41. CIR vs.

Fisher Private International Law; Article 10 of the old Civil

Code; Husband and wife.—Article 10 of the old Civil Code does not
VOL. 1, JANUARY 28, 1961 93 govern the property relations of husband and wife. It refers to
Collector of Internal Revenue vs. Fisher successional rights, which are distinct from the property relations of
No. L-11622. January 28, 1961. the spouses.
THE COLLECTOR OF INTERNAL REVENUE, Taxation; Estate and inheritance taxes; Share of surviving
petitioner, vs. DOUGLAS FlSHER and BETTINA FlSHER, and the spouse is deductible.—In determining- the net taxable estate of a
COURT OF TAX APPEALS, respondents. deceased British subject, for purposes of the estate and inheritance
No. L-11668. January 28, 1961. taxes, where said deceased was married to another British citizen in
DOUGLAS FISHER and BETTINA FISHER, petitioners, vs. THE Manila in 1909, the one-half conjugal share of the surviving wife
COLLECTOR OF INTERNAL REVENUE, and the COURT OF TAX should be deducted inasmuch as they are presumed to have adopted
APPEALS. respondents. the system of conjugal partnership in the absence of an ante-nuptial
94 agreement.
9 SUPREME COURT REPORTS Evidence; Proof of foreign laws.—Foreign laws do not prove
4 ANNOTATED themselves in our courts. They are not a matter of judicial notice. Like
Collector of Internal Revenue vs. Fisher any other fact, they must be alleged and proven.
Husband and wife; Conjugal partnership.—In the absence of any Same.—The provisions of the Rules of Court on proof of foreign
ante-nuptial agreement, the husband and wife are presumed to have laws do not exclude the presentation of other competent evidence to
adopted the system of conjugal partnership. prove the existence of a foreign law. The
Civil Code of the Philippines; Husband and wife; Marriage.—The 95
property relations of husband and wife who were married in 1909 are  
governed by article 1325 of the Spanish Civil Code and not by article VOL. 1, JANUARY 28, 1961 95
124 of the New Civil Code. Collector of Internal Revenue vs. Fisher
Same; Private International Law (Conflict of laws).—Artide 1325 testimony of a lawyer, practising in California, together with a
of the Old Civil Code and article 124 of the New Civil Code both quotation from a publication of Bancroft-Whitney, is sufficient to prove
adhere to the so-called nationality theory of determining the property the certain provisions of the California Internal Revenue Code.
relations of spouses where one of them is a foreigner and they have Taxation; Estate and inheritance taxes; Reciprocity in
made no prior agreement as to the administration, disposition and exemption.—Under section 122 of the Tax Code and section 13851 of
ownership of their conjugal properties. In such a case, the national the California Inheritance Tax Law, the reciprocity must be total, that
law of the husband becomes the dominant law in determining the is, with respect to transfer or death taxes of any and every character,
property relations of the spouses. However, there is a difference in the case of the Philippine law, and to legacy, succession, or death
between two articles. Article 124 expressly provides that it applies taxes of any and every character, in the case of the California law.
regardless of where the marriage was celebrated, while article 1325 is Therefore, if any of the two states collects or imposes and does not
limited to marriages contracted abroad. Both articles apply only to exempt any transfer, death, legacy, or succession tax of any
mixed marriages between a Filipino and a foreigner. character, the reciprocity does not work. The shares of stock in the
Same; Old law; Property relations of British citizens who were, Philippines, left by a deceased resident of California, are subject to
married in Manila in 1909.—English law governs the property relations the Philippine inheritance tax. The reciprocity provisions of section
of a man and woman, both British citizens, who were married in 122 of the Tax Code are not applicable because there is no total
Manila 1909. reciprocity under the two laws.
Evidence; Foreign laws; Processual presumption.—In the Same; Deduction under Federal Estate Tax Law.—The amount
absence of proof of a foreign law, the processual presumption is that it allowed under the Federal Estate Tax Law is in the nature of a
is the same as the law of the forum. deduction and not of an exemption, regarding which reciprocity cannot
Page 1 of 11
be claimed under section 122 of the Philippine Tax Code. Nor is allowance in order that it may constitute a valid claim against the
reciprocity allowed under the Federal Law. Philippine estate under ancillary administration.
Taxation; Estate and inheritance taxes; Assessed value is not Same; Deductions allowed the estate of nonresident aliens.—No
the controlling market value.—For purposes of the estate and deduction from the estate of a nonresident alien is allowed unless the
inheritance taxes, the assessed value of real estate is considered as value of his gross estate not situated in the Philippines is stated in the
the fair market value only when evidence to the contrary has not been return. This requirement is intended to enable the revenue officer to
submitted. If there is such contrary evidence, the assessed value will determine how much of the debt may be deducted pursuant to section
not be considered the fair market value. 89(b)(l) of the Tax Code. The deduction is allowed only to the extent
Same; Market value of shares of stock.—Shares of stock of a of that portion of the debt, which is equivalent to the proportion that
Philippine (domestic) corporation have a situs here for purposes of the Philippine estate bears to the total estate wherever situated. If the
taxation. Their situs is not California where the certificates were Philippine estate constitutes but 1/5 of the entire estate, wherever
located and in whose stock exchange the shares were registered. situated, then only 1/5 of the debt may be deducted. If no statement of
Their fair market value should be based on the price prevailing in this the estate situated outside the Philippines is attached to the return,
country where they are sought to be taxed. then no part of the debt may be deducted from the decedents' estate.
