Lorenzo v. Posadas Case Digest

 

  PABLO LORENZO v. JUAN POSADAS, JR. June 18, 1937 | Laurel, J. | PALN Benefits Received Theory DOCTRINE: The obligation to pay taxes rests not upon the privileges enjoyed by, or the protection afforded to, a citizen by the government, but upon the necessity of money for the support of the state (Dobbins vs. Erie County). For this reason, no one is allowed to object to or resist the payment of taxes solely because no personal benefit to him can be pointed out. (Thomas vs. Gay). CASE SUMMARY:  SUMMARY:  Lorenzo, a trustee to Thomas’ estate, filed with the CFI to recover 2052.74 in Inheritance Tax paid to the CIR Posadas. Posadas claims that the estate being included in the trust does not exempt it from paying inheritance tax. The court ruled that intoagreement with Posadas, Sec. delivery 1544 (b) is trustee stated that the executor must que paytrust, the tax to transferring the estate the beneficiary, in other words to itthe is delivery to the cestui the prior trustee cannot deny that when he accepted he therefore acknowledged that the estate is not his. In addition, the court discussed that delaying collection due to a trust formed will lead to the abuse of the length prior to turnover and [DOCTRINE]. FACTS:   Lorenzo is the Trustee of the Estate of Thomas Hanley (Deceased). Posadas is the Collector of Internal Revenue   Thomas Hanley died in Zamboanga in the year 1992; PJM Moore was the original Trustee appointed by the court before turning it over to Lorenzo in Feb. 1932. o  The Will stated the Estate will pass to Matthew Hanley (Nephew) 10 years after the dea death th of Tho Thomas. mas.   Posadas as CIR assessed that the estate valued P27,920 in Real Estate and P1465 in Personality o  P480.81 was the allowed deduction. o  P1434.24 was the assessment + Penalties for delinquency in payment payment (1%/Mo) from July 1, 1931. = P2052.74. P2052.74.     In Oct. 15, 1932, Posadas filed a motion during the testamentary proceedings praying that Lorenzo pay the amount.   

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GRANTED. o  Lorenzo pay pays s under protest, stating that if not refunded he will institute action for recovery  Posadas refuses to refund. Lorenzo filed w with ith the CFI of Zamboanga Zamboanga against Posadas for the refund of P2052.74 P2052.74 inheritance tax he paid plus o  6% interest per annum starting Sep. 15, 1932 (Date he paid under protest). Posadas filed a Counter claim of 1191.27 for alleged interest due, not part of the original assessment. o  Both were dismissed by the CFI and both appealed.

MAIN ISSUE: W/N ISSUE: W/N There is Delinquency of Payment?  – YES.  – YES. MAIN RULING: [YES] a. Posadas maintains that it was the duty of the executor to pay the tax before the delivery of the decedent's property to the trustee. He cites Section 1544 (b): i. "(b) In other cases, within the six months subsequent to the death of the predecessor; but if judicial testamentary or intestate proceedings shall be instituted prior to the expiration of said period, the payment shall be made by the executor or administrator before delivering to each beneficiary  his share…” share …”   b. Placing a Property in Trust does not remove it from the operation of Inheritance Tax Law or exempt it from paying Inheritance Tax. i. Delivery of the estate to the trustee was in esse delivery of the same estate to the cestui que trust, the beneficiary in this case. When Moore accepted the trust and took possession of the trust estate, he thereby admitted that the estate belonged not to him but to his cestui que trust. ii. Public Policy also justifies the conclusion; delaying collection due to a trust being created can lead to abuse by testators that may place similar conditions as this case, essentially making collection of tax at the will of the private individual. The above result is a sufficient warning against the acceptance of the contention of the plaintiff ITCAB. Taxes are essential to the very existence of government. c. The obligation to pa pay y taxes rests not upon the privileges enjoyed by, or the protection afforded to, a citizen by the government, but upon the necessity of money for the support of the state (Dobbins vs. Erie County). For this reason, no one is allowed to object to or resist the payment of taxes solely because no personal benefit to him can be pointed out. (Thomas vs. Gay) d. That taxes must be collected promptly prompt ly is a policy deeply intrenched in our tax system. T Thus, hus, no court is allowed to t o grant injunction to restrain the collection of any internal revenue tax (sec. 1578, Revised Administrative Code; Sarasola vs. Trinidad).   Trinidad).

