proceeding. She is the registered owner of the land and had become liable for taxes thereon. For all purposes, she is the delinquent taxpayer "against whom the taxes were assessed." It cannot be Nemesio for the latter's obligation to pay ended where Basilia's liability began.
   Basilia may be criticized for failure to have changed the name in the assessment record. However, such circumstance, nevertheless, cannot supplant the absence of notice.

 

MAMBULAO LUMBER CO. vs. REPUBLIC
132 SCRA 1
GR No. L-37061, September 5, 1984
"Forest charges are internal revenue taxes and the BIR has the sole power and duty to collect them. Thus, an assessment made by the Bureau of Forestry cannot be considered an assessment made by the BIR."

 

FACTS: The Bureau of Forestry sent a demand letter dated January 15, 1949 to Mambulao Lumber Co. demanding for the payment of forest charges and surcharges. Mambulao protested the assessment. On August 29,1958, the BIR likewise wrote a letter to the company demanding payment, which subsequently requested reinvestigation. The BIR gave the company twenty (20) days from receipt within which to submit the results of its verification of payments. For failure to comply and failure to pay its tax liability despite demands, CIR filed a complaint for collection with CFI-Manila on August 25, 1961. The CFI-Manila and Court of Appeals decided against Mambulao ordering it to pay the tax liability. Petitioner argued that the collection is barred by the statute of limitations under Sections 332 of the NIRC. As stated, the collection should be made within the five (5) year period. From 1949 (date when the Bureau of Forestry assessed and demand payment as forestry charges and surcharges) up to 1961 (date of filing of complaint), it is already more than five years.

 

ISSUE: Has the period of filing of collection complaint prescribed?

 

HELD: No. The action for collection is not barred by prescription. The basis of the complaint filed on August 1961 was the demand letter made by the CIR on August 29, 1958 and not the demand letter of the Bureau of Forestry on January 1949. So that the reckoning date of the 5-year period should be from the date of the BIR letter and not that of the Bureau of Forestry. This must be so because forest charges are internal revenue taxes and the BIR has the sole power and duty to collect them.

FERNANDOS HERMANOS, INC. vs. COMMISSIONER
29 SCRA 552
GR No. No. L-21551, September 30, 1969
"The filing of an answer to taxpayer's petition for review is considered as institution of judicial action."

 

FACTS: The Commissioner of Internal Revenue assessed the petitioner investment corporation of deficiency income taxes for the years 1950 to 1954 and for 1957. There were two conflicting dates of assessment, which are vital to the compliance with the statute of limitations, based on each claim of the petitioner and the respondent; the Commisioner's record of date of assesment is February 27, 1956 while the petitioner believes the demand was made on December 27, 1955 so that, as the petitioner corporation claims, the Commissioner's action to recover its tax liability should be deemed to have prescribed for failure on the part of the Commissioner to file a complaint for collection against it in an appropriate civil action.

 

ISSUE: Has the action for collection prescribed?

 

HELD: No. It has been held that "a judicial action for the collection of a tax is begun by the filing of a complaint with the proper court of first instance, or where the assessment is appealed to the Court of Tax Appeals, by filing an answer to the taxpayer's petition for review wherein payment of the tax is prayed for." This is but logical for where the taxpayer avails of the right to appeal the tax assessment to the Court of Tax Appeals, the said Court is vested with the authority to pronounce judgment as to the taxpayer's liability to the exclusion of any other court. In the present case, regardless of whether the assessments were made on February 24 and 27, 1956, as claimed by the Commissioner, or on December 27, 1955 as claimed by the taxpayer, the government's right to collect the taxes due has clearly not prescribed, as the taxpayer's appeal or petition for review was filed with the Tax Court on May 4, 1960, with the Commissioner filing on May 20, 1960 his Answer with a prayer for payment of the taxes due, long before the expiration of the five-year period to effect collection by judicial action counted from the date of assessment.

 

REPUBLIC vs. ARANETA
2 SCRA 144
GR No. L-14142, May 30, 1961
"Where the tax obligation is secured by a bond, the prescriptive period for the action for the forfeiture of the bond is governed by the Civil Code."

 

FACTS: The Solicitor General, in behalf of the Republic of the Philippines, filed before CFI of Manila an action against the defendant Araneta, as principals, and Manila Surety, as surety, to recover the internal revenue taxes including surcharges, the payment of which was guaranteed by a bond executed when the first extrajudicial demand for payment was made. The appellant-taxpayers contend that the appellee's cause of action has prescribed, because the action for recovery of internal revenue taxes and surcharge due brought on 22 February 1957, was not commenced within the period of five years after the assessment dated 15 May 1948 had been made, as provided for in Section 331 of the Tax Code.

 

ISSUE: Has the action to recover the taxes due from the taxpayer and the surety already prescribed?

 

HELD: No. The appellant-taxpayers cannot invoke prescription under the provisions of Section 331 of the NIRC because the government is suing on the bond executed and filed by them to guarantee payment in 6 monthly installments of the tax liability due from 1946 to 1948, which is a separate and distinct obligation of the parties thereto. The action to enforce the obligation on the bond executed on March 18, 1949, having been filed in court on February 22, 1957, was within the 10-year prescriptive period to enforce a written contractual obligation, as set by the Civil Code.

 

MARCOS II vs. CA
273 SCRA 47
GR No. 120880, June 5, 1997
"The approval of the court sitting in probate is not a mandatory requirement in the collection of estate taxes."
"In case of failure to file a return, the tax may be assessed at anytime within 10 years after the omission."

 

FACTS: Bongbong Marcos sought for the reversal of the ruling of the Court of Appeals to grant CIR's petition to levy the properties of the late Pres. Marcos to cover the payment of his tax delinquencies during the period of his exile in the US. The Marcos family was assessed by the BIR after it failed to file estate tax returns. However the assessment were not protested administratively by Mrs. Marcos and the heirs of the late president so that they became final and unappealable after the period for filing of opposition has prescribed. Marcos contends that the properties could not be levied to cover the tax dues because they are still pending probate with the court, and settlement of tax deficiencies could not be had, unless there is an order by the probate court or until the probate proceedings are terminated.
    Petitioner also pointed out that applying Memorandum Circular No. 38-68, the BIR's Notices of Levy on the Marcos properties were issued beyond the allowed period, and are therefore null and void.

 

ISSUE: Are the contentions of Bongbong Marcos correct?

 

HELD: No. The deficiency income tax assessments and estate tax assessment are already final and unappealable -and-the subsequent levy of real properties is a tax remedy resorted to by the government, sanctioned by Section 213 and 218 of the National Internal Revenue Code. This summary tax remedy is distinct and separate from the other tax remedies (such as Judicial Civil actions and Criminal actions), and is not affected or precluded by the pendency of any other tax remedies instituted by the government.
  The approval of the court, sitting in probate, or as a settlement tribunal over the deceased's estate is not a mandatory requirement in the collection of estate taxes. On the contrary, under Section 87 of the NIRC, it is the probate or settlement court which is bidden not to authorize the executor or judicial administrator of the decedent's estate to deliver any distributive share to any party interested in the estate, unless it is shown a Certification by the Commissioner of Internal Revenue that the estate taxes have been paid. This provision disproves the petitioner's contention that it is the probate court which approves the assessment and collection of the estate tax.
   On the issue of prescription, the omission to file an estate tax return, and the subsequent failure to contest or appeal the assessment made by the BIR is fatal to the petitioner's cause, as under Sec.223 of the NIRC, in case of failure to file a return, the tax may be assessed at anytime within 10 years after the omission, and any tax so assessed may be collected by levy upon real property within 3 years (now 5 years) following the assessment of the tax. Since the estate tax assessment had become final and unappealable by the petitioner's default as regards protesting the validity of the said assessment, there is no reason why the BIR cannot continue with the collection of the said tax.

REPUBLIC vs. HIZON
320 SCRA 574
GR No. 130430, December 13, 1999
"A request for reconsideration of the tax assessment does not effectively suspend the running of the precriptive period if the same is filed after the assessment had become final and unappealable."

 

FACTS: On July 18, 1986, the BIR issued to respondent Salud V. Hizon a deficiency income tax assessment covering the fiscal year 1981-1982. Respondent not having contested the assessment, petitioner BIR, on January 12, 1989, served warrants of distraint and levy to collect the tax deficiency. However, for reasons not known, it did not proceed to dispose of the attached properties.
    More than three years later, the respondent wrote the BIR requesting a reconsideration of her tax deficiency assessment. The BIR, in a letter dated August 11, 1994, denied the request. On January 1, 1997, it filed a case with the RTC to collect the tax deficiency. Hizon moved to dismiss the case on two grounds: (1) that the complaint was not filed upon authority of the BIR Commissioner as required by Sec. 221 of the NIRC, and (2) that the action had already prescribed. Over petitioner's objection, the trial court granted the motion and dismissed the complaint.
    BIR on the other hand contends that respondent's request for reinvestigation of her tax deficiency assessment on November 1992 effectively suspended the running of the period of prescription.

 

ISSUE: Has the action for collection of the tax prescribed?

 

HELD: Yes. Sec. 229 of the NIRC mandates that a request for reconsideration must be made within 30 days from the taxpayer's receipt of the tax deficiency assessment, otherwise the assessment becomes final, unappealable and, therefore, demandable. The notice of assessment for respondent's tax deficiency was issued by petitioner on July 18, 1986. On the other hand, respondent made her request for reconsideration thereof only on November 3, 1992, without stating when she received the notice of tax assessment. Hence, her request for reconsideration did not suspend the running of the prescriptive period provided under Sec. 223(c). Although the Commissioner acted on her request by eventually denying it on August 11, 1994, this is of no moment and does not detract from the fact that the assessment had long become demandable.

