GONZALO VILLANUEVA, represented by his heirs, CIVIL LAW Property; donations

petitioner, vs. SPOUSES FROILAN and LEONILA

BRANOCO, respondents It is immediately apparent that Rodrigo passed naked
G.R. No. 172804 title to Rodriguez under a perfected donation inter vivos.

CARPIO, J.: First. Rodrigo stipulated that "if the herein Donee
predeceases me, the [Property] will not be reverted to
RTC – IN FAVOR OF THE PETITIONER the Donor, but will be inherited by the heirs of xxx
CTA – GRANTED THE RESPONDENTS APPEAL AND Rodriguez," signaling the irrevocability of the passage of
SET ASIDE THE RULING OF RTC title to Rodriguez’s estate, waiving Rodrigos right to
reclaim title.
HENCE, THIS PETITION
Second. What Rodrigo reserved for herself was only the
SC – RULED IN THE NEGATIVE beneficial title to the Property, evident from Rodriguezs
undertaking to "give one [half] xxx of the produce of the
FACTS: land to Apoy Alve during her lifetime." Indeed, if Rodrigo
still retained full ownership over the Property, it was
Gonzalo, here represented by his heirs, sued spouses unnecessary for her to reserve partial usufructuary right
Froilan and Leonila Branoco in the RTC of Naval, Biliran over it.
for the recovery of a parcel of land in Leyte. He claimed
ownership over the property through purchase from Third. The existence of consideration other than the
Casimiro Vere who in turn purchased the property from donors death, such as the donors love and affection to
Alvegia Rodrigo in 1970. The respondents in this case the done and the services the latter rendered, while also
claimed ownership in their answer through purchase in true of devises, nevertheless "corroborates the express
1983 from Rodriguez to whom Rodrigo donated the irrevocability of xxx[inter vivos] transfers." Thus, the CA
property in 1965. committed no error in giving weight to Rodrigos
statement of "love and affection" for Rodriguez, her
The trial court ruled in favor of the petitioner, saying that niece, as consideration for the gift, to underscore its
by the time Rodriguez sold the property to the finding.
respondents in this case she had no title to transfer
because the donation to her by Rodrigo was deemed Petition is DENIED.
cancelled when Rodrigo decided to sell the property to
Vere instead. ISSUE:
Whether or not there was a valid donation inter vivos
The respondents brought the case up to the Court of
Appeals, which granted their appeal. It found the RULING:
following factors pivotal to its reading of the Deed as Post-mortem dispositions typically –
donation inter vivos: (1) Rodriguez had been in
possession of the Property as owner since 21 May 1962, (1) Convey no title or ownership to the transferee before
subject to the delivery of part of the produce to Apoy the death of the transferor; or, what amounts to the
Alve; (2) the Deeds consideration was not Rodrigos same thing, that the transferor should retain the
death but her "love and affection" for Rodriguez, ownership (full or naked) and control of the property
considering the services the latter rendered; (3) Rodrigo while alive;
waived dominion over the Property in case Rodriguez
predeceases her, implying its inclusion in Rodriguez’s (2) That before the [donor’s] death, the transfer should
estate; and (4) Rodriguez accepted the donation in the be revocable by the transferor at will, ad nutum; but
Deed itself, an act necessary to effectuate donations revocability may be provided for indirectly by means of a
inter vivos, not devises. Accordingly, the CA upheld the reserved power in the donor to dispose of the properties
sale between Rodriguez and respondents, and, conveyed;
conversely found the sale between Rodrigo and
petitioners predecessor-in-interest, Vere, void for (3) That the transfer should be void if the transferor
Rodrigos lack of title. should survive the transferee.

ISSUE: [4] The specification in a deed of the causes whereby

Whether petitioner’s title is superior to that of the act may be revoked by the donor indicates that the
respondents. donation is inter vivos, rather than a disposition mortis
causa;
HELD:
The petition is unmeritorious. [5] That the designation of the donation as mortis causa,
or a provision in the deed to the effect that the donation
is “to take effect at the death of the donor” are not
controlling criteria; such statements are to be construed
together with the rest of the instrument, in order to give
effect to the real intent of the transferor; and

(6) That in case of doubt, the conveyance should be

deemed donation inter vivos rather than mortis causa, in
order to avoid uncertainty as to the ownership of the
property subject of the deed.