Same; Deductibility of expenses allowed by the probate court.— Taxation; Interest on amount overpaid.—In the absence of any
The Supreme Court will not disturb the ruling of the Tax Court, statutory provision clearly or expressly directing or authorizing the
allowing the administrator's fee, lawyer's fee and judicial and payment of interest on taxes overpaid, the National Government
administration expenses as liabilities of the estate, it appearing the cannot be required to pay interest.
said items were likewise allowed by the probate court. The ruling of PETITION for review by certiorari of a decision of the Court of Tax
the Tax Court, disallowing an additional amount for funeral expenses, Appeals.
for lack of evidence, should be upheld. The Supreme Court will set The facts are stated in the opinion of the Court.
aside the factual findings of the Tax Court only in case they are not BARRERA, J.:
supported by any evidence. This case relates to the determination and settlement of the hereditary
96 estate left by the deceased Walter G. Stevenson, and the laws
96 VOL. 1, JANUARY 28, 1961 applicable thereto.
Collector of Internal Revenue vs. Fisher 97
Executors and administrators; Settlement of decedent's VOL. 1, JANUARY 28, 1961 97
estates; Ancillary and domiciliary adminintration.—The distinction Collector of Internal Revenue vs. Fisher
between a domiciliary and an ancillary administration serves only to Walter G. Stevenson (born in the Philippines on August 9, 1874 of
distinguish one administration from the other, for the two proceedings British parents and married in the City of Manila on January 23, 1909
are separate and independent. The reason for the ancillary to Beatrice Mauricia Stevenson, another British subject) died on
administration is that a grant of administration does not, ex proprio February 22, 1951 in San Francisco, California, U.S.A., whereto he
vigore, have any effect beyond the limits of the country in which it was and his wife moved and established their permanent residence since
granted. In other words, there is a regular administration under the May 10, 1945. In his will executed in San Francisco on May 22, 1947,
control of the court, where claims must be presented and approved and which was duly probated in the Superior Court of California on
and expenses of administration allowed before the deductions from April 11, 1951, Stevenson instituted his wife Beatrice as his sole
the estate can be authorized. heiress to the following real and personal properties acquired by the
Same; California debt of decedent should be presented to spouses while residing in the Philippines, described and preliminarily
Philippine court for allo-icance.--A debt of the decedent, which was assessed as follows:
incurred in California and which was allowed by the California court, Gross Estate
having jurisdiction over the domiciliary administration, should, Real Property—2 parcels of land in Ba
nevertheless, be presented to the Philippine probate court for      guio, covered by T.C.T. Nos. 378
Page 2 of 11
      and P 43,500.00 P43,500.00. After allowing the deductions claimed by the ancillary
379 ................................. administrator for funeral expenses in the amount of P2,000.00 and for
Personal Property judicial and administration fiXpenses in the sum of P5,500.00, the
(1) 177 shares of stock of Collector assessed the estate the amount of P5,147.98 for estate tax
Canacao and P10,875,25 for inheritance tax, or a total of P16,023.23. Both of
Estate at P10.00 1,770.00 these assessments were paid by the estate on June 6, 1952.
each............... On September 27, 1952, the ancillary administrator filed an
(2) 210,000 shares of stock of amended estate and inheritance tax return in pursuance of his
Min reservation made at the time of filing of the preliminary return and for
danao Mother Lode Mines, the purpose of availing of the right granted by section 91 of the
Inc. National Internal Revenue Code.
at F0.88 per 79,800.00 In this amended return the valuation of the 210,000 shares of stock
share .................. in the Mindanao Mother Lode Mines, Inc. was reduced from P0.38 per
(3) Cash credit with Canacao share, as originally declared, to P0.20 per share, or from a total
Es valuation of P79.800.00 to P42,000.00. This change in price per share
tate, Inc. 4,870.88 of stock was based by the ancillary administrator on the market
(4) Cash with the Chartered quotation of the stock obtaining at the San Francisco (California)
Bank of Stock Exchange six months from the death of Stevenson, that is, as of
India, Australia & 851.97 August 22, 1951. In addition, the ancillary administrator made claim
China ............... for the following deductions:
Total Gross P130.792.86 Funeral expenses ($1,043.26) ....................... P 2,086.52
Assets ............................... Judicial Expenses:
On May 22, 1951, ancillary administration proceedings were instituted      (a) Administrator's Pl,204.34
in the Court of First Instance of Manila for the settlement of the estate Fee.................
in the Philippines. In due time, Stevenson's will was duly admitted to      (b) Attorneys' 6,000.00
probate by our court and Ian Murray Statt was appointed ancillary Fee...................
administrator of the estate, who on July 11, 1951, filed a preliminary      (c) Judicial and
estate and inheritance tax return with the reservation of having the Administra
properties declared therein finally appraised at their values six months           tion expenses as
after the death of Stevenson. Preliminary return was made by the of Aug
ancillary administrator in order to secure the waiver of the Collector of           ust 9, 1,400.05 8,604.39
Internal Revenue on the inheritance tax due on the 1952..............
98 Real Estate Tax for
9 SUPREltE COURT REPORTS 1951 on Ba
8 ANNOTATED      guio real properties
Collector of Internal Revenue vs. Fisher (O.R. No.