CIR vs. VILLA
22 SCRA 3
GR No. L-23988, January 2, 1968
"What may be the subject of a judicial review is the decision of the Commissioner on the protest against assessment, not the assessment itself."

 

FACTS: The spouses Villa filed joint income tax returns for the years 1951 to 1956. The BIR issued assessments for deficiency of income tax for the said years. Without contesting the said assessments with the CIR, they filed a petition for review with the CTA. The CTA took cognizance of the of the appeal and rendered favorable judgment to the spouses. The CIR appealed to the SC questioning the jurisdiction of the CTA.

 

ISSUE: Is an appeal to the CTA proper in this case? Is the CTA vested with jurisdiction?

 

HELD: No. The rule is that where a taxpayer questions an assessment and asks the Collector to reconsider or cancel the same because he (the taxpayer) believes he is not liable therefor, the assessment becomes a "disputed assessment" that the Collector must decide, and the taxpayer can appeal to the Court of Tax Appeals only upon receipt of the decision of the Collector on the disputed assessment.  Since in the instant case the taxpayer appealed the assessment of the Commissioner of Internal Revenue without previously contesting the same, the appeal was premature and the Court of Tax Appeals had no jurisdiction to entertain said appeal. For, as stated, the jurisdiction of the Tax Court is to review by appeal decisions of Internal Revenue on disputed assessments. The Tax Court is a court of special jurisdiction. As such, it can take cognizance only of such matters as are clearly within its jurisdiction.

Word of the Week

"The letter killeth, but the spirit giveth life."

 

The quote from 2 Corinthians 3:6 if taken scholarly would normally be understood as referring to the way scriptures, canons, and statutes are to be read, interpreted and explained.

 

Literally, this "word," the "word of the week," its letters as well as its spirit does not only kill, does not only claim life, but burry you deep underground. Alas, this has been killing me softly, and its spirit has been diggin' my grave. This has been a habit and i want it out as badly as i want it to be. hahayzz..

 

The work files up, the opportunities have been pounding doors, but as usual, the very last minute of the day is the sweetest time to move your hands and swiftly grind away the heap.

 

Dictionary.com defines the "word" as brief as this..

pro·cras·ti·na·tion

  /proʊˌkræstəˈneɪʃən, prə‐/ Show Spelled[proh-kras-tuh-ney-shuhn, pruh‐]  (noun) - the act or habit of procrastinating, or putting off or delaying, especially something requiring immediate attention: She was smart, but her constant procrastination led her to be late with almost every assignment.

  

Meanwhile, wikipedia defines it this way...

 

In psychology, procrastination refers to the act of replacing high-priority actions with tasks of lower priority, or doing something from which one derives enjoyment, and thus putting off important tasks to a later time. In accordance with Freud, the Pleasure principle may be responsible for procrastination; humans do not prefer negative emotions, and handing off a stressful task until a further date is enjoyable. The concept that humans work best under pressure provides additional enjoyment and motivation to postponing a task. Some psychologists cite such behavior as a mechanism for coping with the anxiety associated with starting or completing any task or decision. Other psychologists indicate that anxiety is just as likely to get people to start working early as late and the focus should be impulsiveness. That is, anxiety will cause people to delay only if they are impulsive.

Schraw, Wadkins, and Olafson have proposed three criteria for a behavior to be classified as procrastination: it must be counterproductive, needless, and delaying. Similarly, Steel (2007) reviews all previous attempts to define procrastination, indicating it is "to voluntarily delay an intended course of action despite expecting to be worse off for the delay."

Procrastination may result in stress, a sense of guilt and crisis, severe loss of personal productivity, as well as social disapproval for not meeting responsibilities or commitments. These feelings combined may promote further procrastination. While it is regarded as normal for people to procrastinate to some degree, it becomes a problem when it impedes normal functioning. Chronic procrastination may be a sign of an underlying psychological disorder. Such procrastinators may have difficulty seeking support due to social stigma and the belief that task-aversion is caused by laziness, low willpower or low ambition.

 

Luckily for me, this has been working for quite some time, with of course some few good results. But i know this is wrong, and bad, and ugly.. and this should be arrested, and killed, and burried, and forgotten...
 

 

Digested Cases in Taxation (on criminal prosecution and taxpayers' suits)

UNGAB vs. CUSI

97 SCRA 877
GR No. L-41919-24 May 30, 1980
"An assessment of a deficiency is not necessary to a criminal prosecution for wilful attempt to defeat and evade the income tax."

FACTS: The BIR filed six criminal charges against Quirico Ungab, a banana saplings producer, for allegedly evading payment of taxes and other violations of the NIRC. Ungab, subsequently filed a motion to quash on the ground that (1) the information are null and void for want of authority on the part of the State Prosecutor to initiate and prosecute the said cases; and (2)that the trial court has no jurisdiction to take cognizance of the case in view of his pending protest against the assessment made by the BIR examiner. The trial court denied the motion prompting the petitioner to file a petition for certiorari and prohibition with preliminary injunction and restraining order to annul and set aside the information filed.

ISSUE: Is the contention that the criminal prosecution is premature since the CIR has not yet resolved the protest against the tax assessment tenable?

HELD: No. The contention is without merit. What is involved here is not the collection of taxes where the assessment of the Commissioner of Internal Revenue may be reviewed by the Court of Tax Appeals, but a criminal prosecution for violations of the National Internal Revenue Code which is within the cognizance of courts of first instance. While there can be no civil action to enforce collection before the assessment procedures provided in the Code have been followed, there is no requirement for the precise computation and assessment of the tax before there can be a criminal prosecution under the Code.
   An assessment of a deficiency is not necessary to a criminal prosecution for wilful attempt to defeat and evade the income tax. A crime is complete when the violator has knowingly and wilfully filed a fraudulent return with intent to evade and defeat the tax. The perpetration of the crime is grounded upon knowledge on the part of the taxpayer that he has made an inaccurate return, and the government's failure to discover the error and promptly to assess has no connections with the commission of the crime.

 

CIR vs. CA
257 SCRA 200
GR No. 119322 June 4, 1996
"Before one is prosecuted for willful attempt to evade or defeat any tax, the fact that a tax is due must first be proved."

FACTS: The CIR assessed Fortune Tobacco Corp for 7.6 Billion Pesos representing deficiency income, ad valorem and value-added taxes for the year 1992 to which Fortune moved for reconsideration of the assessments. Later, the CIR filed a complaint with the Department of Justice against the respondent Fortune, its corporate officers, nine (9) other corporations and their respective corporate officers for alleged fraudulent tax evasion for supposed non-payment by Fortune of the correct amount of taxes, alleging among others the fraudulent scheme of making simulated sales to fictitious buyers declaring lower wholesale prices, as allegedly shown by the great disparity on the declared wholesale prices registered in the "Daily Manufacturer's Sworn Statements" submitted by the respondents to the BIR. Such documents when requested by the court were not however presented by the BIR, prompting the trial court to grant the prayer for preliminary injuction sought by the respondent upon the reason that tax liabiliity must be duly proven before any criminal prosecution be had. The petitioner relying on the Ungab Doctrine sought the lifting of the writ of preliminary mandatory injuction issued by the trial court.

ISSUE: Whose contention is correct?

HELD: In view of the foregoing reasons, misplaced is the petitioners' thesis citing Ungab v. Cusi, that the lack of a final determination of Fortune's exact or correct tax liability is not a bar to criminal prosecution, and that while a precise computation and assessment is required for a civil action to collect tax deficiencies, the Tax Code does not require such computation and assessment prior to criminal prosecution.

    Reading Ungab carefully, the pronouncement therein that deficiency assessment is not necessary prior to prosecution is pointedly and deliberately qualified by the Court with following statement quoted from Guzik v. U.S.: "The crime is complete when the violator has knowingly and wilfully filed a fraudulent return with intent to evade and defeat a part or all of the tax." In plain words, for criminal prosecution to proceed before assessment, there must be a prima facie showing of a wilful attempt to evade taxes. There was a wilful attempt to evade tax in Ungab because of the taxpayer's failure to declare in his income tax return "his income derived from banana sapplings." In the mind of the trial court and the Court of Appeals, Fortune's situation is quite apart factually since the registered wholesale price of the goods, approved by the BIR, is presumed to be the actual wholesale price, therefore, not fraudulent and unless and until the BIR has made a final determination of what is supposed to be the correct taxes, the taxpayer should not be placed in the crucible of criminal prosecution. Herein lies a whale of difference between Ungab and the case at bar.

 

CIR vs. PASCOR
309 SCRA 402
GR No. 128315 June 29, 1999
 "An assessment is not necessary before a criminal charge can be filed."

FACTS: The BIR examined the books of account of Pascor Realty and Devt Corp for years 1986, 1987 and 1988, from which a tax liability of 10.5 Million Pesos was found. Based on the recommendations of the examiners, the CIR filed an information with the DOJ for tax evasion against the officers of Pascor. Upon receipt of the subpoena, the latter filed an urgent request for reconsideration/reinvestigation with the CIR, which was immediately denied upon the ground that no formal assessment has yet been issued by the Commisioner. Pascor elevated the CIR's decision to the CTA on a petition for review. The CIR filed a Motion to Dismiss on the ground of lack of jurisdiction of CTA as there was no formal assessment made against the respondents. The CTA dismissed the motion, hence this petition.

ISSUE: Is a formal assessment necessary in the filing of a criminal complaint?

HELD: No. Section 222 of the NIRC states that an assessment is not necessary before a criminal charge can be filed. This is the general rule. Private respondents failed to show that they are entitled to an exception. Moreover, the criminal charge need only be supported by a prima facie showing of failure to file a required return. This fact need not be proven by an assessment.

