Home of ChanRobles Virtual Law Library

PHILIPPINE SUPREME COURT DECISIONS

EN BANC

[G.R. Nos. L-14166 & L-14320. April 28, 1962. ]

FINLEY J. GIBBS, as Trustee for JOHNSON KELLEY GIBBS, ALLISON DEFRANCE GIBBS, CANDACE GIBBS, DOUGLAS FLETCHER GIBBS, and REGINALD KELLEY GIBBS, plaintiff-petitioner; ALLISON J. GIBBS and ESTHER K. GIBBS, intervenors-petitioners, v. COLLECTOR OF INTERNAL REVENUE and COURT OF TAX APPEALS, Respondents.

[G.R. No. L-14320. April 28, 1962. ]

COLLECTOR OF INTERNAL REVENUE, Petitioner, v. FINLEY J. GIBBS, as Trustee for JOHNSON KELLEY GIBBS, ALLISON DEFRANCE GIBBS, CANDACE GIBBS, DOUGLAS FLETCHER GIBBS and REGINALD KELLEY GIBBS, respondent; ALLISON J. GIBBS and ESTHER K. GIBBS, respondents-intervenors.

Ozaeta, Gibbs & Ozaeta, for Petitioners.

Assistant Solicitor General J. P. Alejandro, Solicitor C.T. Limcaoco and Atty. J. G. Azurin for respondents L-14320.

Assistant Solicitor General J. P. Alejandro, Solicitor C.T. Limcaoco and Atty. J. G. Azurin, for Petitioners.

Ozaeta, Gibbs & Ozaeta for Respondents.


SYLLABUS


1. TRUSTS; PROVISIONS OF TRUST AGREEMENTS; PAYMENT OF CONSIDERATION STIPULATED IN THE AGREEMENT. — If the trustors were earnestly concerned in providing ample funds to assure the support, maintenance, care, health, higher education and travel of their children and the launching of their career after they had became of age, they would not have really meant to require them to pay the consideration stipulated in the trust agreement.

2. ID.; ID.; REASON GIVEN FOR EXECUTION OF AGREEMENTS OBVIOUSLY UNTRUE. — Considering that one of the prime objectives of the trustors in executing the trust agreements was "to transfer as much as possible of our Philippine assets to the United States in the form of dollars", it is understandable that they did not wish the stock in question to be disposed of in the Philippines, for this would surely defeat the accomplishment of said objectives. At the same time, it is apparent that the reason given in said compromise agreements for the execution thereof is not true.

3. TAXATION; GIFT TAXES; QUESTION OF WHO SHALL PAY TAX DETERMINED BY LAW. — The question as to who shall pay any given tax and what shall be the basis thereof is determined by law, the operation of which can not be affected by the provisions of the contract to which the Government is not a party.

4. ID.; ID.; PAYMENT OF INTEREST ON UNPAID TAX. — Section 119 (b) (2) of the Tax Code, which provides for the payment of interest on any unpaid tax, applies only when the taxes are not paid within the extension granted by the Commissioner of Internal Revenue.


D E C I S I O N


CONCEPCION, J.:


These are two (2) appeals one by the plaintiff and the plaintiffs-intervenors and the other by the Government, from a decision of the Court of Tax Appeals, hereafter referred to as the lower court, promulgated on February 28, 1958, the dispositive part of which reads:jgc:chanrobles.com.ph

"IN VIEW OF THE FOREGOING the decision appealed from is modified and the defendant Collector of Internal Revenue is hereby ordered to refund to the plaintiff the sum of P5,381.88, as computed in Annex ’A’ hereof, with interest at the legal rate from date of payment. Without special pronouncement as to costs."cralaw virtua1aw library

as amended by a resolution of said lower court, dated July 25, 1958, the concluding paragraph of which is as follows:jgc:chanrobles.com.ph

"WHEREFORE our decision of February 28, 1958 is modified in the sense that the delinquency interest of one-half (1/2) of one (1%) percent should be computed on the deficiency taxes only from July 1, 1954 to July 30, 1954, and the defendant Collector of Internal Revenue is hereby ordered to refund to plaintiff the sum of P9,387.54 as computed in Annex ’A’ hereof, with interest at the legal rate from the date of payment. Without special pronouncement as to costs."cralaw virtua1aw library

On September 25, 1950, Allison J. Gibbs and his wife Esther K. Gibbs, hereinafter referred to as trustors, executed five (5) separate documents each, entitled "Deed of Sale and Declaration of Trust", whereby the respective trustors transferred, sold and assigned, in trust, 53,000 shares of stock of the Lepanto Consolidated Mining Coin favor of each one of their five (5) children, namely Johnson Kelly Gibbs, Allison De France Gibbs, Candace Gibbs, Douglas Fletcher Gibbs and Reginald Kelley Gibbs, in consideration of the sum of P926,227.70, to be paid "on or before December 23, 1950, by selling, mortgaging, hypothecating, or pledging part or all of the corpus of the trust." The market value of said 53,000 shares on September 25, 1950 was P34,980.00

The terms and conditions of the ten (10) deeds of trust were identical. Instituted trustee, without bond, in said ten (10) deeds, was Finnley J. Gibbs, a brother of trustor Allison J. Gibbs, who, as attorney-in-fact of the former, accepted the trust, in his (Finnley J. Gibbs’) name, for and on behalf of the aforementioned beneficiaries. The trust was to terminate upon the respective beneficiary reaching the age of 35. If the beneficiary died before reaching that age, leaving legitimate issue, the trust would continue, but for the benefit of the latter, and the full distribution and termination of the trust with respect to such issue would be effected not later than 20 years after the death of said beneficiary. If the beneficiary died before reaching the age o
Top of Page