 

  OTHER ISSUES: a) W/N  – The Inheritance tax be computed based on the value at time of death or Value at turnover? b) When does Inheritance Tax Accrue and When is it Satisfied? c) W/N The co compensation mpensation of Trustee should be deducted to get the net value of the property? – property?  – NO.  NO. d) W/N Act. No. 3606 should retroactively apply? apply? –  – NO.  NO. OTHER RULINGS: A) [TIME OF DEATH] Lorenzo contends that the estate of Thomas [Real P.], did not and could not legally pass to the instituted heir, Matthew, until after the expiration of 10Y from death. a. The Tax shoul should d be based on the value of the estate in 1932, or 10Y after the testator's death. He showed that in 1932 the real properties in question had a reasonable value of only P5,787. b. This amount would generate an inheritance tax which, excluding excluding deductions, interest and surcharge, would amount only to about P169.52 P169.52.. SC ruled that since the state derives its power to tax on the death of the decedent: c. Succession takes place and the right of the state to tax vests instantly, instantly , the tax should be measured by the   value of the estate as it stood at the time of the decedent's death , regardless of any subsequent contingency affecting value or any subsequent increase or decrease in value. d. Ross Insurance p. 72 (Cited by SC): The right of the state to an inheritance tax accrues at the moment of death, and hence is ordinarily measured as to any beneficiary by the value at that time of such property as passes to him. Subsequent appreciation or depreciation is immaterial .   B) [ACCRUES UPON TRANSMISSION OF PROPERTY] a. Section 1536 as amended, of the Administrative Administrative code, imposes the tax upon "every "every transmission by virtue of inheritance, devise, bequest, gift mortis causa, or advance in anticipation of inheritance, devise, or bequest .."" b. The tax therefore is upon transmission or the transfer or devolution of property of a decedent, made effective by his death. c. It is separate from obligation to pay which is fixed by Sec. 1544 in rel. 1543 of the Admin Code. C) [NO.] a. The plaintiff contends that the compensation and fees of the trustees, which aggregate P1,187.28 should also be deducted under Sec. 1539 of the RAC which says: "In "In order to determine the net sum which must bear the tax, when an inheritance is concerned, there shall be deducted, in case of a resident, . . . the judicial expenses of the testamentary or intestate proceedings, proceedings , . . .." b. A trustee is entitled to receive a fair compensation for his services (Barney vs. Saunders). i. But from this it does not follow that the compensation may lawfully be deducted in arriving at the net value of the estate subject to tax. ii. There is no statute in the Philippines which requires trustees' commissions to be deducted  in determining the net value of the estate subject to inheritance tax D) [NO] a. Settled rule: Inheritance Taxation iis s governed by the statute in force at the time of the death of death  of the decedent. b.

Though the Regulations No. 65 of the DoF makes Sec. 3 of Act No. 3606, amending Sec. 1544 of the RAC, is applicable to all estates the inheritance taxes due from which have not been paid, the Act itself contains no provisions indicating legislative intent to give it retroactive effect. No Such effect can be given the statute by this court. FINAL CALCULATION: Net Value of Property: P28,904.19 Primary Tax: [1% of first 10K + 2% of value above 10K but below 30K] + 200% of [] [100 + 378.08] + 956.16 = P1,434.24 P1,434.24   Additional Sums Collectible:  Collectible:  Interest (12%/YR) = P P1,465.31 1,465.31 PAID: P2052.74 Surcharge (25%) = P724.88 BALANCE: P1,581.69   P1,581.69 Compromise Sum = P10 Total: P3,634.43   P3,634.43 Defendant only claims P1191.27 claims  P1191.27  – This is what will be granted DISPOSITION: LOWER COURT MODIFIED (Cost against Plaintiff) Plaintiff)   NOTES: