THE COLLECTOR OF INTERNAL REVENUE, PETITIONER, VS. ANTONIO CAMPOS RUEDA, RESPONDENT.

DECISION
FERNANDO, J.:
The basic issue posed by petitioner Collector of Internal Revenue in this appeal from a decision of the Court of Tax Appeals as to
whether or not the requisites of statehood, or at least much thereof as may be necessary for the acquisition of an international
personality, must be satisfied for a "foreign country" to fall within the exemption of Section 122 of the National Internal Revenue
Code[1] is now ripe for adjudication. The Court of Tax Appeals answered the question in the negative, and thus reversed the action
taken by petitioner Collector, who would hold respondent Antonio Campos Rueda, as administrator of the estate of the
late Estrella Soriano Vda. de Cerdeira, liable for the sum of P161,874.95 as deficiency estate and inheritance taxes for the transfer of
intangible personal properties in the Philippines, the deceased, a Spanish national having been a resident of Tangier, Morocco from
1931 up to the time of her death in 1955. In an earlier resolution promulgated May 30, 1962, this Court on the assumption that the
need for resolving the principal question would be obviated, referred the matter back to the Court of Tax Appeals to determine whether
the alleged law of Tangier did grant the reciprocal tax exemption required by the aforesaid Section 122. Then came an order from the
Court of Tax Appeals submitting copies of legislation of Tangier that would manifest that the element of reciprocity was not lacking. It was not until July 29, 1969 that the case was deemed submitted for decision. When the petition for review was filed
on January 2, 1958, the basic issue raised was impressed with an element of novelty. Four days thereafter, however, on January 6,
1958, it was held by this Court that the aforesaid provision does not require that the "foreign country" possess an international
personality to come within its terms.[2] Accordingly, we have to affirm.
The decision of the Court of Tax Appeals, now under review, sets forth the background facts as follows: "This is an appeal interposed
by petitioner Antonio Campos Rueda, as administrator of the estate of the deceased DoaMaria de la Estrella Soriano Vda.
de Cerdeira, from the decision of the respondent Collector of Internal Revenue, assessing against and demanding from the former the
sum of P161,874.95 as deficiency estate and inheritance taxes, including interests and penalties, on the transfer of intangible personal
properties situated in the Philippinesand belonging to said Maria de la Estrella Soriano Vda. de Cerdeira, Maria de
la Estrella Soriano Vda. deCerdeira (Maria Cerdeira for short) is a Spanish national by reason of her marriage to a Spanish citizen and
was a resident of Tangier, Morocco from 1931 up to her death on January 2, 1955. At the time of her demise she left, among others,
intangible personal properties in the Philippines."[3] Then came this portion: "On September 29, 1955, petitioner filed a provisional
estate and inheritance tax return on all the properties of the late Maria Cerdeira. On the same date, respondent, pending investigation,
issued an assessment for estate and inheritance taxes in the respective amounts of P111,592.48 and P157,791.48, or a total of
P269,383.96, which tax liabilities were paid by petitioner. On November 17, 1955, an amended return was filed * * * wherein
intangible personal properties with the value of P396,308.90 were claimed as exempted from taxes. On November 23, 1955,
respondent, pending investigation, issued another assessment for estate and inheritance taxes in the amounts of P202,262.40 and
P267,402.84, respectively, or a total of P469,665.24 * * *. In a letter dated January 11, 1956, respondent denied the request for
exemption on the ground that the law of Tangier is not reciprocal to Section 122 of the National Internal Revenue Code. Hence,
respondent demanded the payment of the sums of P239,439.49 representing deficiency estate and inheritance taxes
including ad valorem penalties, surcharges, interests and compromise penalties * * *. In a letter, dated February 8, 1956, and received
by respondent on the following day, petitioner request ed for the reconsideration of the decision denying the claim for tax exemption
of the intangible personal properties and the imposition of the 25% and 5% ad valorem penalties * * *. However, respondent denied
this request, in his letter dated May 5, 1956 * * * and received by petitioner on May 21, 1956. Respondent premised the denial on the
grounds that there was no reciprocity [with Tangier, which was moreover] a mere principality, not a foreign country. Consequently,
respondent demanded the payment of the sums of P73,851.21 and P88,023.74 respectively, or a total of P161,874.95 as deficiency
estate and inheritance taxes including surcharges, interests and compromise penalties." [4]
The matter was then elevated to the Court of Tax Appeals. As there was no dispute between the parties regarding the values of the
properties and the mathematical correctness of the deficiency assessments, the principal question as noted dealt with the reciprocity

aspect as well as the insistence by the Collector of Internal Revenue that Tangier was not a foreign country within the meaning of
Section 122. In ruling against the contention of the Collector of Internal Revenue, the appealed decision states: "In fine, we believe,
and so hold, that the expression 'foreign country', used in the last proviso of Section 122 of the National Internal Revenue Code, refers
to a government of that foreign power which, although not an international person in the sense of international law, does not impose
transfer or death taxes upon intangible personal properties of our citizens not residing therein, or whose law allows a similar
exemption from such taxes. It is, therefore, not necessary that Tangier should have been recognized by our Government in order to
entitle the petitioner to the exemption benefits of the last proviso of Section 122 of our Tax Code." [5]
Hence this appeal to this Court by petitioner. The respective briefs of the parties were duly submitted, but as above indicated, instead
of ruling definitely on the question, this Court, on May 30, 1962, resolved to inquire further into the question of reciprocity and sent
back the case to the Court of Tax Appeals for the reception of evidence thereon. The dispositive portion of such resolution reads as
follows: "While section 122 of the Philippine Tax Codeaforequoted speaks of 'intangible personal property' in both subdivisions (a)
and (b); the alleged laws of Tangier refer to 'bienes muebles situados en Tanger', 'bienes muebles radicantes en Tanger', 'movables' and
'movable property'. In order that this Court may be able to determine whether the alleged laws of Tangier grant the reciprocal tax
exemptions required by Section 122 of the Tax Code, and without, for the time being, going into the merits of the issues raised by the
petitioner-appellant, the case is [remanded] to the Court of Tax Appeals for the reception of evidence or proofs on whether or not the
words 'bienes muebles', 'movables' and 'movable property' as used in the Tangier laws, include or embrace 'intangible personal
property', as used in the Tax Code."[6] In line with the above resolution, the Court of Tax Appeals admitted evidence submitted by the
administrator, petitioner Antonio Campos Rueda, consisting of exhibits of laws of Tangier to the effect that "the transfers by reason of
death of movable properties, corporeal or incorporeal, including furniture and personal effects, as well as of securities, bonds, shares, *
* *, were not subject, on that date and in said zone, to the payment of any death tax, whatever might have been the nationality of the
deceased or his heirs and legatees." It was further noted in an order of such Court referring the matter back to us that such "exhibits
were duly admitted in evidence during the hearing of the case on September 9, 1963. Respondent presented no evidence."[7]
The controlling legal provision as noted is a proviso in Section 122 of the National Internal Revenue Code. It reads thus: "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 foreign country, or (b) if the laws of the foreign country of which
the decedent was a resident at the time of his death allow a similar exemption from transfer taxes or death taxes of every character in
respect of intangible personal property owned by citizens of the Philippines not residing in that foreign country." [8] The only obstacle
therefore to a definitive ruling is whether or not as vigorously insisted upon by petitioner the acquisition of international personality is
a condition sine qua non to Tangier being considered a "foreign country." Deference to the De Lara ruling, as was made clear in the
opening paragraph of this opinion, calls for an affirmance of the decision of the Court of Tax Appeals.
It does not admit of doubt that if a foreign country is to be identified with a state, it is required in line with Pound's formulation that it
be a politically organized sovereign community independent of outside control bound by ties of nationhood, legally supreme within its
territory, acting through a government functioning under a regime of law.[9] It is thus a sovereign person with the people composing it
viewed as an organized corporate society under a government with the legal competence to exact obedience to its commands. [10] It has
been referred to as a body-politic organized by common consent for mutual defense and mutual safety and to promote the general
welfare.[11]Correctly has it been described by Esmein as "the juridical personification of the nation."[12] This is to view it in the light of
its historical development. The stress is on its being a nation, its people occupying a definite territory, politically organized, exercising
by means of its government its sovereign will over the individuals within it and maintaining its separate international personality. Laski could speak of it then as a territorial society divided into government and subjects, claiming within its allotted area a
supremacy over all other institutions.[13] McIver similarly would point to the power entrusted to its government to maintain within its