210,000 shares of stock in the Mindanao Mother Lode Mines, Inc.      B-1 652.50
which the estate then desired to dispose in the United States. Acting 686836) ......................
upon said return, the Collector of Internal Revenue accepted the 99
valuation of the personal properties declared therein, but increased VOL. 1, JANUARY 28, 1961 99
the appraisal of the two parcels of land located in Baguio City by fixing Collector of Internal Revenue vs. Fisher
their &ir market value in the amount of P52.200.00, insteed of Claims against the estate:
Page 3 of 11
     ($5,000.00) P10.000.0 Collector of Internal Revenue vs. Fisher
P10.000.00 ............... 0 one-half (1/2) share of the surviving spouse in the conjugal
.......... partnership property as diminished by the obligations properly
Plus: 4% int. p.a. chargeable to such property should be deducted from the net estate
from Feb. 2 of the deceased Walter G. Stevenson, pursuant to Section 89-C of the
     to 22, 1951 22.47 10,022.4 National Internal Revenue Code: (b) the intangible personal property
7 belonging to the estate of said Stevenson is exempt from inheritance
               Sub- P tax, pursuant to the proviso of section 122 of the National Internal
Total ......................... 21,365.8 Revenue Code in relation to the California Inheritance Tax Law but
........... 8 decedent's estate is not entitled to an exemption o£ P4,000.00 in the
In the meantime, on December 1, 1952, Beatrice Mauricia Stevenson computation of the estate tax; (c) for purposes of estate and
assigned all her rights and interests in the estate to the spouses, inheritance taxation the Baguio real estate of the spouses should be
Douglas and Bettina Fisher, respondents herein. valued at P52-,200.00, and 210,000 shares of stock in the Mindanao
On September 7, 1953, the ancillary administrator filed a second Mother Lode Mines, Inc. should be appraised at P0.38 per share; and
amended estate and inheritance tax return (Exh. "M-N"). This return (d) the estate shall be entitled to a deduction of P2,000.00 for funeral
declared the same assets of the estate stated in the amended return expenses and judicial expenses of P8,604.89."
of September 22, 1952, except that it contained new claims for From this decision, both parties appealed.
additional exemption and deduction to wit: (1) deduction in the amount The Collector of Internal Revenue, hereinafter called petitioner,
of P4,000.00 from the gross estate of the decedent as provided for in assigned four errors allegedly committed by the trial court, while the
Section 861 (4) of the U.S. Federal Internal Revenue Code which the assignees, Douglas and Bettina Fisher, hereinafter called
anciUary administrator averred was allowable by way of the respondents, made six assignments of error. Together, the assigned
reciprocity granted by Section 122 of the National Internal Revenue errors raise the following main issues for resolution by this Court:
Code, as then held by the Board of Tax Appeals in case No. 71 1. (1)Whether or not, in determining the taxable net
entitled "Housman vs. Collector," August 14, 1952; and (2) exemption estate of the decedent, one-half (1/2) of the n6t estat6
from the imposition of estate and inheritance taxes on the 210,000 should be deducted therefrom as the share of the
shares of stock in the Mindanao Mother Lode Mines, Inc. also surviving spouse in accordance with 6ur law on
pursuant to the reciprocity proviso of Section 122 of the National conjugal partnership and in relation to section 89 (c)
Internal Revenue Code. In this last return, the estate claimed that it of the National Internal Revenue Code;
was liable only for the amount of P525.34 for estate tax and P238.06 2. (2)Whether or not the estate can avail itself of the
for inheritance tax and that, as a consequence, it had overpaid the reciprocity proviso embodied in Section 122 of the
government. The refund of the amount of P15,259.83, allegedly National Internal Revenue Code granting exemption
overpaid, was accordingly requested by the estate. The Collector from the payment of estate and inheritance taxes on
denied the claim. For this reason, action was commenced in the Court the 210,000 shares of stock in the Mindanao Mother
of First Instance of Manila by respondents, as assignees of Beatrice Lode Mines, Inc.;
Mauricia Stevenson, for the recovery of said amount. Pursuant to 3. (3)Whether or not the estate is entitled to the
Republic Act No. 1125, the case was forwarded to the Court of Tax deduction of P4,000.00 allowed by Section 861, U.S.
Appeals which court, after hearing, rendered decision the dispositive Internal Revenue Code in relation to section 122 of
portion of which reads as follows: the National Internal Revenue Code;
"In fine, we are of the opinion and so hold that: (a) the 4. (4)Whether or not the real estate properties of the
100 decedent located in Baguio City and the 210,000
100 SUPREME COURT REPORTS shares 6f stock in the Mindanao Mother Lode Mines,
ANNOTATED Inc., were correctly appraised by the lower court;
Page 4 of 11
 101 Collector of Internal Revenue vs. Fisher
VOL. 1, JANUARY 28, 1961 101 jugal properties. In such a case, the national law of the husband
Collector of Internal Revenue vs. Fisher becomes the dominant law in determining the property relation of the
1. (5)Whether or not the estate as entitled to the spouses. There is, however, a difference between the two articles in
following deductions: P8,604.39 for judicial and that Article 1241 of the new Civil Code expressly provides that it shall
administration expenses; P2.086.52 for funeral be applicable regardless of whether the marriage was celebrated in
expenses; P652.50 for real estate taxes; and the Philippines or abroad.while Article 13252 of the old Civil Code is
P10.022.47 representing the amount of indebtedness limited to marriages contracted in a foreign land.
