The Bank of the Philippine Islands, admin of the estate of Adolphe Oscar policy was made payable to the

ble to the estate. One-half of the said proceeds belong to the

FACTS The Court took note of Manresa’s Commentaries on the Civil Code, vol. 9, page 589,
2nd edition which said that:
 BPI (plaintiff) is the administrator of the estate of the deceased Adolphe Oscar
Schuetze. “The amount of the policy represents the premiums to be paid, and the right to it arises the
 Rosario Gelano Vda de Schuetze is the widow of the deceased. moment the contract is perfected, for at the moment the power of disposing of it may be
exercised, and if death occurs payment may be demanded. It is therefore something acquired
 The deceased executed a will, in accordance with law, and named Vda de for a valuable consideration during the marriage, though the period of its fulfillment, depend
Schuetze as his universal heir. upon the death of one of the spouses, which terminates the partnership. So considered, the
 The deceased, made various trips to Europe. Coming from Java and with the question may be said to be decided by articles 1396 and 1401: if the premiums are paid with
intention of going to Bremen, landed in the Philippines and died there on the exclusive property of husband or wife, the policy belongs to the owner; if with
February 2, 1928. conjugal property, or if the money cannot be proved as coming from one or the other of
the spouses, the policy is community property.”
CFI probate proceedings
 The widow, before notary public Salvador Zaragoza, drew a general power It also took note of doctrine in Martin v Moran case of the SC of Texas:
appointing plaintiff as her attorney-in-fact and had, among other powers, the
A husband took out an endowment life insurance policy on his life, payable "as directed by will."
power to represent her in all legal actions. He paid the premiums thereon out of community funds, and by his will made the proceeds
 CFI Manila appointed BPI as administrator of the estate of the deceased. of the policy payable to his own estate. Held, that the proceeds were community estate, one-
o According to the testamentary proceedings, the deceased, at the time of his half of which belonged to the wife.
death, possessed real property and personal property consisting of shares of
stock in 19 domestic corporations. Similar rulings were made by the SC of California in In re Stan’s Estate and In re
o The value of all the property amounted to P 217,560. Webb’s Estate.
o Among the personal property was a life-insurance policy No. 194538
issued at Manila for the sum of $ 10,000 by the Sun Life Assurance Defendant alleges: It is a fundamental principle that a life-insurance policy belongs
Company of Canada, Manila branch. exclusively to the beneficiary upon the death of the person insured. Since the
 The policy named the estate of the deceased as the beneficiary deceased named his own estate as the sole beneficiary, the estate became the sole
without any qualification whatsoever. owner of the proceeds which became subject to inheritance tax.
Citing Del Val v. Del Val: An heir appointed beneficiary to a life insurance
Inheritance tax on the proceeds of the insurance policy policy taken out by the deceased, becomes the absolute owner of such policy upon
 BPI, as administrator of the estate, received from Sun Life Assurance Company the death of the insured.
of Canada the proceeds of the insurance policy. It then delivered to the widow P
20,150. Court: The estate of a deceased person cannot be placed on the same footing as an
 The defendant, Juan Posados Jr., CIR, then imposed an inheritance tax of P individual heir. The proceeds of a life insurance policy payable to the estate of the
1209 upon the transmission of the proceeds of the policy. BPI paid the insured passed to the executor or administrator of such estate, and forms part of its
inheritance tax under protest. assets; whereas the proceeds of a life-insurance policy payable to an heir of the
 After various demands, the CIR refused to refund to the widow the amount of insured as beneficiary belongs exclusively to said heir and does not form part of the
the inheritance tax. deceased's estate subject to administrator.

 The present complaint seeks to recover from the CIR, the amount of P 1,209 When a married man has his life insured and names his own estate after death,
paid by plaintiff under protest in its capacity as administrator. beneficiary, he makes no alienation of the proceeds of conjugal funds to a third
 CFI ruled in favor of the CIR. Plaintiff then appealed to the SC. person, but appropriates them himself, adding them to the assets of his estate, in
contravention of the provisions of article 1401, paragraph 1, of the Civil Code cited
ISSUES above, which provides that:

WON the amount received from the insurance policy is paraphernal or community "To the conjugal partnership belongs" (1) Property acquired for a valuable consideration during
the marriage at the expense of the common fund, whether the acquisition is made for the
property – YES.
partnership or for one of the spouses only."
The premiums on the life insurance policy (except the first) were paid out of the
Furthermore, such appropriation is a fraud practised upon the wife, which cannot be
conjugal funds. The proceeds of the policy (excluding the proportional part
allowed to prejudice her, according to article 1413, paragraph 2, of said Code.
corresponding to the first premium) constitute community property even if the
WON the CIR has authority, under the law, to collect the inheritance tax upon one- points questions may arise as to when a temporary stop in transit is such as to make the
half of the life insurance policy taken out by the deceased, which belongs to him and property taxable at the place of stoppage. Whether the property is taxable in such a case usually
is made payable to his estate – Only with regard to the proportion belonging depends on the length of time and the purpose of the interruption of transit. . . . . . . .
exclusively to the assured (the deceased)
It has been held that property of a construction company, used in construction of a railroad,
acquires a situs at the place where used for an indefinite period. So tangible personal property in
Section 1536 of the Administrative Code, as amended by section 10 of Act No. 2835 the state for the purpose of undergoing a partial finishing process is not to be regarded as in the
and section 1 of Act No. 3031, states. — course of transit nor as in the state for a mere temporary purpose.

