G.R. No.

140944

April 30, 2008

RAFAEL ARSENIO S. DIZON, in his c p ci!" s !h# $%&ici l A&'inis!r !or o( !h# Es! !# o( !h# &#c# s#& $OSE ). FERNANDEZ, )#!i!ion#r, * +#rs%s * ,O-R. OF .A/ A))EALS n& ,O00ISSIONER OF IN.ERNAL RE1EN-E, R#spon&#n!s. 2************************************************************************************2 DECISION NACHURA, J.: Before this Court is a Petition for Review on Certiorari[1] under Rule 45 of the Rules of Civil Procedure seeking the reversal of the Court of Appeals (CA !ecision["] datedApril #$% 1&&& which affir'ed the !ecision[#] of the Court of (a) Appeals (C(A dated *une 1+% 1&&+,[4] The Facts -n .ove'/er +% 1&0+% *ose P, 1ernande2 (*ose died, (hereafter% a petition for the pro/ate of his will[5] was filed with Branch 51 of the Regional (rial Court (R(C of 3anila(pro/ate court ,[4] (he pro/ate court then appointed retired 5upre'e Court *ustice Arsenio P, !i2on (*ustice !i2on and petitioner% Att6, Rafael Arsenio P, !i2on (petitioner as 5pecial and Assistant 5pecial Ad'inistrator% respectivel6% of the 7state of *ose (7state , 8n a letter[+] dated -cto/er 1#% 1&00% *ustice !i2on infor'ed respondent Co''issioner of the Bureau of 8nternal Revenue (B8R of the special proceedings for the 7state, Petitioner alleged that several re9uests for e)tension of the period to file the re9uired estate ta) return were granted /6 the B8R since the assets of the estate% as well as the clai's against it% had 6et to /e collated% deter'ined and identified, (hus% in a letter[0] dated 3arch 14% 1&&$% *ustice !i2on authori2ed Att6, *esus 3, :on2ales (Att6, :on2ales to sign and file on /ehalf of the 7state the re9uired estate ta) return and to represent the sa'e in securing a Certificate of (a) Clearance, 7ventuall6% on April 1+% 1&&$% Att6, :on2ales wrote a letter [&]addressed to the B8R Regional !irector for 5an Pa/lo Cit6 and filed the estate ta) return[1$] with the sa'e B8R Regional -ffice% showing therein a .8; estate ta) lia/ilit6% co'puted as follows<

C-3P=(A(8-. -1 (A> Con?ugal Real Propert6 (5ch, 1 Con?ugal Personal Propert6 (5ch," (a)a/le (ransfer (5ch, # :ross Con?ugal 7state ;ess< !eductions (5ch, 4 .et Con?ugal 7state ;ess< 5hare of 5urviving 5pouse .et 5hare in Con?ugal 7state ))) .et (a)a/le 7state 7state (a) !ue P1$%055%$"$,$$ #%44$%5&1,#4 14%#15%411,#4 10+%0""%5+4,$4 .8; .8; , .8; .8; .8; , ,[11]

-n April "+% 1&&$% B8R Regional !irector for 5an Pa/lo Cit6% -s'undo :, ='ali issued Certification .os, "$5"[1"] and "$5#[1#] stating that the ta)es due on the transfer of real and personal properties[14] of *ose had /een full6 paid and said properties 'a6 /e transferred to his heirs, 5o'eti'e in August 1&&$% *ustice !i2on passed awa6, (hus% on -cto/er ""% 1&&$% the pro/ate court appointed petitioner as the ad'inistrator of the 7state,[15] Petitioner re9uested the pro/ate court@s authorit6 to sell several properties for'ing part of the 7state% for the purpose of pa6ing its creditors% na'el6< 79uita/le Banking Corporation (P1&%+54%4"0,#1 % Ban9ue de ;@8ndochine et, de 5ue2 (=5A4%0"0%&$5,&$ as of *anuar6 #1% 1&00 % 3anila Banking Corporation (P04%1&&%14$,44 as of 1e/ruar6 "0% 1&0& and 5tate 8nvest'ent Bouse% 8nc, (P4%"0$%$$4,"1 , Petitioner 'anifested that 3anila Bank% a 'a?or creditor of the 7state was not included% as it did not file a clai' with the pro/ate court since it had securit6 over several real estate properties for'ing part of the 7state,[14] Bowever% on .ove'/er "4% 1&&1% the Assistant Co''issioner for Collection of the B8R% (he'istocles 3ontal/an% issued 7state (a) Assess'ent .otice .o, 1A5C7C0+C&1C$$#"4&%[1+] de'anding the pa6'ent of P44%&+#%&05,4$ as deficienc6 estate ta)% ite'i2ed as follows<
!eficienc6 7state (a)C 1&0+ 7state ta) "5D surchargeC late filing late pa6'ent 8nterest Co'pro'iseCnon filing non pa6'ent P#1%040%414,40 +%&4+%1$#,4" +%&4+%1$#,4" 1&%1"1%$40,40 "5%$$$,$$ "5%$$$,$$

no notice of death no CPA Certificate (otal a'ount due E collecti/le

15,$$ #$$,$$ P44%&+#%&05,4$[10]

8n his letter[1&] dated !ece'/er 1"% 1&&1% Att6, :on2ales 'oved for the reconsideration of the said estate ta) assess'ent, Bowever% in her letter["$] dated April 1"% 1&&4% the B8R Co''issioner denied the re9uest and reiterated that the estate is lia/le for the pa6'ent of P44%&+#%&05,4$ as deficienc6 estate ta), -n 3a6 #% 1&&4% petitioner received the letter of denial, -n *une "% 1&&4% petitioner filed a petition for review["1] /efore respondent C(A, (rial on the 'erits ensued, As found /6 the C(A% the respective parties presented the following pieces of evidence% to wit<
8n the hearings conducted% petitioner did not present testi'onial evidence /ut 'erel6 docu'entar6 evidence consisting of the following< .ature of !ocu'ent 1, (sic 7)hi/its