allegedly incurred by the decedent during his lifetime; It must be noted, however, that what has just been said refers to
and mixed marriages between a Filipino citizen and a foreigner. In the
2. ((5)Whether or not the estate is entitled to the' instant case, both spouses are foreigners who married in the
payment of interest on the amount it claims to have Philippines. Manresa,3 in his Commentaries, has this to say on this
overpaid the government and to be refundable to it. point:
In deciding the first issue, the lower court applied a well-known "La regla establecida en el art. 1.315, se refiere a las capitulaciones
doctrine in our civil law that in the absence of any ante-nuptial otorgadas en España y entre españoles. El 1.325, a las celebradas
agreement, the contracting parties are presumed to have adopted the en el extranjero cuando alguno de los c6nyuges es español. En
system of conjugal part-nership as to the properties acquired during- cuanto a la regla procedente cuando dos extranjeros se casan en
their marriage. The application of this doctrine to the instant case is España, o dos españoles en el extranjero. hay que atender en el
being disputed, however, by petitioner Collector of Internal Revenue, primer caso a la legislación de pais a que aquellos pertenezean, y en
who contends that pursuant to Article 124 of the New Civil Code, the el segundo, a las reglas generales consignadas en los articulos 9 y 10
property relation of the spouses Stevensons ought not to be de nuestro Codigo." (Italics supplied.)
determined by the Philippine law, but by the national law of the _______________
1
decedent husband, in this case, the law of England. It is alleged by  "ART. 124. If the marriage is between a citizen of the Philippines
petitioner that English laws do not recognize legal partnership and a foreigner, whether celebrated in the Philippines or abroad, the
between spouses, and that what obtains in that jurisdiction is .another following rules shall prevail:
regime of property relation, wherein all properties acquired during the 1. (1)If the husband is a citizen of the Philippines while
marriage pertain and belong exclusively to the husband. In further the wife is a foreigner, the provisions of this Code
support of his Stand, petitioner cites Article 16 of the New Civil Code shall govern their property relations;
(Art. 10 of the old) to the effect that in testate and intestate 2. (2)If the husband is a foreigner and the wife is a
proceedings, the amount of successional rights, among others, is to citizen of the Philippines, the laws of the husband's
be determined by the national law of the decedent. country shall be followed, without prejudice to the
In this connection, let it be noted that since the marriage of the provisions of this Code with regard to immovable
Stevensons in the Philippines took place in 1909, the applicable law is property."
2
Article 1325 of the old Civil Code and not Article 124 0f the New Civil  "ART. 1325. Should the marriage be contracted in a foreign
Code which became effective only in 1950. It is true that both articles country, between a Spaniard and a foreign woman or between a
adhere to the so-called nationality theory of determin-ing the property foreigner and a Spanish woman, and the contracting parties should
relation of spouses where one of them is a foreigner and they have not make any statement or stipulation with respect to their property, it
made no prior agreement as tothe administration, disposition, and shall be understood, when the husband is a Spaniard, that he marries
ownership of their con- under the system of the legal conjugal partnership, and when the wife
102 is a Spaniard, that she marries under the system of law in force in the
102 SUPREME COURT REPORTS husband's country, all without prejudice to the provisions of this code
ANNOTATED with respect to real property.
Page 5 of 11
 3
 IX Manresa, Comentarios al Codigo Civil Español, p. 202. 104
103 104 SUPREME COURT REPORTS
VOL. 1, JANUARY 28,, 1961 103 ANNOTATED
Collector of Internal Revenue vs. Fisher Collector of Internal Revenue vs. Fisher
If we adopt the view of Manresa, the law determinative of the property and Taxation Code, on the ground that: (1) the said proviso of the
relation of the Stevensons, married in 1909, would be the English law California Revenue and Taxation Code has not been duly proven by
even if the marriage was celebrated in the Philippines, both of them the respondents; (2) the reciprocity exemptions granted  by section
being foreigners. But. as correctly observed by the Tax Court, the 122 of the National Internal Revenue Code can only be availed of by
pertinent English law that allegedly vests in the decedent 'husband full residents of foreign countries and not of residents of a state in the
ownership of the properties acquired during the marriage has not Uttit&d States; and (3) there is no "total" reciprocity between the
been proven by petitioner. Except for a mere allegation in his answer, Philippines and the state of California in that while the former exempts
which is not sufficient, the record is bereft of any evidence as to what payment of both estate and inheritance taxes on intangible personal
English law says on the matter. In the absence of proof, the Court is properties, the latter only exempts the payment of inheritance tax.
justified, therefore, in indulging in what Wharton calls "processual To prove the pertinent California law, Attorney Allison Gibbs,
presumption," in presuming that the law of England on this matter is counsel for herein respondents, testified that as an active member of
the same as our law.4 the California Bar since 1931, he is familiar with the revenue and
Nor do we believe petitioner can make use of Article 16 of the New taxation laws of the State of California. When asked by the lower court
Civil Code (art. 10, old Civil Code) to bolster his stand. A reading of to state the pertinent California law as regards exemption of intangible
Article 10 of the old Civil Code, which incidentally is the one personal properties, the witness cited article 4, section 13851 (a) and
applicable, shows that it does not encompass or contemplate to (b) of the California Internal and Revenue Code as published in
govern the question of property relation between spouses. Said article Derring's California Code, & publication of the Bancroft-Whitney
distinctly speaks of amount of successional rights and this term, in our Company, Inc. And as part of his testimony, a full quotation of the
opinion, properly refers to the extent or amount of property that each cited section was offered in evidence as Exhibits "V-2" by the
heir is legally entitled to inherit from the estate available for respondents.