“Every transmission by virtue of inheritance, devise, bequest, gift mortis causa or advance in ITC, if the proceeds of the life-insurance policy taken out by the late Adolphe Oscar
anticipation of inheritance, devise, or bequest of real property located in the Philippine Islands Schuetze and made payable to his estate, were delivered to the Bank of the
and real rights in such property; of any franchise which must be exercised in the Philippine Philippine Islands for administration and distribution, they were not in transit but were
Islands; of any shares, obligations, or bonds issued by any corporation or sociedad anonima
more or less permanently located in the Philippine Islands, according to the foregoing
organized or constituted in the Philippine Islands in accordance with its laws; of any shares or
rights in any partnership, business or industry established in the Philippine Islands or of any rules. If this be so, half of the proceeds which is community property, belongs to
personal property located in the Philippine Islands shall be subject to the following tax: xx xxx the estate of the deceased and is subject to the inheritance tax, in accordance
xxx” with the legal provision quoted above, irrespective of whether or not the late Adolphe
Oscar Schuetze was domiciled in the Philippine Islands at the time of his death.
In as much as the proceeds of the insurance policy on the life of the late Adolphe
Oscar Schuetze were paid to the Bank of the Philippine Islands, as administrator of  Judgment REVERSED. Defendant is ordered to return to the plaintiff the
the deceased's estate, for management and partition, and as such proceeds were one-half of the tax collected upon the amount of P20,150, after deducting the
turned over to the sole and universal testamentary heiress Rosario Gelano Vda. de proportional part corresponding to the first premium.
Schuetze, the plaintiff-appellant, here in Manila, the situs of said proceeds is the
Philippine Islands. IMPERIAL DISSENT

Cooley in “The Law of Taxation” enunciates the general rule governing the levying of It is an established and generally recognized principle that in a life-insurance policy where the
taxes upon tangible personal property, in the following words:— insured has named a beneficiary, the proceeds belong to said beneficiary, and to him alone.

The suits of tangible personal property, for purposes of taxation may be where the owner is "Vested Interest of Beneficiary. — In practically every jurisdiction it is the rule that in an ordinary
domiciled but is not necessarily so. Unlike intangible personal property, it may acquire a taxation life insurance policy made payable to a beneficiary, and which does not authorize a change of
situs in a state other than the one where the owner is domiciled, merely because it is located beneficiary, the named beneficiary has an absolute, vested interest in the policy from the date of
there. Its taxable situs is where it is more or less permanently located, regardless of the domicile its issuance, delivery and acceptance, and this is true of a policy payable to the children of the
of the owner. It is well settled that the state where it is more or less permanently located has the insured equally, without naming them, or their executors, administrators or assigns
power to tax it although the owner resides out of the state, regardless of whether it has been
taxed for the same period at the domicile of the owner, provided there is statutory authority for When in a life insurance policy the insured's estate is named beneficiary, the proceeds must be
taxing such property. It is equally well settled that the state where the owner is domiciled has no delivered not to the decedent's heirs, but to his administrator or legal representative.
power to tax it where the property has acquired an actual situs in another state by reason of its
more or less permanent location in that state. the proceeds of a life insurance policy are payable to the executor or administrator of insured as
assets of his estate where by the terms of the policy the proceeds are payable to insured, his
estate, his legal representatives, his executors or administrators, his "executors, administrators,
With reference to the meaning of the words "permanent" and "in transit," he has the or assigns," or even his "heirs, executors, administrators, or assigns." ..."
following to say:
While there is some authority to the effect that "legal representatives" means the persons
In order to acquire a situs in a state or taxing district so as to be taxable in the state or district entitled to the estate of the insured, and not his executor or administrator, the better view is that
regardless of the domicile of the owner and not taxable in another state or district at the domicile ordinarily the proceeds of such a policy pass to his executor or administrator."
of the owner, tangible personal property must be more or less permanently located in the state
or district. In other words, the situs of tangible personal property is where it is more or less If the foregoing are the principles which should govern life-insurance policies with reference to
permanently located rather than where it is merely in transit or temporarily and for no beneficiaries and the right to the proceeds of such policies, it is evident that Schuetze's
considerable length of time. If tangible personal property is more or less permanently located in estate, and not his widow or the conjugal partnership, is entitled to the proceeds of said
a state other than the one where the owner is domiciled, it is not taxable in the latter state but is policy exclusively, and may receive them from the insurer. The parties must have so
taxable in the state where it is located. If tangible personal property belonging to one domiciled understood it when the insurer delivered the net amount of the policy to the Bank of the
in one state is in another state merely in transitu or for a short time, it is taxable in the former Philippine Islands, as judicial administrator of the insured.
state, and is not taxable in the state where it is for the time being. . . . .

Property merely in transit through a state ordinarily is not taxable there. Transit begins when an
article is committed to a carrier for transportation to the state of its destination, or started on its
ultimate passage. Transit ends when the goods arrive at their destination. But intermediate these