It is immediately apparent that Rodrigo passed naked

title to Rodriguez under a perfected donation inter vivos.

First. Rodrigo stipulated that “if the herein Donee

predeceases me, the [Property] will not be reverted to
the Donor, but will be inherited by the heirs of x x x
Rodriguez,” signaling the irrevocability of the passage of
title to Rodriguez’s estate, waiving Rodrigo’s right to
reclaim title. This transfer of title was perfected the
moment Rodrigo learned of Rodriguez’s acceptance of
the disposition which, being reflected in the Deed, took
place on the day of its execution on 3 May 1965.
Rodrigo’s acceptance of the transfer underscores its
essence as a gift in presenti, not in futuro, as only
donations inter vivos need acceptance by the recipient.

Second. What Rodrigo reserved for herself was only the

beneficial title to the Property, evident from Rodriguez’s
undertaking to “give one [half] x x x of the produce of the
land to Apoy Alve during her lifetime.” Thus, the Deed’s
stipulation that “the ownership shall be vested on
Rodriguez upon my demise,” taking into account the
non-reversion clause, could only refer to Rodrigo’s
beneficial title.

Third. The existence of consideration other than the

donor’s death, such as the donor’s love and affection to
the donee and the services the latter rendered

, while also true of devises, nevertheless “corroborates

the express irrevocability of x x x [inter vivos] transfers.”
 Lladoc vs. CIR, 14 SCRA 292 (1965) of the privilege of receiving the properties (Phipps vs.
G.R. No. L-19201 June 16, 1965 Com. of Int. Rec. 91 F 2d 627). Manifestly, gift tax is not
within the exempting provisions of the section just
COMMISSIONER OF INTERNAL REVENUE – DENIED mentioned. A gift tax is not a property tax, but an excise
THE MOTION FOR RECON tax imposed on the transfer of property by way of gift
CTA – AFFIRMED THE DECISION OF CIR inter vivos, the imposition of which on property used
SC – RULED IN THE AFFIRMATIVE exclusively for religious purposes, does not constitute an
impairment of the Constitution.
Fact:
Sometime in 1957, the M.B. Estate, Inc., of Bacolod City, As well observed by the learned respondent Court, the
donated P10,000.00 in cash to Rev. Fr. Crispin Ruiz, phrase “exempt from taxation,” as employed in the
then parish priest of Victorias, Negros Occidental, and Constitution (supra) should not be interpreted to mean
predecessor of herein petitioner, for the construction of a exemption from all kinds of taxes. And there being no
new Catholic Church in the locality. The total amount clear, positive or express grant of such privilege by law,
was actually spent for the purpose intended. On March in favor of petitioner, the exemption herein must be
3, 1958, the donor M.B. Estate, Inc., filed the donor’s gift denied.
tax return. Under date of April 29, 1960, the respondent
Commissioner of Internal Revenue issued an
assessment for donee’s gift tax against the Catholic
Parish of Victorias, Negros Occidental, of which
petitioner was the priest.

The tax amounted to P1,370.00 including surcharges,

interests of 1% monthly from May 15, 1958 to June 15,
1960, and the compromise for the late filing of the return.
Petitioner lodged a protest to the assessment and
requested the withdrawal thereof. The protest and the
motion for reconsideration presented to the
Commissioner of Internal Revenue were denied.

The petitioner appealed to the Court of Tax Appeals on

November 2, 1960. In the petition for review, the Rev. Fr.
Casimiro Lladoc claimed, among others, that at the time
of the donation, he was not the parish priest in Victorias;
that there is no legal entity or juridical person known as
the “Catholic Parish Priest of Victorias,” and, therefore,
he should not be liable for the donee’s gift tax. It was
also asserted that the assessment of the gift tax, even
against the Roman Catholic Church, would not be valid,
for such would be a clear violation of the provisions of
the Constitution.