distribution. It needs to be pointed out that the property relation of It is well-settled that foreign laws do not prove themselves in our
spouses, as distinguished from their successional rights, is governed jurisdiction and our courts are not authorized to take judicial notice of
differently by the specific and express provisions of Title VI, Chapter I them.5 Like any other f act, they must be alleged and proved.6
of our new Civil Code (Title III, Chapter I of the old Civil Code.) We, Section 41, Rule 123 of our Rules of Court prescribes the manner
therefore, find that the lower court correctly deducted the half of the of proving foreign laws before our tribunal. However, although we
conjugal property in determining the 'hereditary estate left by the believe It desirable that these laws be proved in accordance with said
deceased Stevenson. rule, we heM in the case of Willamette Iron and Steel Works v.
On the second issue, petitioner disputes the action of the Tax Muzzal, 81 Phil. 471, that "a reading of sections 300 and 301 of our
Court in exempting the respondents from paying inheritance tax on Code of Civil Procedure (now section 41, Rule 128) will convince one
the 210,000 shares of stock in the Mindanao Mother Lode Mines, Inc. that these sections do not exclude the presentation of
in virtue of the reciprocity proviso of Section 122 of the National _______________
5
Internal Revenue Code, in relation to Section 13851 of the California  Lim vs. Collector of of Customs, supra; International Harvester
Revenue Co. vs. Hamburg-American Line, supra; Phil. Manufacturing Co. vs.
_______________ Union Ins. Society of Canton, 42 Phil. 378; Adong vs. Cheong Seng
4
 Yam Ka Lim vs. Collector of Customs, 30 Phil. 46; Lim & Lim vs. Gee, 43 Phil. 53.
6
Collector of Customs, 36 Phil. 472; International Harvester Co. vs.  Sy Joc Lieng vs. Sy Quia, 16 Phil. 138; Ching Huat v& Co
Hamburg-American Line, 42 Phil. 845; Beam vs. Yatco, 46 O.G. No. Heong, 77 Phil. 985: Adong vs. Cheong, supra.
2, p. 530.) 105
Page 6 of 11
 VOL. 1, JANUARY 28, 1961 105 United States or foreign state or country in which the
Collector of Internal Revenue vs. Fisher nonresident resided allowed a similar
other competent evidence to prove the existence of a foreign law." In 106
that case, we considered the testimony of an attorney-at-law of San 106 SUPREME COURT REPORTS
Francisco, California who quoted verbatim a section of the California ANNOTATED
Civil Code and who stated that the same was in force at the time the Collector of Internal Revenue vs. Fisher
obligations were contracted, as sufficient evidence to establish the 1. exemption in respect to intangible; personal property
existence of said law. In line with this view, we find no error, therefore, of residents of the Territory or State of the United
on the part of the Tax Court in considering the pertinent California law States or foreign state or country of residence of the
as proved by respondents' witness. decedent." (7d.)
We now take up the question of reciprocity in exemption from It is clear from both these quoted provisions that the reciprocity must
transfer or death taxes, between the State of California and the be total, that is, with respect to transfer or death taxes of any and
Philippines. every character, in the case of the Philippine law, and to legacy,
Section 122 of our National Internal Revenue Code, in pertinent succession, or death tax of any and every character, in the case of the
part provides: California law. Therefore, if any of the two states collects or imposes
"x x x And, provided, further, That no tax shall be collected under this and does not exempt any transfer, death, legacy, or succession tax of
Title in respect of intangible personal property (a) if the decedent at any character, the reciprocity does not work. This is the underlying
the time of his death was a resident of a foreign country which at the principle of the reciprocity clauses in both laws.
