THE CASE OF CIR V. FISHER - 42 PJP 21
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This is the case of CIR v. Fisher (1961).[1]
In the case of CIR v. Fisher, a British man named Walter Stevenson, who was born and married in the Philippines, died in California in 1951. He and his wife had moved to California in 1945 and had lived there until he passed away. In his will, he left real and personal properties in the Philippines to his wife, Beatrice. The gross estate involved was Php130,792.85.
Following the demise of Walter Stevenson, ancillary probate proceedings were initiated in CFI of Manila to administer his Philippine estate. A duly appointed ancillary administrator filed the necessary estate and inheritance tax returns. Later, inheritance[2] and estate taxes were assessed.
The case reached the Court of Tax Appeals (“CTA”) which ruled:
“In fine, we are of the opinion and so hold that: (a) the one-half (1/2) share of the surviving spouse in the conjugal partnership property as diminished by the obligations properly chargeable to such property should be deducted from the net estate of the deceased Walter G. Stevenson, pursuant to Section 89-C of the National Internal Revenue Code; (b) the intangible personal property belonging to the estate of said Stevenson is exempt from inheritance tax, pursuant to the proviso of section 122 of the National Internal Revenue Code in relation to the California Inheritance Tax Law but decedent's estate is not entitled to an exemption of P4,000.00 in the computation of the estate tax; (c) for purpose of estate and inheritance taxation the Baguio real estate of the spouses should be valued at P52,200.00, and the 210,000 shares of stock in the Mindanao Mother Lode Mines Inc. should be appraised at P0.38 per share; and (d) the estate shall be entitled to a deduction of P2,000.00 for funeral expenses and judicial expenses of P8,604.39.”
In the Supreme Court, it was found that the lower court a quo applied a well-known doctrine in civil law that, in the absence of any ante-nuptial agreement, the contracting parties are presumed to have adopted the system of conjugal partnership as to the properties acquired during their marriage.[3] The Collector of Internal Revenue (“CIR”) disputed the application of this doctrine to the instant case, contending that, pursuant to Article 124 of the NCC, the property relations of the spouses Stevensons ought not be determined by the Philippine law, but by the national law of the decedent husband, i.e., the law of England.
Petitioner also alleged that English laws did not recognize legal partnership between spouses and that what obtained in that jurisdiction was another regime of property relations wherein all properties acquired during the marriage pertained and belonged exclusively to the husband. In other words, petitioner’s argument was that, under English laws, the regime of separation of properties between husband and wife was observed.
In further support of this stand, the CIR cited Article 16 of the NCC to the effect that, in testate and intestate proceedings, the amount of successional rights, among others, is to be determined by the national law of the decedent.
The Supreme Court said that, since the marriage of the Stevensons in the Philippines took place in 1909, the applicable law should be Article 1325 of the old Civil Code, not Article 124 of the NCC which took effect only in 1950. Both provisions, nevertheless, adhere to nationality theory of determining the property relations of spouses[4] where one of them is a foreigner and they have made no prior agreement as to the administration, disposition, and ownership of their conjugal properties. Thus, the national law of the husband should be considered the dominant law in determining the property relation of the spouses.
There is, however, a difference between the two articles in that Article 124 of the NCC expressly provides that it shall be made applicable regardless of whether the marriage was celebrated in the Philippines or abroad. On the other hand, Article 1325 of the old Civil Code is limited to marriages contracted in a foreign land. Both provisions refer to mixed marriages but, in this case, both spouses were foreigners who married in the Philippines.
If the view of Manresa is adopted, the law determinative of the property relations of the Stevensons, married in 1909, would be English law even if the marriage was celebrated in the Philippines, both of them being foreigners. However, the English law that allegedly vested in the decedent husband full ownership of the properties acquired during the marriage was not proved by the CIR. Except for a mere allegation, which cannot be considered sufficient, the records of this case were bereft of any evidence as to what English law said on the matter. In the absence of proof, the Court said that it was justified to indulge in what Wharton has called the doctrine of “processual presumption,” i.e., presuming that the law of England on this matter is the same as Philippine law.[5]
The Court further explained that Article 16 of the NCC (Article 10 of the old Civil Code) could not be used by the CIR to bolster its stand. A reading of Article 10 of the old Civil Code, which, incidentally, was the one applicable, shows that it does not encompass or contemplate to govern the question of property relations between spouses. Said provision speaks of the amount of successional rights, which refers to the extent or amount of property that each heir is legally entitled to inherit from the estate available for distribution. The property relations of spouses, as distinguished from their successional rights, is governed a different provision of law.