territory the conditions of a legal order and to enter into international relations.[14] With the latter requisite satisfied, international law
does not exact independence as a condition of statehood. So Hyde did opine.[15]
Even on the assumption then that Tangier is bereft of international personality petitioner has not successfully made out a case. It bears
repeating that four days after the filing of this petition on January 6, 1958 in Collector of Internal Revenue v. De Lara, [16] it was
specifically held by us: "Considering the State of California as a foreign country in relation to section 122 of our Tax Code we believe
and hold, as did the Tax Court, that the Ancilliary Administrator is entitled to exemption from the inheritance tax on the intangible
personal property found in the Philippines."[17]There can be no doubt that California as a state in the American Union was lacking in
the alleged requisite of international personality. Nonetheless, it was held to be a foreign country within the meaning of Section 122
of the National Internal Revenue Code.[18]
What is undeniable is that even prior to the De Lara ruling, this Court did commit itself to the doctrine that even a tiny principality,
that of Liechtenstein, hardly an international personality in the traditional sense, did fall under this exempt category. So it appears in
an opinion of the Court by the then Acting Chief Justice Bengzon, who thereafter assumed that position in a permanent capacity,
in Kiene v. Collector of Internal Revenue.[19] As was therein noted: "The Board found from the documents submitted to it - proof of the
laws of Liechtenstein - that said country does not impose estate, inheritance and gift taxes on intangible personal property of Filipino
citizens not residing in that country. Wherefore, the Board declared that pursuant to the exemption above established, no estate or
inheritance taxes were collectible, Ludwig Kiene being a resident of Liechtenstein when he passed away."[20] Then came this definitive
ruling: "The Collector - hereafter named respondent - cites decisions of the United States Supreme Court and of this Court, holding
that intangible personal property in the Philippines belonging to a nonresident foreigner, who died outside of this country is subject to
the estate tax, in disregard of the principle 'mobilia sequunturpersonam'. Such property is admittedly taxable here. Without the
proviso above quoted, the shares of stock owned here by the Ludwig Kiene would be concededly subject to estate and inheritance
taxes. Nevertheless our Congress chose to make an exemption where conditions are such that demand reciprocity - as in this
case. And the exemption must be honored.[21]
WHEREFORE, the decision of the respondent Court of Tax Appeals of October 30, 1957 is affirmed. Without pronouncement as to
costs.
Concepcion, C.J., Makalintal, Zaldivar, Castro, Barredo, Villamor, and Makasiar, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-22734

September 15, 1967

COMMISSIONER OF INTERNAL REVENUE, petitioner,

vs.
MANUEL B. PINEDA, as one of the heirs of deceased ATANASIO PINEDA, respondent.
Office of the Solicitor General for petitioner.
Manuel B. Pineda for and in his own behalf as respondent.
BENGZON, J.P., J.:
On May 23, 1945 Atanasio Pineda died, survived by his wife, Felicisima Bagtas, and 15 children, the eldest of whom is Manuel B.
Pineda, a lawyer. Estate proceedings were had in the Court of First Instance of Manila (Case No. 71129) wherein the surviving widow
was appointed administratrix. The estate was divided among and awarded to the heirs and the proceedings terminated on June 8, 1948.
Manuel B. Pineda's share amounted to about P2,500.00.
After the estate proceedings were closed, the Bureau of Internal Revenue investigated the income tax liability of the estate for the
years 1945, 1946, 1947 and 1948 and it found that the corresponding income tax returns were not filed. Thereupon, the representative
of the Collector of Internal Revenue filed said returns for the estate on the basis of information and data obtained from the aforesaid
estate proceedings and issued an assessment for the following:

1. Deficiency income tax

1945
P135.83
1946
436.95
1947
1,206.91
Add: 5% surcharge
1% monthly interest from
November 30, 1953 to April
15, 1957
Compromise for late filing
Compromise for late payment
Total amount due
2. Additional residence tax for 1945
3. Real Estate dealer's tax for the
fourth quarter of 1946 and the
whole year of 1947

P1,779.69
88.98
720.77
80.00
40.00
P2,707.44
===========
P14.50
===========
P207.50
===========

Manuel B. Pineda, who received the assessment, contested the same. Subsequently, he appealed to the Court of Tax Appeals alleging
that he was appealing "only that proportionate part or portion pertaining to him as one of the heirs."
After hearing the parties, the Court of Tax Appeals rendered judgment reversing the decision of the Commissioner on the ground that
his right to assess and collect the tax has prescribed. The Commissioner appealed and this Court affirmed the findings of the Tax Court
in respect to the assessment for income tax for the year 1947 but held that the right to assess and collect the taxes for 1945 and 1946
has not prescribed. For 1945 and 1946 the returns were filed on August 24, 1953; assessments for both taxable years were made within
five years therefrom or on October 19, 1953; and the action to collect the tax was filed within five years from the latter date, on
August 7, 1957. For taxable year 1947, however, the return was filed on March 1, 1948; the assessment was made on October 19,
1953, more than five years from the date the return was filed; hence, the right to assess income tax for 1947 had prescribed.
Accordingly, We remanded the case to the Tax Court for further appropriate proceedings.1
In the Tax Court, the parties submitted the case for decision without additional evidence.
On November 29, 1963 the Court of Tax Appeals rendered judgment holding Manuel B. Pineda liable for the payment corresponding
to his share of the following taxes:
Deficiency income tax
1945
1946
Real estate dealer's fixed
tax 4th quarter of 1946
and whole year of 1947

P135.83
436.95
P187.50

The Commissioner of Internal Revenue has appealed to Us and has proposed to hold Manuel B. Pineda liable for the payment of all
the taxes found by the Tax Court to be due from the estate in the total amount of P760.28 instead of only for the amount of taxes
corresponding to his share in the estate.1awphl.nt
Manuel B. Pineda opposes the proposition on the ground that as an heir he is liable for unpaid income tax due the estate only up to the
extent of and in proportion to any share he received. He relies on Government of the Philippine Islands v. Pamintuan2 where We held
that "after the partition of an estate, heirs and distributees are liable individually for the payment of all lawful outstanding claims
against the estate in proportion to the amount or value of the property they have respectively received from the estate."
We hold that the Government can require Manuel B. Pineda to pay the full amount of the taxes assessed.
Pineda is liable for the assessment as an heir and as a holder-transferee of property belonging to the estate/taxpayer. As an heir he is
individually answerable for the part of the tax proportionate to the share he received from the inheritance. 3 His liability, however,
cannot exceed the amount of his share.4
As a holder of property belonging to the estate, Pineda is liable for he tax up to the amount of the property in his possession. The
reason is that the Government has a lien on the P2,500.00 received by him from the estate as his share in the inheritance, for unpaid
income taxes4a for which said estate is liable, pursuant to the last paragraph of Section 315 of the Tax Code, which we quote
hereunder:
If any person, corporation, partnership, joint-account (cuenta en participacion), association, or insurance company liable to
pay the income tax, neglects or refuses to pay the same after demand, the amount shall be a lien in favor of the Government
of the Philippines from the time when the assessment was made by the Commissioner of Internal Revenue until paid with
interest, penalties, and costs that may accrue in addition thereto upon all property and rights to property belonging to the
taxpayer: . . .

By virtue of such lien, the Government has the right to subject the property in Pineda's possession, i.e., the P2,500.00, to satisfy the
income tax assessment in the sum of P760.28. After such payment, Pineda will have a right of contribution from his co-heirs, 5 to
achieve an adjustment of the proper share of each heir in the distributable estate.
All told, the Government has two ways of collecting the tax in question. One, by going after all the heirs and collecting from each one
of them the amount of the tax proportionate to the inheritance received. This remedy was adopted in Government of the Philippine
Islands v. Pamintuan, supra. In said case, the Government filed an action against all the heirs for the collection of the tax. This action
rests on the concept that hereditary property consists only of that part which remains after the settlement of all lawful claims against
the estate, for the settlement of which the entire estate is first liable. 6 The reason why in case suit is filed against all the heirs the tax
due from the estate is levied proportionately against them is to achieve thereby two results: first, payment of the tax; and second,
adjustment of the shares of each heir in the distributed estate as lessened by the tax.
Another remedy, pursuant to the lien created by Section 315 of the Tax Code upon all property and rights to property belonging to the
taxpayer for unpaid income tax, is by subjecting said property of the estate which is in the hands of an heir or transferee to the
payment of the tax due, the estate. This second remedy is the very avenue the Government took in this case to collect the tax. The
Bureau of Internal Revenue should be given, in instances like the case at bar, the necessary discretion to avail itself of the most
expeditious way to collect the tax as may be envisioned in the particular provision of the Tax Code above quoted, because taxes are
the lifeblood of government and their prompt and certain availability is an imperious need.7 And as afore-stated in this case the suit
seeks to achieve only one objective: payment of the tax. The adjustment of the respective shares due to the heirs from the inheritance,
as lessened by the tax, is left to await the suit for contribution by the heir from whom the Government recovered said tax.
WHEREFORE, the decision appealed from is modified. Manuel B. Pineda is hereby ordered to pay to the Commissioner of Internal
Revenue the sum of P760.28 as deficiency income tax for 1945 and 1946, and real estate dealer's fixed tax for the fourth quarter of
1946 and for the whole year 1947, without prejudice to his right of contribution for his co-heirs. No costs. So ordered.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-31364 March 30, 1979
MISAEL P. VERA, as Commissioner of Internal Revenue, and JAIME ARANETA, as Regional Director, Revenue Region No.
14, Bureau of Internal Revenue, petitioners,
vs.
HON. JOSE F. FERNANDEZ, Judge of the Court of First Instance of Negros Occidental, Branch V, and FRANCIS A.
TONGOY, Administrator of the Estate of the late LUIS D. TONGOY respondents.
DE CASTRO, J.:
Appeal from two orders of the Court of First Instance of Negros Occidental, Branch V in Special Proceedings No. 7794, entitled:
"Intestate Estate of Luis D. Tongoy," the first dated July 29, 1969 dismissing the Motion for Allowance of Claim and for an Order of
Payment of Taxes by the Government of the Republic of the Philippines against the Estate of the late Luis D. Tongoy, for deficiency
income taxes for the years 1963 and 1964 of the decedent in the total amount of P3,254.80, inclusive 5% surcharge, 1% monthly
interest and compromise penalties, and the second, dated October 7, 1969, denying the Motion for reconsideration of the Order of
dismissal.
The Motion for allowance of claim and for payment of taxes dated May 28, 1969 was filed on June 3, 1969 in the abovementioned
special proceedings, (par. 3, Annex A, Petition, pp. 1920, Rollo). The claim represents the indebtedness to the Government of the late
Luis D. Tongoy for deficiency income taxes in the total sum of P3,254.80 as above stated, covered by Assessment Notices Nos. 11-5029-1-11061-21-63 and 11-50-291-1 10875-64, to which motion was attached Proof of Claim (Annex B, Petition, pp. 21-22, Rollo).
The Administrator opposed the motion solely on the ground that the claim was barred under Section 5, Rule 86 of the Rules of Court
(par. 4, Opposition to Motion for Allowance of Claim, pp. 23-24, Rollo). Finding the opposition well-founded, the respondent Judge,
Jose F. Fernandez, dismissed the motion for allowance of claim filed by herein petitioner, Regional Director of the Bureau of Internal
Revenue, in an order dated July 29, 1969 (Annex D, Petition, p. 26, Rollo). On September 18, 1969, a motion for reconsideration was
filed, of the order of July 29, 1969, but was denied in an Order dated October 7, 1969.
Hence, this appeal on certiorari, petitioner assigning the following errors:
1. The lower court erred in holding that the claim for taxes by the government against the estate of Luis D. Tongoy
was filed beyond the period provided in Section 2, Rule 86 of the Rules of Court.
2. The lower court erred in holding that the claim for taxes of the government was already barred under Section 5,
Rule 86 of the Rules of Court.

