CONCEPCION VIDAL DE ROCES AND HER HUSBAND, MARCOS ROCES, AND ELVIRA VIDAL DE RICHARDS, PLAINTIFFS AND APPELLANTS, VS. JUAN POSADAS, JR., COLLECTOR OF INTERNAL REVENUE, DEFENDANT…

The
plaintiffs herein brought this action to recover from the defendant,
Collector of Internal Revenue, certain sums of money paid by them under
protest as inheritance tax. They appealed from the judgment rendered by
the Court of First Instance of Manila dismissing the action, without
costs.

On March 10 and 12, 1925, Esperanza Tuazon, by means
of public documents, donated certain parcels of land situated in Manila
to the plaintiffs herein, who, with their respective husbands, accepted
them in the same public documents, which were duly recorded in the
registry of deeds. By virtue of said donations, the plaintiffs took
possession of the said lands, received the fruits thereof and obtained
the corresponding transfer certificates of title.

On
January 5, 1926, the donor died in the City of Manila without leaving
any forced heir and in her will which was admitted to probate, she
bequeathed to each of the donees the sum of P5,000. After the estate
had been distributed among the instituted legatees and before delivery
of their respective shares, the appellee herein, as Collector of
Internal Revenue, ruled that the appellants, as donees and legatees,
should pay as inheritance tax the sums of P16,673 and P13,951.45,
respectively. Of these sums P15,191.48 was levied as tax on the
donation to Concepcion Vidal de Roces and P1,481.52 on her legacy, and,
likewise, P12,388.95 was imposed upon the donation made to Elvira Vidal
de Richards and P1,462.50 on her legacy. At first the appellants
refused to pay the aforementioned taxes but, at the insistence of the
appellee and in order not to delay the adjudication of the legacies,
they agreed at last, to pay them under protest.

The appellee
filed a demurrer to the complaint on the ground that the facts alleged
therein were not sufficient to constitute a cause of action. After the
legal questions raised therein had been discussed, the court sustained
the demurrer and ordered the amendment of the complaint which the
appellants failed to do, whereupon the trial court dismissed the action
on the ground that the aforementioned appellants did not really have a
right of action.

In their brief, the appellants assign only
one alleged error, to wit: that the demurrer interposed by the appellee
was sustained without sufficient ground.

The judgment appealed from was based on the provisions of section 1540 of the Administrative Code which reads as follows:

“Sec. 1540. Additions of gifts and advances.—After
the aforementioned deductions have been made, there shall be added to
the resulting amount the value of all gifts or advances made by the
predecessor to any of those who, after his death, shall prove to be his
heirs, devisees, legatees, or donees mortis causa.”

The appellants contend that the above-mentioned legal provision does not include donations inter vivos
and if it does, it is unconstitutional, null and void for the following
reasons: first, because it violates section 3 of the Jones Law which
provides that no law should embrace more than one subject, and that
subject should be expressed in the title thereof; second, that the
Legislature has no authority to impose inheritance tax on donations inter vivos;
and third, because a legal provision of this character contravenes the
fundamental rule of uniformity of taxation. The appellee, in turn,
contends that the words “all gifts” refer clearly to donations inter vivos and, in support of his theory, cites the doctrine laid down in the case of Tuason and Tuason vs.
Posadas (54 Phil., 289). After a careful study of the law and the
authorities applicable thereto, we are of the opinion that neither
theory reflects the true spirit of the aforementioned provision. The
gifts referred to in section 1540 of the Revised Administrative Code
are, obviously, those donations inter vivos that take effect
immediately or during the lifetime of the donor but are made in
consideration or in contemplation of death. Gifts inter vivos,
the transmission of which is not made in contemplation of the donor’s
death should not be understood as included within the said legal
provision for the reason that it would amount to imposing a direct tax
on property and not on the transmission thereof, which act does not
come within the scope of the provisions contained in Article XI of
Chapter 40 of the Administrative Code which deals expressly with the
tax on inheritances, legacies and other acquisitions mortis causa.

Our interpretation of the law is not in conflict with the rule laid down in the case of Tuason and Tuason vs. Posadas, supra. We said therein, as we say now, that the expression “all gifts” refers to gifts inter vivos inasmuch as the law considers them as advances on inheritance, in the sense that they are gifts inter vivos
made in contemplation or in consideration of death. In that case, it
was not held that that kind of gifts consisted in those made completely
independent of death or without regard to it.

Said legal
provision is not null and void on the alleged ground that the subject
matter thereof is not embraced in the title of the section under which
it is enumerated. On the contrary, its provisions are perfectly
summarized in the heading, “Tax on Inheritance, etc.” which is the
title of Article XI. Furthermore, the constitutional provision cited
should not be so strictly construed as to make it necessary that the
title contain a full index to all the contents of the law. It is
sufficient if the language used therein is expressed in such a way that
in case of doubt it would afford a means of determining the
legislator’s intention. (Lewis’ Sutherland Statutory Construction, Vol.
II, p. 651.) Lastly, the circumstance that the Administrative Code was
prepared and compiled strictly in accordance with the provisions of the
Jones Law on that matter should not be overlooked and that, in a
compilation of laws such as the Administrative Code, it is but natural
and proper that provisions referring to diverse matters should be
found. (Ayson and Ignacio vs. Provincial Board of Rizal and Municipal Council of Navotas, 39 Phil., 931.)