time of his death did not impose a transfer tax or death tax of any In the Philippines, upon the death of any citizen or resident, or non-
character in respect of intangible personal property of citizens of the resident with properties therein, there are imposed upon 'his estate
Philippines not residing in that foreign country, or (b) if the laws of the and its settlement, both an estate and an inheritance tax. Under the
foreign country of which the decedent was a resident at the time of his laws of California, only inheritance tax is imposed. On the other hand,
death allow a similar exemption from transfer taxes or death taxes of the Federal Internal Revenue Code imposes an estate tax on non-
every character in respect of intangible personal property owned by residents not citizens of the United States, but does not provide for
citizens of the Philippines not residing in that foreign country." (Italics any exemption on the basis of reciprocity. Applying these laws in the
supplied.) manner the Court of Tax Appeals did in the instant case, we will have
On the other hand, Section 13851 of the California Inheritance Tax a situation where a Californian, who is non-resident in the Philippines
Law, insofar as pertinent, reads: but has intangible personal properties here, will be subject to the
"SEC. 13851, Intangibles of nonresident: Conditions. Intangible payment of an estate tax, although exempt from the payment of the
personal property is exempt from the tax imposed by this part if the inheritance tax. This being the case, will a Filipino, non-resident of
decedent at the time of his death was a resident of a Territory or California, but with intangible personal properties there, be entitled to
another State of the United States or of a foreign state or country the exemption clause of the California law, since the Californian has
which then imposed a legacy, succession, or death tax in respect to not been exempted from every character of legacy, succession, or
intangible personal property of its own residents, but either: death tax because he is, under our law, under obligation to pay an
1. "(a)Did not impose a legacy, succession, or death tax estate tax? Upon the other hand, if we exempt the Californian from
of any character in respect to intangible personal paying the estate tax, we do not thereby entitle a Filipino to be exempt
property of residents of this State, or from a similar estate tax in California because under the Federal Law,
2. "(b)Had in its laws a reciprocal provision under which which is equally enforceable in California, he is bound to pay the
intangible personal property of a non-resident same, there being no reciprocity recognized in respect thereto. In both
was exempt from legacy, succession, or death taxes instances, the Filipino citizen is always at a disadvantage. We do not
of every character if the Territory or other State of the believe that our legislature has intended such an un-
107
Page 7 of 11
 VOL. 1, JANUARY 28, 1961 107 valuation made by petitioner which was sustained by the tax court, for
Collector of Internal Revenue vs. Fisher as the tax court aptly observed:
fair situation to the detriment of our own government and people. We, "The two parcels of land containing 36,254 square meters were
therefore, find and declare that the lower court erred in exempting the valued by the administrator of the estate in the Estate and Inheritance
estate in question from payment of the inheritance tax. tax returns filed by him at P43.500.00 which is the assessed value of
We are not unaware of our ruling in the case of Collector of said properties. On the other hand, defendant appraised the same at
Internal Revenue vs. Lara (G.R. Nos. L-9456 & Lr9481, prom. P52.200.00. It is of common knowledge, and this Court can take
January 6, 1958, 54 O.G. 2881) exempting the estate of the deceased judicial notice of it, that assessments for real estate taxation purposes
Hugo H. Miller from payment of the inheritance tax imposed by the are very much lower than the true and fair market value of the
Collector of Internal Revenue. It will be noted, however, that the issue properties at a given time and place. In fact one year after decedent's
of reciprocity between the pertinent provisions of our tax law and that death or in 1952 the said properties were sold for a price of
of the State of California was not there squarely raised, and the ruling P72.000.00 and there is no showing that special or extraordinary
therein cannot control the determination of the case at bar. Be that as circumstances caused the sudden increase from the price of
it may, we now declare that in view of the express provisions of both P43,500.00, if we were to accept this value as a fair and reasonable
the Philippine and California laws that the exemption would one as of 1951. Even more, the counsel for plaintiffs himself admitted
apply only if the law of the other grants an exemption from legacy, in open court that he was willing to purchase the said properties at
succession, or death taxes of every character, there could not P2.00 per square meter. In the light of these facts we believe and
be partial reciprocity. It would have to be total or none at all. therefore hold that the valuation of P52.200.00 of the real estate in
With respect to the question of deduction or reduction in the Baguio made by defendant is fair, reasonable and justified in the
amount of P4,000.00 based on the U.S. Federal Estate Tax Law premises." (Decision, p. 19).
which is also being claimed by respondents, we uphold and adhere to In respect to the valuation of the 210,000 shares of stock in the
our ruling in the Lara case (supra) that the amount of $2,000.00 Mindanao Mother Lode Mines, Inc., (a domestic corporation),
allowed under the Federal Estate Tax Law is in the nature of a respondents contend that their value should be fixed on the basis of
deduction and not of an exemption regarding which reciprocity cannot the market quotation obtaining at the San Francisco (California) Stock
be claimed under the proviso of section 122 of our National Internal Exchange, on the theory that the certificates of stocks were then held
Revenue Code. Nor is reciprocity authorized under the Federal Law. in that place and registered with the said stock exchange. We cannot
On the issue of the correctness of the appraisal of the two parcels agree with respondents' argument. The situs of the shares of stock,
of land situated in Baguio City, it is contended that their assessed for purposes of taxation, being located here in the Philippines, as
values, as appearing in the tax rolls 6 months after the death of respondents themselves concede, and considering that they are
Stevenson, ought to have been considered by petitioner as their fair sought to be taxed in this jurisdiction, consistent with the exercise of
market value, pursuant to section 91 of the National Internal Revenue our government's taxing authority, their fair market value should be
Code. It should be pointed out, however, that in accordance with said taxed on the basis of the price prevailing in our country.
proviso the properties are required to be appraised at their fair market Upon the other hand, we find merit in respondents' other
value and the assessed value thereof shall be considered as the f air contention that the said shares of stock commanded a lesser value at
market value only when evi- the Manila Stock Exchange six months after the death of Stevenson.