    The issuance of an assessment must be distinguished from the filing of a complaint. Before an assessment is issued, there is, by practice, a pre-assessment notice sent to the taxpayer. The taxpayer is then given a chance to submit position papers and documents to prove that the assessment is unwarranted. If the commissioner is unsatisfied, an assessment signed by him or her is then sent to the taxpayer informing the latter specifically and clearly that an assessment has been made against him or her. In contrast, the criminal charge need not go through all these. The criminal charge is filed directly with the DOJ. Thereafter, the taxpayer is notified that a criminal case had been filed against him, not that the commissioner has issued an assessment. It must be stressed that a criminal complaint is instituted not to demand payment, but to penalize the taxpayer for violation of the Tax Code.

MACEDA vs. MACARAIG, JR.
197 SCRA 771
GR No. 88291 May 31, 1991
"A taxpayer may question the legality of a law or regulation when it involves illegal expenditure of public money."

FACTS: Senator Ernesto Maceda sought to nullify certain decisions, orders, rulings, and resolutions of respondents Executive Secretary, Secretary of Finance, Commissioner of Internal Revenue, Commissioner of Customs and the Fiscal Incentives Review Board FIRB for exempting the National Power Corporation (NPC) from indirect tax and duties. RA 358, RA 6395 and PD 380 expressly grant NPC exemptions from all taxes whether direct or indirect. In 1984, however, PD 1931 and EO 93 withdrew all tax exemptions granted to all GOCCs including the NPC but granted the President and/or the Secretary of Finance by recommendation of the FIRB the power to restore certain tax exemptions. Pursuant to the latter law, FIRB issued a resolution restoring the tax and duty exemption privileges of the NPC. The actions of the respondents were thus questioned by the petitioner by this petition for certiorari, prohibition and mandamus with prayer for a writ of preliminary injunction and/or restraining order. To which public respondents argued, among others, that petitioner does not have the standing to challenge the questioned orders and resolution because he was not in any way affected by such grant of tax exemptions.

ISSUE: Has a taxpayer the capacity to question the legality of the resolution issued by the FIRB restoring the tax exemptions?

HELD: Yes. In this petition it is alleged that petitioner is "instituting this suit in his capacity as a taxpayer and a duly-elected Senator of the Philippines." Public respondent argues that petitioner must show that he has sustained direct injury as a result of the action and that it is not sufficient for him to have a mere general interest common to all members of the public. The Court however agrees with the petitioner that as a taxpayer he may file the instant petition following the ruling in Lozada when it involves illegal expenditure of public money. The petition questions the legality of the tax refund to NPC by way of tax credit certificates and the use of said assigned tax credits by respondent oil companies to pay for their tax and duty liabilities to the BIR and Bureau of Customs.

GONZALES vs. MARCOS
65 SCRA 624
GR No. L-31685 July 31, 1975
"With the absence of any pecuniary or monetary interest owing from the public, a taxpayer may not have the right to question the legality of an issuance creating a trust for the benefit of the people but purely funded by charity."

FACTS: The petitioner questioned the validity of EO No. 30 creating the Cultural Center of the Philippines, having as its estate the real and personal property vested in it as well as donations received, financial commitments that could thereafter be collected, and gifts that may be forthcoming in the future. It was likewise alleged that the Board of Trustees did accept donations from the private sector and did secure from the Chemical Bank of New York a loan of $5 million guaranteed by the National Investment & Development Corporation as well as $3.5 Million received from President Johnson of the United States in the concept of war damage funds, all intended for the construction of the Cultural Center building estimated to cost P48 million. The petition was denied by the trial court arguing that with not a single centavo raised by taxation, and the absence of any pecuniary or monetary interest of petitioner that could in any wise be prejudiced distinct from those of the general public.

ISSUE: Has a taxpayer the capacity to question the validity of the issuance in this case?

HELD: No. It was therein pointed out as "one more valid reason" why such an outcome was unavoidable that "the funds administered by the President of the Philippines came from donations [and] contributions [not] by taxation." Accordingly, there was that absence of the "requisite pecuniary or monetary interest." The stand of the lower court finds support in judicial precedents. This is not to retreat from the liberal approach followed in Pascual v. Secretary of Public Works, foreshadowed by People v. Vera, where the doctrine of standing was first fully discussed. It is only to make clear that petitioner, judged by orthodox legal learning, has not satisfied the elemental requisite for a taxpayer's suit. Moreover, even on the assumption that public funds raised by taxation were involved, it does not necessarily follow that such kind of an action to assail the validity of a legislative or executive act has to be passed upon. This Court, as held in the recent case of Tan v. Macapagal, "is not devoid of discretion as to whether or not it should be entertained." The lower court thus did not err in so viewing the situation.

ABAYA vs. EBDANE, JR.
515 SCRA 720
GR No. 167919,  February 14, 2007
"A taxpayer need not be a party to the contract to challenge its validity."

FACTS: The petitioners, Plaridel M. Abaya who claims that he filed the instant petition as a taxpayer, former lawmaker, and a Filipino citizen, and Plaridel C. Garcia likewise claiming that he filed the suit as a taxpayer, former military officer, and a Filipino citizen, mainly seek to nullify a DPWH resolution which recommended the award to private respondent China Road & Bridge Corporation of the contract for the implementation of the civil works known as Contract Package No. I (CP I). They also seek to annul the contract of agreement subsequently entered into by and between the DPWH and private respondent China Road & Bridge Corporation pursuant to the said resolution.

ISSUE: Has petitioners the legal standing to file the instant case against the government?

HELD: Petitioners, as taxpayers, possess locus standi to file the present suit. Briefly stated, locus standi is a right of appearance in a court of justice on a given question. More particularly, it is a party’s personal and substantial interest in a case such that he has sustained or will sustain direct injury as a result of the governmental act being challenged.  Locus standi, however, is merely a matter of procedure and it has been recognized that in some cases, suits are not brought by parties who have been personally injured by the operation of a law or any other government act but by concerned citizens, taxpayers or voters who actually sue in the public interest. Consequently, the Court, in a catena of cases, has invariably adopted a liberal stance on locus standi, including those cases involving taxpayers.

    The prevailing doctrine in taxpayer’s suits is to allow taxpayers to question contracts entered into by the national government or government- owned or controlled corporations allegedly in contravention of law. A taxpayer is allowed to sue where there is a claim that public funds are illegally disbursed, or that public money is being deflected to any improper purpose, or that there is a wastage of public funds through the enforcement of an invalid or unconstitutional law. Significantly, a taxpayer need not be a party to the contract to challenge its validity.

Digested Cases in Taxation Law (set 2)

TIO vs. VRB
151 SCRA 208
GR No. L-75697, June 18, 1987
"The public purpose of a tax may legally exist even if the motive which impelled the legislature to impose the tax was to favor one industry over another."

FACTS: The petitioner assails the validity of PD 1987 entitled an "Act creating the Videogram Regulatory Board," citing especially Section 10 thereof, which imposes a tax of 30% on the gross receipts payable to the local government. Petitioner contends that aside from its being a rider and not germane to the subject matter thereof, and such imposition was being harsh, confiscatory, oppressive and/or unlawfully restraints trade in violation of the due process clause of the Constitution.

ISSUE: Is PD 1987 a valid exercise of taxing power of the state?

HELD: Yes. It is beyond serious question that a tax does not cease to be valid merely because it regulates, discourages, or even definitely deters the activities taxed. The power to impose taxes is one so unlimited in force and so searching in extent, that the courts scarcely venture to declare that it is subject to any restrictions whatever, except such as those rest in the discretion of the authority which exercises it. In imposing a tax, the legislature acts upon its constituents. This is, in general, a sufficient security against erroneous and oppressive taxation.
   The levy of the 30% tax is for a public purpose. It was imposed primarily to answer the need for regulating the video industry, particularly because of the rampant film piracy, the flagrant violation of intellectual property rights, and the proliferation of pornographic video tapes. And while it was also an objective of the DECREE to protect the movie industry, the tax remains a valid imposition.
   The public purpose of a tax may legally exist even if the motive which impelled the legislature to impose the tax was to favor one industry over another.

CITY OF BAGUIO vs. DE LEON
25 SCRA 938
GR No. L-24756, October 31, 1968
"There is no double taxation where one tax is imposed by the state and the other is imposed by the city."

FACTS: The City of Baguio passed an ordinance imposing a license fee on any person, entity or corporation doing business in the City. The ordinance sourced its authority from RA No. 329, thereby amending the city charter empowering it to fix the license fee and regulate businesses, trades and occupations as may be established or practiced in the City. De Leon was assessed for P50 annual fee it being shown that he was engaged in property rental and deriving income therefrom. The latter assailed the validity of the ordinance arguing that it is ultra vires for there is no statury authority which expressly grants the City of Baguio to levy such tax, and that there it imposed double taxation, and violates the requirement of uniformity.

ISSUE: Are the contentions of the defendant-appellant tenable?

HELD: No. First, RA 329 was enacted amending Section 2553 of the Revised Administrative Code empowering the City Council not only to impose a license fee but to levy a tax for purposes of revenue, thus the ordinance cannot be considered ultra vires for there is more than ample statury authority for the enactment thereof.
   Second, an argument against double taxation may not be invoked where one tax is imposed by the state and the other is imposed by the city, so that where, as here, Congress has clearly expressed its intention, the statute must be sustained even though double taxation results.
   And third, violation of uniformity is out of place it being widely recognized that there is nothing inherently obnoxious in the requirement that license fees or taxes be exacted with respect to the same occupation, calling or activity by both the state and the political subdivisions thereof.

BAGATSING vs. RAMIREZ
74 SCRA 306
GR No. L-41631, December 17, 1976
"The entrusting of the tax collection to private entities does not destroy the public purpose of a tax ordinance."

FACTS: Aside from the issue on publication, private respondent bewails that the market stall fees imposed in the disputed City Ordinance No. 7522, which regulates public markets and prescribes fees for rentals of stalls, are diverted to the exclusive private use of the Asiatic Integrated Corporation since the collection of said fees had been let by the City of Manila to the said corporation in a "Management and Operating Contract."