;etter dated -cto/er 1#% 1&00 fro' Arsenio P, !i2on addressed to the Co''issioner of 8nternal Revenue infor'ing the latter of the special proceedings for the settle'ent of the estate (p, 1"4% B8R records F Petition for the pro/ate of the will and issuance of letter of ad'inistration filed with the Regional (rial Court (R(C of 3anila% docketed as 5p, Proc, .o, 0+C4"&0$ (pp, 1$+C1$0% B8R records F Pleading entitled GCo'plianceG filed with the pro/ate Court su/'itting the final inventor6 of all the properties of the deceased (p, 1$4% B8R records F Attach'ent to 7)h, GCG which is the detailed and co'plete listing of the properties of

GAG

",

GBG E GBC1H

#,

GCG

4,

the deceased (pp, 0&C1$5% B8R rec, F 5,

GCC1G to GCC1+G

Clai's against the estate filed /6 79uita/le Banking Corp, with the pro/ate Court in the a'ount of P1&%+54%4"0,#1 as of 3arch #1% 1&00% together with the Anne)es to the clai' (pp, 44C00% B8R records F G!G to G!C"4G Clai' filed /6 Ban9ue de ;@ 8ndochine et de 5ue2 with the pro/ate Court in the a'ount of =5 A4%0"0%&$5,&$ as of *anuar6 #1% 1&00 (pp, "4"C"45% B8R records F Clai' of the 3anila Banking Corporation (3BC which as of .ove'/er +% 1&0+ a'ounts to P45%150%$"#,54% /ut reco'puted as of 1e/ruar6 "0% 1&0& at a total a'ount of P04%1&&%14$,44F together with the de'and letter fro' 3BC@s law6er (pp, 1&4C1&+% B8R records F !e'and letter of 3anila Banking Corporation prepared /6 Asedillo% Ra'os and Associates ;aw -ffices addressed to 1ernande2 Ber'anos% 8nc,% represented /6 *ose P, 1ernande2% as 'ortgagors% in the total a'ount of P"4$%4+&%4&#,1+ as of 1e/ruar6 "0% 1&0& (pp, 104C10+% B8R records F Clai' of 5tate 8nvest'ent Bouse% 8nc, filed with the R(C% Branch I88 of 3anila% docketed as Civil Case .o, 04C#05&& entitled G5tate 8nvest'ent Bouse% 8nc,% Plaintiff% versus 3ariti'e Co'pan6 -verseas% 8nc, andJor *ose P, 1ernande2% !efendants%G (pp, "$$C"15% B8R records F ;etter dated 3arch 14% 1&&$ of Arsenio P, !i2on addressed to Att6, *esus 3, :on2ales% (p, 104% B8R records F

4,

G7G to G7C#G

+,

G1G to G1C#G

0,

G:G E G:C1G

&,

GBG to GBC14G

1$,

G8G

11,

;etter dated April 1+% 1&&$ fro' *,3, :on2ales addressed to the Regional !irector of B8R in 5an Pa/lo Cit6 (p, 10#% B8R records F 7state (a) Return filed /6 the estate of the late *ose P, 1ernande2 through its authori2ed representative% Att6, *esus 3, :on2ales% for Arsenio P, !i2on% with attach'ents (pp, 1++C10"% B8R records F Certified true cop6 of the ;etter of Ad'inistration issued /6 R(C 3anila% Branch 51% in 5p, Proc, .o, 0+C4"&0$ appointing Att6, Rafael 5, !i2on as *udicial Ad'inistrator of the estate of *ose P, 1ernande2F (p, 1$"% C(A records and Certification of Pa6'ent of estate ta)es .os, "$5" and "$5#% /oth dated April "+% 1&&$% issued /6 the -ffice of the Regional !irector% Revenue Region .o, 4CC% 5an Pa/lo Cit6% with attach'ents (pp, 1$#C1$4% C(A records, ,

G*G

1",

GKG to GKC5G

1#,

G;G

14,

G3G to G3C5G

Respondent's [BIR] counsel presented on June !, "##$ one %&tness &n t'e person o( Al)erto Enr&*ue+, %'o %,s one o( t'e re-enue e.,/&ners %'o conducted t'e &n-est&0,t&on on t'e est,te t,. c,se o( t'e l,te Jose 1. 2ern,nde+. In t'e course o( t'e d&rect e.,/&n,t&on o( t'e %&tness, 'e &dent&(&ed t'e (ollo%&n0: !ocu'entsJ 5ignatures 1, ", 7state (a) Return prepared /6 the B8RF 5ignatures of 3a, Ana/ella A/uloc and Al/erto 7nri9ue2% *r, appearing at the lower Portion of 7)h, G1GF 3e'orandu' for the Co''issioner% B8R Record p, 1#0

CdoC

#,

dated *ul6 1&% 1&&1% prepared /6 revenue e)a'iners% 3a, Ana/ella A, A/uloc% Al/erto 5, 7nri9ue2 and Ra6'und 5, :allardoF Reviewed /6 3a)i'ino I, (agle 4, 5ignature of Al/erto 5, 7nri9ue2 appearing at the lower portion on p, " of 7)h, G"GF 5ignature of 3a, Ana/ella A, A/uloc appearing at the lower portion on p, " of 7)h, G"GF 5ignature of Ra6'und 5, :allardo appearing at the ;ower portion on p, " of 7)h, G"GF 5ignature of 3a)i'ino I, (agle also appearing on p, " of 7)h, G"GF 5u''ar6 of revenue 7nforce'ent -fficers Audit Report% dated *ul6 1&% 1&&1F 5ignature of Al/erto 7nri9ue2 at the lower portion of 7)h, G#GF 5ignature of 3a, Ana/ella A, A/uloc at the lower portion of 7)h, G#GF 5ignature of Ra6'ond 5, :allardo at the lower portion of 7)h, G#GF 5ignature of 3a)i'ino I, (agle at the lower portion of 7)h, G#GF !e'and letter (1A5C7C0+C&1C$$ % signed /6 the Asst, Co''issioner for Collection for the Co''issioner of 8nternal Revenue% de'anding pa6'ent of the a'ount of P44%&+#%&05,4$F and Assess'ent .otice 1A5C7C0+C&1C$$

pp, 14#C144

CdoC

5,

CdoC

4,

CdoC

+,

CdoC

0,

p, 1#&

&,

CdoC

1$,

CdoC

11,

CdoC

1",

CdoC

1#,

p, 14& pp, 14&C1+$[""]

14,

The CTA's Ruling -n *une 1+% 1&&+% the C(A denied the said petition for review, Citing this Court@s ruling in Vda. de Oate v. Court of Appeals%["#] the C(A opined that the afore'entioned pieces of evidence introduced /6 the B8R were ad'issi/le in evidence, (he C(A ratiocinated<
Although the a/oveC'entioned docu'ents were not for'all6 offered as evidence for respondent% considering that respondent has /een declared to have waived the presentation thereof during the hearing on 3arch "$% 1&&4% still the6 could /e considered as evidence for respondent since the6 were properl6 identified during the presentation of respondent@s witness% whose testi'on6 was dul6 recorded as part of the records of this case, Besides% the docu'ents 'arked as respondent@s e)hi/its for'ed part of the B8R records of the case,["4]

.evertheless% the C(A did not full6 adopt the assess'ent 'ade /6 the B8R and it ca'e up with its own co'putation of the deficienc6 estate ta)% to wit<
Con?ugal Real Propert6 Con?ugal Personal Prop, :ross Con?ugal 7state ;ess< !eductions .et Con?ugal 7state ;ess< 5hare of 5urviving 5pouse .et 5hare in Con?ugal 7state Add< CapitalJParaphernal Properties L P44%45"%01#,44 ;ess< Capital J Paraphernal !eductions .et (a)a/le 7state 7state (a) !ue Add< "5D 5urcharge for ;ate 1iling Add< Penalties forC.o notice of death .o CPA certificate (otal deficienc6 estate ta) P 5%$4"%$14,$$ ##%$"1%&&&,&# #0%$04%$15,&# "4%"5$%$$$,$$ P 11%0#4%$15,&# 5%&1+%$$+,&4 P 5%&1+%$$+,&4

44%45"%01#,44 P 5$%54&%0"1,4" MMMMMMMMMMMM P "&%&#5%#4",&+ +%40#%0#5,+4 15,$$ #$$,$$ P #+%41&%4&#,+1 MMMMMMMMMMMMM

e)clusive of "$D interest fro' due date of its pa6'ent until full pa6'ent thereof [5ec, "0# (/ % (a) Code of 1&0+],["5]

(hus% the C(A disposed of the case in this wise<

3HERE2ORE% viewed fro' all the foregoing% the Court finds the petition un'eritorious and denies the sa'e, Petitioner andJor the heirs of *ose P, 1ernande2 are here/6 ordered to pa6 to respondent the a'ount of P#+%41&%4&#,+1 plus "$D interest fro' the due date of its pa6'ent until full pa6'ent thereof as estate ta) lia/ilit6 of the estate of *ose P, 1ernande2 who died on .ove'/er +% 1&0+, SO ORDERED,["4]

Aggrieved% petitioner% on 3arch "% 1&&0% went to the CA via a petition for review,["+] The CA's Ruling -n April #$% 1&&&% the CA affir'ed the C(A@s ruling, Adopting in full the C(A@s findings% the CA ruled that the petitioner@s act of filing an estate ta) return with the B8R and the issuance of B8R Certification .os, "$5" and "$5# did not deprive the B8R Co''issioner of her authorit6 to reCe)a'ine or reCassess the said return filed on /ehalf of the 7state,["0] -n 3a6 #1% 1&&&% petitioner filed a 3otion for Reconsideration ["&] which the CA denied in its Resolution[#$] dated .ove'/er #% 1&&&, Bence% the instant Petition raising the following issues<
1, Nhether or not the ad'ission of evidence which were not for'all6 offered /6 the respondent B8R /6 the Court of (a) Appeals which was su/se9uentl6 upheld /6 the Court of Appeals is contrar6 to the Rules of Court and rulings of this Bonora/le CourtF ", Nhether or not the Court of (a) Appeals and the Court of Appeals erred in recogni2ingJconsidering the estate ta) return prepared and filed /6 respondent B8R knowing that the pro/ate court appointed ad'inistrator of the estate of *ose P, 1ernande2 had previousl6 filed one as in fact% B8R Certification Clearance .os, "$5" and "$5# had /een issued in the estate@s favorF #, Nhether or not the Court of (a) Appeals and the Court of Appeals erred in disallowing the valid and enforcea/le clai's of creditors against the estate% as lawful deductions despite clear and convincing evidence thereofF and 4, Nhether or not the Court of (a) Appeals and the Court of Appeals erred in validating erroneous dou/le i'putation of values on the ver6 sa'e estate properties in the estate ta) return it prepared and filed which effectivel6 /loated the estate@s assets,[#1]

(he petitioner clai's that in as 'uch as the valid clai's of creditors against the 7state are in e)cess of the gross estate% no estate ta) was dueF that the lack of a for'al offer of evidence is fatal to B8R@s causeF that the doctrine laid down in Vda. de Oate has alread6 /een a/andoned in a long line of cases in which the Court held that evidence not for'all6 offered is without an6 weight or valueF that 5ection #4 of Rule 1#" of the Rules on 7vidence re9uiring a for'al offer of evidence is 'andator6 in characterF that% while B8R@s witness Al/erto 7nri9ue2 (Al/erto in his testi'on6 /efore the C(A identified the pieces of evidence afore'entioned such that the sa'e were 'arked% B8R@s failure to for'all6 offer said pieces of evidence and depriving petitioner the opportunit6 to crossCe)a'ine Al/erto% render the sa'e inad'issi/le in evidenceF that assu'ing arguendo that the ruling in Vda. de Oate is still applica/le% B8R failed to co'pl6 with the doctrine@s re9uisites /ecause the docu'ents herein re'ained si'pl6 part of the B8R records and were not dul6 incorporated in the court recordsF that the B8R failed to consider that although the actual pa6'ents 'ade to the 7state creditors were lower than their respective clai's% such were co'pro'ise agree'ents reached long after the 7state@s lia/ilit6 had /een settled /6 the filing of its estate ta) return and the issuance of B8R Certification .os, "$5" and "$5#F and that the reckoning date of the clai's against the 7state and the settle'ent of the estate ta) due should /e at the ti'e the estate ta) return was filed /6 the ?udicial ad'inistrator and the issuance of said B8R Certifications and not at the ti'e the afore'entioned Co'pro'ise Agree'ents were entered into with the 7state@s creditors,[#"] -n the other hand% respondent counters that the docu'ents% /eing part of the records of the case and dul6 identified in a dul6 recorded testi'on6 are considered evidence even if the sa'e were not for'all6 offeredF that the filing of the estate ta) return /6 the 7state and the issuance of B8R Certification .os, "$5" and "$5# did not deprive the B8R of its authorit6 to e)a'ine the return and assess the estate ta)F and that the factual findings of the C(A as affir'ed /6 the CA 'a6 no longer /e reviewed /6 this Court via a petition for review,[##] The Issues (here are two ulti'ate issues which re9uire resolution in this case< First, Nhether or not the C(A and the CA gravel6 erred in allowing the ad'ission of the pieces of evidence which were not for'all6 offered /6 the B8RF and Second, Nhether or not the CA erred in affir'ing the C(A in the latter@s deter'ination of the deficienc6 estate ta) i'posed against the 7state,

The Courts Ruling (he Petition is i'pressed with 'erit, =nder 5ection 0 of RA 11"5% the C(A is categoricall6 descri/ed as a court of record, As cases filed /efore it are litigated de novo% part6Clitigants shall prove ever6 'inute aspect of their cases, 8ndu/ita/l6% no evidentiar6 value can /e given the pieces of evidence su/'itted /6 the B8R% as the rules on docu'entar6 evidence re9uire that these docu'ents 'ust /e for'all6 offered /efore the C(A, [#4] Pertinent is 5ection #4% Rule 1#" of the Revised Rules on 7vidence which reads<
SEC. 45. Offer of evidence. O (he court shall consider no evidence which has not /een for'all6 offered, (he purpose for which the evidence is offered 'ust /e specified,

(he C(A and the CA rel6 solel6 on the case of Vda. de Oate% which reiterated this Court@s previous rulings in People v. Napat-a[#5] and People v. Mate[#4] on the ad'ission and consideration of e)hi/its which were not for'all6 offered during the trial, Although in a long line of cases 'an6 of which were decided after Vda. de Oate% we held that courts cannot consider evidence which has not /een for'all6 offered%[#+] nevertheless% petitioner cannot validl6 assu'e that the doctrine laid down in Vda. de Oate has alread6 /een a/andoned, Recentl6% in Ramos v. i!on%[#0] this Court% appl6ing the said doctrine% ruled that the trial court ?udge therein co''itted no error when he ad'itted and considered the respondents@ e)hi/its in the resolution of the case% notwithstanding the fact that the sa'e were not for'all6 offered, ;ikewise% in Far "ast #an$ % &rust Compan' v. Commissioner of (nternal Revenue%[#&] the Court 'ade reference to said doctrine in resolving the issues therein, 8ndu/ita/l6% the doctrine laid down in Vda. e Oate still su/sists in this ?urisdiction, 8n Vda. de Oate% we held that<
1ro' the foregoing provision% it is clear that for evidence to /e considered% the sa'e 'ust /e for'all6 offered, Corollaril6% the 'ere fact that a particular docu'ent is identified and 'arked as an e)hi/it does not 'ean that it has alread6 /een offered as part of the evidence of a part6, 8n (nterpacific &ransit) (nc. v. Aviles [104 5CRA #05]% we had the occasion to 'ake a distinction /etween identification of docu'entar6 evidence and its for'al offer as an e)hi/it, Ne said that the first is done in the course of the trial and is acco'panied /6 the 'arking of the evidence as an e)hi/it while the second is done onl6 when the part6 rests its case and not /efore, A part6% therefore% 'a6 opt to for'all6 offer his evidence if he /elieves that it will advance his cause or not to do so at

all, 8n the event he chooses to do the latter% the trial court is not authori2ed /6 the Rules to consider the sa'e, Bowever% in People v. Napat-a [1+& 5CRA 4$#] citing People v. Mate [1$# 5CRA 404]% %e rel,.ed t'e (ore0o&n0 rule ,nd ,llo%ed e-&dence not (or/,ll6 o((ered to )e ,d/&tted ,nd cons&dered )6 t'e tr&,l court pro-&ded t'e (ollo%&n0 re*u&re/ents ,re present, -&+.: (&rst, t'e s,/e /ust ',-e )een dul6 &dent&(&ed )6 test&/on6 dul6 recorded ,nd, second, t'e s,/e /ust ',-e )een &ncorpor,ted &n t'e records o( t'e c,se,[4$]

1ro' the foregoing declaration% however% it is clear that Vda. de Oate is 'erel6 an e)ception to the general rule, Being an e)ception% it 'a6 /e applied onl6 when there is strict co'pliance with the re9uisites 'entioned thereinF otherwise% the general rule in 5ection #4 of Rule 1#" of the Rules of Court should prevail, 8n this case% we find that these re9uire'ents have not /een satisfied, (he assailed pieces of evidence were presented and 'arked during the trial particularl6 when Al/erto took the witness stand, Al/erto identified these pieces of evidence in his direct testi'on6,[41] Be was also su/?ected to crossCe)a'ination and reCcross e)a'ination /6 petitioner,[4"] But Al/ertoPs account and the e)changes /etween Al/erto and petitioner did not sufficientl6 descri/e the contents of the said pieces of evidence presented /6 the B8R, 8n fact% petitioner sought that the lead e)a'iner% one 3a, Ana/ella A, A/uloc% /e su''oned to testif6% inas'uch as Al/erto was inco'petent to answer 9uestions relative to the working papers, [4#] (he lead e)a'iner never testified, 3oreover% while Al/erto@s testi'on6 identif6ing the B8R@s evidence was dul6 recorded% the B8R docu'ents the'selves were not incorporated in the records of the case, A co''on fact threads through Vda. de Oate and Ramos that does not e)ist at all in the instant case, 8n the afore'entioned cases% the e)hi/its were 'arked at the preCtrial proceedings to warrant the pronounce'ent that the sa'e were dul6 incorporated in the records of the case, (hus% we held in Ramos<
8n this case% we find and so rule that these re9uire'ents have /een satisfied, 7'e e.'&)&ts &n *uest&on %ere presented ,nd /,r8ed dur&n0 t'e pre9tr&,l o( t'e c,se t'us, t'e6 ',-e )een &ncorpor,ted &nto t'e records. 1urther% 7lpidio hi'self e)plained the contents of these e)hi/its when he was interrogated /6 respondents@ counsel,,, )))) But what further defeats petitioner@s cause on this issue is that respondents@ e)hi/its were 'arked and ad'itted during the preCtrial stage as shown /6 the PreC (rial -rder 9uoted earlier,[44]

Nhile the C(A is not governed strictl6 /6 technical rules of evidence%[45] as rules of procedure are not ends in the'selves and are pri'aril6 intended as tools in the ad'inistration of ?ustice% the presentation of the B8R@s evidence is not a 'ere procedural technicalit6 which 'a6 /e disregarded considering that it is the onl6 'eans /6 which the C(A 'a6 ascertain and verif6 the truth of B8R@s clai's against the 7state,[44] (he B8R@s failure to for'all6 offer these pieces of evidence% despite C(A@s directives% is fatal to its cause, [4+] 5uch failure is aggravated /6 the fact that not even a single reason was advanced /6 the B8R to ?ustif6 such fatal o'ission, (his% we take against the B8R, Per the records of this case% the B8R was directed to present its evidence[40] in the hearing of 1e/ruar6 "1% 1&&4% /ut B8R@s counsel failed to appear, [4&] (he C(A denied petitioner@s 'otion to consider B8R@s presentation of evidence as waived% with a warning to B8R that such presentation would /e considered waived if B8R@s evidence would not /e presented at the ne)t hearing, Again% in the hearing of 3arch "$% 1&&4% B8R@s counsel failed to appear,[5$] (hus% in its Resolution[51] dated 3arch "1% 1&&4% the C(A considered the B8R to have waived presentation of its evidence, 8n the sa'e Resolution% the parties were directed to file their respective 'e'orandu', Petitioner co'plied /ut B8R failed to do so, [5"] 8n all of these proceedings% B8R was dul6 notified, Bence% in this case% we are constrained to appl6 our ruling in *eirs of Pedro Pasag v. Paroc+a,[5#]
A for'al offer is necessar6 /ecause ?udges are 'andated to rest their findings of facts and their ?udg'ent onl6 and strictl6 upon the evidence offered /6 the parties at the trial, 8ts function is to ena/le the trial ?udge to know the purpose or purposes for which the proponent is presenting the evidence, -n the other hand% this allows opposing parties to e)a'ine the evidence and o/?ect to its ad'issi/ilit6, 3oreover% it facilitates review as the appellate court will not /e re9uired to review docu'ents not previousl6 scrutini2ed /6 the trial court, 5trict adherence to the said rule is not a trivial 'atter, (he Court in Constantino v. Court of Appeals ruled that t'e (or/,l o((er o( one's e-&dence &s dee/ed %,&-ed ,(ter (,&l&n0 to su)/&t &t %&t'&n , cons&der,)le per&od o( t&/e. It e.pl,&ned t',t t'e court c,nnot ,d/&t ,n o((er o( e-&dence /,de ,(ter , l,pse o( t'ree :4; /ont's )ec,use to do so %ould <condone ,n &ne.cus,)le l,.&t6 &( not non9co/pl&,nce %&t' , court order %'&c', &n e((ect, %ould encour,0e needless del,6s ,nd der,&l t'e speed6 ,d/&n&str,t&on o( =ust&ce,G Appl6ing the afore'entioned principle in this case% we find that the trial court had reasona/le ground to consider that petitioners had waived their right to 'ake a for'al offer of docu'entar6 or o/?ect evidence, !espite several e)tensions of ti'e to 'ake their for'al offer% petitioners failed to co'pl6 with their co''it'ent and allowed al'ost five 'onths to lapse /efore finall6 su/'itting it, 1et&t&oners' (,&lure to co/pl6 %&t' t'e rule on ,d/&ss&)&l&t6 o(

e-&dence &s ,n,t'e/, to t'e e((&c&ent, e((ect&-e, ,nd e.ped&t&ous d&spens,t&on o( =ust&ce.

Baving disposed of the foregoing procedural issue% we proceed to discuss the 'erits of the case, -rdinaril6% the C(A@s findings% as affir'ed /6 the CA% are entitled to the highest respect and will not /e distur/ed on appeal unless it is shown that the lower courts co''itted gross error in the appreciation of facts, [54] 8n this case% however% we find the decision of the CA affir'ing that of the C(A tainted with palpa/le error, 8t is ad'itted that the clai's of the 7state@s afore'entioned creditors have /een condoned, As a 'ode of e)tinguishing an o/ligation% [55] condonation or re'ission of de/t[54] is defined as<
an act of li/eralit6% /6 virtue of which% without receiving an6 e9uivalent% the creditor renounces the enforce'ent of the o/ligation% which is e)tinguished in its entiret6 or in that part or aspect of the sa'e to which the re'ission refers, 8t is an essential characteristic of re'ission that it /e gratuitous% that there is no e9uivalent received for the /enefit givenF once such e9uivalent e)ists% the nature of the act changes, 8t 'a6 /eco'e dation in pa6'ent when the creditor receives a thing different fro' that stipulatedF or novation% when the o/?ect or principal conditions of the o/ligation should /e changedF or co'pro'ise% when the 'atter renounced is in litigation or dispute and in e)change of so'e concession which the creditor receives,[5+]

Ieril6% the second issue in this case involves the construction of 5ection +& of the .ational 8nternal Revenue Code[5&] ((a) Code which provides for the allowa/le deductions fro' the gross estate of the decedent, (he specific 9uestion is whether the actual clai's of the afore'entioned creditors 'a6 /e full6 allowed as deductions fro' the gross estate of *ose despite the fact that the said clai's were reduced or condoned through co'pro'ise agree'ents entered into /6 the 7state with its creditors,
[50]

QClai's against the estate%H as allowa/le deductions fro' the gross estate under 5ection +& of the (a) Code% are /asicall6 a reproduction of the deductions allowed under 5ection 0& (a (1 (C and (7 of Co''onwealth Act .o, 444 (CA 444 % otherwise known as the .ational 8nternal Revenue Code of 1&#&% and which was the first codification of Philippine ta) laws, Philippine ta) laws were% in turn% /ased on the federal ta) laws of the =nited 5tates, (hus% pursuant to esta/lished rules of statutor6 construction% the decisions of A'erican courts construing the

federal ta) code are entitled to great weight in the interpretation of our own ta) laws,[4$] 8t is noteworth6 that even in the =nited 5tates% there is so'e dispute as to whether the deducti/le a'ount for a clai' against the estate is fi)ed as of the decedent@s death which is the general rule% or the sa'e should /e ad?usted to reflect postCdeath develop'ents% such as where a settle'ent /etween the parties results in the reduction of the a'ount actuall6 paid, [41] -n one hand% the =,5, court ruled that the appropriate deduction is the QvalueH that the clai' had at the date of the decedent@s death,[4"] Also% as held in Propstra v. -.S.% [4#] where a lien clai'ed against the estate was certain and enforcea/le on the date of the decedent@s death% the fact that the clai'ant su/se9uentl6 settled for lesser a'ount did not preclude the estate fro' deducting the entire a'ount of the clai' for estate ta) purposes, (hese pronounce'ents essentiall6 confir' the general principle that postCdeath develop'ents are not 'aterial in deter'ining the a'ount of the deduction, -n the other hand% the 8nternal Revenue 5ervice (5ervice opines that postC death settle'ent should /e taken into consideration and the clai' should /e allowed as a deduction onl6 to the e)tent of the a'ount actuall6 paid, [44] Recogni2ing the dispute% the 5ervice released Proposed Regulations in "$$+ 'andating that the deduction would /e li'ited to the actual a'ount paid,[45] 8n announcing its agree'ent with Propstra%[44] the =,5, 5th Circuit Court of Appeals held<
Ne are persuaded that the .inth Circuit@s decision,,,in Propstra correctl6 appl6 the (t+aca &rust dateCofCdeath valuation principle to enforcea/le clai's against the estate, As we interpret (t+aca &rust% when the 5upre'e Court announced the dateCofCdeath valuation principle% it was 'aking a ?udg'ent a/out the nature of the federal estate ta) specificall6% that it is a ta) i'posed on the act of transferring propert6 /6 will or intestac6 and% /ecause the act on which the ta) is levied occurs at a discrete ti'e% i.e.% the instance of death% the net value of the propert6 transferred should /e ascertained% as nearl6 as possi/le% as of that ti'e, (his anal6sis supports /road application of the dateCofCdeath valuation rule,[4+]

Ne e)press our agree'ent with the dateCofCdeath valuation rule% 'ade pursuant to the ruling of the =,5, 5upre'e Court in (t+aca &rust Co. v. -nited States,[40] First, (here is no law% nor do we discern an6 legislative intent in our ta) laws% which disregards the dateCofCdeath valuation principle and particularl6 provides that postCdeath develop'ents 'ust /e considered in deter'ining the net value of the estate, 8t /ears e'phasis that ta) /urdens are not to /e i'posed% nor presu'ed to /e i'posed% /e6ond what the statute e)pressl6 and clearl6 i'ports%

ta) statutes /eing construed strictissimi .uris against the govern'ent,[4&] An6 dou/t on whether a person% article or activit6 is ta)a/le is generall6 resolved against ta)ation,[+$] Second, 5uch construction finds relevance and consistenc6 in our Rules on 5pecial Proceedings wherein the ter' Gclai'sG re9uired to /e presented against a decedent@s estate is generall6 construed to 'ean de/ts or de'ands of a pecuniar6 nature which could have /een enforced against the deceased in his lifeti'e% or lia/ilit6 contracted /6 the deceased /efore his death .[+1] (herefore% the clai's e)isting at the ti'e of death are significant to% and should /e 'ade the /asis of% the deter'ination of allowa/le deductions, 3HERE2ORE% the instant Petition is >RAN7ED, Accordingl6% the assailed !ecision dated April #$% 1&&& and the Resolution dated .ove'/er #% 1&&& of the Court of Appeals in CAC:,R, 5,P, .o, 44&4+ are RE?ERSED and SE7 ASIDE, (he Bureau of 8nternal Revenue@s deficienc6 estate ta) assess'ent against the 7state of *ose P, 1ernande2 is here/6 NU@@I2IED, .o costs, SO ORDERED, AN7ONIO EDUARDO B. NACHURA Associate *ustice
[1] ["]

!ated *anuar6 "$% "$$$% rollo) pp, 0C"$, Particularl6 docketed as CAC:,R, 5P .o, 44&4+F penned /6 Associate *ustice 3arina ;, Bu2on% with Presiding *ustice *esus 3, 7l/inias (now retired and Associate *ustice 7ugenio 5, ;a/itoria (now retired % concurringF id, at ""C#1, [#] Particularl6 docketed as C(A Case .o, 5114F penned /6 Associate *udge Ra'on -, !e Ie6ra and concurred in /6 Presiding *udge 7rnesto !, Acosta and Associate *udge A'ancio R, 5agaF id, at ##C41, [4] (his case was decided /efore the C(A was elevated /6 law to the sa'e level as the CA /6 virtue of Repu/lic Act (RA .o, &"0" otherwise known as GAn Act "/panding t+e 0urisdiction of t+e Court of &a/ Appeals 1C&A2) "levating its Ran$ to t+e 3evel of a Collegiate Court 4it+ Special 0urisdiction and "nlarging its Mem5ers+ip) Amending for t+e Purpose Certain Sections of Repu5lic Act No. 6678) as amended) ot+er4ise $no4n as &+e 3a4 Creating t+e Court of &a/ Appeals) and for ot+er purposes) G which was approved on 3arch #$% "$$4, Bence% upon its effectivit6% decisions of the C(A are now appeala/le directl6 to the 5upre'e Court, [5] B8R Records% pp, 1C00, [4] (he said petition is entitled< 8n the 3atter of the Petition to Approve the Nill of *ose P, 1ernande2% Carlos P, 1ernande2% Petitioner% particularl6 docketed as 5pecial Proceedings .o, 0+C4"&0$F B8R Record% pp, 1$+C1$0, [+] 8d, at 1"4, [0] 8d, at 104, [&] 8d, at 10#, [1$] 8d, at 10",
[11] [1"]

8d, Rollo) p, 40, [1#] 8d, at 4&, [14] ;ists of Personal and Real Properties of *oseF id, at +$C+#, [15] C(A Record% p, 1$", [14] Rollo% p, 1$, [1+] B8R Records% p, 14&, [10] 8d, [1&] 8d, at 1+1, ["$] B6 then B8R Co''issioner ;iwa6wa6 Iin2onsCChatoF id, at "++C"+0, ["1] C(A Records% pp, 1C+, [""] Rollo% pp, #+C4$ (7'phasis supplied , ["#] :,R, .o, 11414&% .ove'/er "#% 1&&5% "5$ 5CRA "0#% "0+% citing People v. Napat-a% 1+& 5CRA 4$# (1&0& and People v. Mate% 1$# 5CRA 404 (1&01 , ["4] C(A Records% p, 140, ["5] 8d, at 144C14+, ["4] 8d, at 14+, ["+] CA rollo% pp, #C1+, ["0] Citing 5ection 14 of the 1&&# .ational 8nternal Revenue Code,

["&] [#$] [#1] [#"] [##]

Rollo% pp, ""C#1, 8d, at #", 8d, at 114C115, 8d, Respondent B8R@s 3e'orandu' dated -cto/er 14% "$$$F id, at 14$C144,

[#4] [#5]