Issue:
Whether the petitioner is liable for the assessed donee’s
gift tax on the donated for the construction of the
Victorias Parish Church.

Held:
Yes, exempts from taxation cemeteries, churches and
parsonages or convents, appurtenant thereto, and all
lands, buildings, and improvements used exclusively for
religious purposes. The exemption is only from the
payment of taxes assessed on such properties
enumerated, as property taxes, as contra distinguished
from excise taxes. In the present case, what the
Collector assessed was a donee’s gift tax; the
assessment was not on the properties themselves.

It did not rest upon general ownership; it was an excise

upon the use made of the properties, upon the exercise
 GESTOPA VS. CA
GR No. 111904

Acceptance is a mark that the donation is inter vivos.

Donations mortis causa, being in the form of a will, are
not required to be accepted by the donee during the
donor’s lifetime.

RTC – RULED IN FAVOR OF THE PETITIONERS

CA – REVERSED THE DECISION OF THE RTC

HENCE, THIS INTANT PETITION

SC - IN FAVOR OF THE RESPONDENT

FACTS:
Spouses Danlag own six parcels of land. To four parcels
of land, they executed a donation mortis causa in favor
of respondent Mercedes Danlag-Pilapil, reserving
donor's rights to amend, cancel, or revoke the donation
and to sell or encumber such properties. Years later,
they executed another donation, this time inter vivos, to
six parcels of land in favor of respondents, reserving
their rights to the fruits of the land during their lifetime
and for prohibiting the donee to sell or dispose the
properties donated. Subsequently, the spouses sold 2
parcels to herein petitioners, spouses Gestopa, and
eventually revoking the donation. Respondent filed a
petition to quiet title, stating that she had already
become the owner of the parcels of land. Trial Court
ruled in favor of petitioners, but CA reversed.

ISSUE:
Whether the (second) donation was inter vivos or mortis
causa

RULING:
It was donation inter vivos. The spouses were aware of
the difference between the two donations, and that they
needed to execute another deed of donation inter vivos,
since it has a different application to a donation mortis
causa.

Also, the court stated four reasons to the matter:

(1) that the spouses donated the parcels of land out of
love and affection, a clear indication of a donation inter
vivos;
(2) the reservation of a lifetime usufruct;
(3) reservation of sufficient properties for maintenance
that shows the intention to part with their six lot; and
(4) respondent's acceptance, contained in the deed of
donation.

Once a deed of donation has been accepted, it cannot

be revoked, except for officiousness or ingratitude, which
the spouses failed to invoke.
 Apolinaria Austria-Magat vs. Court of Appeals house and lot in favor of herein petitioner Apolinaria
(G.R. No. 106755, February 1, 2002, 375 SCRA 556) Austria-Magat for Five Thousand Pesos (P5,000.00). As
the result of the registration of that sale, TCT No. RT-
When the deed of donation provides that the donor will 4036 in the name of the donor was cancelled and in lieu
not dispose or take away the property donated, he is in thereof TCT No. T-10434 was issued in favor of
effect making a donation inter vivos. petitioner Apolinaria Austria-Magat on February 8, 1979.
On September 21, 1983, herein respondents
Here, the 2nd characteristic of a donation mortis causa (representing their deceased mother Consolacion
(revocable at will) is absent. Austria), Ricardo, Mamerto and Segunda, all surnamed
Sumpelo (representing their deceased mother Rosario
RTC – DISMISSED THE ACTION FILED BY THE Austria) and Florentino Lumubos filed before the
RESPONDENTS Regional Trial Court of Cavite an action against the
CA – REVERSED THE DECISION OF THE TRIAL petitioner for annulment of TCT No. T-10434 and other
COURT relevant documents, and for reconveyance and
SC – IN FAVOR OF THE RESPONDENTS damages.