ISSUE: Does the delegation of the collection of taxes to a private entity invalidates a tax ordinance and defeats its public purpose?

HELD: No. The assumption is of course saddled on erroneous premise. The fees collected do not go direct to the private coffers of the corporation. Ordinance No. 7522 was not made for the corporation but for the purpose of raising revenues for the city. That is the object it serves. The entrusting of the collection of the fees does not destroy the public purpose of the ordinance. So long as the purpose is public, it does not matter whether the agency through which the money is dispensed is public or private. The right to tax depends upon the ultimate use, purpose and object for which the fund is raised. It is not dependent on the nature or character of the person or corporation whose intermediate agency is to be used in applying it. The people may be taxed for a public purpose, although it be under the direction of an individual or private corporation.

PASCUAL vs. SECRETARY OF PUBLIC WORKS
110 PHIL 331
GR No. L-10405, December 29, 1960
"A law appropriating the public revenue is invalid if the public advantage or benefit, derived from such expenditure, is merely incidental in the promotion of a particular enterprise."

FACTS: Governor Wenceslao Pascual of Rizal instituted this action for declaratory relief, with injunction, upon the ground that RA No. 920, which apropriates funds for public works particularly for the construction and improvement of Pasig feeder road terminals. Some of the feeder roads, however, as alleged and as contained in the tracings attached to the petition, were nothing but projected and planned subdivision roads, not yet constructed within the Antonio Subdivision, belonging to private respondent Zulueta, situated at Pasig, Rizal; and which projected feeder roads do not connect any government property or any important premises to the main highway. The respondents' contention is that there is public purpose because people living in the subdivision will directly be benefitted from the construction of the roads, and the government also gains from the donation of the land supposed to be occupied by the streets, made by its owner to the government.

ISSUE: Should incidental gains by the public be considered "public purpose" for the purpose of justifying an expenditure of the government?

HELD: No. It is a general rule that the legislature is without power to appropriate public revenue for anything but a public purpose. It is the essential character of the direct object of the expenditure which must determine its validity as justifying a tax, and not the magnitude of the interest to be affected nor the degree to which the general advantage of the community, and thus the public welfare, may be ultimately benefited by their promotion. Incidental to the public or to the state, which results from the promotion of private interest and the prosperity of private enterprises or business, does not justify their aid by the use public money.
   The test of the constitutionality of a statute requiring the use of public funds is whether the statute is designed to promote the public interest, as opposed to the furtherance of the advantage of individuals, although each advantage to individuals might incidentally serve the public.

COMMISSIONER vs. BOAC
149 SCRA 395
GR No. L-65773-74 April 30, 1987
"The source of an income is the property, activity or service that produced the income. For such source to be considered as coming from the Philippines, it is sufficient that the income is derived from activity within the Philippines."

FACTS: Petitioner CIR seeks a review of the CTA's decision setting aside petitioner's assessment of deficiency income taxes against respondent British Overseas Airways Corporation (BOAC) for the fiscal years 1959 to 1971. BOAC is a 100% British Government-owned corporation organized and existing under the laws of the United Kingdom, and is engaged in the international airline business. During the periods covered by the disputed assessments, it is admitted that BOAC had no landing rights for traffic purposes in the Philippines. Consequently, it did not carry passengers and/or cargo to or from the Philippines, although during the period covered by the assessments, it maintained a general sales agent in the Philippines — Wamer Barnes and Company, Ltd., and later Qantas Airways — which was responsible for selling BOAC tickets covering passengers and cargoes. The CTA sided with BOAC citing that the proceeds of sales of BOAC tickets do not constitute BOAC income from Philippine sources since no service of carriage of passengers or freight was performed by BOAC within the Philippines and, therefore, said income is not subject to Philippine income tax. The CTA position was that income from transportation is income from services so that the place where services are rendered determines the source.

ISSUE: Are the revenues derived by BOAC from sales of ticket for air transportation, while having no landing rights here, constitute income of BOAC from Philippine sources, and accordingly, taxable?

HELD: Yes. The source of an income is the property, activity or service that produced the income. For the source of income to be considered as coming from the Philippines, it is sufficient that the income is derived from activity within the Philippines. In BOAC's case, the sale of tickets in the Philippines is the activity that produces the income. The tickets exchanged hands here and payments for fares were also made here in Philippine currency. The site of the source of payments is the Philippines. The flow of wealth proceeded from, and occurred within, Philippine territory, enjoying the protection accorded by the Philippine government. In consideration of such protection, the flow of wealth should share the burden of supporting the government.

ATLAS CONSOLIDATED MINING DEVT CORP vs. CIR
524 SCRA 73, 103
GR Nos. 141104 & 148763, June 8, 2007
"The taxpayer must justify his claim for tax exemption or refund by the clearest grant of organic or statute law and should not be permitted to stand on vague implications."

"Export processing zones (EPZA) are effectively considered as foreign territory for tax purposes."

FACTS:  Petitioner corporation, a VAT-registered taxpayer engaged in mining, production, and sale of various mineral products, filed claims with the BIR for refund/credit of input VAT on its purchases of capital goods and on its zero-rated sales in the taxable quarters of the years 1990 and 1992. BIR did not immediately act on the matter prompting the petitioner to file a petition for review before the CTA. The latter denied the claims on the grounds that for zero-rating to apply, 70% of the company's sales must consists of exports, that the same were not filed within the 2-year prescriptive period (the claim for 1992 quarterly returns were judicially filed only on April 20, 1994), and that petitioner failed to submit substantial evidence to support its claim for refund/credit.
   The petitioner, on the other hand, contends that CTA failed to consider the following: sales to PASAR and PHILPOS within the EPZA as zero-rated export sales; the 2-year prescriptive period should be counted from the date of filing of the last adjustment return which was April 15, 1993, and not on every end of the applicable quarters; and that the certification of the independent CPA attesting to the correctness of the contents of the summary of suppliers’ invoices or receipts examined, evaluated and audited by said CPA should substantiate its claims. 

ISSUE: Did the petitioner corporation sufficiently establish the factual bases for its applications for refund/credit of input VAT?

HELD:  No. Although the Court agreed with the petitioner corporation that the two-year prescriptive period for the filing of claims for refund/credit of input VAT must be counted from the date of filing of the quarterly VAT return, and that sales to PASAR and PHILPOS inside the EPZA are taxed as exports because these export processing zones are to be managed as a separate customs territory from the rest of the Philippines, and thus, for tax purposes, are effectively considered as foreign territory, it still denies the claims of petitioner corporation for refund of its input VAT on its purchases of capital goods and effectively zero-rated sales during the period claimed for not being established and substantiated by appropriate and sufficient evidence. 
   Tax refunds are in the nature of tax exemptions.  It is regarded as in derogation of the sovereign authority, and should be construed in strictissimi juris against the person or entity claiming the exemption.  The taxpayer who claims for exemption must justify his claim by the clearest grant of organic or statute law and should not be permitted to stand on vague implications.

BOARD OF ASSESSMENT APPEALS OF LAGUNA vs. CTA, NWSA
8 SCRA 224
GR No. L-18125, May 31, 1963
"A tax on property of the Government, whether national or local, would merely have the effect of taking money from one pocket to put it in another pocket."

FACTS: National Waterworks and Sewerage Authority (NWSA), a public corporation owned by the Government of the Philippines as well as all property comprising waterworks and sewerage systems placed under it, took over  the Cabuyao-Sta. Rosa-Biñan Waterworks System in 1956. It was assessed by the Provincial Assessor of Laguna, for purposes of real estate taxes, on the real properties owned by Cabuyao Waterworks. The respondent protested claiming it is exempted from the payment of real estate taxes in view of the nature and kind of said property and functions and activities of petitioner. The petitioner denied the protest arguing that such real properties are subject to real estate tax because although said properties belong to the Republic of the Philippines, the same holds it, not in its governmental, political or sovereign capacity, but in a private, proprietary or patrimonial character, which, allegedly, is not covered by the exemption contained in section 3(a) of Republic Act No. 470.

ISSUE: Are the real properties owned by the respondent public corporation subject to real estate tax?

HELD: No. Republic Act No. 470 makes no distinction between property held in a sovereign, governmental or political capacity and those possessed in a private, proprietary or patrimonial character. And where the law does not distinguish neither may we, unless there are facts and circumstances clearly showing that the lawmaker intended the contrary, but no such facts and circumstances have been brought to our attention. Indeed, the noun "property" and the verb "owned" used in said section 3(a) strongly suggest that the object of exemption is considered more from the view point of dominion, than from that of domain.
   Moreover, taxes are financial burdens imposed for the purpose of raising revenues with which to defray the cost of the operation of the Government, and a tax on property of the Government, whether national or local, would merely have the effect of taking money from one pocket to put it in another pocket. Hence, it would not serve, in the final analysis, the main purpose of taxation. What is more, it would tend to defeat it, on account of the paper work, time and consequently, expenses it would entail.

PEPSI-COLA BOTTLING CO. OF THE PHILS., INC. vs. CITY OF BUTUAN
24 SCRA 789
GR No. L-22814, August 28, 1968
"The classification made in the exercise of power to tax, to be valid, must be reasonable ."

FACTS:  Plaintiff-appellant Pepsi-Cola sought to recover the sums paid by it under protest, to the City of Butuan, and collected by the latter, pursuant to its Municipal Ordinance No. 110 which plaintiff assails as null and void because it partakes of the nature of an import tax, amounts to double taxation, highly unjust and discriminatory, excessive, oppressive and confiscatory, and constitutes an invlaid delegation of the power to tax. The ordinance imposes taxes for every case of softdrinks, liquors and other carbonated beverages, regardless of the volume of sales, shipped to the agents and/or consignees  by outside dealers or any person or company having its actual business outside the City.

