SECOND DIVISION

GONZALO VILLANUEVA, G.R. No. 172804

represented by his heirs,
Petitioner,
-versus-
SPOUSES FROILAN and Promulgated:
LEONILA BRANOCO,
Respondents. January 24, 2011
x --------------------------------------------------------------------------------------- x
D E C I S I O N
CARPIO, J.:


The Case

This resolves the petition for review
1
of the ruling
2
of the Court of Appeals dismissing a suit to recover a
realty.
The Facts


Petitioner Gonzalo Villanueva (petitioner), here represented by his heirs,
3
sued respondents, spouses Froilan
and Leonila Branoco (respondents), in the Regional Trial Court of Naval, Biliran (trial court) to recover a
3,492 square-meter parcel of land in Amambajag, Culaba, Leyte (Property) and collect damages. Petitioner
claimed ownership over the Property through purchase in July 1971 from Casimiro Vere (Vere), who, in turn,
bought the Property from Alvegia Rodrigo (Rodrigo) in August 1970. Petitioner declared the Property in his
name for tax purposes soon after acquiring it.

In their Answer, respondents similarly claimed ownership over the Property through purchase in
July 1983 from Eufracia Rodriguez (Rodriguez) to whom Rodrigo donated the Property in May 1965. The
two-page deed of donation (Deed), signed at the bottom by the parties and two witnesses, reads in full:

KNOW ALL MEN BY THESE PRESENTS:

That I, ALVEGIA RODRIGO, Filipino, of legal age, widow of the late Juan Arcillas, a
resident of Barrio Bool, municipality of Culaba, subprovince of Biliran, Leyte del Norte,
Philippines, hereby depose and say:

That as we live[d] together as husband and wife with Juan Arcillas, we begot
children, namely: LUCIO, VICENTA, SEGUNDINA, and ADELAIDA, all surnamed ARCILLAS,
and by reason of poverty which I suffered while our children were still young; and because
my husband Juan Arcillas aware as he was with our destitution separated us [sic] and left for
Cebu; and from then on never cared what happened to his family; and because of that one
EUFRACIA RODRIGUEZ, one of my nieces who also suffered with our poverty, obedient as
she was to all the works in our house, and because of the love and affection which I feel [for]
her, I have one parcel of land located at Sitio Amambajag, Culaba, Leyte bearing Tax Decl. No.
1878 declared in the name of Alvegia Rodrigo, I give (devise) said land in favor of EUFRACIA
RODRIGUEZ, her heirs, successors, and assigns together with all the improvements existing
thereon, which parcel of land is more or less described and bounded as follows:

1. Bounded North by Amambajag River; East, Benito Picao; South, Teofilo
Uyvico; and West, by Public land; 2. It has an area of 3,492 square meters
more or less; 3. It is planted to coconuts now bearing fruits; 4. Having an
assessed value of P240.00; 5. It is now in the possession of EUFRACIA
RODRIGUEZ since May 21, 1962 in the concept of an owner, but the Deed of
Donation or that ownership be vested on her upon my demise.
That I FURTHER DECLARE, and I reiterate that the land above described, I already
devise in favor of EUFRACIA RODRIGUEZ since May 21, 1962, her heirs, assigns, and that if
the herein Donee predeceases me, the same land will not be reverted to the Donor, but will
be inherited by the heirs of EUFRACIA RODRIGUEZ;

That I EUFRACIA RODRIGUEZ, hereby accept the land above described from Inay
Alvegia Rodrigo and I am much grateful to her and praying further for a longer life; however,
I will give one half (1/2) of the produce of the land to Apoy Alve during her lifetime.
4


Respondents entered the Property in 1983 and paid taxes afterwards.

The Ruling of the Trial Court

The trial court ruled for petitioner, declared him owner of the Property, and ordered respondents to
surrender possession to petitioner, and to pay damages, the value of the Propertys produce since 1982 until
petitioners repossession and the costs.
5
The trial court rejected respondents claim of ownership after
treating the Deed as a donation mortis causa which Rodrigo effectively cancelled by selling the Property to
Vere in 1970.
6
Thus, by the time Rodriguez sold the Property to respondents in 1983, she had no title to
transfer.
Respondents appealed to the Court of Appeals (CA), imputing error in the trial courts interpretation of the
Deed as a testamentary disposition instead of an inter vivos donation, passing title to Rodriguez upon its
execution.

Ruling of the Court of Appeals

The CA granted respondents appeal and set aside the trial courts ruling. While conceding that the language
of the [Deed is] x x x confusing and which could admit of possible different interpretations,
7
the CA found the
following factors pivotal to its reading of the Deed as donation inter vivos: (1) Rodriguez had been in
possession of the Property as owner since 21 May 1962, subject to the delivery of part of the produce to Apoy
Alve; (2) the Deeds consideration was not Rodrigos death but her love and affection for Rodriguez,
considering the services the latter rendered; (3) Rodrigo waived dominion over the Property in case
Rodriguez predeceases her, implying its inclusion in Rodriguezs estate; and (4) Rodriguez accepted the
donation in the Deed itself, an act necessary to effectuate donations inter vivos, not devises.
8
Accordingly, the
CA upheld the sale between Rodriguez and respondents, and, conversely found the sale between Rodrigo and
petitioners predecessor-in-interest, Vere, void for Rodrigos lack of title.


In this petition, petitioner seeks the reinstatement of the trial courts ruling. Alternatively, petitioner claims
ownership over the Property through acquisitive prescription, having allegedly occupied it for more than 10
years.
9


Respondents see no reversible error in the CAs ruling and pray for its affirmance.

The Issue

The threshold question is whether petitioners title over the Property is superior to respondents. The
resolution of this issue rests, in turn, on whether the contract between the parties predecessors-in-interest,
Rodrigo and Rodriguez, was a donation or a devise. If the former, respondents hold superior title, having
bought the Property from Rodriguez. If the latter, petitioner prevails, having obtained title from Rodrigo
under a deed of sale the execution of which impliedly revoked the earlier devise to Rodriguez.

The Ruling of the Court

We find respondents title superior, and thus, affirm the CA.

Naked Title Passed from Rodrigo to Rodriguez Under a
Perfected Donation


We examine the juridical nature of the Deed whether it passed title to Rodriguez upon its execution or is
effective only upon Rodrigos death using principles distilled from relevant jurisprudence. Post-mortem
dispositions typically

(1) Convey no title or ownership to the transferee before the death of the transferor;
or, what amounts to the same thing, that the transferor should retain the ownership (full or
naked) and control of the property while alive;

(2) That before the [donors] death, the transfer should be revocable by the
transferor at will, ad nutum; but revocability may be provided for indirectly by means of a
reserved power in the donor to dispose of the properties conveyed;



(3) That the transfer should be void if the transferor should survive the transferee.
10


Further

[4] [T]he specification in a deed of the causes whereby the act may be revoked by
the donor indicates that the donation is inter vivos, rather than a disposition mortis causa[;]

[5] That the designation of the donation as mortis causa, or a provision in the deed
to the effect that the donation is to take effect at the death of the donor are not controlling
criteria; such statements are to be construed together with the rest of the instrument, in
order to give effect to the real intent of the transferor[;] [and]

(6) That in case of doubt, the conveyance should be deemed donation inter vivos
rather than mortis causa, in order to avoid uncertainty as to the ownership of the property
subject of the deed.
11


It is immediately apparent that Rodrigo passed naked title to Rodriguez under a perfected donation
inter vivos. First. Rodrigo stipulated that if the herein Donee predeceases me, the [Property] will not be
reverted to the Donor, but will be inherited by the heirs of x x x Rodriguez, signaling the irrevocability of the
passage of title to Rodriguezs estate, waiving Rodrigos right to reclaim title. This transfer of title was
perfected the moment Rodrigo learned of Rodriguezs acceptance of the disposition
12
which, being reflected in
the Deed, took place on the day of its execution on 3 May 1965. Rodrigos acceptance of the transfer
underscores its essence as a gift in presenti, not in futuro, as only donations inter vivos need acceptance by the
recipient.
13
Indeed, had Rodrigo wished to retain full title over the Property, she could have easily stipulated,
as the testator did in another case, that the donor, may transfer, sell, or encumber to any person or entity the
properties here donated x x x
14
or used words to that effect. Instead, Rodrigo expressly waived title over the
Property in case Rodriguez predeceases her.

In a bid to diffuse the non-reversion stipulations damning effect on his case, petitioner tries to profit
from it, contending it is a fideicommissary substitution clause.
15
Petitioner assumes the fact he is laboring to
prove. The question of the Deeds juridical nature, whether it is a will or a donation, is the crux of the present
controversy. By treating the clause in question as mandating fideicommissary substitution, a mode of
testamentary disposition by which the first heir instituted is entrusted with the obligation to preserve and to
transmit to a second heir the whole or part of the inheritance,
16
petitioner assumes that the Deed is a will.
Neither the Deeds text nor the import of the contested clause supports petitioners theory.

Second. What Rodrigo reserved for herself was only the beneficial title to the Property, evident from
Rodriguezs undertaking to give one [half] x x x of the produce of the land to Apoy Alve during her lifetime.
17

Thus, the Deeds stipulation that the ownership shall be vested on [Rodriguez] upon my demise, taking into
account the non-reversion clause, could only refer to Rodrigos beneficial title. We arrived at the same
conclusion in Balaqui v. Dongso
18
where, as here, the donor, while b[inding] herself to answer to the [donor]
and her heirs x x x that none shall question or disturb [the donees] right, also stipulated that the donation
does not pass title to [the donee] during my lifetime; but when I die, [the donee] shall be the true owner of
the donated parcels of land. In finding the disposition as a gift inter vivos, the Court reasoned:


Taking the deed x x x as a whole, x x x x it is noted that in the same deed [the donor]
guaranteed to [the donee] and her heirs and successors, the right to said property thus
conferred. From the moment [the donor] guaranteed the right granted by her to [the donee]
to the two parcels of land by virtue of the deed of gift, she surrendered such right; otherwise
there would be no need to guarantee said right. Therefore, when [the donor] used the words
upon which the appellants base their contention that the gift in question is a donation mortis
causa [that the gift does not pass title during my lifetime; but when I die, she shall be the
true owner of the two aforementioned parcels] the donor meant nothing else than that
she reserved of herself the possession and usufruct of said two parcels of land until her
death, at which time the donee would be able to dispose of them freely.
19
(Emphasis
supplied)


Indeed, if Rodrigo still retained full ownership over the Property, it was unnecessary for her to reserve partial
usufructuary right over it.
20


Third. The existence of consideration other than the donors death, such as the donors love and
affection to the donee and the services the latter rendered, while also true of devises, nevertheless
corroborates the express irrevocability of x x x [inter vivos] transfers.
21
Thus, the CA committed no error in
giving weight to Rodrigos statement of love and affection for Rodriguez, her niece, as consideration for the
gift, to underscore its finding.
It will not do, therefore, for petitioner to cherry-pick stipulations from the Deed tending to serve his
cause (e.g. the ownership shall be vested on [Rodriguez] upon my demise and devise). Dispositions
bearing contradictory stipulations are interpreted wholistically, to give effect to the donors intent. In no less
than seven cases featuring deeds of donations styled as mortis causa dispositions, the Court, after going over
the deeds, eventually considered the transfers inter vivos,
22
consistent with the principle that the designation
of the donation as mortis causa, or a provision in the deed to the effect that the donation is to take effect at
the death of the donor are not controlling criteria [but] x x x are to be construed together with the rest of the
instrument, in order to give effect to the real intent of the transferor.
23
Indeed, doubts on the nature of
dispositions are resolved to favor inter vivos transfers to avoid uncertainty as to the ownership of the
property subject of the deed.
24


Nor can petitioner capitalize on Rodrigos post-donation transfer of the Property to Vere as proof of
her retention of ownership. If such were the barometer in interpreting deeds of donation, not only will great
legal uncertainty be visited on gratuitous dispositions, this will give license to rogue property owners to set at
naught perfected transfers of titles, which, while founded on liberality, is a valid mode of passing ownership.
The interest of settled property dispositions counsels against licensing such practice.
25


Accordingly, having irrevocably transferred naked title over the Property to Rodriguez in 1965, Rodrigo
cannot afterwards revoke the donation nor dispose of the said property in favor of another.
26
Thus,
Rodrigos post-donation sale of the Property vested no title to Vere. As Veres successor-in-interest, petitioner
acquired no better right than him. On the other hand, respondents bought the Property from Rodriguez, thus
acquiring the latters title which they may invoke against all adverse claimants, including petitioner.



Petitioner Acquired No Title Over the Property
Alternatively, petitioner grounds his claim of ownership over the Property through his and Veres combined
possession of the Property for more than ten years, counted from Veres purchase of the Property from
Rodrigo in 1970 until petitioner initiated his suit in the trial court in February 1986.
27
Petitioner anchors his
contention on an unfounded legal assumption. The ten year ordinary prescriptive period to acquire title
through possession of real property in the concept of an owner requires uninterrupted possession coupled
with just title and good faith.
28
There is just title when the adverse claimant came into possession of the
property through one of the modes recognized by law for the acquisition of ownership or other real rights, but
the grantor was not the owner or could not transmit any right.
29
Good faith, on the other hand, consists in the
reasonable belief that the person from whom the possessor received the thing was the owner thereof, and
could transmit his ownership.
30


Although Vere and petitioner arguably had just title having successively acquired the Property through sale,
neither was a good faith possessor. As Rodrigo herself disclosed in the Deed, Rodriguez already occupied and
possessed the Property in the concept of an owner (como tag-iya
31
) since 21 May 1962, nearly three years
before Rodrigos donation in 3 May 1965 and seven years before Vere bought the Property from Rodrigo. This
admission against interest binds Rodrigo and all those tracing title to the Property through her, including Vere
and petitioner. Indeed, petitioners insistent claim that Rodriguez occupied the Property only in 1982, when
she started paying taxes, finds no basis in the records. In short, when Vere bought the Property from Rodrigo
in 1970, Rodriguez was in possession of the Property, a fact that prevented Vere from being a buyer in good
faith.
Lacking good faith possession, petitioners only other recourse to maintain his claim of ownership by
prescription is to show open, continuous and adverse possession of the Property for 30 years.
32
Undeniably,
petitioner is unable to meet this requirement.

Ancillary Matters Petitioner Raises Irrelevant

Petitioner brings to the Courts attention facts which, according to him, support his theory that Rodrigo never
passed ownership over the Property to Rodriguez, namely, that Rodriguez registered the Deed and paid taxes
on the Property only in 1982 and Rodriguez obtained from Vere in 1981 a waiver of the latters right of
ownership over the Property. None of these facts detract from our conclusion that under the text of the Deed
and based on the contemporaneous acts of Rodrigo and Rodriguez, the latter, already in possession of the
Property since 1962 as Rodrigo admitted, obtained naked title over it upon the Deeds execution in 1965.
Neither registration nor tax payment is required to perfect donations. On the relevance of the waiver
agreement, suffice it to say that Vere had nothing to waive to Rodriguez, having obtained no title from
Rodrigo. Irrespective of Rodriguezs motivation in obtaining the waiver, that document, legally a scrap of
paper, added nothing to the title Rodriguez obtained from Rodrigo under the Deed.
WHEREFORE, we DENY the petition. We AFFIRM the Decision dated 6 June 2005 and the Resolution
dated 5 May 2006 of the Court of Appeals.

SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-19201 June 16, 1965
REV. FR. CASIMIRO LLADOC, petitioner,
vs.
The COMMISSIONER OF INTERNAL REVENUE and The COURT of TAX APPEALS, respondents.
Hilado and Hilado for petitioner.
Office of the Solicitor General for respondents.
PAREDES, J.:
Sometime in 1957, the M.B. Estate, Inc., of Bacolod City, donated P10,000.00 in cash to Rev. Fr. Crispin Ruiz,
then parish priest of Victorias, Negros Occidental, and predecessor of herein petitioner, for the construction
of a new Catholic Church in the locality. The total amount was actually spent for the purpose intended.
On March 3, 1958, the donor M.B. Estate, Inc., filed the donor's gift tax return. Under date of April 29, 1960,
the respondent Commissioner of Internal Revenue issued an assessment for donee's gift tax against the
Catholic Parish of Victorias, Negros Occidental, of which petitioner was the priest. The tax amounted to
P1,370.00 including surcharges, interests of 1% monthly from May 15, 1958 to June 15, 1960, and the
compromise for the late filing of the return.
Petitioner lodged a protest to the assessment and requested the withdrawal thereof. The protest and the
motion for reconsideration presented to the Commissioner of Internal Revenue were denied. The petitioner
appealed to the Court of Tax Appeals on November 2, 1960. In the petition for review, the Rev. Fr. Casimiro
Lladoc claimed, among others, that at the time of the donation, he was not the parish priest in Victorias; that
there is no legal entity or juridical person known as the "Catholic Parish Priest of Victorias," and, therefore, he
should not be liable for the donee's gift tax. It was also asserted that the assessment of the gift tax, even
against the Roman Catholic Church, would not be valid, for such would be a clear violation of the provisions of
the Constitution.
After hearing, the CTA rendered judgment, the pertinent portions of which are quoted below:
... . Parish priests of the Roman Catholic Church under canon laws are similarly situated as its
Archbishops and Bishops with respect to the properties of the church within their parish. They are
the guardians, superintendents or administrators of these properties, with the right of succession
and may sue and be sued.
x x x x x x x x x
The petitioner impugns the, fairness of the assessment with the argument that he should not be held
liable for gift taxes on donation which he did not receive personally since he was not yet the parish
priest of Victorias in the year 1957 when said donation was given. It is intimated that if someone has
to pay at all, it should be petitioner's predecessor, the Rev. Fr. Crispin Ruiz, who received the
donation in behalf of the Catholic parish of Victorias or the Roman Catholic Church. Following
petitioner's line of thinking, we should be equally unfair to hold that the assessment now in question
should have been addressed to, and collected from, the Rev. Fr. Crispin Ruiz to be paid from income
derived from his present parish where ever it may be. It does not seem right to indirectly burden the
present parishioners of Rev. Fr. Ruiz for donee's gift tax on a donation to which they were not
benefited.
x x x x x x x x x
We saw no legal basis then as we see none now, to include within the Constitutional exemption, taxes
which partake of the nature of an excise upon the use made of the properties or upon the exercise of
the privilege of receiving the properties. (Phipps vs. Commissioner of Internal Revenue, 91 F [2d]
627; 1938, 302 U.S. 742.)
It is a cardinal rule in taxation that exemptions from payment thereof are highly disfavored by law,
and the party claiming exemption must justify his claim by a clear, positive, or express grant of such
privilege by law. (Collector vs. Manila Jockey Club, G.R. No. L-8755, March 23, 1956; 53 O.G. 3762.)
The phrase "exempt from taxation" as employed in Section 22(3), Article VI of the Constitution of the
Philippines, should not be interpreted to mean exemption from all kinds of taxes. Statutes exempting
charitable and religious property from taxation should be construed fairly though strictly and in such
manner as to give effect to the main intent of the lawmakers. (Roman Catholic Church vs. Hastrings 5
Phil. 701.)
x x x x x x x x x
WHEREFORE, in view of the foregoing considerations, the decision of the respondent Commissioner
of Internal Revenue appealed from, is hereby affirmed except with regard to the imposition of the
compromise penalty in the amount of P20.00 (Collector of Internal Revenue v. U.S.T., G.R. No. L-
11274, Nov. 28, 1958); ..., and the petitioner, the Rev. Fr. Casimiro Lladoc is hereby ordered to pay to
the respondent the amount of P900.00 as donee's gift tax, plus the surcharge of five per centum (5%)
as ad valorem penalty under Section 119 (c) of the Tax Code, and one per centum (1%) monthly
interest from May 15, 1958 to the date of actual payment. The surcharge of 25% provided in Section
120 for failure to file a return may not be imposed as the failure to file a return was not due to willful
neglect.( ... ) No costs.
The above judgment is now before us on appeal, petitioner assigning two (2) errors allegedly committed by
the Tax Court, all of which converge on the singular issue of whether or not petitioner should be liable for the
assessed donee's gift tax on the P10,000.00 donated for the construction of the Victorias Parish Church.
Section 22 (3), Art. VI of the Constitution of the Philippines, exempts from taxation cemeteries, churches and
parsonages or convents, appurtenant thereto, and all lands, buildings, and improvements used exclusively for
religious purposes. The exemption is only from the payment of taxes assessed on such properties
enumerated, as property taxes, as contra distinguished from excise taxes. In the present case, what the
Collector assessed was a donee's gift tax; the assessment was not on the properties themselves. It did not rest
upon general ownership; it was an excise upon the use made of the properties, upon the exercise of the
privilege of receiving the properties (Phipps vs. Com. of Int. Rec. 91 F 2d 627). Manifestly, gift tax is not within
the exempting provisions of the section just mentioned. A gift tax is not a property tax, but an excise tax
imposed on the transfer of property by way of gift inter vivos, the imposition of which on property used
exclusively for religious purposes, does not constitute an impairment of the Constitution. As well observed by
the learned respondent Court, the phrase "exempt from taxation," as employed in the Constitution (supra)
should not be interpreted to mean exemption from all kinds of taxes. And there being no clear, positive or
express grant of such privilege by law, in favor of petitioner, the exemption herein must be denied.
The next issue which readily presents itself, in view of petitioner's thesis, and Our finding that a tax liability
exists, is, who should be called upon to pay the gift tax? Petitioner postulates that he should not be liable,
because at the time of the donation he was not the priest of Victorias. We note the merit of the above claim,
and in order to put things in their proper light, this Court, in its Resolution of March 15, 1965, ordered the
parties to show cause why the Head of the Diocese to which the parish of Victorias pertains, should not be
substituted in lieu of petitioner Rev. Fr. Casimiro Lladoc it appearing that the Head of such Diocese is the real
party in interest. The Solicitor General, in representation of the Commissioner of Internal Revenue,
interposed no objection to such a substitution. Counsel for the petitioner did not also offer objection thereto.
On April 30, 1965, in a resolution, We ordered the Head of the Diocese to present whatever legal issues
and/or defenses he might wish to raise, to which resolution counsel for petitioner, who also appeared as
counsel for the Head of the Diocese, the Roman Catholic Bishop of Bacolod, manifested that it was submitting
itself to the jurisdiction and orders of this Court and that it was presenting, by reference, the brief of
petitioner Rev. Fr. Casimiro Lladoc as its own and for all purposes.
In view here of and considering that as heretofore stated, the assessment at bar had been properly made and
the imposition of the tax is not a violation of the constitutional provision exempting churches, parsonages or
convents, etc. (Art VI, sec. 22 [3], Constitution), the Head of the Diocese, to which the parish Victorias
Pertains, is liable for the payment thereof.
The decision appealed from should be, as it is hereby affirmed insofar as tax liability is concerned; it is
modified, in the sense that petitioner herein is not personally liable for the said gift tax, and that the Head of
the Diocese, herein substitute petitioner, should pay, as he is presently ordered to pay, the said gift tax,
without special, pronouncement as to costs.
Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L., Dizon, Regala, Makalintal, Bengzon, J.P. , and Zaldivar, JJ.,
concur.
Barrera, J., took no part.
SECOND DIVISION


JARABINI G. DEL ROSARIO, G.R. No. 187056
Petitioner,
Present:

CARPIO, J., Chairperson,
- versus - PERALTA,
BERSAMIN,*
ABAD, and
PEREZ,** JJ.




ASUNCION G. FERRER, substituted
by her heirs, VICENTE, PILAR,
ANGELITO, FELIXBERTO, JR.,
all surnamed G. FERRER, and Promulgated:
MIGUELA FERRER ALTEZA,
Respondents. September 20, 2010

x --------------------------------------------------------------------------------------- x

DECISION

ABAD, J.:


This case pertains to a gift, otherwise denominated as a donation mortis causa, which in reality is a
donation inter vivos made effective upon its execution by the donors and acceptance thereof by the donees,
and immediately transmitting ownership of the donated property to the latter, thus precluding a subsequent
assignment thereof by one of the donors.


The Facts and the Case

On August 27, 1968 the spouses Leopoldo and Guadalupe Gonzales executed a document entitled
Donation Mortis Causa, in favor of their two children, Asuncion and Emiliano, and their granddaughter,


Jarabini (daughter of their predeceased son, Zoilo) covering the spouses 126-square meter lot and the house
on it in Pandacan, Manila in equal shares. The deed of donation reads:

It is our will that this Donation Mortis Causa shall be irrevocable and shall be
respected by the surviving spouse.

It is our will that Jarabini Gonzales-del Rosario and Emiliano Gonzales will
continue to occupy the portions now occupied by them.

It is further our will that this DONATION MORTIS CAUSA shall not in any way
affect any other distribution of other properties belonging to any of us donors
whether testate or intestate and where ever situated.

It is our further will that any one surviving spouse reserves the right,
ownership, possession and administration of this property herein donated and
accepted and this Disposition and Donation shall be operative and effective upon the
death of the DONORS.

Although denominated as a donation mortis causa, which in law is the equivalent of a will, the deed
had no attestation clause and was witnessed by only two persons. The named donees, however, signified
their acceptance of the donation on the face of the document.

Guadalupe, the donor wife, died in September 1968. A few months later or on December 19, 1968,
Leopoldo, the donor husband, executed a deed of assignment of his rights and interests in subject property to
their daughter Asuncion. Leopoldo died in June 1972.

In 1998 Jarabini filed a petition for the probate of the August 27, 1968 deed of donation mortis
causa before the Regional Trial Court (RTC) of Manila in Sp. Proc. 98-90589. Asuncion opposed the petition,
invoking his father Leopoldos assignment of his rights and interests in the property to her.

After trial, the RTC rendered a decision dated June 20, 2003, finding that the donation was in fact one
made inter vivos, the donors intention being to transfer title over the property to the donees during the
donors lifetime, given its irrevocability. Consequently, said the RTC, Leopoldos subsequent assignment of
his rights and interest in the property was void since he had nothing to assign. The RTC thus directed the
registration of the property in the name of the donees in equal shares.

On Asuncions appeal to the Court of Appeals (CA), the latter rendered a decision on December 23,
2008, reversing that of the RTC. The CA held that Jarabini cannot, through her petition for the probate of the
deed of donation mortis causa, collaterally attack Leopoldos deed of assignment in Asuncions favor. The CA
further held that, since no proceeding exists for the allowance of what Jarabini claimed was actually a
donation inter vivos, the RTC erred in deciding the case the way it did. Finally, the CA held that the donation,
being one given mortis causa, did not comply with the requirements of a notarial will, rendering the same
void. Following the CAs denial of Jarabinis motion for reconsideration, she filed the present petition with
this Court.

Issue Presented

The key issue in this case is whether or not the spouses Leopoldo and Guadalupes donation to
Asuncion, Emiliano, and Jarabini was a donation mortis causa, as it was denominated, or in fact a donation
inter vivos.

The Courts Ruling

That the document in question in this case was captioned Donation Mortis Causa is not controlling.
This Court has held that, if a donation by its terms is inter vivos, this character is not altered by the fact that
the donor styles it mortis causa.

In Austria-Magat v. Court of Appeals, the Court held that irrevocability is a quality absolutely
incompatible with the idea of conveyances mortis causa, where revocability is precisely the essence of the
act. A donation mortis causa has the following characteristics:

1. It conveys no title or ownership to the transferee before the death of
the transferor; or, what amounts to the same thing, that the transferor should retain
the ownership (full or naked) and control of the property while alive;

2. That before his death, the transfer should be revocable by the
transferor at will, ad nutum; but revocability may be provided for indirectly by means
of a reserved power in the donor to dispose of the properties conveyed; and

3. That the transfer should be void if the transferor should survive the
transferee. (Underscoring supplied)

The Court thus said in Austria-Magat that the express irrevocability of the donation is the
distinctive standard that identifies the document as a donation inter vivos. Here, the donors plainly said that
it is our will that this Donation Mortis Causa shall be irrevocable and shall be respected by the surviving
spouse. The intent to make the donation irrevocable becomes even clearer by the proviso that a surviving
donor shall respect the irrevocability of the donation. Consequently, the donation was in reality a donation
inter vivos.

The donors in this case of course reserved the right, ownership, possession, and administration of
the property and made the donation operative upon their death. But this Court has consistently held that
such reservation (reddendum) in the context of an irrevocable donation simply means that the donors parted
with their naked title, maintaining only beneficial ownership of the donated property while they lived.

Notably, the three donees signed their acceptance of the donation, which acceptance the deed
required. This Court has held that an acceptance clause indicates that the donation is inter vivos, since
acceptance is a requirement only for such kind of donations. Donations mortis causa, being in the form of a
will, need not be accepted by the donee during the donors lifetime.

Finally, as Justice J. B. L. Reyes said in Puig v. Peaflorida, in case of doubt, the conveyance should be
deemed a donation inter vivos rather than mortis causa, in order to avoid uncertainty as to the ownership of
the property subject of the deed.

Since the donation in this case was one made inter vivos, it was immediately operative and final. The
reason is that such kind of donation is deemed perfected from the moment the donor learned of the donees
acceptance of the donation. The acceptance makes the donee the absolute owner of the property donated.

Given that the donation in this case was irrevocable or one given inter vivos, Leopoldos subsequent
assignment of his rights and interests in the property to Asuncion should be regarded as void for, by then, he
had no more rights to assign. He could not give what he no longer had. Nemo dat quod non habet.

The trial court cannot be faulted for passing upon, in a petition for probate of what was initially
supposed to be a donation mortis causa, the validity of the document as a donation inter vivos and the nullity
of one of the donors subsequent assignment of his rights and interests in the property. The Court has held
before that the rule on probate is not inflexible and absolute. Moreover, in opposing the petition for probate
and in putting the validity of the deed of assignment squarely in issue, Asuncion or those who substituted her
may not now claim that the trial court improperly allowed a collateral attack on such assignment.