FACTS ISSUE:
Basilisa Comerciante is a mother of five (5) children, WON the donation was intervivos.
namely, Rosario Austria, Consolacion Austria, herein
petitioner Apolinaria Austria-Magat, RULING
Leonardo(deceased), and one of herein respondents, YES. The decisive proof that the deed is a donation inter
Florentino Lumubos. In 1953, Basilisa bought a parcel of vivos is in the provision that : Ibinibigay ko at
residential land together with the improvement thereon ipinagkakaloob ng ganap at hindi mababawi sa naulit na
covered and described in Transfer Certificate of Title No. apat na anak ko at sa kanilang mga tagapagmana, ang
RT-4036 (T-3268). On December 17, 1975, Basilisa aking lupang residential o tirahan sampu ng aking bahay
executed a document designated as Kasulatan sa nakatirik doon xxx. This is a clear expression of the
Kaloobpala (Donation). The said document which was irrevocability of the conveyance. The irrevocability of the
notarized by Atty. Carlos Viniegra, reads as follows: donation is a characteristic of a donation inter vivos. By
the words hindi mababawi, the donor expressly
Na ako, si BASELISA COMERCIANTE, may sapat na renounced the right to freely dispose of the house and
gulang, Filipina, balo, at naninirahan sa blg. 809 L. lot in question. The right to dispose of a property is a
Javier Bagong Pook, San Antonio, Lungsod ng Kabite, right essential to full ownership. Hence, ownership of the
Filipinas, sa pamamagitan ng kasulatang itoy. xxx Na house and lot was already with the donees even during
alang-alang sa mabuting paglilingkod at pagtingin na the donors lifetime. xxx
iniukol sa akin ng apat kong mga tunay na anak na sila:
Kusang loob na ibinibigay ko at ipinagkakaloob ng In the attached document to the deed of donation, the
ganap at hindi na mababawi sa naulit ng apat na anak donor and her children stipulated that: Gayon din ang
ko at sa kanilang mga tagamagmana (sic), ang aking nasabing titulo ay hindi mapapasangla o maipagbibili
isang lupang residential o tirahan sampu ng aking bahay ang lupa habang may buhay ang nasabing Basilisa
nahan ng nakatirik doon na nasa Bagong Pook din, San Comerciante.xxx The stipulation is a reiteration of the
Antonio, Lungsod ng Kabite, at nakikilala bilang Lote no. irrevocability of the dispossession on the part of the
7, xxx Na ang Kaloob palang ito ay magkakabisa lamang donor. On the other hand, the prohibition to encumber,
simula sa araw na akoy pumanaw sa mundo, at sa ilalim alienate or sell the property during the lifetime of the
ng kondision na: Magbubuhat o babawasin sa halaga ng donor is a recognition of the ownership over the house
nasabing lupa at bahay ang anumang magugul o gastos and lot in issue of the donees for only in the concept of
sa aking libing at nicho at ang anumang matitira ay an owner can one encumber or dispose a property. The
hahatiin ng APAT na parte, parepareho isang parte sa express irrevocability of the same (hindi na mababawi) is
bawat anak kong nasasabi sa itaas nito upang the distinctive standard that identifies that document as a
maliwanang (sic) at walang makkalamang sinoman sa donation inter vivos. The other provisions therein which
kanila; At kaming apat na anak na naakalagda o nakadiit seemingly make the donation mortis causa do not go
sa kasulatang ito ay TINATANGGAP NAMIN ang against the irrevocable character of the subject donation.
kaloob-palang ito ng aming magulang na si Basilisa
Comerciante, at tuloy pinasasalamatan namin siya ng Thus, the court arrived at no other conclusion in that the
taos sa (sic) puso dahil sa kagandahan look (sic) niyang petitioners cited provisions are only necessary
ito sa amin. Xxx (sgd.) assurances that during the donors lifetime, the latter
would still enjoy the right of possession over the
Basilisa and her said children likewise executed another property; but, his naked title of ownership has been
notarized document denominated as Kasulatan which is passed on to the donees; and that upon the donors
attached to the deed of donation. On February 6, 1979, death, the donees would get all the rights of ownership
Basilisa executed a Deed of Absolute Sale of the subject
over the same including the right to use and possess the that the same will only take effect upon the death of the
same. donor and that there is a prohibition to alienate,
encumber is mortis causa. The court disagrees. The said
Furthermore, it also appeared that the provision in the provisions should be harmonized with its express
deed of donation regarding the prohibition to alienate the irrevocability. In Bonsato where the donation per the
subject property is couched in general terms such that deed of donation would also take effect upon the death
even the donor is deemed included in the said of the donor with reservation for the donor to enjoy the
prohibition (Gayon din ang nasabing Titulo ay hindi fruits of the land, the Court held that the said statements
mapapasangla o maipagbibili ang lupa habang only mean that “after the donor’s death, the donation will
maybuhay ang nasabing Basilisa Comerciante). Both the take effect so as to make the donees the absolute
donor and the donees were prohibited from alienating owners of the donated property, free from all liens and
and encumbering the property during the lifetime of the encumbrances.
donor. If the donor intended to maintain full ownership
over the said property until her death, she could have In Gestopa v. Court of Appeals, the Court held that the
expressly stated therein a reservation of her right to prohibition to alienate does not necessarily defeat the
dispose of the same. The prohibition on the donor to inter vivos character of the donation. It even highlights
alienate the said property during her lifetime is proof that the fact that what remains with the donor is the right of
naked ownership over the property has been transferred usufruct and not anymore the naked title of ownership
to the donees. It also supports the irrevocable nature of over the property donated. In the case at bar, the
the donation considering that the donor has already provision in the deed of donation that the donated
divested herself of the right to dispose of the donated property will remain in the possession of the donor just
property. On the other hand, the prohibition on the goes to show that the donor has given up his naked title
donees only meant that they may not mortgage or of ownership thereto and has maintained only the right to
dispose the donated property while the donor enjoys and use (jus utendi) and possess (jus possidendi) the subject
possesses the property during her lifetime. However, it is donated property.
clear that the donees were already the owners of the
subject property due to the irrevocable character of the Furthermore, the act of selling the property to petitioner
donation. herein cannot be construed as a valid act of revocation
of donation. A formal case ought to be filed pursuant to
ISSUE: Art 764 which speaks of an action bearing a prescriptive
Whether or not the deed of donation was intervivos. period of 4 years from non-compliance with the deed of
donation. In this case, the 4 year prescriptive period
HELD: does not even apply because none of the terms (if any)
YES. were even violated.
The court found that whether the donation is inter vivos
or mortis causa depends on whether the donor intended
to transfer ownership over the properties upon the
execution of the deed.