ISSUE: Does the tax ordinance violate the uniformity requirement of taxation?

HELD: Yes. The tax levied is discriminatory. Even if the burden in question were regarded as a tax on the sale of said beverages, it would still be invalid, as discriminatory, and hence, violative of the uniformity required by the Constitution and the law therefor, since only sales by "agents or consignees" of outside dealers would be subject to the tax. Sales by local dealers, not acting for or on behalf of other merchants, regardless of the volume of their sales, and even if the same exceeded those made by said agents or consignees of producers or merchants established outside the City of Butuan, would be exempt from the disputed tax.
   It is true that the uniformity essential to the valid exercise of the power of taxation does not require identity or equality under all circumstances, or negate the authority to classify the objects of taxation. The classification made in the exercise of this authority, to be valid, must, however, be reasonable and this requirement is not deemed satisfied unless: (1) it is based upon substantial distinctions which make real differences; (2) these are germane to the purpose of the legislation or ordinance; (3) the classification applies, not only to present conditions, but, also, to future conditions substantially identical to those of the present; and (4) the classification applies equally to all those who belong to the same class.

PEPSI-COLA BOTTLING CO. OF THE PHILS., INC. vs. MUNICIPALITY OF TANAUAN
69 SCRA 460
GR No. L-31156, February 27, 1976
"Legislative power to create political corporations for purposes of local self-government carries with it the power to confer on such local governmental agencies the power to tax.

FACTS: Plaintiff-appellant Pepsi-Cola commenced a complaint with preliminary injunction to declare Section 2 of Republic Act No. 2264, otherwise known as the Local Autonomy Act, unconstitutional as an undue delegation of taxing authority as well as to declare Ordinances Nos. 23 and 27 denominated as "municipal production tax" of the Municipality of Tanauan, Leyte, null and void. Ordinance 23 levies and collects from soft drinks producers and manufacturers a tax of one-sixteenth (1/16) of a centavo for every bottle of soft drink corked, and Ordinance 27 levies and collects on soft drinks produced or manufactured within the territorial jurisdiction of this municipality a tax of ONE CENTAVO (P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity. Aside from the undue delegation of authority, appellant contends that it allows double taxation, and that the subject ordinances are void for they impose percentage or specific tax.

ISSUE: Are the contentions of the appellant tenable?

HELD: No. On the issue of undue delegation of taxing power, it is settled that the power of taxation is an essential and inherent attribute of sovereignty, belonging as a matter of right to every independent government, without being expressly conferred by the people.  It is a power that is purely legislative and which the central legislative body cannot delegate either to the executive or judicial department of the government without infringing upon the theory of separation of powers. The exception, however, lies in the case of municipal corporations, to which, said theory does not apply. Legislative powers may be delegated to local governments in respect of matters of local concern. By necessary implication, the legislative power to create political corporations for purposes of local self-government carries with it the power to confer on such local governmental agencies the power to tax.
   Also, there is no validity to the assertion that the delegated authority can be declared unconstitutional on the theory of double taxation. It must be observed that the delegating authority specifies the limitations and enumerates the taxes over which local taxation may not be exercised. The reason is that the State has exclusively reserved the same for its own prerogative. Moreover, double taxation, in general, is not forbidden by our fundamental law, so that double taxation becomes obnoxious only where the taxpayer is taxed twice for the benefit of the same governmental entity or by the same jurisdiction for the same purpose, but not in a case where one tax is imposed by the State and the other by the city or municipality.
   On the last issue raised, the ordinances do not partake of the nature of a percentage tax on sales, or other taxes in any form based thereon. The tax is levied on the produce (whether sold or not) and not on the sales. The volume capacity of the taxpayer's production of soft drinks is considered solely for purposes of determining the tax rate on the products, but there is not set ratio between the volume of sales and the amount of the tax.

OSMEÑA vs. ORBOS
220 SCRA 703
GR No. 99886, March 31, 1993
" To avoid the taint of unlawful delegation of the power to tax, there must be a standard which implies that the legislature determines matter of principle and lays down fundamental policy."

FACTS: Senator John Osmeña assails the constitutionality of paragraph 1c of PD 1956, as amended by EO 137, empowering the Energy Regulatory Board (ERB) to approve the increase of fuel prices or impose additional amounts on petroleum products which proceeds shall accrue to the Oil Price Stabilization Fund (OPSF) established for the reimbursement to ailing oil companies in the event of sudden price increases. The petitioner avers that the collection on oil products establishments is an undue and invalid delegation of legislative power to tax. Further, the petitioner points out that since a 'special fund' consists of monies collected through the taxing power of a State, such amounts belong to the State, although the use thereof is limited to the special purpose/objective for which it was created. It thus appears that the challenge posed by the petitioner is premised primarily on the view that the powers granted to the ERB under P.D. 1956, as amended, partake of the nature of the taxation power of the State.

ISSUE: Is there an undue delegation of the legislative power of taxation?

HELD: None. It seems clear that while the funds collected may be referred to as taxes, they are exacted in the exercise of the police power of the State. Moreover, that the OPSF as a special fund is plain from the special treatment given it by E.O. 137. It is segregated from the general fund; and while it is placed in what the law refers to as a "trust liability account," the fund nonetheless remains subject to the scrutiny and review of the COA. The Court is satisfied that these measures comply with the constitutional description of a "special fund."    With regard to the alleged undue delegation of legislative power, the Court finds that the provision conferring the authority upon the ERB to impose additional amounts on petroleum products provides a sufficient standard by which the authority must be exercised. In addition to the general policy of the law to protect the local consumer by stabilizing and subsidizing domestic pump rates, P.D. 1956 expressly authorizes the ERB to impose additional amounts to augment the resources of the Fund.

VILLEGAS vs. HIU CHIONG
86 SCRA 270
GR No. L-29646, November 10, 1978
"A tax law should be declared invalid if it fails to lay down standards to guide or limit the actions of the taxing authority."

FACTS: The Municipal Board of Manila enacted Ordinance No. 6537 which prohibits aliens from being employed or to engage or participate in any position or occupation or business, without first securing an employment permit from the Mayor of Manila and paying the permit fee of P50.00. The respondent challenged the validity of the ordinance upon the contention that it does not qualify as a valid exercise of the power to tax for, as a revenue measure imposed on aliens employed in the City of Manila, the ordinance is discriminatory and violative of the rule of the uniformity in taxation, and as a police power measure, it makes no distinction between useful and non-useful occupations, imposing a fixed P50.00 employment permit, which is out of proportion to the cost of registration and that it fails to prescribe any standard to guide and/or limit the action of the Mayor, thus, violating the fundamental principle on delegation of legislative powers:

ISSUE: Is there a valid exercise of the taxing power of the local government?

HELD: None. First, the ordinance is not a regulatory or police power measure; it is but a revenue measure guised in a police power measure. Second, the P50.00 fee is unreasonable not only because it is excessive but because it fails to consider valid substantial differences in situation among individual aliens who are required to pay it. Although the equal protection clause of the Constitution does not forbid classification, it is imperative that the classification should be based on real and substantial differences having a reasonable relation to the subject of the particular legislation. The same amount of P50.00 is being collected from every employed alien whether he is casual or permanent, part time or full time or whether he is a lowly employee or a highly paid executive.
   On the illegal delegation part of the argument, Ordinance No. 6537 is void for it does not lay down any criterion or standard to guide the Mayor in the exercise of his discretion. It has been held that where an ordinance of a municipality fails to state any policy or to set up any standard to guide or limit the mayor's action, expresses no purpose to be attained by requiring a permit, enumerates no conditions for its grant or refusal, and entirely lacks standard, thus conferring upon the Mayor arbitrary and unrestricted power to grant or deny the issuance of permits, such ordinance is invalid, being an undefined and unlimited delegation of power to allow or prevent an activity per se lawful.

ESSO STANDARD EASTERN, INC. vs. ACTING COMMISSIONER OF CUSTOMS
18 SCRA 488
GR No. L-21841, October 28, 1966
"Exemptions from taxation are construed in strictissimi juris against the taxpayer and liberally in favor of the taxing authority."

FACTS: Petitioner, engaged in the industry of processing gasoline, oils etc., claims for the refund of special import taxes paid pursuant to the provision of RA 1394 which imposed a special import tax "on all goods, articles or products imported or brought into the Philippines." Exempt from this tax, by express mandate of Section 6 of the same law are "machinery, equipment, accessories, and spare parts, for the use of industries, miners, mining enterprises, planters and farmers". Petitioner argued that the importation it made of gas pumps used by their gasoline station operators should fall under such exemptions, being directly used in its industry. The Collector of Customs of Manila rejected the claim, and so as the Court on Tax Appeals. The CTA noted that the pumps imported were not used in the processing of gasoline and other oil products but by the gasoline stations, owned by the petitioner, for pumping out, from underground barrels, gasoline sold on retail to customers.

ISSUE: Is the contention of the petitioner tenable? Does the subject imports fall into the exemptions?

HELD: No. The contention runs smack against the familiar rules that exemption from taxation is not favored, and that exemptions in tax statutes are never presumed. Which are but statements in adherence to the ancient rule that exemptions from taxation are construed in strictissimi juris against the taxpayer and liberally in favor of the taxing authority. Tested by this precept, we cannot indulge in expansive construction and write into the law an exemption not therein set forth. Rather, we go by the reasonable assumption that where the State has granted in express terms certain exemptions, those are the exemptions to be considered, and no more. Since the law states that, to be tax-exempt, equipment and spare parts should be "for the use of industries", the coverage herein should not be enlarged to include equipment and spare parts for use in dispensing gasoline at retail.