which raise the sole issue of whether or not the statute of non-claims Section 5, Rule 86 of the New Rule of Court, bars claim of the
government for unpaid taxes, still within the period of limitation prescribed in Section 331 and 332 of the National Internal Revenue
Code.
Section 5, Rule 86, as invoked by the respondent Administrator in hid Oppositions to the Motion for Allowance of Claim, etc. of the
petitioners reads as follows:
All claims for money against the decedent, arising from contracts, express or implied, whether the same be due, not
due, or contingent, all claims for funeral expenses and expenses for the last sickness of the decedent, and judgment
for money against the decedent, must be filed within the time limited in they notice; otherwise they are barred
forever, except that they may be set forth as counter claims in any action that the executor or administrator may
bring against the claimants. Where the executor or administrator commence an action, or prosecutes an action
already commenced by the deceased in his lifetime, the debtor may set forth may answer the claims he has against
the decedents, instead of presenting them independently to the court has herein provided, and mutual claims may be
set off against each other in such action; and in final judgment is rendered in favored of the decedent, the amount to
determined shall be considered the true balance against the estate, as though the claim has been presented directly
before the court in the administration proceedings. Claims not yet due, or contingent may be approved at their
present value.
A perusal of the aforequoted provisions shows that it makes no mention of claims for monetary obligation of the decedent created by
law, such as taxes which is entirely of different character from the claims expressly enumerated therein, such as: "all claims for money
against the decedent arising from contract, express or implied, whether the same be due, not due or contingent, all claim for funeral
expenses and expenses for the last sickness of the decedent and judgment for money against the decedent." Under the familiar rule of
statutory construction of expressio unius est exclusio alterius, the mention of one thing implies the exclusion of another thing not
mentioned. Thus, if a statute enumerates the things upon which it is to operate, everything else must necessarily, and by implication be
excluded from its operation and effect (Crawford, Statutory Construction, pp. 334-335).
In the case of Commissioner of Internal Revenue vs. Ilagan Electric & Ice Plant, et al., G.R. No. L-23081, December 30, 1969, it was
held that the assessment, collection and recovery of taxes, as well as the matter of prescription thereof are governed by the provisions
of the National Internal revenue Code, particularly Sections 331 and 332 thereof, and not by other provisions of law. (See also Lim
Tio, Dy Heng and Dee Jue vs. Court of Tax Appeals & Collector of Internal Revenue, G.R. No. L-10681, March 29, 1958). Even
without being specifically mentioned, the provisions of Section 2 of Rule 86 of the Rules of Court may reasonably be presumed to
have been also in the mind of the Court as not affecting the aforecited Section of the National Internal Revenue Code.
In the case of Pineda vs. CFI of Tayabas, 52 Phil. 803, it was even more pointedly held that "taxes assessed against the estate of a
deceased person ... need not be submitted to the committee on claims in the ordinary course of administration. In the exercise of its
control over the administrator, the court may direct the payment of such taxes upon motion showing that the taxes have been assessed
against the estate." The abolition of the Committee on Claims does not alter the basic ruling laid down giving exception to the claim
for taxes from being filed as the other claims mentioned in the Rule should be filed before the Court. Claims for taxes may be
collected even after the distribution of the decedent's estate among his heirs who shall be liable therefor in proportion of their share in
the inheritance. (Government of the Philippines vs. Pamintuan, 55 Phil. 13).
The reason for the more liberal treatment of claims for taxes against a decedent's estate in the form of exception from the application
of the statute of non-claims, is not hard to find. Taxes are the lifeblood of the Government and their prompt and certain availability are
imperious need. (Commissioner of Internal Revenue vs. Pineda, G. R. No. L-22734, September 15, 1967, 21 SCRA 105). Upon
taxation depends the Government ability to serve the people for whose benefit taxes are collected. To safeguard such interest, neglect
or omission of government officials entrusted with the collection of taxes should not be allowed to bring harm or detriment to the
people, in the same manner as private persons may be made to suffer individually on account of his own negligence, the presumption
being that they take good care of their personal affairs. This should not hold true to government officials with respect to matters not of
their own personal concern. This is the philosophy behind the government's exception, as a general rule, from the operation of the
principle of estoppel. (Republic vs. Caballero, L-27437, September 30, 1977, 79 SCRA 177; Manila Lodge No. 761, Benevolent and
Protective Order of the Elks Inc. vs. Court of Appeals, L-41001, September 30, 1976, 73 SCRA 162; Sy vs. Central Bank of the
Philippines, L-41480, April 30,1976, 70 SCRA 571; Balmaceda vs. Corominas & Co., Inc., 66 SCRA 553; Auyong Hian vs. Court of
Tax Appeals, 59 SCRA 110; Republic vs. Philippine Rabbit Bus Lines, Inc., 66 SCRA 553; Republic vs. Philippine Long Distance
Telephone Company, L-18841, January 27, 1969, 26 SCRA 620; Zamora vs. Court of Tax Appeals, L-23272, November 26, 1970, 36
SCRA 77; E. Rodriguez, Inc. vs. Collector of Internal Revenue, L- 23041, July 31, 1969, 28 SCRA 119.) As already shown, taxes may
be collected even after the distribution of the estate of the decedent among his heirs (Government of the Philippines vs.
Pamintuan, supra; Pineda vs. CFI of Tayabas,supra Clara Diluangco Palanca vs. Commissioner of Internal Revenue, G. R. No. L16661, January 31, 1962).
Furthermore, as held in Commissioner of Internal Revenue vs. Pineda, supra, citing the last paragraph of Section 315 of the Tax Code
payment of income tax shall be a lien in favor of the Government of the Philippines from the time the assessment was made by the
Commissioner of Internal Revenue until paid with interests, penalties, etc. By virtue of such lien, this court held that the property of
the estate already in the hands of an heir or transferee may be subject to the payment of the tax due the estate. A fortiori before the
inheritance has passed to the heirs, the unpaid taxes due the decedent may be collected, even without its having been presented under

Section 2 of Rule 86 of the Rules of Court. It may truly be said that until the property of the estate of the decedent has vested in the
heirs, the decedent, represented by his estate, continues as if he were still alive, subject to the payment of such taxes as would be
collectible from the estate even after his death. Thus in the case above cited, the income taxes sought to be collected were due from the
estate, for the three years 1946, 1947 and 1948 following his death in May, 1945.
Even assuming arguendo that claims for taxes have to be filed within the time prescribed in Section 2, Rule 86 of the Rules of Court,
the claim in question may be filed even after the expiration of the time originally fixed therein, as may be gleaned from the italicized
portion of the Rule herein cited which reads:
Section 2. Time within which claims shall be filed. - In the notice provided in the preceding section, the court shall
state the time for the filing of claims against the estate, which shall not be more than twelve (12) nor less than six (6)
months after the date of the first publication of the notice. However, at any time before an order of distribution is
entered, on application of a creditor who has failed to file his claim within the time previously limited the court may,
for cause shown and on such terms as are equitable, allow such claim to be flied within a time not exceeding one (1)
month. (Emphasis supplied)
In the instant case, petitioners filed an application (Motion for Allowance of Claim and for an Order of Payment of Taxes) which,
though filed after the expiration of the time previously limited but before an order of the distribution is entered, should have been
granted by the respondent court, in the absence of any valid ground, as none was shown, justifying denial of the motion, specially
considering that it was for allowance Of claim for taxes due from the estate, which in effect represents a claim of the people at large,
the only reason given for the denial that the claim was filed out of the previously limited period, sustaining thereby private
respondents' contention, erroneously as has been demonstrated.
WHEREFORE, the order appealed from is reverse. Since the Tax Commissioner's assessment in the total amount of P3,254.80 with 5
% surcharge and 1 % monthly interest as provided in the Tax Code is a final one and the respondent estate's sole defense of
prescription has been herein overruled, the Motion for Allowance of Claim is herein granted and respondent estate is ordered to pay
and discharge the same, subject only to the limitation of the interest collectible thereon as provided by the Tax Code. No
pronouncement as to costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 120880 June 5, 1997
FERDINAND R. MARCOS II, petitioner,
vs.
COURT OF APPEALS, THE COMMISSIONER OF THE BUREAU OF INTERNAL REVENUE and HERMINIA D. DE
GUZMAN, respondents.
TORRES, JR., J.:
In this Petition for Review on Certiorari, Government action is once again assailed as precipitate and unfair, suffering the basic and
oftly implored requisites of due process of law. Specifically, the petition assails the Decision 1 of the Court of Appeals dated November
29, 1994 in CA-G.R. SP No. 31363, where the said court held:
In view of all the foregoing, we rule that the deficiency income tax assessments and estate tax assessment, are
already final and (u)nappealable-and-the subsequent levy of real properties is a tax remedy resorted to by the
government, sanctioned by Section 213 and 218 of the National Internal Revenue Code. This summary tax remedy
is distinct and separate from the other tax remedies (such as Judicial Civil actions and Criminal actions), and is not
affected or precluded by the pendency of any other tax remedies instituted by the government.
WHEREFORE, premises considered, judgment is hereby rendered DISMISSING the petition forcertiorari with
prayer for Restraining Order and Injunction.
No pronouncements as to costs.
SO ORDERED.

