Lorenzo vs.

Posadas (digest)
Lorenzo vs. Posadas
64 Phil 353
Facts:
On 27 May 1922, Thomas Hanley died in Zamboanga, leaving a will and
considerable amount of real and personal properties. Hanleys will provides the
following: his money will be given to his nephew, Matthew Hanley, as well as the
real estate owned by him. It further provided that the property will only be given ten
years after Thomas Hanleys death. Thus, in the testamentary proceedings, the
Court of First Instance of Zamboanga appointed P.J.M. Moore as trustee of the
estate. Moore took oath of office on March 10, 1924, and resigned on Feb. 29, 1932.
Pablo Lorenzo was appointed in his stead. Juan Posadas, Collector of Internal
Revenue, assessed inheritance tax against the estate amounting to P2,057.74 which
includes penalty and surcharge. He filed a motion in the testamentary proceedings
so that Lorenzo will be ordered to pay the amount due. Lorenzo paid the amount in
protest after CFI granted Posadas motion. He claimed that the inheritance tax
should have been assessed after 10 years. He asked for a refund but Posadas
declined to do so. The latter counterclaimed for the additional amount of P1,191.27
which represents interest due on the tax and which was not included in the original
assessment. However, CFI dismissed this counterclaim. It also denied Lorenzos
claim for refund against Posadas. Hence, both appealed.
Issue: Whether the estate was delinquent in paying the inheritance tax and
therefore liable for the P1,191.27 that Posadas is asking for?
Held: Yes. It was delinquent because according to Sec. 1544 (b) of the Revised
Administrative Code, payment of the inheritance tax shall be made before
delivering to each beneficiary his share. This payment should have been made
before March 10, 1924, the date when P.J.M. Moore formally assumed the function of
trustee.
Although the property was only to be given after 10 years from the death of Hanley,
the court considered that delivery to the trustee is delivery to cestui que trust, the
beneficiary within the meaning of Sec. 1544 (b).
Even though there was no express mention of the word trust in the will, the court
of first instance was correct in appointing a trustee because no particular or
technical words are required to create a testamentary trust (69 C.J.,p. 711). The
requisites of a valid testamentary trust are: 1) sufficient words to raise a trust, 2) a
definite subject, 3) a certain or ascertained object. There is no doubt that Hanley
intended to create a trust since he ordered in his will that certain of his properties
be kept together undisposed during a fixed period or for a stated purpose.

***this case was assigned in our Agency and Partnership class. I created this file as
a reviewer. I decided to share it with the world, especially law students like me.
hope it helped!
Lorenzo vs. Posadas Jr. [June 18, 1937]
<3 Fluffy Peaches <3
Facts:

Thomas Hanley died, leaving a will and a considerable amount of real and personal properties. Proceedings for the
probate of his will and the settlement and distribution of his estate were begun in the CFI of Zamboanga. The will was
admitted to probate.

The CFI considered it proper for the best interests of the estate to appoint a trustee to administer the real properties
which, under the will, were to pass to nephew Matthew ten years after the two executors named in the will was
appointed trustee. Moore acted as trustee until he resigned and the plaintiff Lorenzo herein was appointed in his
stead.

During the incumbency of the plaintiff as trustee, the defendant Collector of Internal Revenue (Posadas) assessed
against the estate an inheritance tax, together with the penalties for deliquency in payment. Lorenzo paid said
amount under protest, notifying Posadas at the same time that unless the amount was promptly refunded suit would
be brought for its recovery. Posadas overruled Lorenzos protest and refused to refund the said amount. Plaintiff went
to court. The CFI dismissed Lorenzos complaint and Posadas counterclaim. Both parties appealed to this court.
Issues and Ruling:
1. When does the inheritance tax accrue and when must it be satisfied?

The accrual of the inheritance tax is distinct from the obligation to pay the same.

NCC 657: the rights to the succession of a person are transmitted from the moment of his death. In other words...
the heirs succeed immediately to all of the property of the deceased ancestor. The property belongs to the heirs at
the moment of the death of the ancestor as completely as if the ancestor had executed and delivered to them
a deed for the same before his death.

Whatever may be the time when actual transmission of the inheritance takes place, succession takes place in any
event at the moment of the decedents death. The time when the heirs legally succeed to the inheritance may
differ from the time when the heirs actually receive such inheritance. Thomas Hanley having died on May 27,
1922, the inheritance tax accrued as of the date.

<3 Fluffy Peaches <3

From the fact, however, that Thomas Hanley died on May 27, 1922, it does not follow that the obligation to pay
the tax arose as of the date. The time for the payment on inheritance tax is clearly fixed by section 1544 of the
Revised Administrative Code as amended by Act No. 3031, in relation to section 1543 of the same Code. The two
sections follow:
SEC. 1543. Exemption of certain acquisitions and transmissions. The following shall not be taxed: x x x
(b) The transmission or delivery of the inheritance or legacy by the fiduciary heir or legatee to the trustees.
(c) The transmission from the first heir, legatee, or donee in favor of another beneficiary, in accordance with the
desire of the predecessor. xx

SEC. 1544. When tax to be paid. The tax fixed in this article shall be paid:
(a) In the second and third cases of the next preceding section, before entrance into possession of the property.

The instant case fall under subsection (b), of section 1544, as there is here no fiduciary heirs, first heirs, legatee or
donee. Under the subsection, the tax should have been paid before the delivery of the properties in question to
Moore as trustee.
2. Should the inheritance tax be computed on the basis of the value of the estate at the time of the testators death,
or on its value ten years later?

If death is the generating source from which the power of the estate to impose inheritance taxes takes its being and
if, upon the death of the decedent, succession takes place and the right of the estate to tax vests instantly, the tax
should be measured by the value of the estate as it stood at the time of the decedents death , regardless of
any subsequent contingency value of any subsequent increase or decrease in value