Digested Cases in Wills and Succession

ATUN v. NUÑEZ
GR No.L-8018, October 26, 1955
87 PHIL 762

FACTS: Estefania Atun died without any issue leaving in the possession of the plaintiffs, her neices and nephews, a parcel of land. Such land was delivered by plaintiff Gil Atun to Silvestra Nuñez (sister of defendant-appellee Eusebio Nuñez) for cultivation, for which Silvestra paid the Atuns a part of the harvest as rental. In 1940, Silvestra turned over the land to defendant Eusebio Nuñez, who thereafter refused to recognize plaintiffs' ownership or to deliver their share of the produce. The defendant turn sold the land to his co-defendant Diego Belga, who took the property with the knowledge that it belonged, not to Nuñez, but to plaintiffs. There was no prior judicial declaration, however, that the plaintiffs were the legal heirs of the decedent.

ISSUE: Has plaintiffs the right to recover the property as a successor of the decedent?

HELD: Yes. In the instant case, as the land in question still stands registered in the name of Estefania Atun, now deceased, the present owners thereof would be her legal heirs. It is of record that Estefania Atun died without any issue or ascendants and left as her only surviving heirs the children of her brother Nicolas, plaintiffs herein; and the rule is settled that the legal heirs of a deceased may file an action arising out of a right belonging to their ancestor, without a separate judicial declaration of their status as such, provided there is no pending special proceeding for the settlement of the decedent's estate.

LEDESMA v. MCLACHLIN
GR No.L-44837, November 23, 1938
66 PHIL 547

FACTS: Lorenzo Quitco, died in 1930, leaving defendant Mclachlin and her children as heirs. Plaintiff Ana Ledesma, spurious/illegitimate child of Lorenzo Quitco, and her mother, sued to declare her as compulsory heir which the court however denied. Two years later, Lorenzo's father Eusebio died, and because he left some personal and real properties without a will, an intestate proceeding was instituted and a court order declaring his compulsory heirs did not of course include Ana as one. Following such court action, the plaintiff proceeded to collect the sum payable on a promissory note then issued in favor of her by Lorenzo by filing a claim in the intestate proceedings of Eusebio's Estate claiming that the sum be paid out of the properties inherited by the defendants represents that of the successional rights of Lorenzo as a compulsory heir of his father Eusebio.

ISSUE: Has plaintiff the right collect the sum promised by her father from her grandfather's estate?

HELD: No. The properties inherited by the defendants from their deceased grandfather by representation are not subject to the payment of debts and obligations of their deceased father, who died without leaving any property. While it is true that under the provisions of Articles 924 to 927 of the Civil Code, a child presents his father or mother who died before him in the properties of his grandfather or grandmother, this right of representation does not make the said child answerable for the obligations contracted by his deceased father or mother, because, as may be seen from the provisions of the Code of Civil Procedure referring to partition of inheritances, the inheritance is received with the benefit of inventory, that is to say, the heirs only answer with the properties received from their predecessor. The herein defendants, as heirs of Eusebio Quitco, in representation of their father Lorenzo M. Quitco, are not bound to pay the indebtedness of their father from whom they did not inherit anything.

LIMJOCO v. INTESTATE ESTATE OF PEDRO FRAGRANTE
GR No.L-770, April 27, 1948
80 PHIL 776

FACTS: Petitioner opposed the issuance by the Public Service Commission of a certificate of public convenience to install, maintain and operate an ice plant in San Juan to the respondent despite his demise, contending that the Commission erred in allowing the substitution of the legal representative of the estate of Pedro O. Fragante for the latter as party applicant in the case then pending before the commission, and in subsequently granting to said estate the certificate applied for, which is said to be in contravention of law.

ISSUE: Is the decision of the Commission correct and with basis?

HELD: Yes. If the respondent had not died, there can be no question that he would have had the right to prosecute his application before the commission to its final conclusion. No one would have denied him that right... The aforesaid right of respondent to prosecute said application to its conclusion was one which by its nature did not lapse through his death. Hence, it constitutes a part of the assets of his estate, for which right was a property despite the possibility that in the end the commission might have denied his application, although under the facts of the case, the commission granted the application in view of the financial ability of the estate to maintain and operate the ice plant.

USON v. DEL ROSARIO
GR No.L-4963, January 29, 1953
92 PHIL 530

FACTS: Faustino Nebreda died in 1945 leaving as an only heir his estranged wife Maria Uson, the petitioner. The latter sued to recover the ownership and possession of five parcels of land occupied by defendant Maria del Rosario, decedent's common-law-spouse and her children. As a defense, defendant presented a deed of separation agreed upon and signed Faustino and Uson containing among others an statement giving a parcel of land to Uson as an alimony and the latter renouncing her rights to any inheritance from Faustino.
  The defendant also contends that while it is true that the four minor defendants are illegitimate children of the decedent and under the old Civil Code are not entitled to any successional rights, however, under the new Civil Code they are given the status and rights of natural children and are entitled to the successional rights which the law accords to the latter (article 2264 and article 287, new Civil Code), and because these successional rights were declared for the first time in the new code, they shall be given retroactive effect even though the event which gave rise to them may have occurred under the prior legislation (Article 2253, new Civil Code).

ISSUE: Are the contentions of the defendants correct?

HELD: No. It is evident that when the decedent died in 1945 the five parcels of land he was seized of at the time passed from the moment of his death to his only heir, his widow Maria Uson (Article 657, old Civil Code). As this Court aptly said, "The property belongs to the heirs at the moment of the death of the ancestor as completely as if the ancestor had executed and delivered to them a deed for the same before his death" (Ilustre vs. Alaras Frondosa, 17 Phil., 321). From that moment, therefore, the rights of inheritance of Maria Uson over the lands in question became vested.
  The claim of the defendants that Uson had relinquished her right over the lands in question in view of her expressed renunciation to inherit any future property that her husband may acquire and leave upon his death in the deed of separation they had entered into cannot be entertained for the simple reason that future inheritance cannot be the subject of a contract nor can it be renounced.
  Nor does the contention that the provisions of the New Civil Code shall apply and be given retroactive effect. Article 2253 above referred to provides indeed that rights which are declared for the first time shall have retroactive effect even though the event which gave rise to them may have occurred under the former legislation, but this is so only when the new rights do not prejudice any vested or acquired right of the same origin... As already stated in the early part of this decision, the right of ownership of Maria Uson over the lands in question became vested in 1945 upon the death of her late husband and this is so because of the imperative provision of the law which commands that the rights to succession are transmitted from the moment of death (Article 657, old Civil Code). The new right recognized by the new Civil Code in favor of the illegitimate children of the deceased cannot, therefore, be asserted to the impairment of the vested right of Maria Uson over the lands in dispute.

LITONJUA v. MONTILLA
GR No.L-4170, January 31, 1952, 90PHIL757
90 PHIL 757

FACTS: Pedro Litonjua obtained a judgment against Claudio Montilla for the payment of a sum of P4,039. Failing to find or identify a property of Claudio to be levied, petitioner then proceeded to file a claim in the intestate proceeding of the estate of Agustin Montilla Sr, father of the deceased. The estate has not yet been properly probated.

ISSUE: Could the petitioner succeed in collecting the debt as against the estate of the debtor's deceased parent?

HELD:  No. In the case of Ortiga Brothers and Co. vs. Enage and Yap Tico, 18 Phil. 345, it was held that the creditor of the heirs of a deceased person is entitled to collect his claim out of the property which pertains by inheritance to said heirs, only after the debts of the testate or intestate have been paid and when the net assets that are divisible among the heirs are known, because the debts of the deceased must first be paid before his heirs can inherit. It was therein also held that a person who is not a creditor of a deceased, testate or intestate, has no right to intervene either in the proceedings brought in connection with the estate or in the settlement of the succession. The foregoing pronouncements are perfectly applicable to the case at bar, because the appellant is not a creditor of the deceased Agustin Montilla, Sr. and he seeks to collect his claim out of the inheritance of Claudio Montilla, an heir, before the net assets of the intestate estate have been determined.

DE GUZMAN vda. DE CARRILLO v. DE PAZ
GR No.L-4133, May 13, 1952
91 PHIL 265

FACTS: A lot had been mortgaged by spouses Severino Salak and Petra Garcia to Pedro Magat; the latter then assigned the mortgage to Honoria Salak. After the death Petra, Severino transferred 1/2 of his rights to the property to Honoria for the sum representing 1/2 of the consideratioin paid by her to the mortgagees Magat. Severino later died leaving the defendants as heirs. Honoria also died, with the plaintiff as heir. Intestate proceedings were instituted for the settlement and distribution of the estate of the deceased Severino and Petra, including the lot in question which was adjudicated, after proper proceedings in favor of the defendants. Plaintiff sued for reconveyance of the 1/2 of the portion of the lot in her favor as heir of Honoria.

ISSUE: May the petition prosper?

HELD: No. The property now sought to be recovered from the defendants was adjudicated in their favor after all claims, indebtedness and obligations chargeable against the intestate estate of the deceased Severino Salak and Petra Garcia had been all paid and accounted for out of the estate of the deceased; so that, in the eyes of the law, the properties now in the hands of the defendants are presumed to be free from all claims whatsoever. The claim of the plaintiff set up in the complaint should have been interposed during the pendency and progress of Special Proceeding No. 3; but plaintiff not having done so, she cannot now bring this action against the defendants, for it is clear that there exists no privity of contract between plaintiff and defendants upon which plaintiff can predicate her action against the present defendants.

IBARLE v. PO
GR No.L-5064, February 27, 1953
92 PHIL 721

FACTS: Leonardo Winstanley died leaving a parcel of land to his surviving spouse Catalina Navarro and some minor children. Catalina sold the entire parcel of land to Maria Canoy who later sold the same land to the plaintiff Bienvenido Ibarle. After some time, after her appointment as guardian of her minor children, Catalina again sold 1/2 of the land in question, which portion now belonged to the children as heirs, to herein defendant Esperanza Po.