More than seven years since the demise of the late Ferdinand E. Marcos, the former President of the Republic of the Philippines, the
matter of the settlement of his estate, and its dues to the government in estate taxes, are still unresolved, the latter issue being now
before this Court for resolution. Specifically, petitioner Ferdinand R. Marcos II, the eldest son of the decedent, questions the actuations
of the respondent Commissioner of Internal Revenue in assessing, and collecting through the summary remedy of Levy on Real
Properties, estate and income tax delinquencies upon the estate and properties of his father, despite the pendency of the proceedings on
probate of the will of the late president, which is docketed as Sp. Proc. No. 10279 in the Regional Trial Court of Pasig, Branch 156.
Petitioner had filed with the respondent Court of Appeals a Petition for Certiorari and Prohibition with an application for writ of
preliminary injunction and/or temporary restraining order on June 28, 1993, seeking to
I. Annul and set aside the Notices of Levy on real property dated February 22, 1993 and May 20, 1993, issued by
respondent Commissioner of Internal Revenue;
II. Annul and set aside the Notices of Sale dated May 26, 1993;
III. Enjoin the Head Revenue Executive Assistant Director II (Collection Service), from proceeding with the Auction
of the real properties covered by Notices of Sale.
After the parties had pleaded their case, the Court of Appeals rendered its Decision 2 on November 29, 1994, ruling that the deficiency
assessments for estate and income tax made upon the petitioner and the estate of the deceased President Marcos have already become
final and unappealable, and may thus be enforced by the summary remedy of levying upon the properties of the late President, as was
done by the respondent Commissioner of Internal Revenue.
WHEREFORE, premises considered judgment is hereby rendered DISMISSING the petition forCertiorari with
prayer for Restraining Order and Injunction.
No pronouncements as to cost.
SO ORDERED.
Unperturbed, petitioner is now before us assailing the validity of the appellate court's decision, assigning the following as errors:
A. RESPONDENT COURT MANIFESTLY ERRED IN RULING THAT THE SUMMARY TAX REMEDIES
RESORTED TO BY THE GOVERNMENT ARE NOT AFFECTED AND PRECLUDED BY THE PENDENCY OF
THE SPECIAL PROCEEDING FOR THE ALLOWANCE OF THE LATE PRESIDENT'S ALLEGED WILL. TO
THE CONTRARY, THIS PROBATE PROCEEDING PRECISELY PLACED ALL PROPERTIES WHICH FORM
PART OF THE LATE PRESIDENT'S ESTATE IN CUSTODIA LEGIS OF THE PROBATE COURT TO THE
EXCLUSION OF ALL OTHER COURTS AND ADMINISTRATIVE AGENCIES.
B. RESPONDENT COURT ARBITRARILY ERRED IN SWEEPINGLY DECIDING THAT SINCE THE TAX
ASSESSMENTS OF PETITIONER AND HIS PARENTS HAD ALREADY BECOME FINAL AND
UNAPPEALABLE, THERE WAS NO NEED TO GO INTO THE MERITS OF THE GROUNDS CITED IN THE
PETITION. INDEPENDENT OF WHETHER THE TAX ASSESSMENTS HAD ALREADY BECOME FINAL,
HOWEVER, PETITIONER HAS THE RIGHT TO QUESTION THE UNLAWFUL MANNER AND METHOD IN
WHICH TAX COLLECTION IS SOUGHT TO BE ENFORCED BY RESPONDENTS COMMISSIONER AND
DE GUZMAN. THUS, RESPONDENT COURT SHOULD HAVE FAVORABLY CONSIDERED THE MERITS
OF THE FOLLOWING GROUNDS IN THE PETITION:
(1) The Notices of Levy on Real Property were issued beyond the period provided in the Revenue
Memorandum Circular No. 38-68.
(2) [a] The numerous pending court cases questioning the late President's ownership or interests in
several properties (both personal and real) make the total value of his estate, and the consequent
estate tax due, incapable of exact pecuniary determination at this time. Thus, respondents'
assessment of the estate tax and their issuance of the Notices of Levy and Sale are premature,
confiscatory and oppressive.
[b] Petitioner, as one of the late President's compulsory heirs, was never notified, much less served
with copies of the Notices of Levy, contrary to the mandate of Section 213 of the NIRC. As such,
petitioner was never given an opportunity to contest the Notices in violation of his right to due
process of law.
C. ON ACCOUNT OF THE CLEAR MERIT OF THE PETITION, RESPONDENT COURT MANIFESTLY
ERRED IN RULING THAT IT HAD NO POWER TO GRANT INJUNCTIVE RELIEF TO PETITIONER.

SECTION 219 OF THE NIRC NOTWITHSTANDING, COURTS POSSESS THE POWER TO ISSUE A WRIT OF
PRELIMINARY INJUNCTION TO RESTRAIN RESPONDENTS COMMISSIONER'S AND DE GUZMAN'S
ARBITRARY METHOD OF COLLECTING THE ALLEGED DEFICIENCY ESTATE AND INCOME TAXES BY
MEANS OF LEVY.
The facts as found by the appellate court are undisputed, and are hereby adopted:
On September 29, 1989, former President Ferdinand Marcos died in Honolulu, Hawaii, USA.
On June 27, 1990, a Special Tax Audit Team was created to conduct investigations and examinations of the tax
liabilities and obligations of the late president, as well as that of his family, associates and "cronies". Said audit team
concluded its investigation with a Memorandum dated July 26, 1991. The investigation disclosed that the Marcoses
failed to file a written notice of the death of the decedent, an estate tax returns [sic], as well as several income tax
returns covering the years 1982 to 1986, all in violation of the National Internal Revenue Code (NIRC).
Subsequently, criminal charges were filed against Mrs. Imelda R. Marcos before the Regional Trial of Quezon City
for violations of Sections 82, 83 and 84 (has penalized under Sections 253 and 254 in relation to Section 252 a &
b) of the National Internal Revenue Code (NIRC).
The Commissioner of Internal Revenue thereby caused the preparation and filing of the Estate Tax Return for the
estate of the late president, the Income Tax Returns of the Spouses Marcos for the years 1985 to 1986, and the
Income Tax Returns of petitioner Ferdinand "Bongbong" Marcos II for the years 1982 to 1985.
On July 26, 1991, the BIR issued the following: (1) Deficiency estate tax assessment no. FAC-2-89-91-002464
(against the estate of the late president Ferdinand Marcos in the amount of P23,293,607,638.00 Pesos); (2)
Deficiency income tax assessment no. FAC-1-85-91-002452 and Deficiency income tax assessment no. FAC-1-8691-002451 (against the Spouses Ferdinand and Imelda Marcos in the amounts of P149,551.70 and P184,009,737.40
representing deficiency income tax for the years 1985 and 1986); (3) Deficiency income tax assessment nos. FAC-182-91-002460 to FAC-1-85-91-002463 (against petitioner Ferdinand "Bongbong" Marcos II in the amounts of
P258.70 pesos; P9,386.40 Pesos; P4,388.30 Pesos; and P6,376.60 Pesos representing his deficiency income taxes for
the years 1982 to 1985).
The Commissioner of Internal Revenue avers that copies of the deficiency estate and income tax assessments were
all personally and constructively served on August 26, 1991 and September 12, 1991 upon Mrs. Imelda Marcos
(through her caretaker Mr. Martinez) at her last known address at No. 204 Ortega St., San Juan, M.M. (Annexes "D"
and "E" of the Petition). Likewise, copies of the deficiency tax assessments issued against petitioner Ferdinand
"Bongbong" Marcos II were also personally and constructively served upon him (through his caretaker) on
September 12, 1991, at his last known address at Don Mariano Marcos St. corner P. Guevarra St., San Juan, M.M.
(Annexes "J" and "J-1" of the Petition). Thereafter, Formal Assessment notices were served on October 20, 1992,
upon Mrs. Marcos c/o petitioner, at his office, House of Representatives, Batasan Pambansa, Quezon City.
Moreover, a notice to Taxpayer inviting Mrs. Marcos (or her duly authorized representative or counsel), to a
conference, was furnished the counsel of Mrs. Marcos, Dean Antonio Coronel but to no avail.
The deficiency tax assessments were not protested administratively, by Mrs. Marcos and the other heirs of the late
president, within 30 days from service of said assessments.
On February 22, 1993, the BIR Commissioner issued twenty-two notices of levy on real property against certain
parcels of land owned by the Marcoses to satisfy the alleged estate tax and deficiency income taxes of Spouses
Marcos.
On May 20, 1993, four more Notices of Levy on real property were issued for the purpose of satisfying the
deficiency income taxes.
On May 26, 1993, additional four (4) notices of Levy on real property were again issued. The foregoing tax
remedies were resorted to pursuant to Sections 205 and 213 of the National Internal Revenue Code (NIRC).
In response to a letter dated March 12, 1993 sent by Atty. Loreto Ata (counsel of herein petitioner) calling the
attention of the BIR and requesting that they be duly notified of any action taken by the BIR affecting the interest of
their client Ferdinand "Bongbong" Marcos II, as well as the interest of the late president copies of the aforesaid
notices were, served on April 7, 1993 and on June 10, 1993, upon Mrs. Imelda Marcos, the petitioner, and their
counsel of record, "De Borja, Medialdea, Ata, Bello, Guevarra and Serapio Law Office".

