Vera v Navarro (Taxation)

Vera v Navarro
G.R. No. L-27745 October 18, 1977

FACTS:
Elsie M. Gaches died on March 9, 1966 without a child. The deceased, however, left a last will and testament giving properties to several persons.

Judge Tan was appointed as executor of the testate estate of Elsie M. Gaches without a bond.

In a letter, dated June 3, 1966, Judge Tan informed the Commissioner that the testate estate was worth about ten million (P10 million) pesos and that the estate and inheritance taxes due thereon were about P9.5 million.
After several reassessments, the case ultimately came to the Supreme Court.

ISSUES:

(1) Should the herein respondent heirs be required to pay first the inheritance tax before the probate court may authorize the delivery of the hereditary share pertaining to each of them?

(2) Are the respondent heirs herein who are citizens and residents of the Philippines liable for the payment of the Philippine inheritance tax corresponding to the hereditary share of another heir who is a citizen and resident of the United States of America. said share of the latter consisting of personal (cash deposits and, shares) properties located in the mentioned court

(3) Does the assignment of a certificate of time deposit to the comissioner of Internal Revenue for the purpose of paying t I hereby the estate tax constitute payment of such tax?

(4) Should the herein respondent heirs be held liable for the payment of surcharge and interest on the amount (P700,000.00) representing the face value of time deposit certificates assigned to the Commissioner which could not be converted into cash?

RULING:
(1) No. the distribution of a decedent's assets may only be ordered under any of the following three circumstances, namely, (1) when the inheritance tax, among others, is paid; (2) who bond a suffered bond is given to meet the payment of the tax and all the other options of the nature enumerated in the above-cited provision; etc. This was not complied with

(2)   No.  An analysis of our tax statutes supplies no sufficient indication that the inheritance tax, as a rule, was meant to be the joint and solidary liability of the heirs of a decedent. the payment of the inheritance tax should be taken as'the individual responsibility, to the extent of the benefits received, of each heir.

3. No. a time deposit certificate is a mercantile document and is essentially a promissory note. 5 By the express terms of Article 1249 of the Civil Code of the Philippines, the use of this medium to clear an obligation will "produce the effect of payment only when they have been cashed, or when through the fault of the creditor they have been impaired." Consequently, the value of the said certificates (P700,000.00) should still be considered outstanding.

4. Yes. The Interest charge for 1% per month imposed under Section 101 (a) (1) of the Tax Code is essentially a commotion to the State for delay in the payment of the tax due thereto

The estate cannot likewise be exempted from the payment of the 5% surcharge imposed by Section 101 (c) of the Tax Code