The appellants question the power of the Legislature to impose taxes on
the transmission of real estate that takes effect immediately and
during the lifetime of the donor, and allege as their reason that such
tax partakes of the nature of a land tax which the law has already
created in another part of the Administrative Code. Without making
express pronouncement on this question, for it is unnecessary, we wish
to state that such is not the case in this instance. The tax collected
by the appellee on the properties donated in 1925 really constitutes an
inheritance tax imposed on the transmission of said properties in
contemplation or in consideration of the donor’s death and under the
circumstance that the donees were later instituted as the former’s
legatees. For this reason, the law considers such transmissions in the
form of gifts inter vivos, as advances on inheritance and
nothing therein violates any constitutional provision, inasmuch as said
legislation is within the power of the Legislature.

“Property Subject to Inheritance Tax.—The
inheritance tax ordinarily applies to all property within the power of
the state to reach passing by will or the laws regulating intestate
succession or by gift inter vivos in the manner designated by
statute, whether such property be real or personal, tangible or
intangible, corporeal or incorporeal,” (26 R. C. L., p. 208, par. 177.)

In the case of Tuason and Tuason vs. Posadas, supra,
it was also held that section 1540 of the Administrative Code did not
violate the constitutional provision regarding uniformity of taxation.
It cannot be null and void on this ground because it equally subjects
to the same tax all of those donees who later become heirs, legatees or
donees mortis causa by the will of the donor. There would be
a repugnant and arbitrary exception if the provisions of the law were
not applicable to all donees of the same kind. In the case cited above,
it was said: “At any rate the argument adduced against its
constitutionality, which is the lack of uniformity, does not seem to be
well founded. It was said that under such an interpretation, while a
donee inter vivos who, after the predecessor’s death proved to be an heir, a legatee, or a donee mortis causa, would have to pay the tax, another donee inter vivos who did not prove to be an heir, a legatee, or a donee mortis causa
of the predecessor, would be exempt from such a tax. But as these are
two different cases, the principle of uniformity is inapplicable to
them.”

The last question of a procedural nature arising from
the case at bar, which should be passed upon, is whether the case, as
it now stands, can be decided on the merits or should be remanded to
the court a quo for further proceedings. According to our
view of the case, it follows that, if the gifts received by the
appellants were not given mortis causa, the same would not be
subject to the payment of an inheritance tax and said appellants would
have the right to recover the sums of money claimed by them. Hence the
necessity of ascertaining whether the complaint contains an allegation
to that effect. We have examined said complaint and found nothing of
that nature. On the contrary, it may be inferred from the allegations
contained in paragraphs 2 and 7 thereof that said donations inter vivos
were made in consideration of the donor’s death. We refer to the
allegations that such transmissions were effected in the month of
March, 1925, that the donor died in January, 1926, and that the donees
were instituted legatees in the donor’s will which was admitted to
probate. It is from these allegations, especially the last, that we
infer a presumption juris tantum that said donations were made mortis causa and, as such, are subject to the payment of inheritance tax.

Wherefore, the demurrer interposed by the appellee was well-founded
because it appears that the complaint did not allege facts sufficient
to constitute a cause of action. When the appellants refused to amend
the same, in spite of the court’s order to that effect, they
voluntarily waived the opportunity offered them and they are not now
entitled to have the case remanded for further proceedings, which would
serve no purpose altogether in view of the insufficiency of the
complaint.

Wherefore, the judgment appealed from is hereby affirmed, with costs of this instance against the appellants. So ordered.

Avanceña, C. J., Villamor, Ostrand, Abad Santos, Hull, Vickers, and Butte, JJ., concur.

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DISSENTING

VILLA-REAL, J., with whom concurs Street, J.:

I sustain my concurrence in Justice Street’s dissenting opinion in the case of Tuason and Tuason vs. Posadas (54 Phil., 289).

The majority opinion attempted to distinguish the present case from the above-mentioned case of Tuason and Tuason vs. Posadas, by interpreting section 1540 of the Administrative Code in the sense that it establishes the legal presumption juris tantum that all gifts inter vivos
made to persons who are not forced heirs but who are instituted
legatees in the donor’s will, have been made in contemplation of the
donor’s death. Presumptions are of two kinds: One determined by law
which is also called presumption of law or of right; and another which
is formed by the judge from circumstances antecedent to, coincident
with or subsequent to the principal fact under investigation, which is
also called presumption of man (presuncion de hombre). (Escriche, Vol. IV, p. 662.) The Civil Code as well as the Code of Civil Procedure establishes presumptions juris et de jure and juris tantum
which the courts should take into account in deciding questions of law
submitted to them for decision. The presumption which the majority
opinion wishes to draw from said section 1540 of the Administrative
Code can neither be found in this Code nor in any of the aforementioned
Civil Code and Code of Civil Procedure. Therefore, said presumption
cannot be called legal or of law. Neither can it be called a
presumption of man (presuncion de hombre) inasmuch as the
majority opinion did not infer it from circumstances antecedent to,
coincident with or subsequent to the principal fact which is the
donation itself. In view of the nature, mode of making and effects of
donations inter vivos, the contrary presumption would be more reasonable and logical; in other words, donations inter vivos made to persons who are not forced, heirs, but who are instituted legatees in the donor’s will, should be presumed as not made mortis causa,
unless the contrary is proven. In the case under consideration, the
burden of proof rests with the person who contends that the donation inter vivos has been made mortis causa.

It is, therefore, the undersigned’s humble opinion that the order
appealed from should be reversed and the demurrer overruled, and the
defendant ordered to file his answer to the complaint.