Notices of sale at public auction were posted on May 26, 1993, at the lobby of the City Hall of Tacloban City. The
public auction for the sale of the eleven (11) parcels of land took place on July 5, 1993. There being no bidder, the
lots were declared forfeited in favor of the government.
On June 25, 1993, petitioner Ferdinand "Bongbong" Marcos II filed the instant petition for certiorariand prohibition
under Rule 65 of the Rules of Court, with prayer for temporary restraining order and/or writ of preliminary
injunction.
It has been repeatedly observed, and not without merit, that the enforcement of tax laws and the collection of taxes, is of paramount
importance for the sustenance of government. Taxes are the lifeblood of the government and should be collected without unnecessary
hindrance. However, such collection should be made in accordance with law as any arbitrariness will negate the very reason for
government itself. It is therefore necessary to reconcile the apparently conflicting interests of the authorities and the taxpayers so that
the real purpose of taxation, which is the promotion of the common good, may be achieved. 3
Whether or not the proper avenues of assessment and collection of the said tax obligations were taken by the respondent Bureau is
now the subject of the Court's inquiry.
Petitioner posits that notices of levy, notices of sale, and subsequent sale of properties of the late President Marcos effected by the BIR
are null and void for disregarding the established procedure for the enforcement of taxes due upon the estate of the deceased. The case
of Domingo vs. Garlitos 4 is specifically cited to bolster the argument that "the ordinary procedure by which to settle claims of
indebtedness against the estate of a deceased, person, as in an inheritance (estate) tax, is for the claimant to present a claim before the
probate court so that said court may order the administrator to pay the amount therefor." This remedy is allegedly, exclusive, and
cannot be effected through any other means.
Petitioner goes further, submitting that the probate court is not precluded from denying a request by the government for the immediate
payment of taxes, and should order the payment of the same only within the period fixed by the probate court for the payment of all
the debts of the decedent. In this regard, petitioner cites the case of Collector of Internal Revenue vs. The Administratrix of the Estate
of Echarri (67 Phil 502), where it was held that:
The case of Pineda vs. Court of First Instance of Tayabas and Collector of Internal Revenue (52 Phil 803), relied
upon by the petitioner-appellant is good authority on the proposition that the court having control over the
administration proceedings has jurisdiction to entertain the claim presented by the government for taxes due and to
order the administrator to pay the tax should it find that the assessment was proper, and that the tax was legal, due
and collectible. And the rule laid down in that case must be understood in relation to the case of Collector of
Customs vs. Haygood, supra., as to the procedure to be followed in a given case by the government to effectuate the
collection of the tax. Categorically stated, where during the pendency of judicial administration over the estate of a
deceased person a claim for taxes is presented by the government, the court has the authority to order payment by
the administrator; but, in the same way that it has authority to order payment or satisfaction, it also has the negative
authority to deny the same. While there are cases where courts are required to perform certain duties mandatory and
ministerial in character, the function of the court in a case of the present character is not one of them; and here, the
court cannot be an organism endowed with latitude of judgment in one direction, and converted into a mere
mechanical contrivance in another direction.
On the other hand, it is argued by the BIR, that the state's authority to collect internal revenue taxes is paramount. Thus, the pendency
of probate proceedings over the estate of the deceased does not preclude the assessment and collection, through summary remedies, of
estate taxes over the same. According to the respondent, claims for payment of estate and income taxes due and assessed after the
death of the decedent need not be presented in the form of a claim against the estate. These can and should be paid immediately. The
probate court is not the government agency to decide whether an estate is liable for payment of estate of income taxes. Well-settled is
the rule that the probate court is a court with special and limited jurisdiction.
Concededly, the authority of the Regional Trial Court, sitting, albeit with limited jurisdiction, as a probate court over estate of
deceased individual, is not a trifling thing. The court's jurisdiction, once invoked, and made effective, cannot be treated with
indifference nor should it be ignored with impunity by the very parties invoking its authority.
In testament to this, it has been held that it is within the jurisdiction of the probate court to approve the sale of properties of a deceased
person by his prospective heirs before final adjudication; 5 to determine who are the heirs of the decedent; 6 the recognition of a natural
child; 7 the status of a woman claiming to be the legal wife of the decedent; 8the legality of disinheritance of an heir by the
testator; 9 and to pass upon the validity of a waiver of hereditary rights. 10
The pivotal question the court is tasked to resolve refers to the authority of the Bureau of Internal Revenue to collect by the summary
remedy of levying upon, and sale of real properties of the decedent, estate tax deficiencies, without the cognition and authority of the
court sitting in probate over the supposed will of the deceased.
The nature of the process of estate tax collection has been described as follows:

Strictly speaking, the assessment of an inheritance tax does not directly involve the administration of a decedent's
estate, although it may be viewed as an incident to the complete settlement of an estate, and, under some statutes, it
is made the duty of the probate court to make the amount of the inheritance tax a part of the final decree of
distribution of the estate. It is not against the property of decedent, nor is it a claim against the estate as such, but it is
against the interest or property right which the heir, legatee, devisee, etc., has in the property formerly held by
decedent. Further, under some statutes, it has been held that it is not a suit or controversy between the parties, nor is
it an adversary proceeding between the state and the person who owes the tax on the inheritance. However, under
other statutes it has been held that the hearing and determination of the cash value of the assets and the
determination of the tax are adversary proceedings. The proceeding has been held to be necessarily a proceeding in
rem. 11
In the Philippine experience, the enforcement and collection of estate tax, is executive in character, as the legislature has seen it fit to
ascribe this task to the Bureau of Internal Revenue. Section 3 of the National Internal Revenue Code attests to this:
Sec. 3. Powers and duties of the Bureau. The powers and duties of the Bureau of Internal Revenue shall
comprehend the assessment and collection of all national internal revenue taxes, fees, and charges, and the
enforcement of all forfeitures, penalties, and fines connected therewith, including the execution of judgments in all
cases decided in its favor by the Court of Tax Appeals and the ordinary courts. Said Bureau shall also give effect to
and administer the supervisory and police power conferred to it by this Code or other laws.
Thus, it was in Vera vs. Fernandez 12 that the court recognized the liberal treatment of claims for taxes charged against the estate of the
decedent. Such taxes, we said, were exempted from the application of the statute of non-claims, and this is justified by the necessity of
government funding, immortalized in the maxim that taxes are the lifeblood of the government. Vectigalia nervi sunt rei publicae
taxes are the sinews of the state.
Taxes assessed against the estate of a deceased person, after administration is opened, need not be submitted to the
committee on claims in the ordinary course of administration. In the exercise of its control over the administrator,
the court may direct the payment of such taxes upon motion showing that the taxes have been assessed against the
estate.
Such liberal treatment of internal revenue taxes in the probate proceedings extends so far, even to allowing the enforcement of tax
obligations against the heirs of the decedent, even after distribution of the estate's properties.
Claims for taxes, whether assessed before or after the death of the deceased, can be collected from the heirs even
after the distribution of the properties of the decedent. They are exempted from the application of the statute of nonclaims. The heirs shall be liable therefor, in proportion to their share in the inheritance. 13
Thus, the Government has two ways of collecting the taxes in question. One, by going after all the heirs and
collecting from each one of them the amount of the tax proportionate to the inheritance received. Another remedy,
pursuant to the lien created by Section 315 of the Tax Code upon all property and rights to property belong to the
taxpayer for unpaid income tax, is by subjecting said property of the estate which is in the hands of an heir or
transferee to the payment of the tax due the estate. (Commissioner of Internal Revenue vs. Pineda, 21 SCRA 105,
September 15, 1967.)
From the foregoing, it is discernible that the approval of the court, sitting in probate, or as a settlement tribunal over the deceased is
not a mandatory requirement in the collection of estate taxes. It cannot therefore be argued that the Tax Bureau erred in proceeding
with the levying and sale of the properties allegedly owned by the late President, on the ground that it was required to seek first the
probate court's sanction. There is nothing in the Tax Code, and in the pertinent remedial laws that implies the necessity of the probate
or estate settlement court's approval of the state's claim for estate taxes, before the same can be enforced and collected.
On the contrary, under Section 87 of the NIRC, it is the probate or settlement court which is bidden not to authorize the executor or
judicial administrator of the decedent's estate to deliver any distributive share to any party interested in the estate, unless it is shown a
Certification by the Commissioner of Internal Revenue that the estate taxes have been paid. This provision disproves the petitioner's
contention that it is the probate court which approves the assessment and collection of the estate tax.
If there is any issue as to the validity of the BIR's decision to assess the estate taxes, this should have been pursued through the proper
administrative and judicial avenues provided for by law.
Section 229 of the NIRC tells us how:
Sec. 229. Protesting of assessment. When the Commissioner of Internal Revenue or his duly authorized
representative finds that proper taxes should be assessed, he shall first notify the taxpayer of his findings. Within a
period to be prescribed by implementing regulations, the taxpayer shall be required to respond to said notice. If the
taxpayer fails to respond, the Commissioner shall issue an assessment based on his findings.