In Bonsato v. Court of Appeals, the court recalls the

characteristics of a donation mortis causa,:
(1) It conveys no title or ownership to the transferee
before the death of the transferor; or, what amounts to
the same thing, that the transferor should retain the
ownership (full or naked) and control of the property
while alive;
(2)That before his death, the transfer should be
revocable by the transferor at will, ad nutum; but
revocability may be provided for indirectly by means of a
reserved power in the donor to dispose of the properties
conveyed;
(3) That the transfer should be void if the transferor
should survive the transferee.

For the case at bar, the phrase “hindi na mababawi”

definitely exudes the character of an intervivos
agreement. The other provisions therein which
seemingly make the donation mortis causa do not go
against the irrevocable character of the subject donation.
According to the petitioner, the provisions which state
MARIA CARLA PIROVANO, etc., et al. v. THE On March 8, 1951, however, the majority stockholders of
COMMISSIONER OF INTERNAL REVENUE. G.R. No. the Company voted to revoke the resolution approving
L-19865. July 31, 1965 the donation in favor of the Pirovano children.

FACTS: As a consequence of this revocation and refusal of the

Enrico Pirovano was the father of the herein petitioners- Company to pay the balance of the donation amounting
appellants. In 1941, De la Rama Steamship Co. insured to P564,980.90 despite demands therefor, the herein
the life of said Enrico Pirovano, who was then its petitioners-appellants represented by their natural
President and General Manager until the time of his guardian, Mrs. Estefania R. Pirovano, brought an action
death, with various Philippine and American insurance for the recovery of said amount, plus interest and
companies for a total sum of one million pesos, damages against De la Rama Steamship Co., in the
designating itself as the beneficiary of the policies, Court of First Instance of Rizal, which case ultimately
obtained by it. culminated to an appeal to this Court. On December 29,
1954, this court rendered its decision in the appealed
In the latter part of 1944, said Enrico Pirovano died. case (96 Phil. 335) holding that the donation was valid
and remunerative in nature
The Board of Directors of De la Rama Steamship Co.
adopted a resolution dated July 10, 1946 granting and The above decision became final and executory. In
setting aside, out of the proceeds expected to be compliance therewith, De la Rama Steamship Co. made,
collected on the insurance policies taken on the life of on April 6, 1955, a partial payment on the amount of the
said Enrico Pirovano, the sum of P400,000.00 for equal judgment and paid the balance thereof on May 12, 1955.
division among the four (4) minor children of the
deceased, said sum of money to be convertible into On March 6, 1955, respondent Commissioner of Internal
4,000 shares of stock of the Company, at par, or 1,000 Revenue assessed the amount of P60,869.67 as
shares for each child. Shortly thereafter, the Company donees' gift tax, inclusive of surcharges, interests and
received the total sum of P643,000.00 as proceeds of other penalties, against each of the petitioners-
the said life insurance policies obtained from American appellants, or for the total sum of P243,478.68; and, on
insurers. April 23, 1955, a donor's gift tax in the total amount of
P34,371.76 was also assessed against De la Rama
Various modifications were instituted by the companys Steamship Co., which the latter paid.
Board of Directors on the aforesaid resolution until finally
on June 24, 1947, the Board of Directors of the Petitioners-appellants herein contested respondent
Company providing therein that the Company shall pay Commissioner's assessment and imposition of the
the proceeds of said life insurance policies to the heirs of donees' gift taxes and donor's gift tax and also made a
the said Enrico Pirovano after the Company shall have claim for refund of the donor's gift tax so collected.
settled in full the balance of its present remaining Respondent Commissioner overruled petitioners' claims;
bonded indebtedness, but the annual interests accruing hence, the latter presented two (2) petitions for review