WHEREFORE, the Court GRANTS the petition, SETS ASIDE the assailed December 23, 2008 Decision
and March 6, 2009 Resolution of the Court of Appeals in CA-G.R. CV 80549, and REINSTATES in toto the June
20, 2003 Decision of the Regional Trial Court of Manila, Branch 19, in Sp. Proc. 98-90589.

SECOND DIVISION
[G.R. No. 106755. February 1, 2002]
APOLINARIA AUSTRIA-MAGAT, petitioner, vs. HON. COURT OF APPEALS and FLORENTINO LUMUBOS,
DOMINGO COMIA, TEODORA CARAMPOT, ERNESTO APOLO, SEGUNDA SUMPELO, MAMERTO SUMPELO
and RICARDO SUMPELO, respondents.
D E C I S I O N
DE LEON, JR., J.:
Before us is a petition for review of the Decisioni of the Court of Appeals,ii dated June 30, 1989 reversing the
Decision,iii[3] dated August 15, 1986 of the Regional Trial Court (RTC) of Cavite, Branch 17. The Decision of
the RTC dismissed Civil Case No. 4426 which is an action for annulment of title, reconveyance and damages.
The facts of the case are as follows:
Basilisa Comerciante is a mother of five (5) children, namely, Rosario Austria, Consolacion Austria, herein
petitioner Apolinaria Austria-Magat, Leonardo, and one of herein respondents, Florentino Lumubos.
Leonardo died in a Japanese concentration camp at Tarlac during World War II.
In 1953, Basilisa bought a parcel of residential land together with the improvement thereon covered and
described in Transfer Certificate of Title No. RT-4036 (T-3268) and known as Lot 1, Block 1, Cavite Beach
Subdivision, with an area of 150 square meters, located in Bagong Pook, San Antonio, Cavite City.
On December 17, 1975, Basilisa executed a document designated as Kasulatan sa Kaloobpala (Donation).
The said document which was notarized by Atty. Carlos Viniegra, reads as follows:
KASULATANG SA KALOOBPALA
(DONATION)
TALASTASIN NG LAHAT AT SINUMAN:
Na ako, si BASELISA COMERCIANTE, may sapat na gulang, Filipina, balo, at naninirahan sa blg. 809 L. Javier
Bagong Pook, San Antonio, Lungsod ng Kabite, Filipinas, sa pamamagitan ng kasulatang itoy
NAGSASALAYSAY
Na alang-alang sa mabuting paglilingkod at pagtingin na iniukol sa akin ng apat kong mga tunay na anak na
sila:
ROSARIO AUSTRIA, Filipina, may sapat na gulang, balo, naninirahan sa 809 L. Javier, Bagong Pook, San
Antonio, Lungsod ng Kabite;
CONSOLACION AUSTRIA, Filipina, may sapat na gulang, balo naninirahan sa 809 L. Javier, Bagong Pook, San
Antonio, Lungsod ng Kabite;
APOLINARIA AUSTRIA, Filipina, may sapat na gulang, may asawa, naninirahan sa Pasong Kawayan, Hen.
Trias, Kabite;
FLORENTINO LUMUBOS, Filipino, may sapat na gulang, asawa ni Encarnacion Magsino, at naninirahan din sa
809 L. Javier, Bagong Pook, San Antonio, Lungsod ng Kabite; ay
Kusang loob na ibinibigay ko at ipinagkakaloob ng ganap at hindi na mababawi sa naulit ng apat na anak ko at
sa kanilang mga tagamagmana (sic), ang aking isang lupang residential o tirahan sampu ng aking bahay nahan
ng nakatirik doon na nasa Bagong Pook din, San Antonio, Lungsod ng Kabite, at nakikilala bilang Lote no. 7,
Block no.1, of Subdivision Plan Psd-12247; known as Cavite Beach Subdivision, being a portion of Lot No.
1055, of the Cadastral survey of Cavite, GLRO Cadastral Rec. no. 9539; may sukat na 150 metros cuadrados, at
nakatala sa pangalan ko sa Titulo Torrens bilang TCT-T-3268 (RT-4036) ng Lungsod ng Kabite;
Na ang Kaloob palang ito ay magkakabisa lamang simula sa araw na akoy pumanaw sa mundo, at sa ilalim ng
kondision na:
Magbubuhat o babawasin sa halaga ng nasabing lupa at bahay ang anumang magugul o gastos sa aking libing
at nicho at ang anumang matitira ay hahatiin ng APAT na parte, parepareho isang parte sa bawat anak kong
nasasabi sa itaas nito upang maliwanang (sic) at walang makakalamang sinoman sa kanila;
At kaming apat na anak na nakalagda o nakadiit sa kasulatang ito ay TINATANGGAP NAMIN ang kaloob-
palang ito ng aming magulang na si Basilisa Comerciante, at tuloy pinasasalamatan namin siya ng taos sa (sic)
puso dahil sa kagandahan look (sic) niyang ito sa amin.
SA KATUNAYAN, ay nilagdaan o diniitan namin ito sa Nobeleta, Kabite, ngayong ika-17 ng Disyembre taong
1975.
HER MARK HER MARK
BASELISA COMERCIANTE ROSARIO AUSTRIA
Tagakaloobpala
(Sgd.) APOLINARIA AUSTRIA HER MARK
Tagatanggap-pala CONSOLACION AUSTRIA
(Sgd.)FLORENTINO LUMUBOS
Tagatanggap-pala
(Acknowledgment signed by Notary Public C.T. Viniegra is omitted).iv[4]
Basilisa and her said children likewise executed another notarized document denominated as Kasulatan
which is attached to the deed of donation. The said document states that:
KASULATAN
TALASTASIN NG MADLA:
Na kaming mga nakalagda o nakadiit sa labak nito sila Basilisa Comerciante at ang kanyang mga anak na
sila:
Rosario Austria, Consolacion Austria, Apolonio Austria, at Florentino Lumubos, pawang may mga sapat na
gulang, na lumagda o dumiit sa kasulatang kaloob pala, na sinangayunan namin sa harap ng Notario Publico,
Carlos T. Viniegra, ay nagpapahayag ng sumusunod:
Na ang titulo numero TCT-T-2260 (RT-4036) ng Lungsod ng Kabite, bahay sa loteng tirahan ng Bagong Pook
na nababanggit sa nasabing kasulatan, ay mananatili sa poder o possession ng Ina, na si Basilisa Comerciante
habang siya ay nabubuhay at
Gayon din ang nasabing Titulo ay hindi mapapasangla o maipagbibili ang lupa habang maybuhay ang
nasabing Basilisa Comerciante.
Sa katunayan ang nagsilagda kaming lahat sa labak nito sa harap ng abogado Carlos T. Viniegra at dalawang
saksi.
Nobeleta, Kabite. Ika-17 ng Disyembre, 1975.v[5]
On February 6, 1979, Basilisa executed a Deed of Absolute Sale of the subject house and lot in favor of herein
petitioner Apolinaria Austria-Magat for Five Thousand Pesos (P5,000.00). As the result of the registration of
that sale, Transfer Certificate of Title (TCT for brevity) No. RT-4036 in the name of the donor was cancelled
and in lieu thereof TCT No. T-10434 was issued by the Register of Deeds of Cavite City in favor of petitioner
Apolinaria Austria-Magat on February 8, 1979.
On September 21, 1983, herein respondents Teodora Carampot, Domingo Comia, and Ernesto Apolo
(representing their deceased mother Consolacion Austria), Ricardo, Mamerto and Segunda, all surnamed
Sumpelo (representing their deceased mother Rosario Austria) and Florentino Lumubos filed before the
Regional Trial Court of Cavite an action, docketed as Civil Case No. 4426 against the petitioner for annulment
of TCT No. T-10434 and other relevant documents, and for reconveyance and damages.
On August 15,1986, the trial court dismissed Civil Case No. 4426 per its Decision, the dispositive portion of
which reads:
WHEREFORE, in view of the foregoing, this Court hereby renders judgment for defendant dismissing this case
and ordering plaintiffs to pay the amount of P3,000.00 as attorneys fees and the costs of suit.
SO ORDERED.vi[6]
According to the trial court, the donation is a donation mortis causa pursuant to Article 728 of the New Civil
Code inasmuch as the same expressly provides that it would take effect upon the death of the donor; that the
provision stating that the donor reserved the right to revoke the donation is a feature of a donation mortis
causa which must comply with the formalities of a will; and that inasmuch as the donation did not follow the
formalities pertaining to wills, the same is void and produced no effect whatsoever. Hence, the sale by the
donor of the said property was valid since she remained to be the absolute owner thereof during the time of
the said transaction.
On appeal, the decision of the trial court was reversed by the Court of Appeals in its subject decision, the
dispositive portion of which reads, to wit:
WHEREFORE, in view of the foregoing, the appealed decision is hereby SET ASIDE and a new one rendered:
1. declaring null and void the Deed of Sale of Registered Land (Annex B) and Transfer Certificate of Title No.
T-10434 of the Registry of Deeds of Cavite City (Annex E) and ordering the cancellation thereof; and
2. declaring appellants and appellee co-owners of the house and lot in question in accordance with the deed
of donation executed by Basilisa Comerciante on December 17, 1975.
No pronouncement as to costs.
SO ORDERED.vii[7]
The appellate court declared in its decision that:
In the case at bar, the decisive proof that the deed is a donation inter vivos is in the provision that :
Ibinibigay ko at ipinagkakaloob ng ganap at hindi mababawi sa naulit na apat na anak ko at sa
kanilang mga tagapagmana, ang aking lupang residential o tirahan sampu ng aking bahay
nakatirik doon xxx. (emphasis supplied)
This is a clear expression of the irrevocability of the conveyance. The irrevocability of the donation is a
characteristic of a donation inter vivos. By the words hindi mababawi, the donor expressly renounced the
right to freely dispose of the house and lot in question. The right to dispose of a property is a right essential to
full ownership. Hence, ownership of the house and lot was already with the donees even during the donors
lifetime. xxx
xxx xxx xxx
In the attached document to the deed of donation, the donor and her children stipulated that:
Gayon din ang nasabing titulo ay hindi mapapasangla o maipagbibili ang lupa habang may buhay ang
nasabing Basilisa Comerciante.
The stipulation is a reiteration of the irrevocability of the dispossession on the part of the donor. On the other
hand, the prohibition to encumber, alienate or sell the property during the lifetime of the donor is a
recognition of the ownership over the house and lot in issue of the donees for only in the concept of an owner
can one encumber or dispose a property.viii[8]
Hence this appeal grounded on the following assignment of errors:
I
THE RESPONDENT COURT OF APPEALS, WITH DUE RESPECT, IGNORED THE RULES OF
INTERPRETATION OF CONTRACTS WHEN IT CONSIDERED THE DONATION IN QUESTION AS
INTER VIVOS.
II
THE RESPONDENT COURT OF APPEALS, AGAIN WITH DUE RESPECT, ERRED IN NOT HOLDING
THAT THE PRESENT ACTION HAS PRESCRIBED UNDER THE STATUTE OF LIMITATIONS.ix[9]
Anent the first assignment of error, the petitioner argues that the Court of Appeals erred in ruling that the
donation was a donation inter vivos. She claims that in interpreting a document, the other relevant provisions
therein must be read in conjunction with the rest. While the document indeed stated that the donation was
irrevocable, that must be interpreted in the light of the provisions providing that the donation cannot be
encumbered, alienated or sold by anyone, that the property donated shall remain in the possession of the
donor while she is alive, and that the donation shall take effect only when she dies. Also, the petitioner claims
that the donation is mortis causa for the reason that the contemporaneous and subsequent acts of the donor,
Basilisa Comerciante, showed such intention. Petitioner cites the testimony of Atty. Viniegra, who notarized
the deed of donation, that it was the intent of the donor to maintain control over the property while she was
alive; that such intent was shown when she actually sold the lot to herein petitioner.
We affirm the appellate courts decision.
The provisions in the subject deed of donation that are crucial for the determination of the class to which the
donation belongs are, as follows:
xxx xxx xxx
xxx(I)binibigay ko at ipinagkakaloob ng ganap at hindi mababawi sa naulit na apat na anak ko at sa
kanilang mga tagapagmana, ang aking lupang residential o tirahan sampu ng aking bahay nakatirik doon
na nasa Bagong Pook din, San Antonio, Lungsod ng Kabite
xxx xxx xxx
Na ang Kaloob palang ito ay magkakabisa lamang simula sa araw na akoy pumanaw sa mundo, xxx.
xxx xxx xxx
Na ang titulo numero TCT-T-2260 (RT-4036) ng Lungsod ng Kabite, bahay sa loteng tirahan ng Bagong
Pook na nababanggit sa nasabing kasulatan, ay mananatili sa poder o possesion ng Ina, na si Basilisa
Comerciante habang siya ay nabubuhay at
Gayon din ang nasabing Titulo ay hindi mapapasangla o maipagbibili ang lupa habang maybuhay
ang nasabing Basilisa Comerciante xxx.
It has been held that whether the donation is inter vivos or mortis causa depends on whether the donor
intended to transfer ownership over the properties upon the execution of the deed. In Bonsato v. Court of
Appeals, this Court enumerated the characteristics of a donation mortis causa, to wit:
(1) It conveys no title or ownership to the transferee before the death of the transferor; or, what
amounts to the same thing, that the transferor should retain the ownership (full or naked) and control of the
property while alive;
(2) That before his death, the transfer should be revocable by the transferor at will, ad nutum; but
revocability may be provided for indirectly by means of a reserved power in the donor to dispose of the
properties conveyed;
(3) That the transfer should be void if the transferor should survive the transferee.
Significant to the resolution of this issue is the irrevocable character of the donation in the case at bar. In
Cuevas v. Cuevas, we ruled that when the deed of donation provides that the donor will not dispose or take
away the property donated (thus making the donation irrevocable), he in effect is making a donation inter
vivos. He parts away with his naked title but maintains beneficial ownership while he lives. It remains to be a
donation inter vivos despite an express provision that the donor continues to be in possession and enjoyment
of the donated property while he is alive. In the Bonsato case, we held that:
(W)hat is most significant [in determining the type of donation] is the absence of stipulation that the donor
could revoke the donations; on the contrary, the deeds expressly declare them to be irrevocable, a quality
absolutely incompatible with the idea of conveyances mortis causa where revocability is of the essence of the
act, to the extent that a testator can not lawfully waive or restrict his right of revocation (Old Civil Code,
Art.737; New Civil Code, Art. 828).
Construing together the provisions of the deed of donation, we find and so hold that in the case at bar the
donation is inter vivos. The express irrevocability of the same (hindi na mababawi) is the distinctive
standard that identifies that document as a donation inter vivos. The other provisions therein which
seemingly make the donation mortis causa do not go against the irrevocable character of the subject donation.
According to the petitioner, the provisions which state that the same will only take effect upon the death of
the donor and that there is a prohibition to alienate, encumber, dispose, or sell the same, are proofs that the
donation is mortis causa. We disagree. The said provisions should be harmonized with its express
irrevocability. In Bonsato where the donation per the deed of donation would also take effect upon the death
of the donor with reservation for the donor to enjoy the fruits of the land, the Court held that the said
statements only mean that after the donors death, the donation will take effect so as to make the donees the
absolute owners of the donated property, free from all liens and encumbrances; for it must be remembered
that the donor reserved for himself a share of the fruits of the land donated.
In Gestopa v. Court of Appeals, this Court held that the prohibition to alienate does not necessarily defeat the
inter vivos character of the donation. It even highlights the fact that what remains with the donor is the right
of usufruct and not anymore the naked title of ownership over the property donated. In the case at bar, the
provision in the deed of donation that the donated property will remain in the possession of the donor just
goes to show that the donor has given up his naked title of ownership thereto and has maintained only the
right to use (jus utendi) and possess (jus possidendi) the subject donated property.
Thus, we arrive at no other conclusion in that the petitioners cited provisions are only necessary assurances
that during the donors lifetime, the latter would still enjoy the right of possession over the property; but, his
naked title of ownership has been passed on to the donees; and that upon the donors death, the donees
would get all the rights of ownership over the same including the right to use and possess the same.
Furthermore, it also appeared that the provision in the deed of donation regarding the prohibition to alienate
the subject property is couched in general terms such that even the donor is deemed included in the said
prohibition (Gayon din ang nasabing Titulo ay hindi mapapasangla o maipagbibili ang lupa habang
maybuhay ang nasabing Basilisa Comerciante). Both the donor and the donees were prohibited from
alienating and encumbering the property during the lifetime of the donor. If the donor intended to maintain
full ownership over the said property until her death, she could have expressly stated therein a reservation of
her right to dispose of the same. The prohibition on the donor to alienate the said property during her
lifetime is proof that naked ownership over the property has been transferred to the donees. It also supports
the irrevocable nature of the donation considering that the donor has already divested herself of the right to
dispose of the donated property. On the other hand, the prohibition on the donees only meant that they may
not mortgage or dispose the donated property while the donor enjoys and possesses the property during her
lifetime. However, it is clear that the donees were already the owners of the subject property due to the
irrevocable character of the donation.
The petitioner argues that the subsequent and contemporaneous acts of the donor would show that her
intention was to maintain control over her properties while she was still living. We disagree. Respondent
Domingo Comia testified that sometime in 1977 or prior to the sale of the subject house and lot, his
grandmother, the donor in the case at bar, delivered the title of the said property to him; and that the act of
the donor was a manifestation that she was acknowledging the ownership of the donees over the property
donated. Moreover, Atty. Viniegra testified that when the donor sold the lot to the petitioner herein, she was
not doing so in accordance with the agreement and intent of the parties in the deed of donation; that she was
disregarding the provision in the deed of donation prohibiting the alienation of the subject property; and that
she knew that the prohibition covers her as well as the donees.
Another indication in the deed of donation that the donation is inter vivos is the acceptance clause therein of
the donees. We have ruled that an acceptance clause is a mark that the donation is inter vivos. Acceptance is
a requirement for donations inter vivos. On the other hand, donations mortis causa, being in the form of a will,
are not required to be accepted by the donees during the donors lifetime.
We now rule on whether the donor validly revoked the donation when one of her daughters and donees,
Consolacion Austria, violated the prohibition to encumber the property. When Consolacion Austria
mortgaged the subject property to a certain Baby Santos, the donor, Basilisa Comerciante, asked one of the
respondents herein, Domingo Comia, to redeem the property, which the latter did. After the petitioner in
turn redeemed the property from respondent Domingo, the donor, Basilisa, sold the property to the
petitioner who is one of the donees.
The act of selling the subject property to the petitioner herein cannot be considered as a valid act of
revocation of the deed of donation for the reason that a formal case to revoke the donation must be filed
pursuant to Article 764 of the Civil Code, which speaks of an action that has a prescriptive period of four (4)
years from non-compliance with the condition stated in the deed of donation. The rule that there can be
automatic revocation without benefit of a court action does not apply to the case at bar for the reason that the
subject deed of donation is devoid of any provision providing for automatic revocation in event of non-
compliance with the any of the conditions set forth therein. Thus, a court action is necessary to be filed
within four (4) years from the non-compliance of the condition violated. As regards the ground of estoppel,
the donor, Basilisa, cannot invoke the violation of the provision on the prohibition to encumber the subject
property as a basis to revoke the donation thereof inasmuch as she acknowledged the validity of the
mortgage executed by the donee, Consolacion Austria, when the said donor asked respondent Domingo
Comia to redeem the same. Thereafter, the donor, Basilisa likewise asked respondent Florentino Lumubos
and the petitioner herein to redeem the same. Those acts implied that the donees have the right of control
and naked title of ownership over the property considering that the donor, Basilisa condoned and
acknowledged the validity of the mortgage executed by one of the donees, Consolacion Austria.
Anent the second issue, the petitioner asserts that the action, against the petitioner, for annulment of TCT No.
T-10434 and other relevant documents, for reconveyance and damages, filed by the respondents on
September 21, 1983 on the ground of fraud and/or implied trust has already prescribed. The sale happened
on February 6, 1979 and its registration was made on February 8, 1979 when TCT No. RT-4036 in the name
of the donor was cancelled and in lieu thereof TCT No. T-10434 in the name of the petitioner was issued.
Thus, more than four (4) years have passed since the sale of the subject real estate property was registered
and the said new title thereto was issued to the petitioner. The petitioner contends that an action for
reconveyance of property on the ground of alleged fraud must be filed within four (4) years from the
discovery of fraud which is from the date of registration of the deed of sale on February 8, 1979; and that the
same prescriptive period also applies to a suit predicated on a trust relationship that is rooted on fraud of
breach of trust.
When ones property is registered in anothers name without the formers consent, an implied trust is created
by law in favor of the true owner. Article 1144 of the New Civil Code provides:
Art. 1144. The following actions must be brought within ten years from the time the right of action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment. (n)
Thus, an action for reconveyance of the title to the rightful owner prescribes in ten (10) years from the
issuance of the title. It is only when fraud has been committed that the action will be barred after four (4)
years.
However, the four-year prescriptive period is not applicable to the case at bar for the reason that there is no
fraud in this case. The findings of fact of the appellate court which are entitled to great respect, are devoid of
any finding of fraud. The records do not show that the donor, Basilisa, and the petitioner ever intended to
defraud the respondents herein with respect to the sale and ownership of the said property. On the other
hand, the sale was grounded upon their honest but erroneous interpretation of the deed of donation that it is
mortis causa, not inter vivos; and that the donor still had the rights to sell or dispose of the donated property
and to revoke the donation.
There being no fraud in the trust relationship between the donor and the donees including the herein
petitioner, the action for reconveyance prescribes in ten (10) years. Considering that TCT No. T-10434 in the
name of the petitioner and covering the subject property was issued only on February 8, 1979, the filing of
the complaint in the case at bar in 1983 was well within the ten-year prescriptive period.
The Court of Appeals, therefore, committed no reversible error in its appealed Decision.
WHEREFORE, the appealed Decision dated June 30, 1989 of the Court of Appeals is hereby AFFIRMED. No
pronouncement as to costs.
SO ORDERED.