Such assessment may be protested administratively by filing a request for reconsideration or reinvestigation in such
form and manner as may be prescribed by implementing regulations within (30) days from receipt of the
assessment; otherwise, the assessment shall become final and unappealable.
If the protest is denied in whole or in part, the individual, association or corporation adversely affected by the
decision on the protest may appeal to the Court of Tax Appeals within thirty (30) days from receipt of said decision;
otherwise, the decision shall become final, executory and demandable. (As inserted by P.D. 1773)
Apart from failing to file the required estate tax return within the time required for the filing of the same, petitioner, and the other heirs
never questioned the assessments served upon them, allowing the same to lapse into finality, and prompting the BIR to collect the said
taxes by levying upon the properties left by President Marcos.
Petitioner submits, however, that "while the assessment of taxes may have been validly undertaken by the Government, collection
thereof may have been done in violation of the law. Thus, the manner and method in which the latter is enforced may be questioned
separately, and irrespective of the finality of the former, because the Government does not have the unbridled discretion to enforce
collection without regard to the clear provision of law." 14
Petitioner specifically points out that applying Memorandum Circular No. 38-68, implementing Sections 318 and 324 of the old tax
code (Republic Act 5203), the BIR's Notices of Levy on the Marcos properties, were issued beyond the allowed period, and are
therefore null and void:
. . . the Notices of Levy on Real Property (Annexes O to NN of Annex C of this Petition) in satisfaction of said
assessments were still issued by respondents well beyond the period mandated in Revenue Memorandum Circular
No. 38-68. These Notices of Levy were issued only on 22 February 1993 and 20 May 1993 when at least seventeen
(17) months had already lapsed from the last service of tax assessment on 12 September 1991. As no notices of
distraint of personal property were first issued by respondents, the latter should have complied with Revenue
Memorandum Circular No. 38-68 and issued these Notices of Levy not earlier than three (3) months nor later than
six (6) months from 12 September 1991. In accordance with the Circular, respondents only had until 12 March 1992
(the last day of the sixth month) within which to issue these Notices of Levy. The Notices of Levy, having been
issued beyond the period allowed by law, are thus void and of no effect. 15
We hold otherwise. The Notices of Levy upon real property were issued within the prescriptive period and in accordance with the
provisions of the present Tax Code. The deficiency tax assessment, having already become final, executory, and demandable, the same
can now be collected through the summary remedy of distraint or levy pursuant to Section 205 of the NIRC.
The applicable provision in regard to the prescriptive period for the assessment and collection of tax deficiency in this instance is
Article 223 of the NIRC, which pertinently provides:
Sec. 223. Exceptions as to a period of limitation of assessment and collection of taxes. (a) In the case of a false or
fraudulent return with intent to evade tax or of a failure to file a return, the tax may be assessed, or a proceeding in
court for the collection of such tax may be begun without assessment, at any time within ten (10) years after the
discovery of the falsity, fraud, or omission:Provided, That, in a fraud assessment which has become final and
executory, the fact of fraud shall be judicially taken cognizance of in the civil or criminal action for the collection
thereof.
xxx xxx xxx
(c) Any internal revenue tax which has been assessed within the period of limitation above prescribed, may be
collected by distraint or levy or by a proceeding in court within three years following the assessment of the tax.
xxx xxx xxx
The omission to file an estate tax return, and the subsequent failure to contest or appeal the assessment made by the BIR is fatal to the
petitioner's cause, as under the above-cited provision, in case of failure to file a return, the tax may be assessed at any time within ten
years after the omission, and any tax so assessed may be collected by levy upon real property within three years following the
assessment of the tax. Since the estate tax assessment had become final and unappealable by the petitioner's default as regards
protesting the validity of the said assessment, there is now no reason why the BIR cannot continue with the collection of the said tax.
Any objection against the assessment should have been pursued following the avenue paved in Section 229 of the NIRC on protests on
assessments of internal revenue taxes.
Petitioner further argues that "the numerous pending court cases questioning the late president's ownership or interests in several
properties (both real and personal) make the total value of his estate, and the consequent estate tax due, incapable of exact pecuniary
determination at this time. Thus, respondents' assessment of the estate tax and their issuance of the Notices of Levy and sale are
premature and oppressive." He points out the pendency of Sandiganbayan Civil Case Nos. 0001-0034 and 0141, which were filed by

the government to question the ownership and interests of the late President in real and personal properties located within and outside
the Philippines. Petitioner, however, omits to allege whether the properties levied upon by the BIR in the collection of estate taxes
upon the decedent's estate were among those involved in the said cases pending in the Sandiganbayan. Indeed, the court is at a loss as
to how these cases are relevant to the matter at issue. The mere fact that the decedent has pending cases involving ill-gotten wealth
does not affect the enforcement of tax assessments over the properties indubitably included in his estate.
Petitioner also expresses his reservation as to the propriety of the BIR's total assessment of P23,292,607,638.00, stating that this
amount deviates from the findings of the Department of Justice's Panel of Prosecutors as per its resolution of 20 September 1991.
Allegedly, this is clear evidence of the uncertainty on the part of the Government as to the total value of the estate of the late President.
This is, to our mind, the petitioner's last ditch effort to assail the assessment of estate tax which had already become final and
unappealable.
It is not the Department of Justice which is the government agency tasked to determine the amount of taxes due upon the subject
estate, but the Bureau of Internal Revenue, 16 whose determinations and assessments are presumed correct and made in good
faith. 17 The taxpayer has the duty of proving otherwise. In the absence of proof of any irregularities in the performance of official
duties, an assessment will not be disturbed. Even an assessment based on estimates is prima facie valid and lawful where it does not
appear to have been arrived at arbitrarily or capriciously. The burden of proof is upon the complaining party to show clearly that the
assessment is erroneous. Failure to present proof of error in the assessment will justify the judicial affirmance of said assessment. 18 In
this instance, petitioner has not pointed out one single provision in the Memorandum of the Special Audit Team which gave rise to the
questioned assessment, which bears a trace of falsity. Indeed, the petitioner's attack on the assessment bears mainly on the alleged
improbable and unconscionable amount of the taxes charged. But mere rhetoric cannot supply the basis for the charge of impropriety
of the assessments made.
Moreover, these objections to the assessments should have been raised, considering the ample remedies afforded the taxpayer by the
Tax Code, with the Bureau of Internal Revenue and the Court of Tax Appeals, as described earlier, and cannot be raised now via
Petition for Certiorari, under the pretext of grave abuse of discretion. The course of action taken by the petitioner reflects his disregard
or even repugnance of the established institutions for governance in the scheme of a well-ordered society. The subject tax assessments
having become final, executory and enforceable, the same can no longer be contested by means of a disguised protest. In the
main, Certiorari may not be used as a substitute for a lost appeal or remedy. 19 This judicial policy becomes more pronounced in view
of the absence of sufficient attack against the actuations of government.
On the matter of sufficiency of service of Notices of Assessment to the petitioner, we find the respondent appellate court's
pronouncements sound and resilient to petitioner's attacks.
Anent grounds 3(b) and (B) both alleging/claiming lack of notice We find, after considering the facts and
circumstances, as well as evidences, that there was sufficient, constructive and/or actual notice of assessments, levy
and sale, sent to herein petitioner Ferdinand "Bongbong" Marcos as well as to his mother Mrs. Imelda Marcos.
Even if we are to rule out the notices of assessments personally given to the caretaker of Mrs. Marcos at the latter's
last known address, on August 26, 1991 and September 12, 1991, as well as the notices of assessment personally
given to the caretaker of petitioner also at his last known address on September 12, 1991 the subsequent notices
given thereafter could no longer be ignored as they were sent at a time when petitioner was already here in the
Philippines, and at a place where said notices would surely be called to petitioner's attention, and received by
responsible persons of sufficient age and discretion.
Thus, on October 20, 1992, formal assessment notices were served upon Mrs. Marcos c/o the petitioner, at his office,
House of Representatives, Batasan Pambansa, Q.C. (Annexes "A", "A-1", "A-2", "A-3"; pp. 207-210,
Comment/Memorandum of OSG). Moreover, a notice to taxpayer dated October 8, 1992 inviting Mrs. Marcos to a
conference relative to her tax liabilities, was furnished the counsel of Mrs. Marcos Dean Antonio Coronel (Annex
"B", p. 211, ibid). Thereafter, copies of Notices were also served upon Mrs. Imelda Marcos, the petitioner and their
counsel "De Borja, Medialdea, Ata, Bello, Guevarra and Serapio Law Office", on April 7, 1993 and June 10, 1993.
Despite all of these Notices, petitioner never lifted a finger to protest the assessments, (upon which the Levy and
sale of properties were based), nor appealed the same to the Court of Tax Appeals.
There being sufficient service of Notices to herein petitioner (and his mother) and it appearing that petitioner
continuously ignored said Notices despite several opportunities given him to file a protest and to thereafter appeal to
the Court of Tax Appeals, the tax assessments subject of this case, upon which the levy and sale of properties
were based, could no longer be contested (directly or indirectly) via this instant petition for certiorari. 20
Petitioner argues that all the questioned Notices of Levy, however, must be nullified for having been issued without validly serving
copies thereof to the petitioner. As a mandatory heir of the decedent, petitioner avers that he has an interest in the subject estate, and
notices of levy upon its properties should have been served upon him.