on the principal shall be paid to the heirs of the said against respondent's rulings before the Court of Tax
Enrico Pirovano, or their duly appointed representative, Appeals, said petitions having been docketed as CTA
whenever the Company is in a position to meet said Cases Nos. 347 and 375. CTA Case No. 347 relates to
obligation. the petition disputing the legality of the assessment of
donees' gift taxes and donor's gift tax while CTA Case
On September 13, 1949, the stockholders of the No. 375 refers to the claim for refund of the donor's gift
Company formally ratified the various resolutions tax already paid.
hereinabove mentioned with certain clarifying
modifications that the payment of the donation shall not The two cases, being interrelated to each other, were
be effected until such time as the Company shall have tried jointly and terminated.
first duly liquidated its present bonded indebtedness in
the amount of P3,260,855.77 with the National On January 31, 1962, the Court of Tax Appeals
Development Company, or fully redeemed the preferred rendered its decision in the two cases wherein the
shares of stock in the amount which shall be issued to petitioners were ordered to pay the donees' gift taxes as
the National Development Company in lieu thereof; and assessed by respondent, plus 5% surcharge and interest
that any and all taxes, legal fees, and expenses in any at the rate of 1% per month from March 8, 1955 to the
way connected with the above transaction shall be date of payment of said donees' gift taxes. Respondent
chargeable and deducted from the proceeds of the life is ordered to apply the sum of P34,371.76 which is
insurance policies mentioned in the resolutions of the refundable to petitioners, against the amount due from
Board of Directors. petitioners. With costs against petitioners in Case No.
347.
Petitioners-appellants herein filed a motion to reconsider imposed upon the donee, is also a donation." (Art. 619,
the above decision, which the lower court denied. old Civil Code)
Hence, this appeal.
In donations made to a person for services rendered to
ISSUE: the donor, the donor's will is moved by acts which
Whether or not the lower court erred in ordering the directly benefit him. The motivating cause is gratitude,
petitioners-appellants to pay the donees' gift taxes as acknowledgment of a favor, a desire to compensate.
assessed by respondent as well as the imposition of (Sinco and Capistrano, The Civil Code, Vol. 1, p. 676;
surcharge and interest on the amount of donees' gift Manresa, 5th ed., pp. 72-73.)
taxes.
donation has reached the stage of perfection which is
HELD: valid and binding upon the corporation and as such
Love and affection are not considerations of value they cannot be rescinded unless there is exists legal grounds
are not estimable in terms of value. Nor are sentiments for doing so.
of gratitude for gratuitous part favors or kindnesses; nor
are obligations which are merely moral. It has been well donation was embodied in a resolution duly approved by
said that if a moral obligation were alone sufficient it the Board of Directors on January 6, 1947
would remove the necessity for any consideration at all,
since the fact of making a promise impose, the moral July 25, 1949: BOD approved the proposal of Mrs.
obligation to perform it." Pirovano to buy the house at New Rochelle, New York,
owned by a subsidiary of the corporation at the costs of
It is of course perfectly possible that a donation or gift S75,000
should at the same time impose a burden or condition on
the donee involving some economic liability for him. Art. 2 reasons given for the rescission of donation in the
726 of the Tax Code provides that there is also a resolution of the corporation adopted on March 8, 1951 -
donation "when the gift imposes upon the donee a valid and legal as to justify the rescission
burden which is less than the value of the thing given."
Section 111 of the Tax Code has in view situations of corporation failed to comply with the conditions to which
this kind, since it also prescribes that "the amount by the above donation was made subject
which the value of the property exceeded the value of
the consideration" shall be deemed a gift for the purpose in the opinion of the Securities and Exchange
of the tax. . Commission said donation is ultra vires

