G.R. No. 29204, 29205, 29206, 29207, 29208, 29209, December 29, 1928
RUFINA ZAPANTA, ET AL., plaintiffs-appellees, vs. JUAN POSADAS, JR., ET AL., defendants-appellants.

(Consolidated Cases)

FACTS

Father Braulio Pineda died in January 1925 without ascendants or descendants. He left a will instituting his sister, Irene Pineda, as his sole heir. During his lifetime, he executed several donation instruments in favor of the six sets of plaintiffs (his relatives, including some brothers). The donations contained conditions requiring the donees to pay him certain amounts of rice or money annually during his lifetime. The instruments expressly stipulated that failure to comply would revoke the donations *ipso facto* and that the donations would take effect upon acceptance. All donees accepted the donations during Father Braulio’s lifetime.

After his death, the Collector of Internal Revenue assessed and collected inheritance taxes from the donees on the donated properties, pursuant to Section 1536 of the Administrative Code (as amended), which taxes transmissions “by virtue of inheritance, devise, bequest, gift *mortis causa* or advance in anticipation of inheritance, devise, or bequest.” The donees paid under protest and filed separate actions for recovery. The trial court held the donations were *inter vivos* and not subject to inheritance tax, ordering a refund. The Collector appealed.

ISSUE

Whether the donations executed by Father Braulio Pineda are donations *inter vivos* or donations *mortis causa* (or advances in anticipation of inheritance), and thus subject to inheritance tax under Section 1536 of the Administrative Code.

RULING

The Supreme Court AFFIRMED the trial court’s decision. The donations are donations *inter vivos* and are not subject to inheritance tax.

The Court laid down the principal characteristics distinguishing a donation *mortis causa* from a donation *inter vivos*:
1. In a donation *mortis causa*, the donor’s death is the event that determines the acquisition of, or right to, the property.
2. A donation *mortis causa* is revocable at the will of the donor.

Applying these principles:
* Effect During Lifetime: The donations in question expressly stipulated they would take effect upon acceptance. Since acceptance occurred during the donor’s lifetime, the donees’ right to the property was acquired and took effect while he was still alive.
* Nature of the Condition: The imposition of an annual payment condition was a resolutory condition. The existence of such a condition presupposes that a right had already been created and taken effect; otherwise, there would be nothing to resolve upon non-compliance. The fact that the condition was to be performed during the donor’s lifetime merely fixed the period for compliance and did not make his death the determining event for the acquisition of rights.
* Revocability: The donations were not revocable at the mere will of the donor. Revocation could only occur upon the specific contingency of non-fulfillment of the condition or other causes prescribed by law, not by the donor’s arbitrary choice.
* Onerous Nature: The condition rendered the donations onerous, moving them closer to the nature of a contract and further away from a disposition *mortis causa*. Under Article 622 of the Civil Code, to the extent the value of the donation did not exceed the burden imposed, it partook of a contract.
* Not an “Advance”: The donations could not be considered “advances in anticipation of inheritance” under the tax law because the donees were not heirs or legatees of the deceased at the time of his death (as he had instituted a sole heir in his will). Furthermore, if the donations were treated as *mortis causa*, they would be void for lacking the formalities of a will (under Section 618 of the Code of Civil Procedure), and the government would have no basis to tax a transfer that did not legally occur.

DISSENTING OPINION (Street, J.):
Justice Street agreed that the donations were not *mortis causa*. However, he argued they were taxable as “advances in anticipation of inheritance.” He viewed the donations and the will as parts of a single scheme to distribute the donor’s estate. The donations were made to all who would have been intestate heirs except one, and that one was made the sole heir in the will. He contended that the taxability should be determined based on the situation when the donations were made (when the donees were prospective heirs), and the statute aimed to prevent tax evasion through such anticipatory distributions.