EN BANC
G.R. No. L-15939 January 31, 1966
ANGELES UBALDE PUIG, ET AL., plaintiffs-appellants, vs. ESTELLA MAGBANUA PEAFLORIDA,
ET AL., defendants-appellants.
R E S O L U T I O N
(Main opinion was promulgated on November 29, 1965).
REYES, J.B.L., J.:
Defendants-appellants Estela Magbanua Peaflorida, et al., insist that the reservation by the donor
of the right to dispose of the property during her lifetime in the deed of December 28, 1949
indicates that title had passed to the donee in her lifetime, otherwise, it is argued, the reservation
would be superfluous, and they cite American authorities in support.
This thesis would be plausible if the reservation of the power to dispose were the only indication to
be considered in deciding whether the donation of December 28, 1949 was mortis causa or inter

vivos. But such is not the case. The Court in its decision took to account not only the foregoing
circumstance but also the fact that the deceased expressly and consistently declared her
conveyance to be one of donation mortis causa, and further forbade the registration of the deed
until after her death. All these features concordantly indicated that the conveyance was not
intended to produce any definitive effects, nor to finally pass any interest to the grantee, except
from and after the death of the grantor.
We see nothing in the deed itself to indicate that any right, title or interest in the properties
described was meant to be transferred to Doa Estela Magbanua prior to the death of the grantor,
Carmen Ubalde Vda. de Parcon. Not ownership, certainly, for the stipulation:
Que esta escritura de donacion mortis causa no se registrara en la oficina del Registrador de
Titulos de Iloilo sino despues del fallecimiento de la Donante
necessarily meant, according to section 50 of the Land Registration Act, that the deed in question
should not take effect as a conveyance nor bind the land until after the death of the "donor".
Neither did the document operate to vest possession upon Doa Estela Magbanua, in view of the
express condition that (paragraph 3) if at the date of her death the donor had not transferred, sold,
or conveyed one-half of lot 58 of the Pototan Cadastre to other persons or entities, the donee would
be bound to pay to Caridad Ubalde, married to Tomas Pedrola, the amount of P600.00, and such
payment was to be made on the date the donee took possession of Lot No. 58. As the obligation to
pay the legacy to Caridad Ubalde would not definitely arise until after the death of the donor,
because only by then would it become certain that the "donor" could not transfer the property to
someone else, and such payment must precede the taking possession of the property "donated", it
necessarily follows that the "donee's" taking of possession could not occur before the death of the
donor.
It being thus clear that the disposition contained in the deed is one that produces no effect until the
death of the grantor, we are clearly faced by an act mortis causa of the Roman and Spanish law. We
thus see no need of resorting to American authorities as to the import of the reservation of the
donor's right to dispose of the donated property, for the Spanish authorities are very clear on this
point:
Desde el momento en que la muerte del donante es la que determina la adquisicion o el
derecho a los bienes; desde el montento en que la disposicion puede ser revocada
voluntariamente, se salva la linea divisoria entre unos y otros actos: la donacion equivale a
un legado; mas aun que esto: es un legado en realidad. (5 Manresa, 5th Ed., p. 107)
Ahora bien: si el mal llamado donante no solo dilata la fecha de la ejecucion para el
momento de su muerte, sino que ademas se reserva la facultad de revocar a su arbitrio la
disposicion, entonces el acto no es valido bajo la forma de contrato; hay en realidad una
disposicion mortis causa que exige las solemnidades del testamento. (V Manresa, 5th Ed., p.
109) (Emphasis supplied)
The presence of an acceptance is but a consequence of the erroneous concept of the true nature of
the juridical act, and does not indicate that in the same is a true donation inter vivos.

Appellant Magbanua further argues that the reserved power of the donor to convey the donated
property to other parties during her lifetime is but a resolutory condition (albeit a potestative one)
that confirms the passing of the title to the donee. In reality, this argument is a veritable petitio
principii; it takes for granted what has to be proved, i.e., that some proprietary right has passed
under the terms of the deed, which, as we have shown, is not true until the donor has died.
It is highly illuminating to compare the condition imposed in the deed of donation of December 28,
1949 with that established in the contract dealt with in Taylor vs. Uy Tieng Piao & Tau Liuan, 43
Phil. 874, invoked by appellants.
In the alleged deed of donation of December 28, 1949, the late Doa Carmen Ubalde imposed
expressly that:
Que antes de su muerte, la Donante podra enajenar, vender, traspasar e hipotecar a
cualesquiera personas o entidades los bienes aqui donados a favor de la Donataria en
concepto de Donacion mortis causa.
In the Taylor vs. Uy Tieng Piao case, on the other hand, the condition read:
It is understood and agreed that should the machinery to be installed in said factory fail, for
any reason, to arrive, in the City of Manila within the period of six (6) months from date
hereof, this contract may be cancelled by the party of the second part at its option, such
cancellation, however, not to occur before the expiration of such six (6) months. (pp. 874-
875, cas. cit.).
In the Uy Tieng Piao case the contract could only be cancelled after six months, so that there could
be no doubt that it was in force at least for that long, and the optional cancellation can be viewed as
a resolutory condition (or more properly, a non-retroactive revocatory one); but no such restriction
limited the power of the donor, Doa Carmen Ubalde, to set at naught the alleged conveyance in
favor of Doa Estela Magbanua by conveying the property to other parties at any time, even at the
very next instant after executing the donation, if she so chose. It requires no argument to
demonstrate that the power, as reserved in the deed, was a power to destroy the donation at any
time, and that it meant that the transfer is not binding on the grantor until her death made it
impossible to channel the property elsewhere. Which, in the last analysis, as held in our main
decision, signifies that the liberality is testamentary in nature, and must appear with the
solemnities required of last wills and testaments in order to be legally valid.
Wherefore, the motion to reconsider is denied.
Bengzon, C.J., Concepcion, Dizon, Regala, Bengzon and Zaldivar, JJ., concur.
Barrera, J., took no part.
Makalintal, J., is on leave.
Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION
G.R. No. 155810 August 13, 2004
LYDIA SUMIPAT, LAURITO SUMIPAT, ALEJANDRO SUMIPAT, ALICIA SUMIPAT, and LIRAFE
SUMIPAT, petitioners,
vs.
BRIGIDO BANGA, HERMINIGILDO TABOTABO, VIVIANO TABOTABO, BERNARDITA ANION,
and LEONIDA TABOTABO, respondents.

D E C I S I O N

TINGA, J.:
This is a Petition for Review on Certiorari of the Decision of the Court of Appeals which reversed and
set aside the decision
3
of the Regional Trial Court (RTC) and partially annulled the Deed of Absolute
Transfer and/or Quitclaim (the deed) subject of this case.
We quote the appellate courts findings of fact:
The spouses Placida Tabo-tabo and Lauro Sumipat, who contracted marriage on July 20,
1939, acquired three parcels of land two of which were covered by Original Certificate of
Title No. P-17842 and Transfer Certificate of Title No. T-15826.
The couple was childless.
Lauro Sumipat, however, sired five illegitimate children out of an extra-marital affair with
Pedra Dacola, namely: herein defendants-appellees Lydia, Laurito, Alicia, Alejandro and
Lirafe, all surnamed Sumipat.
On January 5, 1983, Lauro Sumipat executed a document denominated "DEED OF
ABSOLUTE TRANSFER AND/OR QUIT-CLAIM OVER REAL PROPERTIES" (the assailed
document) in favor of defendants-appellees covering the three parcels of land (the
properties). On the document appears the signature of his wife Placida which indicates that
she gave her marital consent thereto.
It appears that on January 5, 1983 when the assailed document was executed, Lauro
Sumipat was already very sick and bedridden; that upon defendant-appellee Lydias
request, their neighbor Benjamin Rivera lifted the body of Lauro Sumipat whereupon Lydia
guided his (Lauro Sumipats) hand in affixing his signature on the assailed document which
she had brought; that Lydia thereafter left but later returned on the same day and requested
Lauros unlettered wife Placida to sign on the assailed document, as she did in haste, even
without the latter getting a responsive answer to her query on what it was all about.