Petitioners finally contend that, even assuming that the articles of incorporation contain:
donation in question is subject to donees' gift taxes, the
imposition of the surcharge of 5% and interest of 1% per To invest and deal with the moneys of the company and
month from March 8, 1955 was not justified because the immediately required, in such manner as from time to
proceeds of the life insurance policies were actually time may be determined.
received on April 6, 1955 and May 12, 1955 only and in
accordance with Section 115(c) of the Tax Code; the To aid in any other manner any person, association, or
filing of the returns of such tax became due on March 1, corporation of which any obligation or in which any
1956 and the tax became payable on May 15, 1956, as interest is held by this corporation or in the affairs or
provided for in Section 116(a) of the same Code. In prosperity of which this corporation has a lawful interest.
other words, petitioners maintain that the assessment By ratification the infirmity of the corporate act has been
and demand for donees' gift taxes was prematurely obliterated thereby making it perfectly valid and
made and of no legal effect; hence, they should not be enforceable. This is specially so if the donation is not
held liable for such surcharge and interest. merely executory but executed and consummated and
no creditors are prejudice, or if there are creditors
ISSUE: affected, the latter has expressly given their confirmity
W/N corporation donation of the proceeds of insurance
policies is an ultra vires act

HELD:
NO. valid and binding remunerative donation.

That which is made to a person in consideration of his

merits or for services rendered to the donor, provided
they do not constitute recoverable debts, or that in which
a burden less than the value of the thing given is
THE PHILIPPINE AMERICAN LIFE AND GENERAL 3. Whether or not the subject transaction is a taxable
INSURANCE COMPANY vs. SECRETARY OF donation
FINANCE and COMMISSIONER OF INTERNAL
REVENUE RULING
G.R. No. 210987, November 24, 2014 1. The CTA not the CA has jurisdiction over the matter.