108 Through Atty. Allison Gibbs, respondents have shown that at that time
108 SUPREME COURT REPORTS a share of said
ANNOTATED 109
Collector of Internal Revenue vs. Fisher VOL. 1, JANUARY 28, 1961 109
dence to the contrary has not been shown. After a careful review of Collector of Internal Revenue vs. Fisher
the record, we are satisfied that such evidence exists to justify the stock was bid for at only P.325 (p. 103, t.s.n.). Significantly, the
testimony of Atty. Gibbs in this respect has never been questioned nor
Page 8 of 11
refuted by petitioner either before this court or in the court below. In 110 SUPREME COURT REPORTS
the absence of evidence to the contrary, we are, therefore, ANNOTATED
constrained to reverse the Tax Court on this point and to hold that the Collector of Internal Revenue vs. Fisher
value of a share in the said mining company on August 22, 1951 in ly incurred. Under the circumstances, we see no ground to reverse
the Philippine market was P.325 as claimed by respondents. this finding of fact which, under Republic Act of California National
It should be noted that the petitioner and the Tax Court valued Association, which it would appear, that while still living, Walter G.
each share of stock of P.38 on the basis of the declaration made by Stevenson obtained we are not inclined to pass upon the claim of
the estate in its preliminary return. Patently, this should not have been respondents in respect to the additional amount of P86.52 for funeral
the case, in view of the fact that the ancillary administrator had expenses which was disapproved by the court a quo for lack of
reserved and availed of his legal right to have the properties of the evidence.
estate declared at their fair market value as of six months from the In connection with the deduction of P652.50 representing the
time the decedent died. amount of realty taxes paid in 1951 on the decedent's two parcels of
On the fifth issue, we shall consider the various deductions, from land in Baguio City, which respondents claim was disallowed by the
the allowance or disallowance of which by the Tax Court, both Tax Court, we find that this claim has in fact been allowed. What
petitioner and respondents have appealed. happened here, which a careful review of the record will reveal, was
Petitioner, in this regard, contends that no evidence of record that the Tax Court, in itemizing the liabilities of the estate, viz:
exists to support the allowance of the sum of P8.604.39 for the 1 Administrator's P1
following expenses: ) fee ..............................................................................................
1 Administrator's Pl.20 2 Attorney's 6
) fee ......................................... 4.34 ) fee .....................................................................................................
......................... 3 Judicial and Administration expenses
2 Attorney's 6,000. )
) fee ......................................... 00 as of August 9, 2
................................ 1952 ............................................................................................
3 Judicial and Administrative 1,400.           T o t a P9
) expenses .............................. 05 1 .....................................................................................................
........... added the P652.50 for realty taxes as a liability of the estate, to the
               Total P8.60 Pl,400.05 for judicial and administration expenses approved by the
Deductions ............................ 4.39 court, making a total of P2,052.55, exactly the same figure which was
.......................................... arrived at by the Tax Court for judicial and administration expenses.
An examination of the record discloses, however, that the foregoing Hence, the difference between the total of P9,256.98 allowed by the
items were considered deductible by the Tax Court on the basis of Tax Court as deductions, and the P8,604.39 as found by the probate
their approval by the probate court to which said expenses, we may court, which is P652.50, the same amount allowed for realty taxes.
presume, had also been presented for consideration. It is to be An evident oversight 'has involuntarily been made in omitting the
supposed that the probate court would not have approved said items P2,000.00 for funeral expenses in the final computation. This amount
were they not supported by evidence presented by the estate. In has been expressly allowed by the lower court and there is no reason
allowing the items in question, the Tax Court had before it the why it should not be.
pertinent order of the probate court which was submitted in evidence We come now to the other claim of respondents that pursuant to
by respondents. (Exh. "AA-2", p. 100, record). As the Tax Court said, section 89 (b) (1) in relation to section 89 (a) (1) (E) and section 89
it found no basis for departing from the findings of the probate court, (d), National Internal Revenue Code, the amount of P10,022.47
as it must have been satisfied that those expenses were actual- should have been allowed the estate as a deduction, because it
110
Page 9 of 11
represented an indebtedness of the decedent incurred during his 112 SUPREME COURT REPORTS
lifetime.  In sup- ANNOTATED
111 Collector of Internal Revenue vs. Fisher
VOL. 1, JANUARY 28, 1961 111 ment of just debts and expenses of administration. 10 In other words,
Collector of Internal Revenue vs. Fisher there is a regular administration under the control of the court, where
port thereof, they offered in evidence a duly certified claim, presented claims must be presented and approved, and expenses of
to the probate court in California by the Bank of California National administration allowed before deductions from the estate can be
Association, which it would appear, that while still living, Walter G. authorized. Otherwise, we would have the actuations of our own
Stevenson obtained a loan of $5,000.0 secured by a pledge on probate court, in the settlement and distribution of the estate situated
140,000 of his shares of stock in the Mindanao Mother Lode Mines, here, subject to the proceedings before the foreign court over which
Inc. (Exhs. "Q-Q4", pp. 53-59, record). The Tax Court disallowed this our courts have no control. We do not believe such a procedure is
item on the ground that the local probate court had not approved the countenanced or contemplated in the Rules of Court.
same as a valid claim against the estate and because it constituted an Another reason for the disallowance of this indebtedness as a
indebtedness in respect to intangible personal property which the Tax deduction, springs from the provisions of Section 89, letter (d),
Court held to be exempt from inheritance tax. number (1), of the National Internal Revenue Code which reads:
For two reasons, we uphold the action of the lower court in "(d) Miscellaneous provisions.—(1) No deductions shall be allowed in
disallowing the deduction. the case of a non-resident not a citizen of the Philippines unless the
Firstly, we believe that the approval of the Philippine probate court executor, administrator or anyone o£ the heirs, as the case may be,
of this particular indebtedness of the decedent is necessary. This is so includes in the return required to be filed under section ninety-three
although the same, it is averred, has been already admitted and the value at the time of his death of that part of the gross eState of the
approved by the corresponding probate court in California, situs of the non-resident not situated in the Philippines."
