Zapanta vs. Posadas

Donations made during the donor's lifetime, which take effect upon the donee's acceptance and are subject only to a resolutory condition, are donations inter vivos and are not subject to inheritance tax. The distinguishing characteristics of a donation mortis causa are that the donor's death determines the acquisition of the property and that it is revocable at the will of the donor; where the right to the property is acquired during the donor's lifetime and the donation is irrevocable except upon nonfulfillment of the condition, the donation is inter vivos.

Father Braulio Pineda died in January 1925 without any ascendants or descendants, leaving a will instituting his sister Irene Pineda as his sole heiress. During his lifetime, he executed instruments donating some of his property to six plaintiffs, who were relatives and some of them brothers of the donor. The donations were made in consideration of the donor's affection for the donees and of services they had rendered him, but were charged with the obligation to pay him certain amounts of rice or money annually during his lifetime. The donations contained a provision that failure to fulfill this condition would revoke the donations ipso facto, and another clause that they would take effect upon acceptance, which acceptance occurred during the donor's lifetime.

Father Braulio Pineda died in January 1925 without any ascendants or descendants, leaving a will in which he instituted his sister Irene Pineda as his sole heiress. During his lifetime, Father Braulio donated some of his property by instruments to the six plaintiffs, severally, with the condition that some of them would pay him a certain amount of rice, and others of money every year, and with the express provision that failure to fulfill this condition would revoke the donations ipso facto. These six plaintiff-donees are relatives, and some of them brothers of Father Braulio Pineda. The donations contained another clause that they would take effect upon acceptance, and they were accepted during Father Braulio's lifetime by every one of the donees.

Every one of the six plaintiffs filed a separate action against the Collector of Internal Revenue and his deputy for the sums of which each of them paid, under protest, as inheritance tax on the property donated to them, in accordance with section 1536 of the Administrative Code, as amended by section 10 of Act No. 2835, and by section 1 of Act No. 3031. Section 1536 of the Administrative Code reads: "Every transmission by virtue of inheritance, devise, bequest, gift mortis causa or advance in anticipation of inheritance, devise, or bequest of real property located in the Philippine Islands and real rights in such property; . . ."

The trial court, in deciding these six cases, held that the donations to the six plaintiffs made by the deceased Father Braulio Pineda are donations inter vivos, and therefore not subject to the inheritance tax, and ordered the defendants to return to each of the plaintiffs the sums paid by the latter. The defendants appealed from this judgment.

• Donations as Mortis Causa: The appellants contended that the donations made by Father Braulio Pineda to each of the plaintiffs are donations mortis causa, upon which the Administrative Code imposes inheritance tax.
• Donations as Advances on Inheritance: The appellants further argued that the donations should be considered as advances on inheritance or legacy under the terms of section 1536 of the Administrative Code, since the donees were persons who would have been entitled to inherit if no will had been made.

• Donations as Inter Vivos: The appellees maintained that the donations are expressly stated in the instruments to be inter vivos, made in consideration of the donor's affection and services rendered, and that they took effect upon acceptance during the donor's lifetime.
• Not Subject to Inheritance Tax: The appellees argued that since the donations are inter vivos, they are not subject to inheritance tax, and the amounts paid under protest should be refunded.

• Nature of the Donations: Whether the donations made by Father Braulio Pineda to each of the plaintiffs are donations inter vivos or mortis causa.
• Taxability as Advances on Inheritance: Whether the donations can be considered as advances on inheritance or legacy subject to inheritance tax under section 1536 of the Administrative Code.

• Nature of the Donations: No. The donations are inter vivos, not mortis causa. The effect of the donations, that is, the acquisition of the right to the property, was produced while the donor was still alive, for according to their expressed terms they were to have this effect upon acceptance, which took place during the donor's lifetime.
• Taxability as Advances on Inheritance: No. The donations cannot be considered as advances on inheritance or legacy because the donees were not heirs or legatees of their predecessor in interest upon his death, and the donations are neither an inheritance nor a legacy.

• Nature of the Donations: The principal characteristics of a donation mortis causa, which distinguish it essentially from a donation inter vivos, are that in the former it is the donor's death that determines the acquisition of, or the right to, the property, and that it is revocable at the will of the donor. In the donations in question, their effect was produced while the donor was still alive, for according to their expressed terms they were to have this effect upon acceptance, and this took place during the donor's lifetime. The nature of these donations is not affected by the fact that they were subject to a condition, since it was imposed as a resolutory condition, which necessarily implies that the right came into existence first, because otherwise there would be nothing to resolve upon the nonfulfillment of the condition imposed. Neither does the fact that these donations are revocable give them the character of donations mortis causa, inasmuch as the revocation is not the failure to fulfill the condition imposed; in relation to the donor's will alone, these donations are irrevocable. The condition, in so far as it renders the donation onerous, takes it further away from the disposition mortis causa and brings it nearer to contract; by virtue of this condition imposed, they are not donations throughout their full extent, but only so far as they exceed the incumbrance imposed, for so far as concerns the portion equivalent to or less than said incumbrance, it has the nature of a real contract and is governed by the rule on contracts (art. 622 of the Civil Code). In the part in which it is strictly a donation, it is a donation inter vivos, because its effect was produced by the donees' acceptance during the donor's lifetime and was not determined by the donor's death. If the donor's life is mentioned in connection with this condition, it is only to fix the donor's death as the end of the term within which the condition must be fulfilled, and not because such death of the donor is the cause which determines the birth of the right to the donation. The property donated passed to the ownership of the donees from the acceptance of the donations, and these could not be revoked except upon the nonfulfillment of the condition imposed, or for other causes prescribed by the law, but not by mere will of the donor.
• Taxability as Advances on Inheritance: Neither can these donations be considered as an advance on inheritance or legacy, according to the terms of section 1536 of the Administrative Code, because they are neither an inheritance nor a legacy. It cannot be said that the plaintiffs received such advance on inheritance or legacy, since they were not heirs or legatees of their predecessor in interest upon his death (sec. 1540 of the Administrative Code). Neither can it be said that they obtained this inheritance or legacy by virtue of a document which does not contain the requisites of a will (sec. 618 of the Code of Civil Procedure). Besides, if the donations were mortis causa, then they must be governed by the law on testate succession (art. 620 of the Civil Code), and the documents in which these donations appear, being instruments which do not contain the requisites of a will, are not valid to transmit the property to the donees (sec. 618, Code of Civil Procedure). Then the defendants are not justified in collecting from the donees the inheritance tax on property which has not been legally transferred to them, and in which they acquired no right.