After Lauro Sumipats death on January 30, 1984, his wife Placida, hereinafter referred to as
plaintiff-appellant, and defendants-appellees jointly administered the properties 50% of the
produce of which went to plaintiff-appellant.
As plaintiff-appellants share in the produce of the properties dwindled until she no longer
received any and learning that the titles to the properties in question were already
transferred/made in favor of the defendants-appellees, she filed a complaint for declaration
of nullity of titles, contracts, partition, recovery of ownership now the subject of the present
appeal.
Defendant-appellee Lydia disclaims participation in the execution of the assailed document,
she claiming to have acquired knowledge of its existence only on January 10, 1983 or five
days after its execution when Lauro Sumipat gave the same to her.
Branch 6 of the Regional Trial Court of Dipolog City decided the case in favor of defendants-
appellees, it holding that by virtue of the assailed document the due execution of which was
not contested by plaintiff-appellant, the properties were absolutely transferred to
defendants-appellees.
4

The trial court found that the subject properties are conjugal having been acquired during the
marriage of Lauro Sumipat and Placida Tabotabo (Placida). However, because Placida failed to
question the genuineness and due execution of the deed and even admitted having affixed her
signature thereon, the trial court declared that the entirety of the subject properties, and not just
Lauro Sumipats conjugal share, were validly transferred to the defendants, the petitioners herein.
5

On appeal,
6
the appellate court held that since Placida was unlettered,
7
the appellees, the
petitioners herein, as the parties interested in enforcing the deed, have the burden of proving that
the terms thereof were fully explained to her.
8
This they failed to do.
Under the Civil Code, a contract where consent is given through mistake, violence, intimidation,
undue influence or fraud is voidable.
9
In order that mistake may invalidate consent, it should refer
to the substance of the thing which is the object of the contract, or to those conditions which have
principally moved one or both parties to enter into the contract.
10

The appellate court found that Placida did not understand the full import of the deed because the
terms thereof were not explained to her either by the petitioners or by the notary public before
whom the deed was acknowledged. According to the appellate court, Judge Pacifico Garcia (Judge
Garcia), before whom the deed was acknowledged, did not identify Placida as having appeared
before him on January 5, 1983 to acknowledge the deed. The jurat indicates that it was only Lauro
Sumipat who appeared before Judge Garcia and to whom he explained the contents of the deed.
Further, the appellate court noted that Judge Garcia himself was under the impression that the deed
conveyed the exclusive properties of Lauro Sumipat. Hence, he could not have explained to Placida
that the deed actually transferred the conjugal properties of Lauro Sumipat and Placida.
11

The Court of Appeals, therefore, annulled the deed insofar as it covers Placidas conjugal share in
the subject properties because the latters consent thereto was vitiated by mistake when she affixed
her signature on the document.

The petitioners filed a Motion for Reconsideration on the grounds of estoppel, absence of fraud and
prescription. The appellate court denied the Motion for Reconsideration in its Resolution
12
dated
October 16, 2002 ruling that the grounds relied upon have been addressed in its Decision dated
April 11, 2002. Anent the ground of prescription, the appellate court held that since the properties
were acquired through fraud or mistake, the petitioners are considered trustees of an implied trust
for the benefit of Placida. Citing jurisprudence,
13
the Court of Appeals ruled that actions based on
implied or constructive trust prescribe 10 years from the issuance of a Torrens Title over the
property. Since two (2) of the subject properties were issued Transfer Certificates of Title (TCT)
Numbered T-40037
14
and T-40038
15
under the petitioners names on August 18, 1987, the
Complaint for declaration of nullity of titles, partition, recovery of ownership and possession,
reconveyance, accounting and damages, which was filed on March 3, 1993, was filed well within the
prescriptive period.
The petitioners are now before this Court principally claiming that Placida freely consented to the
execution of the deed and that they did not commit fraudulent acts in connection with its execution.
They also reiterate their argument that the Court of Appeals should have dismissed the case on the
ground of prescription. It is their contention that the present action being one to annul a contract
on the ground of fraud, it should have been filed within four (4) years from the discovery of fraud or
registration of the instrument with the Registry of Deeds.
The respondents filed their Comment
16
dated February 7, 2003, essentially echoing the findings of
the Court of Appeals on the matter of Placidas consent. According to them, Placida was deceived
and misled into affixing her signature on the deed. They further claim that Placida did not actually
appear before the notary public to acknowledge the instrument.
In their Reply
17
dated April 29, 2003, the petitioners insist that Placida was not illiterate and that
Lauro Sumipat validly transferred the titles over the properties in question to them. They also
argue that if Placida did not understand the import of the deed, she could have questioned Lauro
Sumipat about it since the deed was executed a year before the latter died.
The trial court and the Court of Appeals are in agreement that the subject properties are conjugal,
having been acquired during the marriage of Lauro Sumipat and Placida. They came out, however,
with disparate denouements. While the trial court upheld the validity of the deed as an instrument
of transfer of all the litigated parcels of land in their entirety on the ground that Placida failed to
question its authenticity and due execution, the appellate court struck the deed down insofar as the
conjugal share of Placida is concerned based on its finding that her consent was vitiated by mistake.
At bottom, the crux of the controversy is whether the questioned deed by its terms or under the
surrounding circumstances has validly transferred title to the disputed properties to the
petitioners.
A perusal of the deed reveals that it is actually a gratuitous disposition of property a donation
although Lauro Sumipat imposed upon the petitioners the condition that he and his wife, Placida,
shall be entitled to one-half (1/2) of all the fruits or produce of the parcels of land for their
subsistence and support. The preliminary clauses of the deed read:

That conscious of my advanced age and failing health, I feel that I am not capable anymore
of attending to and maintaining and keeping in continuous cultivation my above described
properties;
That my children are all desirous of taking over the task of maintaining my properties and
have demonstrated since childhood the needed industry and hard work as they have in fact
established possession over my real properties and introduced more improvements over
my lands, the fruit of which through their concerted efforts and labors, I myself and my
family have enjoyed;
That it would be to the best interest of my above mentioned children that the ownership
over my above described properties be transferred in their names, thereby encouraging
them more in developing the lands to its fullest productivity.
18

The deed covers three (3) parcels of land.
19
Being a donation of immovable property, the
requirements for validity set forth in Article 749 of the Civil Code should have been followed, viz:
Art. 749. In order that the donation of the immovable may be valid, it must be made in a
public document, specifying therein the property donated and the value of the charges
which the donee must satisfy.
The acceptance may be made in the same deed of donation or in a separate public
document, but it shall not take effect unless it is done during the lifetime of the donor.
If the acceptance is made in a separate instrument, the donor shall be notified thereof in an
authentic form, and this step shall be noted in both instruments.
Title to immovable property does not pass from the donor to the donee by virtue of a deed of
donation until and unless it has been accepted in a public instrument and the donor duly notified
thereof. The acceptance may be made in the very same instrument of donation. If the acceptance
does not appear in the same document, it must be made in another. Where the deed of donation
fails to show the acceptance, or where the formal notice of the acceptance, made in a separate
instrument, is either not given to the donor or else not noted in the deed of donation and in the
separate acceptance, the donation is null and void.
20

In this case, the donees acceptance of the donation is not manifested either in the deed itself or in a
separate document. Hence, the deed as an instrument of donation is patently void.
We also note the absence of any proof of filing of the necessary return, payment of donors taxes on
the transfer, or exemption from payment thereof. Under the National Internal Revenue Code of
1977, the tax code in force at the time of the execution of the deed, an individual who makes any
transfer by gift shall make a return and file the same within 30 days after the date the gift is made
with the Revenue District Officer, Collection Agent or duly authorized Treasurer of the municipality
in which the donor was domiciled at the time of the transfer.
21
The filing of the return and payment
of donors taxes are mandatory. In fact, the registrar of deeds is mandated not to register in the
registry of property any document transferring real property by way of gifts inter vivos unless a
certification that the taxes fixed and actually due on the transfer had been paid or that the
transaction is tax exempt from the Commissioner of Internal Revenue, in either case, is presented.
22


Neither can we give effect to the deed as a sale, barter or any other onerous conveyance, in the
absence of valid cause or consideration and consent competently and validly given.
23
While it is true
that the appellate court found Placidas consent to have been vitiated by mistake, her testimony on
the matter actually makes out a case of total absence of consent, not merely vitiation thereof. She
testified in this regard, thus:
Q- What have you been doing on that day on January 5, 1983?
A- I was at home boiling water.
Q- While you were boiling water in the house, at that time who arrived, if there was any?
A- Lydia Sumipat arrived.
Court:-(To the witness)
Q- Who is this Lydia Sumipat?
A- The daughter of my husband with his paramour.
Q- How old was she?
A- I did not know if she was already 30 years old at that time because he was born in 1950.
Atty. Legorio:-(To the witness)
Q- When you said Lydia Sumipat, you are referring to one of the defendants in this case?
A- Yes, sir. She is the one.
Q- This Lydia Sumipat you are referring to as one of the principal defendant and daughter of
your husband with his paramour, in January, 1983 what was her educational attainment, if
you know?
A- She has already finished schooling.
Q- Do you know what she obtained?
A- Teacher.
Q- You said she arrived in the afternoon of January 5, 1983 in your house while you were
boiling water. What did she do when she arrived there?
A- She brought with her a paper.
Q- What did she say to you?

A- She told me to sign that paper immediately because there is the witness waiting and so I
asked from her what was that paper I am going to sign. I asked her because I am unlettered
but she said never mind just sign this immediately.
Q- By the way, what is your highest educational attainment?
A- I have never gone to school.
Q- Do you know how to read or to write?
A- I know how to write only my name.
Q- You know how to write your name only?
A- Yes, sir.
Q- You said she told you to sign that piece of paper and you asked her what was that and she
told you "you just sign that", what did you do then?
A- She was in a hurry to let me sign that document so I signed it without knowing what was
that.
Q- Did she tell you that piece of paper was a document wherein the land including your land
in Siayan were to be given to them?
A- I did not give my land.
24

During cross-examination, Placida again denied any knowledge of the nature of the deed:
q You are aware that the titles over these lots had already been transferred in the name of
the defendants?
a They surreptitiously transferred the title in their names, I do not know about it.
q You mean to say you signed a document transferring them in their names?
a There was a piece of paper brought to me to be signed by Lydia; I asked whats all about
but she did not tell me; I was forced to sign considering that according to her somebody was
waiting for it.
q What do you mean that you are force to sign?
a She told me to sign that paper immediately because there is a witness waiting that paper
but she was alone when she came to me.
q So you signed that paper?

a I signed it because she was in a hurry.
q That was done during the lifetime of your husband?
a Yes, sir.
q And your husband also signed that paper?
a I do not know because I have not seen my husband signed, Lydia only came to me to let
me sign that paper.
q Is it not a fact that you and your husband were brought before the office of Judge Pacifico
Garcia of Manukan, and in the office you signed that document?
a I have not gone to the Municipal building of Manukan and I do not know Judge Garcia.
q But what you know now that the titles are transferred in the name of the defendants?
a It was Lydia who caused the transfer of the titles in their names.
q And you know that fact when you signed that paper?
a At the time I signed the paper, I do not know yet that the title would be transferred, it was
only at the time when I requested my niece to follow it up because according to them I am
no longer entitled to the land.
25

In Baranda v. Baranda,
26
this Court declared that the deeds of sale questioned therein are not
merely voidable (as intimated by the plaintiffs themselves in their complaint for annulment of the
deeds and reconveyance of the lots) but null and void ab initio as the supposed seller declared
under oath that she signed the deeds without knowing what they were. The significant
circumstance meant, the Court added, that her consent was not merely marred by vices of consent
so as to make the contracts voidable, but that she had not given her consent at all.
Parenthetically, as Placidas Complaint is entitled Declaration of Nullity of Titles; Contracts; Partition,
Recovery of Ownership and Possession; Reconveyance; Accounting and Damages with Prayer for
Preliminary Injunction and Receivership, the validity of the deed was directly assailed, but its
absolute nullity was not specifically raised as an issue. Nevertheless, both the RTC and the appellate
court took the cue from Placidas theory that the deed is merely voidable as regards her conjugal
share of the properties. However, since the real issue is whether the questioned deed has validly
transferred ownership of the litigated properties, it is appropriate for the Court to inquire into the
form of the deed and the existence of valid consent thereto to ascertain the validity or nullity of the
deed.
From the substantive and procedural standpoints, the objectives to write finis to a protracted
litigation and avoid multiplicity of suits are worth pursuing at all times. Conformably, we have ruled
in a number of cases that an appellate court is accorded broad discretionary power to consider
even errors not assigned. We have applied this tenet, albeit as a matter of exception, in the
following instances: (1) grounds not assigned as errors but affecting jurisdiction over the subject

matter; (2) matters not assigned as errors on appeal but are evidently plain or clerical errors within
contemplation of law; (3) matters not assigned as errors on appeal but consideration of which is
necessary in arriving at a just decision and complete resolution of the case or to serve the interests
of justice or to avoid dispensing piecemeal justice; (4) matters not specifically assigned as errors on
appeal but raised in the trial court and are matters of record having some bearing on the issue
submitted which the parties failed to raise or which the lower court ignored; (5) matters not
assigned as errors on appeal but closely related to an error assigned; and (6) matters not assigned
as errors on appeal but upon which the determination of a question properly assigned is
dependent.
27

In the instant case, the validity of the deed was directly assailed although both parties are of the
view that it is not an absolute nullity. The correct characterization of the deed is, therefore,
determinative of the present controversy. Elsewise framed, the issue of validity or nullity is
interwoven with the positions adopted by the parties and the rulings made by the courts below.
Hence, we shall be resolute in striking down the deed especially as it appears on its face to be a
patent nullity.
Having said this, we shall now proceed to the issue of prescription. Being an absolute nullity, both
as a donation and as a sale, the deed is subject to attack at any time, in accordance with the rule in
Article 1410 of the Civil Code that an action to declare the inexistence of a void contract does not
prescribe.
We are thus unimpressed by the petitioners contention that the appellate court should have
dismissed Placidas appeal on the ground of prescription. Passage of time cannot cure the fatal flaw
in an inexistent and void contract.
28
The defect of inexistence of a contract is permanent and
incurable; hence, it cannot be cured either by ratification or by prescription.
29

Turning now to the effects of the absolute nullity of the deed, it is well-settled that when there is a
showing of illegality, the property registered is deemed to be simply held in trust for the real owner
by the person in whose name it is registered, and the former then has the right to sue for the
reconveyance of the property. The action for the purpose is also imprescriptible. As long as the land
wrongfully registered under the Torrens system is still in the name of the person who caused such
registration, an action in personam will lie to compel him to reconvey the property to the real
owner.
30

One final note. After this Decision shall have become final and executory, the parties may either
extrajudicially divide the estates of Lauro Sumipat and Placida Tabotabo pursuant to Rule 74 of the
Rules of Court or judicially settle the estates pursuant to Rules 78, et seq., in accordance with this
Decision and the law.
WHEREFORE, the instant Petition for Review on Certiorari is DENIED. The Decision of the Regional
Trial Court dated September 29, 1997 and the Decision of the Court of Appeals dated April 11, 2002,
as well as its Resolution dated October 16, 2002, are VACATED. In lieu thereof, judgment is hereby
rendered in favor of the respondents, to wit: (i) DECLARING the Deed of Absolute Transfer and/or
Quitclaim dated January 5, 1983 NULL AND VOID; and (ii) ORDERING the CANCELLATION of
Transfer Certificates of Title Numbered T-40037 and T-40038 (Zamboanga del Norte) and the tax
declaration covering the unregistered parcel of land, all issued in the names of the petitioners
Lydia, Laurito, Alicia, Alejandro and Lirafe, all surnamed Sumipat, and the REINSTATEMENT of