principal or domiciliary administration. It is true that we have here in In the case at bar, no such statement of the gross estate of the
the Philippines only an ancillary administration in this case, but, it has nonresident Stevenson not situated in the Philippines appears in the
been held, the distinction between domiciliary or principal three returns submitted to the court or to the office of the petitioner
administration and ancillary administration serves only to distinguish Collector of Internal Revenue. The purpose of this requirement is to
one administration from the other, for the two proceedings are enable the revenue officer to determine how much of the
separate and independent.8 The reason for the ancillary indebtedness may be allowed to be deducted, pursuant to letter (b),
administration is that, a grant of administration does not ex proprio number (1) of the same section 89 of the Internal Revenue Code
vigore, have any effect beyond the limits of the country in which it was which provides:
granted. Hence, we have the requirement that before a will duly "(b) Deductions allowed to non-resident estates.—In the case of a
probated outside of the Philippines can have effect here, it must first non-resident not a citizen of the Philippines, by deducting from the
be proved and allowed before our courts, in much the same manner value of that part of his gross estate which at the time of his death is
as wills originally presented for allowance therein.9 And the estate situated in the Philippines—
shall be administered under letters testamentary, or letters of "(1) Expenses, losses, indebtedness, and taxes.—That proportion
administration granted by the court, and disposed of according to the of the deductions specified in paragraph (1) of subsection (a) of this
will as probated, after pay- section11 which the value of such part
_______________ _______________
8 10
 In the matter of the testate estate of Basil Gordon Butler, G.R.  Rule 78, Sec. 4, Ibid,
11
No. L-3677, Nov. 29, 1951.  Expenses, losses, indebtedness, and taxes which may be
9
 Rule 78, Secs. 1, 2 and 3, Rules of Court. See also Hix vs. deducted to determine the net estate of a citizen or resident of the
Fluemer, 54 Phil. 610. Philippines.
112 113
Page 10 of 11
 VOL. 1, JANUARY 28, 1961 113 1959) wherein we held that, "in the absence of a statutory provision
Collector of Internal Revenue vs. Fisher clear-
bears to the value of his entire gross estate wherever situated;" 114
In. other words, the allowable deduction is only to the extent of 114 SUPREME COURT REPORTS
that portion of the indebtedness which is equivalent to the proportion ANNOTATED
that the estate in the Philippines bears to the total estate wherever Collector of Internal Revenue vs. Convention
situated. Stated differently, if the properties in the Philippines of Philippine Baptist Churches
constitute but 1/5 of the entire assets wherever situated, then only 1/5 ly or expressly directing or authorizing such payment, and none has
of the indebtedness may be deducted. But since, as heretofore been cited by respondents, the National Government cannot be
adverted to, there is no statement of the value of the estate situated required to pay interest."
outside the Philippines, or that there exists no such properties outside WHEREFORE, as modified in the manner heretofore indicated, the
the Philippines, no part of the indebtedness can be allowed to be judgment of the lower court is hereby affirmed in all other respects not
deducted, pursuant to Section 89, letter (d), number (1) of the Internal inconsistent herewith. No costs. So ordered.
Revenue Code.      Paras, C.J., Bengzon, Bautista
For the reasons thus stated, we affirm the ruling of the lower court Angelo, Labrador, Concepcion, Reyes, J.B.L., Gutierrez
disallowing the deduction of the alleged indebtedness in the sum of David, Paredes and Dizon, JJ., concur.
P10.022.47. Judgment affirmed.
In recapitulation, we hold and declare that: Notes.—-The ruling in the Fisher case, regarding section 122 of
1. (a)only the one-half (1/2) share of the decedent the Tax Code, was reaffirmed in Collector of Internal Revenue vs.
Stevenson in the conjugal partnership property Wood McGrath, L-12710, Feb. 28, 1961, post.
constitutes his hereditary estate subject to the estate The ruling in the same case regarding interest on tax refunds was
and inheritance taxes; modified in the sense that the Commissioner o£ Internal Revenue is
2. (b)the intangible personal property is not exempt from liable to pay interest where the collection of the tax to be refunded
inheritance tax, there existing no complete total was attended with arbitrariness (Collector of Internal Revenue vs.
reciprocity as required in section 122 of the National Binalbagan Estate, Inc., L-12752, Jan. 30, 1965; Victorias Milling
Internal Revenue Code, nor is the decedent's estate Company, Inc, vs. Commissioner of Internal Revenue, L-24769, Feb.
entitled to an exemption of F4.000.00 in the 25, 1967, 19 Supreme Court Reports Annotated 430).
computation of the estate tax; —————
3. (c)for the purpose of estate and inheritance taxes, the © Copyright 2021 Central Book Supply, Inc. All rights reserved.
210,000 shares of stock in the Mindanao Mother Lode
Mines, Inc'. are to be appraised at P0.325 per share;
and
4. (d)the P2.000.00 for funeral expenses should be
deducted in the determination of the net asset of the
deceased Stevenson.
In all other respects, the decision of the Court of Tax Appeals is
affirmed.
Respondents' claim for interest on the amount allegedly overpaid,
if any actually results after a recomputation on the basis of this
decision, is hereby denied in line with our recent decision in Collector
of Internal Revenue v. St. Paul's Hospital (G.R. No. L-12127, May 29,

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