Anent the other issue, the CIR also questioned the tax court’s ruling exempting the respondents from inheritance tax on their 210,000 shares in Mindanao Mother Lode Mines, Inc. based on the reciprocity provision of Section 122 of the National Internal Revenue Code (“NIRC”) in conjunction with Section 13851 of the California Revenue and Taxation Code. The CIR asserted that: (1) respondents failed to adequately establish the existence of the reciprocity proviso under California law; (2) the reciprocity exemption granted under Section 122 is applicable only to residents of foreign countries and not to those of a US state; and, (3) there was lack of complete reciprocity between the Philippines and California as the former exempts both estate and inheritance taxes on intangible personal property while the latter exempts only inheritance tax.
To prove the pertinent California law, Atty. Allison Gibbs, counsel for herein respondent, testified that, as an active member of the California Bar since 1931, he was familiar with the revenue and taxation laws of the State of California. When asked by the lower court to state the pertinent California law as regards exemption of intangible personal properties, the witness cited Article 4, Sections 13851 (a) and (b) of the California Internal and Revenue Code as published in Deerings’s California Code, a publication of the Bancroft-Whitney Company, Inc. And as part of his testimony, a full quotation of the cited section was offered in evidence as Exhibit “V-2” by the respondents.
It is well-settled that foreign laws do not prove themselves in our jurisdiction and our courts are not authorized to take judicial notice of them.[6] Like any other fact, they must be alleged and proved.[7]
Section 41 of Rule 123 of the old Rules of Court prescribes the manner of proving foreign laws. However, although it desirable that these laws be proved in accordance with said rule, the case of Willamette Iron and Steel Works v. Muzzal[8] teaches that a reading of the then Code of Civil Procedure does not exclude the presentation of other competent evidence to prove the existence of a foreign law.
In that case of Willamette Iron, the Court found the testimony of an attorney-at-law of San Francisco, California, who quoted verbatim a section of the California Civil Code and who stated under oath that the same was in force at the time the obligations were contracted. This was found by the Court as sufficient evidence to establish the existence of said law. In line with this, the tax court did not err in considering the pertinent California law as proved by respondents’ witness.
This author would like to note, however, that the better reason for allowing testimonial evidence to show foreign law is the other party’s failure to object to its presentation or admissibility. In this case, no objection was raised by the opposing party when testimonial evidence was presented to prove the existence and contents of foreign law.
As to the question of reciprocity in exemption from transfer or death taxes between the State of California and the Philippines, the Supreme Court said that the reciprocity must be total, that is, with respect to transfer or death taxes of any and every character, in the case of the Philippine law, and to legacy, succession, or death tax of any and every character, in the case of the California law. Therefore, if any of the two states collects or imposes and does not exempt any transfer, death, legacy, or succession tax of any character, the reciprocity does not work and cannot be considered. This is the underlying principle of the reciprocity clauses in both laws.
There being no total reciprocity between the tax exemption laws between the two states, reciprocity could not be claimed and the Court found that the tax exemption did not apply.
Going back to the issue of which law should govern the successional rights flowing from the death of a foreigner, it should be recalled that the NCC is clear on this. Order of succession, amount of successional rights, intrinsic validity of the provisions of a will, and capacity to succeed are governed by the national law of the decedent whose succession is in question.
[1] 110 Phil. 686 [ G.R. Nos. L-11622 and L-11668. January 28, 1961 ] THE COLLECTOR OF INTERNAL REVENUE, PETITIONER VS. DOUGLAS FISHER AND BETTINA FISHER, AND THE COURT OF TAX APPEALS, RESPONDENTS.
[2] There is no inheritance tax anymore under present Philippine tax laws.
[3] Remember that this was decided prior to the FCP.
[4] See Article 80 of the FCP for present rules on property relations between husband and wife.
[5] Yam Ka Lim vs. Collector of Customs, 30 Phil., 46; Lim & Lim vs. Collector of Customs, 36 Phil., 472; International Harvester Co. vs. Hamburg-American Line, 42 Phil., 845; Beam vs. Yatco, 82 Phil., 30; 46 Off. Gaz., No. 2, p. 530.
[6] Phil. Manufacturing Co. vs. Union Ins. Society of Canton, 42 Phil., 378; Adong vs. Cheong Seng Gee, 43 Phil., 53.
[7] Sy Joe Lieng vs. Sy Quia, 16 Phil., 138; Ching Huat vs. Co Heong, 77 Phil., 985.
[8] 61 Phil., 471.