• Donation Inter Vivos vs. Donation Mortis Causa — The principal characteristics of a donation mortis causa that distinguish it essentially from a donation inter vivos are: (1) in the former, it is the donor's death that determines the acquisition of, or the right to, the property; and (2) it is revocable at the will of the donor. Where the donee acquires the right to the property upon acceptance during the donor's lifetime, and the donation is irrevocable except upon nonfulfillment of a resolutory condition or for causes prescribed by law, the donation is inter vivos.
• Resolutory Condition in Donations — A resolutory condition imposed on a donation does not affect its nature as inter vivos, because the imposition of a resolutory condition necessarily implies that the right came into existence first, since otherwise there would be nothing to resolve upon the nonfulfillment of the condition imposed. The mention of the donor's life in connection with such condition only fixes the donor's death as the end of the term within which the condition must be fulfilled, not as the cause determining the birth of the right to the donation.
• Onerous Donations — A donation subject to an onerous condition is not a donation throughout its full extent, but only so far as it exceeds the incumbrance imposed; for so far as concerns the portion equivalent to or less than said incumbrance, it has the nature of a real contract and is governed by the rules on contracts (art. 622 of the Civil Code).

• "The principal characteristics of a donation mortis causa, which distinguish it essentially from a donation inter vivos, are that in the former it is the donor's death that determines the acquisition of, or the right to, the property, and that it is revocable at the will of the donor." — This passage articulates the canonical test distinguishing donations mortis causa from donations inter vivos, which is the controlling doctrine of the case.
• "The nature of these donations is not affected by the fact that they were subject to a condition, since it was imposed as a resolutory condition, and in this sense, it is necessarily implies that the right came into existence first as well as its effect, because otherwise there would be nothing to resolve upon the nonfulfillment of the condition imposed." — This passage explains why a resolutory condition does not convert an inter vivos donation into one mortis causa, a key point in the Court's reasoning.
• "If the donor's life is mentioned in connection with this condition, it is only fix the donor's death as the end of the term within which the condition must be fulfilled, and not because such death of the donor is the cause which determines the birth of the right to the donation." — This passage clarifies that the reference to the donor's lifetime in the condition does not make the donation mortis causa, as it merely sets the period for compliance with the condition.

N/A — The decision does not cite any prior case law.

• Section 1536, Administrative Code — The provision imposing inheritance tax on "every transmission by virtue of inheritance, devise, bequest, gift mortis causa or advance in anticipation of inheritance, devise, or bequest of real property." The Court held that the donations in question, being inter vivos, do not fall within this provision.
• Section 1540, Administrative Code — Cited to show that the plaintiffs were not heirs or legatees of their predecessor in interest upon his death, and therefore could not be said to have received an advance on inheritance or legacy.
• Section 618, Code of Civil Procedure — Cited to show that the donation instruments, not containing the requisites of a will, could not validly transmit property as an inheritance or legacy; and that if the donations were mortis causa, they would be invalid for lacking the requisites of a will.
• Article 622, Civil Code — Applied to hold that the onerous portion of the donation has the nature of a real contract and is governed by the rules on contracts.
• Article 620, Civil Code — Cited to show that if the donations were mortis causa, they would be governed by the law on testate succession.

Justices Johnson, Malcolm, Villamor, Romualdez, and Villa-Real concurred with the majority opinion of Chief Justice Avanceña.

• Justice Street — Dissented on the ground that while the donations were not mortis causa, they should nevertheless be taxable as "advances in anticipation of inheritance" under section 1536 of the Administrative Code. Justice Street considered the donations to be a "transparent attempt at an evasion of the tax," noting that the donations were made to all persons who would have been entitled to inherit if no will had been made, except one, who was instituted as sole heir in the will. He argued that the making of the donations and the making of the will were part of a single purpose to effect the distribution of the donor's property, and that the question of whether the donations should be considered advances in anticipation of inheritance ought to be determined with reference to the situation at the time the donations were made. He also rejected the majority's suggestion that the institution of another person as heir in the will destroyed the capacity of the donees to take as heirs, since the very reason the prospective heir to whom no donation had been made was instituted as sole heir was that advances had already been made to the others.
• Justices Ostrand and Johns — Joined the dissent without a separate opinion.