ESTATE TAX

1. 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.