We do not agree. In the case of notices of levy issued to satisfy the delinquent estate tax, the delinquent taxpayer is the Estate of the
decedent, and not necessarily, and exclusively, the petitioner as heir of the deceased. In the same vein, in the matter of income tax
delinquency of the late president and his spouse, petitioner is not the taxpayer liable. Thus, it follows that service of notices of levy in
satisfaction of these tax delinquencies upon the petitioner is not required by law, as under Section 213 of the NIRC, which pertinently
states:
xxx xxx xxx
. . . Levy shall be effected by writing upon said certificate a description of the property upon which levy is made. At
the same time, written notice of the levy shall be mailed to or served upon the Register of Deeds of the province or
city where the property is located and upon the delinquent taxpayer, or if he be absent from the Philippines, to his
agent or the manager of the business in respect to which the liability arose, or if there be none, to the occupant of the
property in question.
xxx xxx xxx
The foregoing notwithstanding, the record shows that notices of warrants of distraint and levy of sale were furnished the counsel of
petitioner on April 7, 1993, and June 10, 1993, and the petitioner himself on April 12, 1993 at his office at the Batasang
Pambansa. 21 We cannot therefore, countenance petitioner's insistence that he was denied due process. Where there was an opportunity
to raise objections to government action, and such opportunity was disregarded, for no justifiable reason, the party claiming
oppression then becomes the oppressor of the orderly functions of government. He who comes to court must come with clean hands.
Otherwise, he not only taints his name, but ridicules the very structure of established authority.
IN VIEW WHEREOF, the Court RESOLVED to DENY the present petition. The Decision of the Court of Appeals dated November
29, 1994 is hereby AFFIRMED in all respects.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 123206

March 22, 2000

COMMISSIONER OF INTERNAL REVENUE, petitioner,

vs.
COURT OF APPEALS, COURT OF TAX APPEALS and JOSEFINA P. PAJONAR, as Administratrix of the Estate of Pedro
P. Pajonar, respondents.
RESOLUTION
GONZAGA-REYES, J.:
Assailed in this petition for review on certiorari is the December 21, 1995 Decision1 of the Court of Appeals2 in CA-G.R. Sp. No.
34399 affirming the June 7, 1994 Resolution of the Court of Tax Appeals in CTA Case No. 4381 granting private respondent Josefina
P. Pajonar, as administratrix of the estate of Pedro P. Pajonar, a tax refund in the amount of P76,502.42, representing erroneously paid
estate taxes for the year 1988.
Pedro Pajonar, a member of the Philippine Scout, Bataan Contingent, during the second World War, was a part of the infamous Death
March by reason of which he suffered shock and became insane. His sister Josefina Pajonar became the guardian over his person,
while his property was placed under the guardianship of the Philippine National Bank (PNB) by the Regional Trial Court of
Dumaguete City, Branch 31, in Special Proceedings No. 1254. He died on January 10, 1988. He was survived by his two brothers
Isidro P. Pajonar and Gregorio Pajonar, his sister Josefina Pajonar, nephews Concordio Jandog and Mario Jandog and niece Conchita
Jandog.
On May 11, 1988, the PNB filed an accounting of the decedent's property under guardianship valued at P3,037,672.09 in Special
Proceedings No. 1254. However, the PNB did not file an estate tax return, instead it advised Pedro Pajonar's heirs to execute an
extrajudicial settlement and to pay the taxes on his estate. On April 5, 1988, pursuant to the assessment by the Bureau of Internal
Revenue (BIR), the estate of Pedro Pajonar paid taxes in the amount of P2,557.

On May 19, 1988, Josefina Pajonar filed a petition with the Regional Trial Court of Dumaguete City for the issuance in her favor of
letters of administration of the estate of her brother. The case was docketed as Special Proceedings No. 2399. On July 18, 1988, the
trial court appointed Josefina Pajonar as the regular administratrix of Pedro Pajonar's estate.
On December 19, 1988, pursuant to a second assessment by the BIR for deficiency estate tax, the estate of Pedro Pajonar paid estate
tax in the amount of P1,527,790.98. Josefina Pajonar, in her capacity as administratrix and heir of Pedro Pajonar's estate, filed a
protest on January 11, 1989 with the BIR praying that the estate tax payment in the amount of P1,527,790.98, or at least some portion
of it, be returned to the heirs. 3
However, on August 15, 1989, without waiting for her protest to be resolved by the BIR, Josefina Pajonar filed a petition for review
with the Court of Tax Appeals (CTA), praying for the refund of P1,527,790.98, or in the alternative, P840,202.06, as erroneously paid
estate tax. 4 The case was docketed as CTA Case No. 4381.
On May 6, 1993, the CTA ordered the Commissioner of Internal Revenue to refund Josefina Pajonar the amount of P252,585.59,
representing erroneously paid estate tax for the year 1988.5 Among the deductions from the gross estate allowed by the CTA were the
amounts of P60,753 representing the notarial fee for the Extrajudicial Settlement and the amount of P50,000 as the attorney's fees in
Special Proceedings No. 1254 for guardianship.6
On June 15, 1993, the Commissioner of Internal Revenue filed a motion for reconsideration7 of the CTA's May 6, 1993 decision
asserting, among others, that the notarial fee for the Extrajudicial Settlement and the attorney's fees in the guardianship proceedings
are not deductible expenses.
On June 7, 1994, the CTA issued the assailed Resolution8 ordering the Commissioner of Internal Revenue to refund Josefina Pajonar,
as administratrix of the estate of Pedro Pajonar, the amount of P76,502.42 representing erroneously paid estate tax for the year 1988.
Also, the CTA upheld the validity of the deduction of the notarial fee for the Extrajudicial Settlement and the attorney's fees in the
guardianship proceedings.
On July 5, 1994, the Commissioner of Internal Revenue filed with the Court of Appeals a petition for review of the CTA's May 6,
1993 Decision and its June 7, 1994 Resolution, questioning the validity of the abovementioned deductions. On December 21, 1995,
the Court of Appeals denied the Commissioner's petition.9
Hence, the present appeal by the Commissioner of Internal Revenue.
The sole issue in this case involves the construction of section 79 10 of the National Internal Revenue Code 11(Tax Code) which
provides for the allowable deductions from the gross estate of the decedent. More particularly, the question is whether the notarial fee
paid for the extrajudicial settlement in the amount of P60,753 and the attorney's fees in the guardianship proceedings in the amount of
P50,000 may be allowed as deductions from the gross estate of decedent in order to arrive at the value of the net estate.
We answer this question in the affirmative, thereby upholding the decisions of the appellate courts.
In its May 6, 1993 Decision, the Court of Tax Appeals ruled thus:
Respondent maintains that only judicial expenses of the testamentary or intestate proceedings are allowed as a deduction to
the gross estate. The amount of P60,753.00 is quite extraordinary for a mere notarial fee.
This Court adopts the view under American jurisprudence that expenses incurred in the extrajudicial settlement of the estate
should be allowed as a deduction from the gross estate. "There is no requirement of formal administration. It is sufficient that
the expense be a necessary contribution toward the settlement of the case." [ 34 Am. Jur. 2d, p. 765; Nolledo, Bar Reviewer
in Taxation, 10th Ed. (1990), p. 481]
xxx

xxx

xxx

The attorney's fees of P50,000.00, which were already incurred but not yet paid, refers to the guardianship proceeding filed
by PNB, as guardian over the ward of Pedro Pajonar, docketed as Special Proceeding No. 1254 in the RTC (Branch XXXI) of
Dumaguete City. . . .
xxx

xxx

xxx

The guardianship proceeding had been terminated upon delivery of the residuary estate to the heirs entitled thereto.
Thereafter, PNB was discharged of any further responsibility.
Attorney's fees in order to be deductible from the gross estate must be essential to the collection of assets, payment of debts
or the distribution of the property to the persons entitled to it. The services for which the fees are charged must relate to the

proper settlement of the estate. [34 Am. Jur. 2d 767.] In this case, the guardianship proceeding was necessary for the
distribution of the property of the late Pedro Pajonar to his rightful heirs.
xxx