Original Certificate of Title No. P-17842 (Zamboanga del Norte) Transfer Certificate Title No. T-
15826 (Zamboanga del Norte) and the tax declaration covering the unregistered parcel of land, all
in the name of "Lauro Sumipat . . . married to Placida Tabotabo."
Costs against the petitioners.
SO ORDERED.
Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Chico-Nazario, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-5949 November 19, 1955
TANG HO, WILLIAM LEE, HENRI LEE, SOFIA LEE TEEHANKEE, THOMAS LEE, ANTHONY LEE,
JULIA LEE KAW, CHARLES LEE, VALERIANA LEE YU, VICTOR LEE, SILVINO LEE, MARY LEE,
JOHN LEE, and PETER LEE, for themselves and as heirs of LI SENG GIAP, deceased, petitioners,
vs.
THE BOARD OF TAX APPEALS and THE COLLECTOR OF INTERNAL REVENUE, respondents.
Ozaeta, Roxas, Lichauco and Picazo for petitioners.
Office of the Solicitor General Juan R. Liwag and Solicitor Jose P. Alejandro for respondents.
REYES, J.B.L., J.:
This is a petition for the review of the petition of the defunct Board of Tax Appeals holding
petitioner Li Seng Giap, et al. liable for gift taxes in accordance with the assessments made by the
respondent Collector of Internal Revenue.
Petitioners Li Seng Giap (who died during the pendency of this appeal) and his wife Tang Ho and
their thirteen children appear to be the stockholder of two close family corporations named Li Seng
Giap & Sons, Inc. and Li Seng Giap & Co. On or about May, 1951, examiners of the Bureau of Internal
Revenue, then detailed to the Allas Committee of the Congress of the Philippines, made an
examination of the books of the two corporation aforementioned and found that each of Li Seng
Giap's 13 children had a total investment therein of approximately P63,195.00, in shares issued to
them by their father Li Seng Giap (who was the manager and controlling stockholder of the two
corporations) in the years 1940, 1942, 1948, 1949, and 1950 in the following amounts:
Donees 1940 1942 1948 1949 1950
William Lee 7,500 12,500 6,750 27,940 7,500
Henry Lee 7,500 12,500 6,750 27,940 7,500

Sofia Lee 7,500 12,500 16,500 26,690
Thomas Lee 7,500 12,500 7,500 28,190 7,500
Anthony Lee 18,000 7,500 28,190 7,500
Julia Lee 20,000 15,000 25,690 2,500
Charles Lee 20,000 7,500 60,690 7,500
Valeriana Lee 63,190 2,500
Victor Lee 63,190
Silvino Lee 63,190
Mary Lee 63,190
John Lee 63,190
Peter Lee 63,190
The Collector of Internal Revenue regarded these transfers as undeclared gifts made in the
respective years, and assessed against Li Seng Giap and his children donor's and donee's taxes in
the total amount of P76,995.31, including penalties, surcharges, interests, and compromise fee due
to the delayed payment of the taxes. The petitioners paid the sum of P53,434.50, representing the
amount of the basic taxes, and put up a surety bond to guarantee payment of the balance
demanded. And on June 25, 1951, they requested the Collector of Internal Revenue for a revision of
their tax assessments, and submitted donor's and donee's gift tax returns showing that each child
received by way of gift inter vivos, every year from 1939 to 1950 (except in 1947 and 1948) P4,000
in cash; that each of the eight children who married during the period aforesaid, were given an
additional P20,000 as dowry or gift propter nuptias; that the unmarried children received roughly
equivalent amount in 1949, also by way of gifts inter vivos, so that the total donations made to each
and every child, as of 1950, stood at P63,190. Appellants admit that these gifts were not reported;
but contend that as the cash donated came from the conjugal funds, they constituted individual
donations by each of the spouses Li Seng Giap and Tang Ho of one half of the amount received by
the donees in each instance, up to a total of P31,505 to each of the thirteen children from each
parent. They further alleged that the children's stockholding in the two family corporations were
purchased by them with savings from the aforesaid cash donations received from their parents.
Claiming the benefit of gift tax exemptions (under section 110 and 112 of the Internal Revenue
Code) at the rate of P2000 a year for each donation, plus P10,000 for each gift propter nuptias made
by either parent, and appellants' aggregate tax liability, according to their returns, would only be
P4,599.94 for the year 1949, and P228,28 for the year 1950, or a total of P4,838.22, computed as
follows:
DONORS 1939-44 1945-46 1949 1950 TOTAL
Li Seng Giap Exempt Exempt P1,110.72 P74.14 P1,184.86

Tang Ho Exempt Exempt 1,110.72 74.14 1,184.86
Total None None P2,221.44 P148.28 P2,369.72
William Lee Exempt Exempt P253.80 P30.00 P283.80
Henry Lee Exempt Exempt Exempt 15.00 15.00
Sofia Lee Exempt Exempt P51.90 None 51.90
Thomas Lee Exempt Exempt Exempt 15.00 15.00
Anthony Lee Exempt Exempt Exempt 15.00 15.00
Julia Lee Exempt Exempt 26.90 Exempt 26.90
Charles Lee Exempt Exempt Exempt 15.00 15.00
Valeriana Lee Exempt Exempt 26.90 Exempt 26.90
Victor Lee Exempt Exempt 403.80 None 403.80
Silvino Lee Exempt Exempt 403.80 None 403.80
Mary Lee Exempt Exempt 403.80 None 403.80
John Lee Exempt Exempt 403.80 None 403.80
Peter Lee Exempt Exempt 403.80 None 403.80
Total None None P2,378.50 P90.00 P2,468.50
Grand total liability of Donors and
Donees
P4,599.94 P238.28 P4,838.22
The Collector refused to revise his original assessments; and the petitioners appealed to the then
Board of Tax Appeals (created by Executive Order 401-A, in 1951) insisting that the entries in the
books of the corporation do not prove donations; that the true amount and date of the donation
were those appearing in their tax returns; and that the donees merely bought stocks in the
corporation out of savings made from the money received from their parents. The Board of Tax
Appeals upheld the decision of the respondent Collector of Internal Revenue; hence, this petition
for review.
The questions in this appeal may be summarized as follows:
(1) Whether or not the dates and amounts of the donations taxable against petitioners were as
found by the Collector of Internal Revenue from the books of the corporations Li Seng Giap & Sons,
Inc. and Li Seng Giap & Co., or as set forth in petitioners' gift tax returns;
(2) Whether or not the donations made by petitioner Li Seng Giap to his children from the conjugal
property should be taxed against the husband alone, or against husband and wife; and

(3) Whether or not petitioners should be allowed the tax deduction claimed by them.
On the first question, which is of fact the appellants take the preliminary stand that because of
Collector failed to specifically deny the allegation of their petition in the Tax Board he must be
deemed to have admitted the annual and propter nuptias donations alleged by them, and that he is
estopped from denying their existence. As the proceedings before the Tax Board were
administrative in character, not governed by the Rules of Court (see Sec. 10, Executive Order 401-
A),and as the Collector actually submitted his own version of the transactions, we do not consider
that the Collector's failure to make specific denials should be given the same binding effect as in
strict court pleadings.
Going now to the merits of the issue. The appealed findings of the Board of Tax Appeals and of the
Collector of Internal Revenue (that the stock transfers from Li Seng Giap to his children were
donations) appear supported by the following circumstances:
(1) That the transferor Li Seng Giap (now deceased) had in fact conveyed shares to stock to his 13
children on the dates and in the amounts shown in the table on page 2 of this decision.
(2) That none of the transferees appeared to possess adequate independent means to buy the
shares, so much so that they claim now to have purchased the shares with the cash donations made
to them from time to time.
(3) That the total of the alleged cash donations to each child is practically identical to the value of
the shares supposedly purchased by each donee.
(4) That there is no evidence other than the belated sworn gift tax returns of the spouses Li Seng
Giap and Ang Tang Ho, and their children, appellants herein, to support their contention that the
shares were acquired by purchase. No contracts of sale or other documents were presented, nor
any witnesses introduced; not even the claimants themselves have testified.
(5) The claim that the shares were acquired by the children by purchase was first advanced only
after the assessment of gift taxes and penalties due thereon (in the sum of P76,995.31) had been
made, and after the appellants had paid P53,434.50 on account, and had filed a bond to guarantee
the balance.
(6) That for the parent to donate cash to enable the donee to buy from him shares of equivalent
value is, for all intents and purposes, a donation of such shares to the purchaser donee.
We cannot say, under the circumstances, that there is no sufficient evidence on record to support
the findings of the Tax Board that the stock transfers above indicated were made by way of
donation, as would entitle us to disregard or reverse the Board's finding.
The filing of the gift tax returns only after assessments and part payment of the taxes demanded by
the Collector, and the lack of corroboration of the alleged donations in cash, amply justify the Tax
Board's distrust of the veracity of the appellants' belated tax returns "on or before the first of March
following the close of the calendar year" when the gifts were made (Sec. 115, par. [c]; and besides
the return a written notice to the Collector of each donation of P10,000 or more, must be given
within thirty days after the donation, Sec. 114). These yearly returns and notices are evidently

designed to enable the Collector to verify promptly their truth and correctness, while the gifts are
still recent and proof of the circumstances surrounding the making thereof is still fresh and
accessible. On their own admission, appellants failed to file for ten successive years, the
corresponding returns for the alleged yearly gifts of P4,000 to each child, and likewise failed to give
the notices for the P20,000 marriage gifts to each married child. Hence, they are now scarcely in a
position to complain if their contentions are not accepted as truthful without satisfactory
corroboration. Any other view would leave the collection of taxes at the mercy of explanations
concocted ex post facto by evading taxpayers, drafted to suit any facts disclosed upon investigation,
and safe from contradiction because the passing years have erased all trace of the truth.
The second and third issues in this appeal revolve around appellants' thesis that inasmuch as the
property donated was community property (gananciales), and such property is jointly owned by
their parents, the total amount of the gifts made in each year should be divided between the father
and the mother, as separate donors, and should be taxed separately to each one of them.
In assessing the worth of this contention, it must be ever borne in mind that appellants have not
only failed to prove that the donations were actually made by both spouses, Li Seng Giap and Tang
Ho, but that precisely the contrary appears from their own evidence. In the original claim for tax
refund, filed with the Collector of Internal Revenue, under date of June 25, 1951 (copied in pages 6
and 7 of the appellants' petition for review addressed to the Board of Tax Appeals), the father, Li
Seng Giap, describes himself as "the undersigned donor" (par. 1) and speaks of "cash donations
made by the undersigned" (par. 3), without in any way mentioning his wife as a co-participant in
the donation. The issue is thus reduced to the following: Is a donation of community property by
the father alone equivalent in law to a donation of one-half of its value by the father and one-half by
the mother? Appellants submit that all such donations of community property are to be regarded,
for tax purposes, as donations by both spouses, for which two separate exemptions may be claimed
in each instance, one for each spouse.
This presentation should be viewed in the light of the provisions of the Spanish Civil Code of 1889,
which was the governing law in the years herein involved, 1939 to 1950. the determinative rule is
that of Arts. 1409 and 1415, reading as follows:
Art. 1409. The conjugal partnership shall also be chargeable with anything which may have
been given or promised by the husband to the children born of the marriage solely in order
to obtain employment for them or give them a profession, or by both spouses by common
consent, should they not have stipulated that such expenditures should be borne in whole
or in part by the separate property of one of them.
ART. 1415, p. 1. The husband may dispone of the property of the conjugal partnership for
the purposes mentioned in Art. 1409.
In effect, these Articles clearly refute the appellants' theory that because the property donated is
community property, the donations should be viewed as made by both spouses. First, because the
law clearly differentiates the donations of such property "by the husband" from the "donations by
both spouses by common consent" ("por el marido . . . o por ambos conyuges de comun acuerdo," in
the Spanish text).

Next, the wording of Arts. 1409 and 1415 indicates that the lawful donations by the husband to the
common children are valid and are chargeable to the community property, irrespective of whether
the wife agrees or objects thereof. Obviously, should the wife object to the donation, she can not be
regarded as a donor at all.
Even more: Suppose that the husband should make a donation of some community property to a
concubine or paramour. Undeniably, the wife cannot be regarded as joining in any such donation.
Yet under the old Civil Code, the donation would stand, with the only limitation that the wife should
not be prejudiced in the division of the profits after the conjugal partnership affairs are liquidated.
So that if the value of the donation should be found to fit within the limits of the husband's ultimate
share in the conjugal partnership profits, the donation by the husband would remain unassailable,
over and against the non-participation of the wife therein. This Court has so ruled in Baello vs.
Villanueva (54 Phil. 213, 214):
According to article 1413 of the Civil Code, any transfer or agreement upon conjugal
property made by the husband in contravention of its provisions, shall not prejudice his
wife or her heirs. As the conjugal property belongs equally to husband and wife, the
donation of this property made by the husband prejudices the wife in so far as it includes a
part or the whole of the wife's half, and is to that extent invalid. Hence article 1419, in
providing for the liquidation of the conjugal partnership, directs that all illegal donations
made by the husband be charged against his estates and deducted from his capital. But it is
only then, when the conjugal partnership is in the process of liquidation, that it can be
discovered whether or not an illegal donation made by the husband prejudices the wife.
And inasmuch as these gifts are only to be held invalid in so far as they prejudice the wife,
their nullity cannot be decided until after the liquidation of the conjugal partnership and it
is found that they encroach upon the wife's portion.
Appellants herein are therefore in error when they contend that it is enough that the property
donated should belong to the conjugal partnership in order that the donation be considered and
taxed as a donation of both husband and wife, even if the husband should appear as the sole donor.
There is no blinking the fact that, under the old Civil Code, to be a donation by both spouses, taxable
to both, the wife must expressly join the husband in making the gift; her participation therein cannot
be implied.
It is true, as appellants stress, that in Gibbs vs. Government of the Philippines, 59 Phil., 293, this
Court ruled that "the wife, upon acquisition of any conjugal property, becomes immediately vested
with an interest and title equal to that of the husband"; but this Court was careful to immediately
add, "subject to the power of management and disposition which the law vests on the husband." As
has been shown, this power of disposition may, within the legal limits, override the objections of
the wife and render the donation of the husband fully effective without need of the wife's joining
therein. (Civil Code of 1889, Arts 1409, 1415.)
It becomes unnecessary to discuss the nature of a conjugal partnership, there being specific rules
on donations of property belonging to it. The consequence of the husband's legal power to donate
community property is that, where made by the husband alone, the donation is taxable as his own
exclusive act. Hence, only one exemption or deduction can be claimed for every such gift, and not
two, as claimed by appellants herein. In thus holding, the Board of Tax Appeals committed no error.