ISSUE: Which sale was valid, and who has the rightful claim to the property?

HELD: The sale to defendant is valid. Article 657 of the old Civil Code provides: "The rights to the succession of a person are transmitted from the moment of his death." in a slightly different language, this article is incorporated in the new Civil Code as article 777.
  The above provision and comment make it clear that when Catalina Navarro Vda. de Winstanley sold the entire parcel to the Canoy spouses, one-half of it already belonged to the seller's children. No formal or judicial declaration being needed to confirm the children's title, it follows that the first sale was null and void in so far as it included the children's share.
  On the other hand, the sale to the defendant having been made by authority of the competent court was undeniably legal and effective. The fact that it has not been recorded is of no consequence. If registration were necessary, still the non-registration would not avail the plaintiff because it was due to no other cause than his own opposition.

OSORIO v. OSORIO
GR No.L-10474, March 29, 1916
41 PHIL 531

FACTS: Francisco Osorio y Garcia filed a written complaint alleging that he is a natural son of one Francisco Osorio y Reyes who died in 1896; and that he had been in continuous possession of the status of natural son of said Osorio y Reyes, as proven by direct acts of the latter and of his family; that the defendant Soledad Osorio, lawful daughter and lawful heir of said Osorio y Reyes, be ordered to recognize the plaintiff as a natural son of said Osorio y Reyes, and is entitled to share in his father's estate; and, furthermore, that said defendant be ordered to furnish subsistence to plaintiff in such amount as the court might deem proper to fix. The evidence offered relating to the fact of filiation of Osorio y Garcia to Osorio Reyes is strong and unimpeachable, so that the court found the legitimacy of claim of Osorio y Garcia to be properly established.

ISSUE: Has the plaintiff the right to be recognized as co-heir and be entitled to the rights appertaining to his deceased father's estate?

HELD: Yes. Recognition of the child as a natural child must be made if he has been in continuous possession of his filiation, proven by the attendance of his father at his baptism, in the certificate in which his name and that of his mother appear, though the document contains errors, and by his father's statement to various friends that the boy was his natural son, and by his father's always having attended to the care, education and support of his son.
  So that the plaintiff, Francisco Osorio y Garcia, according to the facts proven in this case and the law on the subject, is entitled to have his half sister Soledad Osorio, a legitimate daughter of the father of both of them, recognize him as being the natural, recognized son of Francisco Osorio y Reyes and as entitled to the rights granted him by law in respect to his deceased father's estate, all of which is in possession of the defendant spouses.

RAMIREZ v. BALTAZAR
GR No.L-25049, August 30, 1968
22 SCRA 918

FACTS: Victoriana Eguaras, single, mortgaged a real estate to spouses Baltazar, defendants in this case. Upon demise of Victoriana, the mortgagees, as creditors of the deceased, filed a petition for the intestate proceedings of Victoriana's estate, alleging further that plaintiffs Felimon and Monica Ramirez are heirs of the deceased. Felimon was later appointed as adminstrator but did not qualify so that Artemio Diawan was appointed as judicial administrator of the estate. The mortgagees then filed a foreclosure of the property in question and succeeded, after Diawan failed to file an answer against the petition. The foreclosure sale ensued, the property was bought by the mortgagees themselves and the sale was confirmed by the court. Felimon sued for the annulment of the entire foreclosure proceedings, alleging among others the failure of the judicial administrator to protect their interests. Defendants contended that plaintiffs have no legal capacity to sue and hava no cause of action.

ISSUE: Have the plaintiffs the cause of action against the defendant?

HELD: Yes. There is no question that the rights to succession are automatically transmitted to the heirs from the moment of the death of the decedent. While, as a rule, the formal declaration or recognition to such successional rights needs judicial confirmation, this Court has, under special circumstances, protected these rights from encroachments made or attempted before the judicial declaration. In Pascual vs. Pascual, it was ruled that although heirs have no legal standing in court upon the commencement of testate or intestate proceedings, this rule admits of an exception as "when the administrator fails or refuses to act in which event the heirs may act in his place."

DE BORJA v. MENCIAS
GR No.L-20609, September 29, 1966
21 SCRA 1133

FACTS: Petitioners Juan De Borja et al. petitioned for the reversal of the order of Judge Mencias, denying their petition cause the sale of the properties levied upon to satisfy the money judgment in a civil case rendered in favor of petitioners against respondent Crisanto de Borja. Petitioners levied aganst the rights, interest and
participation which Crisanto de Borja had in certain real properties, as an heir of the decedents Josefa Tangco and Francisco de Borja, whose estates were then pending settlement in Special Proceedings Nos. F-7866 and 1955 of the aforementioned court, respectively.
this Court hereby holds that whatever interest, claim or right which Crisanto de Borja may have in the testate estate of Josefa Tangco and in the intestate estate of Francisco de Borja are subject to attachment and execution for the purpose of satisfying the money judgment rendered against the said heir

ISSUE: May the sale of the property levied for execution proceed?

HELD: The above question must be answered in the affirmative, provided it is understood that the sale shall be only of whatever rights, interest and participation may be adjudicated to said heir as a result of the final settlement of the estates, and that delivery thereof to the judgment creditor or to the purchaser at the public sale thereof shall be made only after the final settlement of the estates and in the manner provided by the legal provision mentioned above.

RODRIGUEZ v. DE BORJA
GR No.L-21993, June 21, 1966
17 SCRA 418

FACTS: Private respondents Apolonia Pangilinan and Adelaida Jacalan delivered to the Clerk of Court of Bulacan a purported last will and testament of Fr. Rodriguez, meanwhile the petitioners filed a petition before the court to examine the purported will but which was later withdrawn, and a petition for the settlement of the intestate estate of Fr. Rodriguez was subsequently field in a another court in Rizal. The petitioners now sought the dismissal of the special proceeding on the settlement of the decedent's estate based on the purported will, questioning therefore the jurisdiction of CFI Bulacan.

ISSUE: Does CFI Bulacan have jurisdiction to proceed with the testate proceedings?

HELD: Yes. The jurisdiction of the Court of First Instance of Bulacan became vested upon the delivery thereto of the will of the late Father Rodriguez, even if no petition for its allowance was filed until later, because upon the will being deposited the court could, motu proprio, have taken steps to fix the time and place for proving the will, and issued the corresponding notices conformably to what is prescribed by section 3, Rule 76, of the Revised Rules of Court. Moreover, aside from the rule that the Court first taking cognizance of the settlement of the estate of a decedent shall exercise jurisdiction to the exclusion of all other courts, intestate succession is only subsidiary or subordinate to the testate, since intestacy only takes place in the absence of a valid operative will.

CHAVEZ v. IAC
GR No. L-68282, November 8, 1990

FACTS: Manuela Buenavista assigned her paraphernal property in equal pro-diviso among her 6 children, while possession of such property still remains with her. Three of her children sold each their share to private respondent Concepcion, consolidating 4/6 portion thereof. Deeds of sale were therefor executed with the conformity of Manuela. Despite such transfers, the latter sold the entire property to one of the siblings, herein petitioner Raquel Chavez. Respondent sued for the annulment of the later sale to Raquel which was denied by the trail court but which later decision overturned by the Court of Appeals. On appeal, petitioner also contends that their mother has left a last will and this will supercedes the earlier transfers.

ISSUE: Is partition inter-vivos, and sale based on such partition valid? Does a last will supercede that of the partition inter-vivos?

HELD: Yes. When a person makes a partition by will, it is imperative that such partition must be executed in accordance with the provisions of the law on wills; however, when a person makes the partition of his estate by an act inter vivos, such partition may even be oral or written, and need not be in the form of a will, provided that the partition does not prejudice the legitime of compulsory heirs. xxx The Deeds of Sale are not contracts entered into with respect to future inheritance but a contract perfected and consummated during the lifetime of Manuela Buenavista who signed the same and gave her consent thereto. Such partition inter vivos, executed by the property owner herself, is valid.

It would be unjust and inequitable to allow Manuela Buenavista Vda. de Chavez to revoke the sales she herself authorized as well as the sale she herself executed in favor of her son only to execute a simulated sale in favor of her daughter Raquel who had already profited from the sale she made of the property she had received in the partition inter vivos.

NERI v. AKUTIN
GR No.L-47799, May 21, 1943
74 PHIL 185

FACTS: This is a case where the testator Agripino Neri in his will left all his property by universal title to the children by his second marriage, the herein respondents, with omission of the children by his first marriage, the herein petitioner. The omission of the heirs in the will was contemplated by the testator with the belief that he had already given each of the children portion of the inheritance, particularly a land he had abandoned was occupied by the respondents over which registration was denied for it turned out to be a public land, and an aggregate amount of money which the respondents were indebted to their father.

ISSUE: Should there be cancellation of the will, in view of the omission of heirs? Is there disinheritance in this case?

HELD: Yes. The Court annulled the institution of heirs and declared a total intestacy on the ground that testator left all his property by universal title to the children by his second marriage, without expressly disinheriting the children by his first marriage but upon the erroneous belief that he had given them already more shares in his property than those given to the children by his second marriage.  Disinheritance made without a statement of the cause, if contested, shall annul the institution of heirs in so far as it is prejudicial to the disinherited person. This is but a case of preterition which annuls the institution of heirs.

BARANDA v. BARANDA
GR No.73275 May 20, 1987

FACTS: Paulina Baranda died without issue, but before her demise, two of her supposed heirs, the herein respondents Evangelina and Elisa Baranda, have already taken possession of 6 parcels of land and caused the transfer of such by virtue of questionable sales which the late widow had also sought the reconveyance which did not however materialized. The petitioners, siblings of the decedent, now sought the annulment of the supposed sale or transfers. Respondents question the petitioners legal standing, them being not a party-in-interest in the deed of sale.