J. Velasco Jr. Indeed, to leave undetermined the mode of appeal from

the Secretary of Finance would be an injustice to
Philamlife sold its shares through a public bidding. taxpayers prejudiced by his adverse rulings. To remedy
However, the selling price was below the book value of this situation, the Court implies from the purpose of RA
the shares. Hence, the BIR imposed donor’s tax on the 1125 and its amendatory laws that the CTA is the proper
price difference. Philamlife appealed to the Secretary of forum with which to institute the appeal. This is not, and
Finance. Due to the adverse ruling, Philamlife appealed should not, in any way, be taken as a derogation of the
with the CA. CA alleged that it does not have jurisdiction power of the Office of President but merely as
for jurisdiction lies with the CTA. The Court ruled that, recognition that matters calling for technical knowledge
the CTA can now rule not only on the propriety of an should be handled by the agency or quasi-judicial body
assessment or tax treatment of a certain transaction, but with specialization over the controversy. As the
also on the validity of the revenue regulation or revenue specialized quasi-judicial agency mandated to adjudicate
memorandum circular on which the said assessment is tax, customs, and assessment cases, there can be no
based. other court of appellate jurisdiction that can decide the
issues raised in the CA petition, which involves the tax
FACTS treatment of the shares of stocks sold.

The Philippine American Life and General Insurance 2. The appellate power of the CTA includes certiorari.
Company (Philamlife) used to own 498,590 Class A
shares in Philam Care Health Systems, Inc. The respective teachings in British American Tobacco
(PhilamCare), representing 49.89% of the latter's and Asia International Auctioneers, at first blush, appear
outstanding capital stock. In 2009, Philamlife offered to to bear no conflict––that when the validity or
sell its shareholdings in PhilamCare through competitive constitutionality of an administrative rule or regulation is
bidding. Thus, on September 24, 2009, petitioner's Class assailed, the regular courts have jurisdiction; and if what
A shares were sold for USD 2, 190,000, or PhP is assailed are rulings or opinions of the Commissioner
104,259,330 to STI Investments, the highest bidder. on tax treatments, jurisdiction over the controversy is
lodged with the CTA. The problem with the above
Philamlife filed an application for a certificate authorizing postulates, however, is that they failed to take into
registration/tax clearance with the Bureau of Internal consideration one crucial point––a taxpayer can raise
Revenue (BIR) to facilitate the transfer of the shares. both issues simultaneously.
Months later, petitioner was informed that it needed to
secure a BIR ruling in connection with its application due Evidently, City of Manila can be considered as a
to potential donor’s tax liability. In compliance, departure from Ursal in that in spite of there being no
Philamlife, requested a ruling to confirm that the sale express grant in law, the CTA is deemed granted with
was not subject to donor’s tax. However, the powers of certiorari by implication. Moreover, City of
Commissioner on Internal Revenue (Commissioner) Manila diametrically opposes British American Tobacco
denied Philamlife’s request through a BIR Ruling. The to the effect that it is now within the power of the CTA,
CIR stated that donor’s tax is imposable on the price through its power of certiorari, to rule on the validity of a
difference of the book value and the selling price. particular administrative rule or regulation so long as it is
within its appellate jurisdiction. Hence, it can now rule
Philamlife then requested the Secretary of Finance to not only on the propriety of an assessment or tax
review the BIR Ruling issued by the CIR. However, the treatment of a certain transaction, but also on the validity
Secretary affirmed the BIR Ruling. Philamlife then of the revenue regulation or revenue memorandum
elevated the case to the Court of Appeals via a petition circular on which the said assessment is based.
for review. The CA dismissed the case for lack of
jurisdiction stating that the case should have been filed 3. The price difference between the selling price and the
with the Court of Tax Appeals. book value is subject to donor’s tax. The absence of
donative intent, if that be the case, does not exempt the
ISSUES sales of stock transaction from donor's tax since Sec.
1. Whether or not the CA has jurisdiction over contested 100 of the NIRC categorically states that the amount by
decisions of the Secretary of Finance which the fair market value of the property exceeded the
2. Whether or not the appellate power of the CTA value of the consideration shall be deemed a gift. Thus,
includes certiorari even if there is no actual donation, the difference in price
is considered a donation by fiction of law.