Premises considered, we are of the opinion and so declare:
(a) That the finding of the defunct Board of Tax Appeals to the effect that shares transferred from Li
Seng Giap to his children were conveyed to them by way of donation inter vivos is supported by
adequate evidence, and therefore cannot be reviewed by this Court (Comm. of Internal Revenue. vs.
Court Holding Co., L. Ed. 981; Comm. of Internal Revenue vs. Scottish American Investment Co., 89 L.
Ed. 113; Comm. of Internal Revenue vs. Tower, 90 L. Ed. 670; Helvering vs. Tax Penn. Oil Co., 81 L.
Ed. 755).
(b) That under the old Civil Code, a donation by the husband alone does not become in law a
donation by both spouses merely because it involves property of the conjugal partnership;
(c) That such a donation of property belonging to the conjugal partnership, made during its
existence, by the husband alone in favor of the common children, is taxable to him exclusively as
sole donor.
Wherefore, the decision appealed from is affirmed with costs to the appellants. So ordered.
Paras, C.J., Bengzon, Padilla, Montemayor, Reyes, A., Bautista Angelo, Jugo, Labrador, and Concepcion,
JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. Nos. L-9456 and L-9481 January 6, 1958
THE COLLECTOR OF INTERNAL REVENUE, petitioner,
vs.
DOMINGO DE LARA, as ancilliary administrator of the estate of HUGO H. MILLER (Deceased),
and the COURT OF TAX APPEALS, respondents.
Allison J. Gibbs, Zafra, De Leon and Veneracion for Domingo E. de Lara.
Assistant Solicitor General Ramon L. Avancena and Cezar L. Kierulf for the Collector of Internal
Revenue.
MONTEMAYOR, J.:
These are two separate appeals, one by the Collector of Internal Revenue, later on referred to as the
Collector, and the other by Domingo de Lara as Ancilliary Administrator of the estate of Hugo H.
Miller, from the decision of the Court of Tax Appeals of June 25, 1955, with the following dispositive
part:
WHEREFORE, respondent's assessment for estate and inheritance taxes upon the estate of
the decedent Hugo H. Miller is hereby modified in accordance with the computation
attached as Annex "A" of this decision. Petitioner is hereby ordered to pay the amount of

P2,047.22 representing estate taxes due, together with the interests and other increments.
In case of failure to pay the amount of P2,047.22 within thirty (30) days from the time this
decision has become final, the 5 per cent surcharge and the corresponding interest due
thereon shall be paid as a part of the tax.
The facts in the case gathered from the record and as found by the Court of Tax Appeals may be
briefly stated as follows: Hugo H. Miller, an American citizen, was born in Santa Cruz, California,
U.S.A., in 1883. In 1905, he came to the Philippines. From 1906 to 1917, he was connected with the
public school system, first as a teacher and later as a division superintendent of schools, later
retiring under the Osmeiia Retirement Act. After his retirement, Miller accepted an executive
position in the local branch of Ginn & Co., book publishers with principal offices in New York and
Boston, U.S.A., up to the outbreak of the Pacific War. From 1922 up to December 7, 1941, he was
stationed in the Philippines as Oriental representative of Ginn & Co., covering not only the
Philippines, but also China and Japan. His principal work was selling books specially written for
Philippine schools. In or about the year 1922, Miller lived at the Manila Hotel. His wife remained at
their home in Ben-Lomond, Santa Cruz, California, but she used to come to the Philippines for brief
visits with Miller, staying three or four months. Miller also used to visit his wife in California. He
never lived in any residential house in the Philippines. After the death of his wife in 1931, he
transferred from the Manila Hotel to the Army and Navy Club, where he was staying at the outbreak
of the Pacific War. On January 17, 1941, Miller executed his last will and testament in Santa Cruz,
California, in which he declared that he was "of Santa Cruz, California". On December 7, 1941,
because of the Pacific War, the office of Ginn & Co. was closed, and Miller joined the Board of
Censors of the United States Navy. During the war, he was taken prisoner by the Japanese forces in
Leyte, and in January, 1944, he was transferred to Catbalogan, Samar, where he was reported to
have been executed by said forces on March 11, 1944, and since then, nothing has been heard from
him. At the time of his death in 1944, Miller owned the following properties:
Real Property situated in Ben-Lomond, Santa Cruz,
California valued at
...................................................................... P 5,000.00
Real property situated in Burlingame, San Mateo,
California valued at
........................................................................................ 16,200.00
Tangible Personal property,
worth............................................. 2,140.00
Cash in the banks in the United
States.................................... 21,178.20
Accounts Receivable from various persons in the
United States including notes
............................................................... 36,062.74
Stocks in U.S. Corporations and U.S. Savings
Bonds, valued at
........................................................................................ 123,637.16
Shares of stock in Philippine Corporations, valued
at .......... 51,906.45

Testate proceedings were instituted before the Court of California in Santa Cruz County, in the
course of which Miller's will of January 17, 1941 was admitted to probate on May 10, 1946. Said
court subsequently issued an order and decree of settlement of final account and final distribution,
wherein it found that Miller was a "resident of the County of Santa Cruz, State of California" at the
time of his death in 1944. Thereafter ancilliary proceedings were filed by the executors of the will
before the Court of First Instance of Manila, which court by order of November 21, 1946, admitted
to probate the will of Miller was probated in the California court, also found that Miller was a
resident of Santa Cruz, California, at the time of his death. On July 29, 1949, the Bank of America,
National Trust and Savings Association of San Francisco California, co-executor named in Miller's
will, filed an estate and inheritance tax return with the Collector, covering only the shares of stock
issued by Philippines corporations, reporting a liability of P269.43 for taxes and P230.27 for
inheritance taxes. After due investigation, the Collector assessed estate and inheritance taxes, which
was received by the said executor on April 3, 1950. The estate of Miller protested the assessment of
the liability for estate and inheritance taxes, including penalties and other increments at
P77,300.92, as of January 16, 1954. This assessment was appealed by De Lara as Ancilliary
Administrator before the Board of Tax Appeals, which appeal was later heard and decided by the
Court of Tax Appeals.
In determining the "gross estate" of a decedent, under Section 122 in relation to section 88 of our
Tax Code, it is first necessary to decide whether the decedent was a resident or a non-resident of
the Philippines at the time of his death. The Collector maintains that under the tax laws, residence
and domicile have different meanings; that tax laws on estate and inheritance taxes only mention
resident and non-resident, and no reference whatsoever is made to domicile except in Section 93
(d) of the Tax Code; that Miller during his long stay in the Philippines had required a "residence" in
this country, and was a resident thereof at the time of his death, and consequently, his intangible
personal properties situated here as well as in the United States were subject to said taxes. The
Ancilliary Administrator, however, equally maintains that for estate and inheritance tax purposes,
the term "residence" is synonymous with the term domicile.
We agree with the Court of Tax Appeals that at the time that The National Internal Revenue Code
was promulgated in 1939, the prevailing construction given by the courts to the "residence" was
synonymous with domicile. and that the two were used intercnangeabiy. Cases were cited in
support of this view, paricularly that of Velilla vs. Posadas, 62 Phil. 624, wherein this Tribunal used
the terms "residence" and "domicile" interchangeably and without distinction, the case involving
the application of the term residence employed in the inheritance tax law at the time (section 1536-
1548 of the Revised Administrative Code), and that consequently, it will be presumed that in using
the term residence or resident in the meaning as construed and interpreted by the Court. Moreover,
there is reason to believe that the Legislature adopted the American (Federal and State) estate and
inheritance tax system (see e.g. Report to the Tax Commision of the Philippines, Vol. II, pages 122-
124, cited in I Dalupan, National Internal Revenue Code Annotated, p. 469-470). In the United
States, for estate tax purposes, a resident is considered one who at the time of his death had his
domicile in the United States, and in American jurisprudence, for purposes of estate and taxation,
"residence" is interpreted as synonymous with domicile, and that
The incidence of estate and succession has historically been determined by domicile and
situs and not by the fact of actual residence. (Bowring vs. Bowers, (1928) 24 F 2d 918, at
921, 6 AFTR 7498, cert. den (1928) 272 U.S.608).

We also agree with the Court of Tax Appeals that at the time of his death, Miller had his residence or
domicile in Santa Cruz, California. During his country, Miller never acquired a house for residential
purposes for he stayed at the Manila Hotel and later on at the Army and Navy Club. Except this wife
never stayed in the Philippines. The bulk of his savings and properties were in the United States. To
his home in California, he had been sending souvenirs, such as carvings, curios and other similar
collections from the Philippines and the Far East. In November, 1940, Miller took out a property
insurance policy and indicated therein his address as Santa Cruz, California, this aside from the fact
that Miller, as already stated, executed his will in Santa Cruz, California, wherein he stated that he
was "of Santa Cruz, California". From the foregoing, it is clear that as a non-resident of the
Philippines, the only properties of his estate subject to estate and inheritance taxes are those shares
of stock issued by Philippines corporations, valued at P51,906.45. It is true, as stated by the Tax
Court, that while it may be the general rule that personal property, like shares of stock in the
Philippines, is taxable at the domicile of the owner (Miller) under the doctrine of mobilia secuuntur
persona, nevertheless, when he during his life time,
. . . extended his activities with respect to his intangibles, so as to avail himself of the
protection and benefits of the laws of the Philippines, in such a way as to bring his person or
property within the reach of the Philippines, the reason for a single place of taxation no
longer obtains- protection, benefit, and power over the subject matter are no longer
confined to California, but also to the Philippines (Wells Fargo Bank & Union Trust Co. vs.
Collector (1940), 70 Phil. 325). In the instant case, the actual situs of the shares of stock is in
the Philippines, the corporation being domiciled herein: and besides, the right to vote the
certificates at stockholders' meetings, the right to collect dividends, and the right to dispose
of the shares including the transmission and acquisition thereof by succession, all enjoy the
protection of the Philippines, so that the right to collect the estate and inheritance taxes
cannot be questioned (Wells Fargo Bank & Union Trust Co. vs. Collector supra). It is
recognized that the state may, consistently with due process, impose a tax upon transfer by
death of shares of stock in a domestic corporation owned by a decedent whose domicile was
outside of the state (Burnett vs. Brooks, 288 U.S. 378; State Commission vs. Aldrich, (1942)
316 U.S. 174, 86 L. Ed. 1358, 62 ALR 1008)." (Brief for the Petitioner, p. 79-80).
The Ancilliary Administrator for purposes of exemption invokes the proviso in Section 122 of the
Tax Code, which provides as follows:
. . ."And Provided, however, That no tax shall be collected under this Title in respect of
intangible personal property (a) if the decedent at the time of his death was a resident of a
foreign country which at the time of his death did not impose a transfer tax or death tax of
any character in respect of intangible personal property of citizens of the Philippines not
residing in that country, or (b) if the laws of the foreign country of which the decedent was
resident at the tune of his death allow a similar exemption from transfer taxes or death
taxes of every character in respect of intangible personal property owned by citizen, of the
Philippine not residing in that foreign country.
The Ancilliary Administrator bases his claim of exemption on (a) the exemption of non-residents
from the California inheritance taxes with respect to intangibles, and (b) the exemption by way of
reduction of P4,000 from the estates of non-residents, under the United States Federal Estate Tax
Law. Section 6 of the California Inheritance Tax Act of 1935, now reenacted as Section 13851,
California Revenue and Taxation Code, reads as follows:

SEC. 6. The following exemption from the tax are hereby allowed:
xxx xxx xxx.
(7) The tax imposed by this act in respect of intangible personal property shall not be
payable if decedent is a resident of a State or Territory of the United States or a foreign state
or country which at the time of his death imposed a legacy, succession of death tax in
respect of intangible personal property within the State or Territory or foreign state or
country of residents of the States or Territory or foreign state or country of residence of the
decedent at the time of his death contained a reciprocal provision under which non-
residents were exempted from legacy or succession taxes or death taxes of every character
in respect of intangible personal property providing the State or Territory or foreign state
or country of residence of such non-residents allowed a similar exemption to residents of
the State, Territory or foreign state or country of residence of such decedent.
Considering the State of California as a foreign country in relation to section 122 of Our Tax Code
we beleive and hold, as did the Tax Court, that the Ancilliary Administrator is entitled to exemption
from the tax on the intangible personal property found in the Philippines. Incidentally, this
exemption granted to non-residents under the provision of Section 122 of our Tax Code, was to
reduce the burden of multiple taxation, which otherwise would subject a decedent's intangible
personal property to the inheritance tax, both in his place of residence and domicile and the place
where those properties are found. As regards the exemption or reduction of P4,000 based on the
reduction under the Federal Tax Law in the amount of $2,000, we agree with the Tax Court that the
amount of $2,000 allowed under the Federal Estate Tax Law is in the nature of deduction and not of
an exemption. Besides, as the Tax Court observes--.
. . . this exemption is allowed on all gross estate of non-residents of the United States, who
are not citizens thereof, irrespective of whether there is a corresponding or similar
exemption from transfer or death taxes of non-residents of the Philippines, who are citizens
of the United States; and thirdly, because this exemption is allowed on all gross estates of
non-residents irrespective of whether it involves tangible or intangible, real or personal
property; so that for these reasons petitioner cannot claim a reciprocity. . .
Furthermore, in the Philippines, there is already a reduction on gross estate tax in the amount of
P3,000 under section 85 of the Tax Code, before it was amended, which in part provides as follows:
SEC. 85. Rates of estate tax.There shall be levied, assessed, collected, and paid upon the
transfer of the net estate of every decedent, whether a resident or non-resident of the
Philippines, a tax equal to the sum of the following percentages of the value of the net estate
determined as provided in sections 88 and 89:
One per centrum of the amount by which the net estate exceeds three thousand pesos and
does not exceed ten thousand pesos;. . .
It will be noticed from the dispositive part of the appealed decision of the Tax Court that the
Ancilliary Administrator was ordered to pay the amount of P2,047.22, representing estate taxes
due, together with interest and other increments. Said Ancilliary Administrator invokes the
provisions of Republic Act No. 1253, which was passed for the benefit of veterans, guerrillas or

victims of Japanese atrocities who died during the Japanese occupation. The provisions of this Act
could not be invoked during the hearing before the Tax Court for the reason that said Republic Act
was approved only on June 10, 1955. We are satisfied that inasmuch as Miller, not only suffered
deprivation of the war, but was killed by the Japanese military forces, his estate is entitled to the
benefits of this Act. Consequently, the interests and other increments provided in the appealed
judgment should not be paid by his estate.
With the above modification, the appealed decision of the Court of Tax Appeals is hereby affirmed.
We deem it unnecessary to pass upon the other points raised in the appeal. No costs.
Bengzon, Paras, C.J., Padilla, Reyes, A., Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Endencia,
and Felix, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 120721 February 23, 2005
MANUEL G. ABELLO, JOSE C. CONCEPCION, TEODORO D. REGALA, AVELINO V. CRUZ,
petitioners,
vs.
COMMISSIONER OF INTERNAL REVENUE and COURT OF APPEALS, respondents.
D E C I S I O N
AZCUNA, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Civil Procedure, assailing the
decision of the Court of Appeals in CA G.R. SP No. 27134, entitled "Comissioner of Internal
Revenue v. Manuel G. Abello, Jose C. Concepcion, Teodoro D. Regala, Avelino V. Cruz and Court of
Tax Appeals," which reversed and set aside the decision of the Court of Tax Appeals (CTA), ordering
the Commissioner of Internal Revenue (Commissioner) to withdraw his letters dated April 21, 1988
and August 4, 1988 assessing donors taxes and to desist from collecting donors taxes from
petitioners.
During the 1987 national elections, petitioners, who are partners in the Angara, Abello, Concepcion,
Regala and Cruz (ACCRA) law firm, contributed P882,661.31 each to the campaign funds of Senator
Edgardo Angara, then running for the Senate. In letters dated April 21, 1988, the Bureau of Internal
Revenue (BIR) assessed each of the petitioners P263,032.66 for their contributions. On August 2,
1988, petitioners questioned the assessment through a letter to the BIR. They claimed that political
or electoral contributions are not considered gifts under the National Internal Revenue Code
(NIRC), and that, therefore, they are not liable for donors tax. The claim for exemption was denied
by the Commissioner.