ISSUE: Can the petitioners impugn the validity of the sales?

HELD: This Court has repeatedly held that "the legal heirs of a decedent are the parties in interest to commence ordinary actions arising out of the rights belonging to the deceased, without separate judicial declaration as to their being heirs of said decedent, provided that there is no pending special proceeding for the settlement of the decedent's estate.

There being no pending special proceeding for the settlement of Paulina Baranda's estate, the petitioners, as her intestate heirs, had the right to sue for the reconveyance of the disputed properties, not to them, but to the estate itself of the decedent, for distribution later in accordance with law. Otherwise, no one else could question the simulated sales and the subjects thereof would remain in the name of the alleged vendees, who would thus have been permitted to benefit from their deception, In fact, even if it were assumed that those suing through attorneys-in-fact were not properly represented, the remaining petitioners would still have sufficed to impugn the validity of the deeds of sale.

BALAIS v. BALAIS
GR No.L-33924, March 18, 1988
159 SCRA 47

FACTS: On an action for recovery of real property filed by the respondents, spurious children of the late Escolastico Balais who died in 1948, against the petitioners, legitimate children of the deceased, the trial court decreed reconveyance of the portion of the property belonging to the legitime and further declaring partition that sent 1/4 portion of the legitime to the respondents. Petitioners come now questioning the partition and seeking the reconveyance of the 1/4 share that went to the spurious children, relying on the provisions of the old civil code, and thereby questioning the competence and jurisdiction of the trial court,

ISSUE: Is the court competent to decree the partition, without it being asked in the complaint? Could the provisions of the new civil code be applied over a case which occurs prior to its effectivity?

HELD: 1. Yes. The court acquired jurisdiction by estoppel. It must be noted that, in spite of the broad challenge the appellants present against the jurisdiction of the trial court to order the distribution of the property, they, in reality, question only that part of the decision awarding a one-fourth part of the property to the illegitimate children of the deceased, upon the ground that under the old Civil Code illegitimate children other than natural enjoyed no successionary rights. They do not contest the delivery of the estate to the deceased's widow or to themselves in the proportions decreed by the court.
2. No. The court erred in applying the provisions of the new code. But as stated, the error of the court notwithstanding, the case is a closed chapter, the decision having been rendered by a court of competent jurisdiction, have become final and executory. A decision, no matter how erroneous, becomes the law of the case between the parties upon attaining finality.

CONDE v. ABAYA
GR No.L-4275, March 23, 1909
13 PHIL 249

FACTS: Casiano Abaya died unmarried however leaving two unaknowledged children by herein plaintiff-appellee Paula Conde. The latter, as a ascendant heir of her children, sued for the settlement of the intestate estate of Casiano along with the acknowledgment of the two as natural children of the deceased. The trial court, with the opposition of the defendant-appellant Roman Abaya, brother of the deceased, rendered judgment bestowing the estate of Casiano to Conde as legitimate heir of the decedent's natural children.

ISSUE: May the mother of a natural child now deceased, bring an action for the acknowledgment of the natural filiation in favor of such child in order to appear in his behalf to receive the inheritance from the deceased natural father.

HELD: The right of action that devolves upon the child to claim his legitimacy lasts during his whole life, while the right to claim the acknowledgment of a natural child lasts only during the life of his presumed parents. An action for the acknowledgment of a natural child may, as an exception, be exercised against the heirs of the presumed parents in two cases: first, in the event of the death of the latter during the minority of the child, and second, upon the discovery of some instrument of express acknowledgment of the child, executed by the father or mother, the existence of which was unknown during the life of the latter.

But such action for the acknowledgment of a natural child can only be exercised by him. It cannot be transmitted to his descendants, or his ascendants.

REIRA v. PALMAROLI
GR No.14851, September 13, 1919
40 PHIL 105

FACTS: Antonia Reira, widow of Juan Pons who was at the time of the latter's death residing at Palma de Mallorca, sought the annulment of the order of the trial court admitting the probate of a purported will of her husband. The purported will was submitted to be admitted to probate by respondent Consul General Palmaroli. The petitioner contends that the probate of the will, in view of her absence, deprived her of her right to contest the original application.

ISSUE: Should the probated will yield to the rights of the decedent's heir?

HELD: Yes. A will is nothing more than a species of conveyance whereby a person is permitted, with the formalities prescribed by law, to control in a certain degree the disposition of his property after his death. Out of consideration for the important interests involved the execution and proof of wills has been surrounded by numerous safeguards, among which is the provision that after death of the testator his will may be judicially established in court. xxx The probate of a will, while conclusive as to its due execution, in no wise involves the intrinsic validity of its provisions. If, therefore, upon the distribution of the estate of the decedent, it should appear that any provision of his will is contrary to the law applicable to his case, the will must necessarily yield upon that point and the disposition made by law must prevail.

MONTINOLA v. HERBOSA

FACTS: Montinola filed an action against the heirs of Dr. Jose Rizal for recovery of possession of personal property (the RIZAL RELICS) allegedly sold to him by Doña Trinidad Rizal. The trial court held that neither party is entitled to the possession of such property, relying principally on the fact that in Rizal's Mi Ultimo Adios, there is a line where Rizal bequeathed all his property to the Filipino people. The court argued that the handwritten work of Rizal constitutes a holographic will giving the State all his property.

ISSUE: Does Mi Ultimo Adios constitute a last will?

HELD: No. An instrument which merely expresses a last wish as a thought or advice but does not contain a disposition of property, and executed without Animus Standi cannot be legally considered a will. Rizal's Mi Ultimo Adios is but a literary piece of work, and was so intended. It may be considered a will in a grammatical sense but not in a legal or juridical sense. Moreover, it also lacks the requirements of a holographic will such as a statement of the year month and day of its execution and his signature.

MERZA v. PORRAS
GR No.L-4888, May 25, 1953
93 PHIL 142

FACTS: Pilar Montealegre died leaving a will (Exhibit A) and a so-called codicil (Exhibit B), disinheriting her husband Pedro Porras and some of her relatives. The two documents were submitted to probate but were denied by the trial court, upon the grounds such as the defect of the attestation clause on Exh. A and that Exh. cannot be considered a codicil for it was executed by the testator a day before Exhibit A, thus  it cannot be included in the probate proceedings.

ISSUE: Should a document, expressly disinheriting certain heirs, executed by the testator prior to a supposed last will, be probated?

HELD: Yes. The trial court and the CA is correct that Exhibit B having been executed one day before Exhibit A could not be considered as a codicil "because a codicil, as the word implies, is only an addition to, or modification of, the will." The Court of Appeals added that "the contents of Exhibit B are couched in the language ordinarily used in a simple affidavit and as such, may not have the legal effect and force to a testamentary disposition."
However,  Exhibit B does partake of the nature of a will. A will is defined in article 667 of the Civil code of Spain as "the act by which a person dispose of all his property or a portion of it," and in article 783 of the new Civil Code as "an act whereby a person is permitted, with the formalities prescribed by law, to control to a certain degree the disposition of his estate, to take effect after his death. Exhibit B comes within this definition.

CASTAÑEDA v. ALEMANY
GR No.1439, March 19, 1904
3 PHIL 426

FACTS: Appellant constested the validity of the will of Doña Juana Moreno upon the ground that although the attestation clause in the will states that the testator signed the will in the presence of three witnesses who also each signed in each presence, the will was not actually written by the testator.

ISSUE: Is it necessary that a will be written by the testator herself?

HELD: No. Section 618 of the Civil Code requires (1) that the will be in writing and (2) either that the testator sign it himself or, if he does not sign it, that it be signed by some one in his presence and by his express direction. Who does the mechanical work of writing the will is a matter of indifference. The fact, therefore, that in this case the will was typewritten in the office of the lawyer for the testratrix is of no consequence.

MICIANO v. BRIMO
GR No.L-22595, November 1, 1927
50 PHIL 867

FACTS: Joseph Brimo, a Turkish national, died leaving a will which one of the clauses states that the law of the Philippines shall govern the partition and not the law of his nationality, and that legatees have to respect the will, otherwise the dispositions accruing to them shall be annulled. By virtue of such condition, his brother, Andre Brimo, an instituted heir was thus excluded because, by his action of having opposed the partition scheme, he did not respect the will. Andre sued contending that the conditions are void being contrary to law which provides that the will shall be probated according to the laws of the nationality of the decedent.

ISSUE: Is the condition as set by the testator valid?

HELD: No. A foreigner's will to the effect that his properties shall be distributed in accordance with Philippine law and not with his national law, is illegal and void, for his national law cannot be ignored in regard to those matters that Article 10 of the Civil Code states said national law should govern. Said condition then, in the light of the legal provisions above cited, is considered unwritten, and the institution of legatees in said will is unconditional and consequently valid and effective even as to the herein oppositor.

BELLIS v. BELLIS
GR No.L-23678, June 6, 1967
20 SCRA 358

FACTS: Amos G. Bellis, a native of Texas and US national, executed a will in the Philippines that specifies legacies for his first wife and three illegitimate children, and the residue estate be divided among his legitimate children. When he died, the executor administered the will but his illegitimate children opposed the partition claiming that aside from the legacies, they should still have a share from the legitime as complusory heirs of the decedent. Texas law, however, does not provide for the legitime.

ISSUE: Are the decedent's illegitimate children entitled to such portion of the legitime? What law shall govern the decendent's will?

HELD: No. The parties admit that the decedent was a citizen of the State of Texas, U.S.A., and that under the laws of Texas, there are no forced heirs or legitimes. Accordingly, since the intrinsic validity of the provision of the will and the amount of successional rights are to be determined under Texas law, the Philippine law on legitimes cannot be applied to the testacy of Amos G. Bellis. Hence, the illegitimate children of the decedent has no claim to the inheritance aside from those expressly provided legacies.