xxx

xxx

PNB was appointed as guardian over the assets of the late Pedro Pajonar, who, even at the time of his death, was incompetent
by reason of insanity. The expenses incurred in the guardianship proceeding was but a necessary expense in the settlement of
the decedent's estate. Therefore, the attorney's fee incurred in the guardianship proceedings amounting to P50,000.00 is a
reasonable and necessary business expense deductible from the gross estate of the decedent. 12
Upon a motion for reconsideration filed by the Commissioner of Internal Revenue, the Court of Tax Appeals modified its previous
ruling by reducing the refundable amount to P76,502.43 since it found that a deficiency interest should be imposed and the
compromise penalty excluded. 13 However, the tax court upheld its previous ruling regarding the legality of the deductions
It is significant to note that the inclusion of the estate tax law in the codification of all our national internal revenue laws with the
enactment of the National Internal Revenue Code in 1939 were copied from the Federal Law of the United States. [ UMALI,
Reviewer in Taxation (1985), p. 285 ] The 1977 Tax Code, promulgated by Presidential Decree No. 1158, effective June 3, 1977,
reenacted substantially all the provisions of the old law on estate and gift taxes, except the sections relating to the meaning of gross
estate and gift. [ Ibid, p. 286. ]
In the United States, [a]dministrative expenses, executor's commissions and attorney's fees are considered allowable deductions from
the Gross Estate. Administrative expenses are limited to such expenses as are actually and necessarily incurred in the administration of
a decedent's estate. [PRENTICE-HALL, Federal Taxes Estate and Gift Taxes (1936), p. 120, 533.] Necessary expenses of
administration are such expenses as are entailed for the preservation and productivity of the estate and for its management for
purposes of liquidation, payment of debts and distribution of the residue among the persons entitled thereto. [Lizarraga Hermanos vs.
Abada, 40 Phil. 124.] They must be incurred for the settlement of the estate as a whole. [34 Am. Jur. 2d, p. 765.] Thus, where there
were no substantial community debts and it was unnecessary to convert community property to cash, the only practical purpose of
administration being the payment of estate taxes, full deduction was allowed for attorney's fees and miscellaneous expenses charged
wholly to decedent's estate. [Ibid., citing Estate of Helis, 26 T.C. 143 (A).]
Petitioner stated in her protest filed with the BIR that "upon the death of the ward, the PNB, which was still the guardian of the estate,
(Annex "Z"), did not file an estate tax return; however, it advised the heirs to execute an extrajudicial settlement, to pay taxes and to
post a bond equal to the value of the estate, for which the state paid P59,341.40 for the premiums. (See Annex "K")." [p. 17, CTA
record.] Therefore, it would appear from the records of the case that the only practical purpose of settling the estate by means of an
extrajudicial settlement pursuant to Section 1 of Rule 74 of the Rules of Court was for the payment of taxes and the distribution of the
estate to the heirs. A fortiori, since our estate tax laws are of American origin, the interpretation adopted by American Courts has some
persuasive effect on the interpretation of our own estate tax laws on the subject.
Anent the contention of respondent that the attorney's fees of P50,000.00 incurred in the guardianship proceeding should not be
deducted from the Gross Estate, We consider the same unmeritorious. Attorneys' and guardians' fees incurred in a trustee's accounting
of a taxable inter vivos trust attributable to the usual issues involved in such an accounting was held to be proper deductions because
these are expenses incurred in terminating an inter vivos trust that was includible in the decedent's estate. [Prentice Hall, Federal Taxes
on Estate and Gift, p. 120, 861] Attorney's fees are allowable deductions if incurred for the settlement of the estate. It is noteworthy to
point that PNB was appointed the guardian over the assets of the deceased. Necessarily the assets of the deceased formed part of his
gross estate. Accordingly, all expenses incurred in relation to the estate of the deceased will be deductible for estate tax purposes
provided these are necessary and ordinary expenses for administration of the settlement of the estate. 14
In upholding the June 7, 1994 Resolution of the Court of Tax Appeals, the Court of Appeals held that:
2. Although the Tax Code specifies "judicial expenses of the testamentary or intestate proceedings," there is no reason why expenses
incurred in the administration and settlement of an estate in extrajudicial proceedings should not be allowed. However, deduction is
limited to such administration expenses as are actually and necessarily incurred in the collection of the assets of the estate, payment of
the debts, and distribution of the remainder among those entitled thereto. Such expenses may include executor's or administrator's fees,
attorney's fees, court fees and charges, appraiser's fees, clerk hire, costs of preserving and distributing the estate and storing or
maintaining it, brokerage fees or commissions for selling or disposing of the estate, and the like. Deductible attorney's fees are those
incurred by the executor or administrator in the settlement of the estate or in defending or prosecuting claims against or due the estate.
(Estate and Gift Taxation in the Philippines, T. P. Matic, Jr., 1981 Edition, p. 176).
xxx

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xxx

It is clear then that the extrajudicial settlement was for the purpose of payment of taxes and the distribution of the estate to the heirs.
The execution of the extrajudicial settlement necessitated the notarization of the same. Hence the Contract of Legal Services of March
28, 1988 entered into between respondent Josefina Pajonar and counsel was presented in evidence for the purpose of showing that the
amount of P60,753.00 was for the notarization of the Extrajudicial Settlement. It follows then that the notarial fee of P60,753.00 was

incurred primarily to settle the estate of the deceased Pedro Pajonar. Said amount should then be considered an administration
expenses actually and necessarily incurred in the collection of the assets of the estate, payment of debts and distribution of the
remainder among those entitled thereto. Thus, the notarial fee of P60,753 incurred for the Extrajudicial Settlement should be allowed
as a deduction from the gross estate.
3. Attorney's fees, on the other hand, in order to be deductible from the gross estate must be essential to the settlement of the estate.
The amount of P50,000.00 was incurred as attorney's fees in the guardianship proceedings in Spec. Proc. No. 1254. Petitioner
contends that said amount are not expenses of the testamentary or intestate proceedings as the guardianship proceeding was instituted
during the lifetime of the decedent when there was yet no estate to be settled.
Again, this contention must fail.
The guardianship proceeding in this case was necessary for the distribution of the property of the deceased Pedro Pajonar. As correctly
pointed out by respondent CTA, the PNB was appointed guardian over the assets of the deceased, and that necessarily the assets of the
deceased formed part of his gross estate. . . .
xxx

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It is clear therefore that the attorney's fees incurred in the guardianship proceeding in Spec. Proc. No. 1254 were essential to the
distribution of the property to the persons entitled thereto. Hence, the attorney's fees incurred in the guardianship proceedings in the
amount of P50,000.00 should be allowed as a deduction from the gross estate of the decedent. 15
The deductions from the gross estate permitted under section 79 of the Tax Code basically reproduced the deductions allowed under
Commonwealth Act No. 466 (CA 466), otherwise known as the National Internal Revenue Code of 1939, 16 and which was the first
codification of Philippine tax laws. Section 89 (a) (1) (B) of CA 466 also provided for the deduction of the "judicial expenses of the
testamentary or intestate proceedings" for purposes of determining the value of the net estate. Philippine tax laws were, in turn, based
on the federal tax laws of the United States. 17 In accord with established rules of statutory construction, the decisions of American
courts construing the federal tax code are entitled to great weight in the interpretation of our own tax laws. 18
Judicial expenses are expenses of administration. 19 Administration expenses, as an allowable deduction from the gross estate of the
decedent for purposes of arriving at the value of the net estate, have been construed by the federal and state courts of the United States
to include all expenses "essential to the collection of the assets, payment of debts or the distribution of the property to the persons
entitled to it." 20 In other words, the expenses must be essential to the proper settlement of the estate. Expenditures incurred for the
individual benefit of the heirs, devisees or legatees are not deductible. 21 This distinction has been carried over to our jurisdiction.
Thus, in Lorenzo v. Posadas 22 the Court construed the phrase "judicial expenses of the testamentary or intestate proceedings" as not
including the compensation paid to a trustee of the decedent's estate when it appeared that such trustee was appointed for the purpose
of managing the decedent's real estate for the benefit of the testamentary heir. In another case, the Court disallowed the premiums paid
on the bond filed by the administrator as an expense of administration since the giving of a bond is in the nature of a qualification for
the office, and not necessary in the settlement of the estate. 23 Neither may attorney's fees incident to litigation incurred by the heirs in
asserting their respective rights be claimed as a deduction from the gross estate. 241wphi1
Coming to the case at bar, the notarial fee paid for the extrajudicial settlement is clearly a deductible expense since such settlement
effected a distribution of Pedro Pajonar's estate to his lawful heirs. Similarly, the attorney's fees paid to PNB for acting as the guardian
of Pedro Pajonar's property during his lifetime should also be considered as a deductible administration expense. PNB provided a
detailed accounting of decedent's property and gave advice as to the proper settlement of the latter's estate, acts which contributed
towards the collection of decedent's assets and the subsequent settlement of the estate.
We find that the Court of Appeals did not commit reversible error in affirming the questioned resolution of the Court of Tax Appeals.
WHEREFORE, the December 21, 1995 Decision of the Court of Appeals is AFFIRMED. The notarial fee for the extrajudicial
settlement and the attorney's fees in the guardianship proceedings are allowable deductions from the gross estate of Pedro
Pajonar.1wphi1.nt
SO ORDERED.