On September 12, 1988, petitioners filed a petition for review with the CTA, which was decided on
October 7, 1991 in favor of the petitioners. As aforestated, the CTA ordered the Commissioner to
desist from collecting donors taxes from the petitioners.
On appeal, the Court of Appeals reversed and set aside the CTA decision on April 20, 1994.The
appellate Court ordered the petitioners to pay donors tax amounting to P263,032.66 each,
reasoning as follows:
The National Internal Revenue Code, as amended, provides:
Sec. 91. Imposition of Tax. (a) There shall be levied, assessed, collected, and paid upon the transfer
by any person, resident, or non-resident, of the property by gift, a tax, computed as provided in
Section 92. (b) The tax shall apply whether the transfer is in trust or otherwise, whether the gift is
direct or indirect, and whether the property is real or personal, tangible or intangible.
Pursuant to the above-quoted provisions of law, the transfer of property by gift, whether the
transfer is in trust or otherwise, whether the gift is direct or indirect, and whether the property is
real or personal, tangible or intangible, is subject to donors or gift tax.
A gift is generally defined as a voluntary transfer of property by one to another without any
consideration or compensation therefor (28 C.J. 620; Santos vs. Robledo, 28 Phil. 250).
In the instant case, the contributions are voluntary transfers of property in the form of money from
private respondents to Sen. Angara, without considerations therefor. Hence, they squarely fall
under the definition of donation or gift.
As correctly pointed out by the Solicitor General:
The fact that the contributions were given to be used as campaign funds of Sen. Angara does not
affect the character of the fund transfers as donation or gift. There was thereby no retention of
control over the disposition of the contributions. There was simply an indication of the purpose for
which they were to be used. For as long as the contributions were used for the purpose for which
they were intended, Sen. Angara had complete and absolute power to dispose of the contributions.
He was fully entitled to the economic benefits of the contributions.
Section 91 of the Tax Code is very clear. A donors or gift tax is imposed on the transfer of property
by gift.
The Bureau of Internal Revenue issued Ruling No. 344 on July 20, 1988, which reads:
Political Contributions. For internal revenue purposes, political contributions in the Philippines
are considered taxable gift rather than taxable income. This is so, because a political contribution is
indubitably not intended by the giver or contributor as a return of value or made because of any
intent to repay another what is his due, but bestowed only because of motives of philanthropy or
charity. His purpose is to give and to bolster the morals, the winning chance of the candidate and/or
his party, and not to employ or buy. On the other hand, the recipient-donee does not regard himself
as exchanging his services or his product for the money contributed. But more importantly he
receives financial advantages gratuitously.

When the U.S. gift tax law was adopted in the Philippines (before May 7, 1974), the taxability of
political contributions was, admittedly, an unsettled issue; hence, it cannot be presumed that the
Philippine Congress then had intended to consider or treat political contributions as non-taxable
gifts when it adopted the said gift tax law. Moreover, well-settled is the rule that the Philippines
need not necessarily adopt the present rule or construction in the United States on the matter.
Generally, statutes of different states relating to the same class of persons or things or having the
same purposes are not considered to be in pari materia because it cannot be justifiably presumed
that the legislature had them in mind when enacting the provision being construed. (5206,
Sutherland, Statutory Construction, p. 546.) Accordingly, in the absence of an express exempting
provision of law, political contributions in the Philippines are subject to the donors gift tax. (cited
in National Internal Revenue Code Annotated by Hector S. de Leon, 1991 ed., p. 290).
In the light of the above BIR Ruling, it is clear that the political contributions of the private
respondents to Sen. Edgardo Angara are taxable gifts. The vagueness of the law as to what comprise
the gift subject to tax was made concrete by the above-quoted BIR ruling. Hence, there is no doubt
that political contributions are taxable gifts.
Petitioners filed a motion for reconsideration, which the Court of Appeals denied in its resolution of
June 16, 1995.
Petitioners thereupon filed the instant petition on July 26, 1995. Raised are the following issues:
1. DID THE HONORABLE COURT OF APPEALS ERR WHEN IT FAILED TO CONSIDER IN ITS
DECISION THE PURPOSE BEHIND THE ENACTMENT OF OUR GIFT TAX LAW?
2. DID THE HONORABLE COURT OF APPEALS ERR IN NOT CONSIDERING THE INTENTION
OF THE GIVERS IN DETERMINING WHETHER OR NOT THE PETITIONERS POLITICAL
CONTRIBUTIONS WERE GIFTS SUBJECT TO DONORS TAX?
3. DID THE HONORABLE COURT OF APPEALS ERR WHEN IT FAILED TO CONSIDER THE
DEFINITION OF AN "ELECTORAL CONTRIBUTION" UNDER THE OMNIBUS ELECTION CODE
IN DETERMINING WHETHER OR NOT POLITICAL CONTRIBUTIONS ARE TAXABLE?
4. DID THE HONORABLE COURT OF APPEALS ERR IN NOT CONSIDERING THE
ADMINISTRATIVE PRACTICE OF CLOSE TO HALF A CENTURY OF NOT SUBJECTING
POLITICAL CONTRIBUTIONS TO DONORS TAX?
5. DID THE HONORABLE COURT OF APPEALS ERR IN NOT CONSIDERING THE AMERICAN
JURISPRUDENCE RELIED UPON BY THE COURT OF TAX APPEALS AND BY THE
PETITIONERS TO THE EFFECT THAT POLITICAL CONTRIBUTIONS ARE NOT TAXABLE
GIFTS?
6. DID THE HONORABLE COURT OF APPEALS ERR IN NOT APPLYING AMERICAN
JURISPRUDENCE ON THE GROUND THAT THIS WAS NOT KNOWN AT THE TIME THE
PHILIPPINES GIFT TAX LAW WAS ADOPTED IN 1939?

7. DID THE HONORABLE COURT OF APPEALS ERR IN RESOLVING THE CASE MAINLY ON
THE BASIS OF A RULING ISSUED BY THE RESPONDENT ONLY AFTER THE ASSESSMENTS
HAD ALREADY BEEN MADE?
8. DID THE HONORABLE COURT OF APPEALS ERR WHEN IT DID NOT CONSTRUE THE GIFT
TAX LAW LIBERALLY IN FAVOR OF THE TAXPAYER AND STRICLTY AGAINST THE
GOVERNMENT IN ACCORDANCE WITH APPLICABLE PRINCIPLES OF STATUTORY
CONSTRUCTION?
First, Fifth and Sixth Issues
Section 91 of the National Internal Revenue Code (NIRC) reads:
(A) There shall be levied, assessed, collected and paid upon the transfer by any person,
resident or nonresident, of the property by gift, a tax, computed as provided in Section 92
(B) The tax shall apply whether the transfer is in trust or otherwise, whether the gift is
direct or indirect, and whether the property is real or personal, tangible or intangible.
The NIRC does not define transfer of property by gift. However, Article 18 of the Civil Code, states:
In matters which are governed by the Code of Commerce and special laws, their deficiency shall be
supplied by the provisions of this Code.
Thus, reference may be made to the definition of a donation in the Civil Code. Article 725 of said
Code defines donation as:
. . . an act of liberality whereby a person disposes gratuitously of a thing or right in favor of another,
who accepts it.
Donation has the following elements: (a) the reduction of the patrimony of the donor; (b) the
increase in the patrimony of the donee; and, (c) the intent to do an act of liberality or animus
donandi.
The present case falls squarely within the definition of a donation. Petitioners, the late Manuel G.
Abello, Jose C. Concepcion, Teodoro D. Regala and Avelino V. Cruz, each gave P882,661.31 to the
campaign funds of Senator Edgardo Angara, without any material consideration. All three elements
of a donation are present. The patrimony of the four petitioners were reduced by P882,661.31 each.
Senator Edgardo Angaras patrimony correspondingly increased by P3,530,645.24. There was
intent to do an act of liberality or animus donandi was present since each of the petitioners gave
their contributions without any consideration.
Taken together with the Civil Code definition of donation, Section 91 of the NIRC is clear and
unambiguous, thereby leaving no room for construction. In Rizal Commercial Banking Corporation v.
Intermediate Appellate Court

the Court enunciated:
It bears stressing that the first and fundamental duty of the Court is to apply the law. When the law
is clear and free from any doubt or ambiguity, there is no room for construction or interpretation.

As has been our consistent ruling, where the law speaks in clear and categorical language, there is
no occasion for interpretation; there is only room for application (Cebu Portland Cement Co. v.
Municipality of Naga, 24 SCRA 708 [1968])
Where the law is clear and unambiguous, it must be taken to mean exactly what it says and the
court has no choice but to see to it that its mandate is obeyed (Chartered Bank Employees
Association v. Ople, 138 SCRA 273 [1985]; Luzon Surety Co., Inc. v. De Garcia, 30 SCRA 111 [1969];
Quijano v. Development Bank of the Philippines, 35 SCRA 270 [1970]).
Only when the law is ambiguous or of doubtful meaning may the court interpret or construe its true
intent. Ambiguity is a condition of admitting two or more meanings, of being understood in more
than one way, or of referring to two or more things at the same time. A statute is ambiguous if it is
admissible of two or more possible meanings, in which case, the Court is called upon to exercise one
of its judicial functions, which is to interpret the law according to its true intent.
Second Issue
Since animus donandi or the intention to do an act of liberality is an essential element of a donation,
petitioners argue that it is important to look into the intention of the giver to determine if a political
contribution is a gift. Petitioners argument is not tenable. First of all, donative intent is a creature
of the mind. It cannot be perceived except by the material and tangible acts which manifest its
presence. This being the case, donative intent is presumed present when one gives a part of ones
patrimony to another without consideration. Second, donative intent is not negated when the
person donating has other intentions, motives or purposes which do not contradict donative intent.
This Court is not convinced that since the purpose of the contribution was to help elect a candidate,
there was no donative intent. Petitioners contribution of money without any material
consideration evinces animus donandi. The fact that their purpose for donating was to aid in the
election of the donee does not negate the presence of donative intent.
Third Issue
Petitioners maintain that the definition of an "electoral contribution" under the Omnibus Election
Code is essential to appreciate how a political contribution differs from a taxable gift. Section 94(a)
of the said Code defines electoral contribution as follows:
The term "contribution" includes a gift, donation, subscription, loan, advance or deposit of money
or anything of value, or a contract, promise or agreement to contribute, whether or not legally
enforceable, made for the purpose of influencing the results of the elections but shall not include
services rendered without compensation by individuals volunteering a portion or all of their time in
behalf of a candidate or political party. It shall also include the use of facilities voluntarily donated
by other persons, the money value of which can be assessed based on the rates prevailing in the
area.
Since the purpose of an electoral contribution is to influence the results of the election, petitioners
again claim that donative intent is not present. Petitioners attempt to place the barrier of mutual
exclusivity between donative intent and the purpose of political contributions. This Court reiterates
that donative intent is not negated by the presence of other intentions, motives or purposes which
do not contradict donative intent.

Petitioners would distinguish a gift from a political donation by saying that the consideration for a
gift is the liberality of the donor, while the consideration for a political contribution is the desire of
the giver to influence the result of an election by supporting candidates who, in the perception of
the giver, would influence the shaping of government policies that would promote the general
welfare and economic well-being of the electorate, including the giver himself.
Petitioners attempt is strained. The fact that petitioners will somehow in the future benefit from
the election of the candidate to whom they contribute, in no way amounts to a valuable material
consideration so as to remove political contributions from the purview of a donation. Senator
Angara was under no obligation to benefit the petitioners. The proper performance of his duties as
a legislator is his obligation as an elected public servant of the Filipino people and not a
consideration for the political contributions he received. In fact, as a public servant, he may even be
called to enact laws that are contrary to the interests of his benefactors, for the benefit of the
greater good.
In fine, the purpose for which the sums of money were given, which was to fund the campaign of
Senator Angara in his bid for a senatorial seat, cannot be considered as a material consideration so
as to negate a donation.
Fourth Issue
Petitioners raise the fact that since 1939 when the first Tax Code was enacted, up to 1988 the BIR
never attempted to subject political contributions to donors tax. They argue that:
. . . It is a familiar principle of law that prolonged practice by the government agency charged with
the execution of a statute, acquiesced in and relied upon by all concerned over an appreciable
period of time, is an authoritative interpretation thereof, entitled to great weight and the highest
respect. . . .
This Court holds that the BIR is not precluded from making a new interpretation of the law,
especially when the old interpretation was flawed. It is a well-entrenched rule that
. . . erroneous application and enforcement of the law by public officers do not block subsequent
correct application of the statute (PLDT v. Collector of Internal Revenue, 90 Phil. 676), and that the
Government is never estopped by mistake or error on the part of its agents (Pineda v. Court of First
Instance of Tayabas, 52 Phil. 803, 807; Benguet Consolidated Mining Co. v. Pineda, 98 Phil. 711,
724).
Seventh Issue
Petitioners question the fact that the Court of Appeals decision is based on a BIR ruling, namely BIR
Ruling No. 88-344, which was issued after the petitioners were assessed for donors tax. This Court
does not need to delve into this issue. It is immaterial whether or not the Court of Appeals based its
decision on the BIR ruling because it is not pivotal in deciding this case. As discussed above, Section
91 (now Section 98) of the NIRC as supplemented by the definition of a donation found in Article
725 of the Civil Code, is clear and unambiguous, and needs no further elucidation.
Eighth Issue

Petitioners next contend that tax laws are construed liberally in favor of the taxpayer and strictly
against the government. This rule of construction, however, does not benefit petitioners because, as
stated, there is here no room for construction since the law is clear and unambiguous.
Finally, this Court takes note of the fact that subsequent to the donations involved in this case,
Congress approved Republic Act No. 7166 on November 25, 1991, providing in Section 13 thereof
that political/electoral contributions, duly reported to the Commission on Elections, are not subject
to the payment of any gift tax. This all the more shows that the political contributions herein made
are subject to the payment of gift taxes, since the same were made prior to the exempting
legislation, and Republic Act No. 7166 provides no retroactive effect on this point.
WHEREFORE, the petition is DENIED and the assailed Decision and Resolution of the Court of
Appeals are AFFIRMED.
No costs.