LORENZO vs. POSADAS JR.
LORENZO vs. POSADAS JR.
LORENZO vs. POSADAS JR.
FACTS: Thomas Hanley died, leaving a will and a considerable amount of real
and personal properties. Proceedings for the probate of his will and the
settlement and distribution of his estate were begun in the CFI of Zamboanga.
The will was admitted to probate.
The CFI considered it proper for the best interests of the estate to appoint a
trustee to administer the real properties which, under the will, were to pass to
nephew Matthew ten years after the two executors named in the will was
appointed trustee. Moore acted as trustee until he resigned and the plaintiff
Lorenzo herein was appointed in his stead.
ISSUE:
(e) Has there been delinquency in the payment of the inheritance tax?
HELD: The judgment of the lower court is accordingly modified, with costs
against the plaintiff in both instances
YES
The defendant maintains that it was the duty of the executor to pay the
inheritance tax before the delivery of the decedent’s property to the trustee.
Stated otherwise, the defendant contends that delivery to the trustee was
delivery to the cestui que trust, the beneficiary in this case, within the meaning
of the first paragraph of subsection (b) of section 1544 of the Revised
Administrative Code. This contention is well taken and is sustained. A trustee
is but an instrument or agent for the cestui que trust
There is no doubt that the testator intended to create a trust. He ordered in his
will that certain of his properties be kept together undisposed during a fixed
period, for a stated purpose. The probate court certainly exercised sound
judgment in appointmening a trustee to carry into effect the provisions of the
will
As the existence of the trust was already proven, it results that the estate which
plaintiff represents has been delinquent in the payment of inheritance tax and,
therefore, liable for the payment of interest and surcharge provided by law in
such cases.
The delinquency in payment occurred on March 10, 1924, the date when
Moore became trustee. On that date trust estate vested in him. The interest
due should be computed from that date.
(a) When does the inheritance tax accrue and when must it be satisfied?
The accrual of the inheritance tax is distinct from the obligation to pay the
same.
Acording to article 657 of the Civil Code, “the rights to the succession of a
person are transmitted from the moment of his death.” “In other words”, said
Arellano, C. J., “. . . the heirs succeed immediately to all of the property of the
deceased ancestor. The property belongs to the heirs at the moment of the
death of the ancestor as completely as if the ancestor had executed and
delivered to them a deed for the same before his death.”
Whatever may be the time when actual transmission of the inheritance takes
place, succession takes place in any event at the moment of the decedent’s
death. The time when the heirs legally succeed to the inheritance may differ
from the time when the heirs actually receive such inheritance. ” Thomas
Hanley having died on May 27, 1922, the inheritance tax accrued as of the
date.
From the fact, however, that Thomas Hanley died on May 27, 1922, it does not
follow that the obligation to pay the tax arose as of the date. The time for the
payment on inheritance tax is clearly fixed by section 1544 of the Revised
Administrative Code as amended by Act No. 3031, in relation to section 1543
of the same Code. The two sections follow:
(c) In determining the net value of the estate subject to tax, is it proper to
deduct the compensation due to trustees?
(d) What law governs the case at bar? Should the provisions of Act No. 3606
favorable to the tax-payer be given retroactive effect?
Lorenzo v. Posadas, G.R. No. L-43082 (64 PHIL 353) June 18, 1937
Issue/s:
1. Whether or not the provisions of Act No. 3606 (Tax Law) which is
favorable to the taxpayer be given retroactive effect?
Held and Reasoning: No. The respondent levied and assessed the
inheritance tax collected from the petitioner under the provisions of
section 1544 of the Revised Administrative Code as amended by Act No.
3606. However, the latter only enacted in 1930 – not the law in force
when the testator died in 1922. Laws cannot be applied retroactively.
The Court states that it is a well-settled principle that inheritance
taxation is governed by the statue in force at the time of the death
of the decendent. The Court also emphasized that “a statute should be
considered as prospective in its operation, unless the language of the
statute clearly demands or expresses that it shall have retroactive
effect…” Act No. 3606 does not contain any provisions indicating a
legislative intent to give it a retroactive effect. Therefore, the provisions
of Act No. 3606 cannot be applied to the case at bar.
Facts:
On 27 May 1922, Thomas Hanley died in Zamboanga, leaving a will and considerable amount of real and
personal properties. Hanley’s will provides the following: his money will be given to his nephew, Matthew
Hanley, as well as the real estate owned by him. It further provided that the property will only be given ten
years after Thomas Hanley’s death. Thus, in the testamentary proceedings, the Court of First Instance of
Zamboanga appointed P.J.M. Moore as trustee of the estate. Moore took oath of office on March 10, 1924,
and resigned on Feb. 29, 1932. Pablo Lorenzo was appointed in his stead. Juan Posadas, Collector of
Internal Revenue, assessed inheritance tax against the estate amounting to P2,057.74 which includes
penalty and surcharge. He filed a motion in the testamentary proceedings so that Lorenzo will be ordered
to pay the amount due. Lorenzo paid the amount in protest after CFI granted Posadas’ motion. He claimed
that the inheritance tax should have been assessed after 10 years. He asked for a refund but Posadas
declined to do so. The latter counterclaimed for the additional amount of P1,191.27 which represents
interest due on the tax and which was not included in the original assessment. However, CFI dismissed
this counterclaim. It also denied Lorenzo’s claim for refund against Posadas. Hence, both appealed.
Issue: Whether the estate was delinquent in paying the inheritance tax and therefore liable for the
P1,191.27 that Posadas is asking for?
Held: Yes. It was delinquent because according to Sec. 1544 (b) of the Revised Administrative Code,
payment of the inheritance tax shall be made before delivering to each beneficiary his share. This payment
should have been made before March 10, 1924, the date when P.J.M. Moore formally assumed the function
of trustee.
Although the property was only to be given after 10 years from the death of Hanley, the court considered
that delivery to the trustee is delivery to cestui que trust, the beneficiary within the meaning of Sec. 1544
(b).
Even though there was no express mention of the word “trust” in the will, the court of first instance was
correct in appointing a trustee because no particular or technical words are required to create a
testamentary trust (69 C.J.,p. 711). The requisites of a valid testamentary trust are: 1) sufficient words to
raise a trust, 2) a definite subject, 3) a certain or ascertained object. There is no doubt that Hanley intended
to create a trust since he ordered in his will that certain of his properties be kept together undisposed during
a fixed period or for a stated purpose.
***this case was assigned in our Agency and Partnership class. I created this file as a reviewer. I decided
to share it with the world, especially law students like me. hope it helped!