Commissioner of (nternal Revenue v. Manila Mining Corporation% :,R, .o, 15#"$4% August #1% "$$5% 440 5CRA 5+1% 500C50&, 5upra note "#, [#4] 5upra note "#, [#+] Far "ast #an$ % &rust Compan' v. Commissioner of (nternal Revenue % :,R, .o, 14&50&% 5epte'/er 15% "$$4% 5$" 5CRA 0+F AlaMartin v. Sultan% :,R, .o, 11+51"% -cto/er "% "$$1% #44 5CRA #14% citing Ong v. Court of Appeals% #$1 5CRA #&1 (1&&& % which further cited Candido v. Court of Appeals% "5# 5CRA +0% 0"C0# (1&&4 F Repu5lic v. Sandigan5a'an% "55 5CRA 4#0% 454 (1&&4 F People v. Peralta% "#+ 5CRA "10% ""4 (1&&4 F Vda. e Alvare! vs. Court of Appeals% "#1 5CRA #$&% #1+C#10 (1&&4 F and People v. Cario) et al.% 145 5CRA 444% 4+1 (1&00 F 5ee also e los Re'es v. (ntermediate Appellate Court % :,R, .o,+4+40% August 11% 1&0&% 1+4 5CRA #&4% 4$1C4$" (1&0& and People v. Mate% supra note "#% at 4&#, [#0] :,R, .o, 1#+"4+% August +% "$$4% 4&0 5CRA 1+% #$C#1, [#&] 5upra note "&% at &1, [4$] =nderscoring supplied, [41] (5.% *une "4% 1&&5, [4"] (5.% *ul6 1"% 1&&5, [4#] 8d, at 4"C4&, [44] 5upra note "&% at #1 and #4% citing Marmont Resort *otel "nterprises v. 9uiang% 140 5CRA #+#% #+&C#0$ (1&00 , [45] Calam5a Steel Center) (nc. 1formerl' 0S Steel Corporation2 v. Commissioner of (nternal Revenue % :,R, .o, 15105+% April "0% "$$5% 45+ 5CRA 40"% 4&4, [44] Commissioner of (nternal Revenue v. Manila Mining Corporation% supra note "0% at 5&#C5&4, [4+] Far "ast #an$ % &rust Compan' v. Commissioner of (nternal Revenue) supra note "&% at &$, [40] C(A Resolution dated *anuar6 1&% 1&&4F C(A Records% p, 11#C114, [4&] C(A Records% p, 11+, [5$] 8d, at 11&, [51] 8d, at 1"$, [5"] C(A -rder dated *une 1+% 1&&4% C(A Records% p, 1#0, [5#] :,R, .o, 15540#% April "+% "$$+% 5"" 5CRA 41$% 414% citing Constantino v. Court of Appeals% :,R, .o, 114$10% .ove'/er 1#% 1&&4% "44 5CRA 5& (-ther citations o'ittedF 7'phasis supplied , [54] Filinvest evelopment Corporation v. Commissioner of (nternal Revenue and Court of &a/ Appeals % :,R, .o, 144&41% August &% "$$+% 5"& 5CRA 4$5% 4$&C41$% citing Carrara Mar5le P+ilippines) (nc. v. Commissioner of Customs % #+" Phil, #""% ###C##4 (1&&& and Commissioner of (nternal Revenue v. Court of Appeals% #50 Phil, 54"% 504 (1&&0 , [55] Article 1"#1 of the Civil Code of the Philippines provides< Art, 1"#1, -/ligations are e)tinguished< (1 B6 pa6'ent or perfor'anceF (" B6 the loss of the thing dueF (# B6 t'e condon,t&on or re/&ss&on o( t'e de)tF (4 B6 the confusion or 'erger of the rights of creditor and de/torF (5 B6 co'pensationF (4 B6 novation, (7'phasis ours, [54] Article 1"+$ of the Civil Code of the Philippines provides< Art, 1"+$, Condonation or re'ission is essentiall6 gratuitous% and re9uires the acceptance /6 the o/ligor, 8t 'a6 /e 'ade e)pressl6 or i'pliedl6, -ne and the other kind shall /e su/?ect to the rules which govern inofficious donations, 7)press condonation shall% further'ore% co'pl6 with the for's of donation, [5+] (olentino% Co''entaries and *urisprudence on the Civil Code of the Philippines% Iol, 8I% 1&&1 ed,% p, #5#% citing 0 3anresa #45, [50] 57C, +&, Computation of net estate and estate ta/ , O 1or the purpose of the ta) i'posed in this Chapter% the value of the net estate shall /e deter'ined< (a 8n the case of a citi2en or resident of the Philippines% /6 deducting fro' the value of the gross estate O (1 "/penses) losses) inde5tedness) and ta/es, O 5uch a'ounts O (A 1or funeral e)penses in an a'ount e9ual to five per centum of the gross estate /ut in no case to e)ceed P5$%$$$,$$F (B 1or ?udicial e)penses of the testa'entar6 or intestate proceedingsF (C 1or clai's against the estateF Provided% (hat at the ti'e the inde/tedness was incurred the de/t instru'ent was dul6 notari2ed and% if the loan was contracted within three 6ears /efore the death of the decedent% the ad'inistrator or e)ecutor shall su/'it a state'ent showing the disposition of the proceeds of the loan, (As a'ended /6 P! .o, 1&&4 (! 1or clai's of the deceased against insolvent persons where the value of decedent@s interest therein is included in the value of the gross estateF and (7 1or unpaid 'ortgages upon% or an6 inde/tedness in respect to propert6% where the value of decedent@s interest therein% undi'inished /6 such 'ortgage or inde/tedness% is included in the value of the gross estate% /ut not including an6 inco'e ta)es upon inco'e received after the death of the decedent% or propert6 ta)es not accrued /efore his death% or an6 estate ta), (he deduction herein allowed in the case of clai's against the estate% unpaid 'ortgages% or an6 inde/tedness% shall when founded upon a pro'ise or agree'ent% /e li'ited to the e)tent that the6 were contracted 5ona fide and for an ade9uate and full reconsideration in 'one6 or 'one6@s worth, (here shall also /e deducted losses incurred during the settle'ent of the estate arising fro' fires% stor's% shipwreck% or other casualties% or fro' ro//er6% theft% or e'/e22le'ent% when such losses are not co'pensated for /6 insurance or otherwise% and if at the ti'e of the filing of the return such losses have not /een clai'ed as a deduction for inco'e ta) purposes in an inco'e ta) return% and provided that such losses were incurred not later than last da6 for the pa6'ent of the estate ta) as prescri/ed in su/section (a of 5ection 04, [5&] (his refers to the 1&++ .ational 8nternal Revenue Code% as a'ended which was effective at the ti'e of *ose@s death on .ove'/er +% 1&0+, [4$] Commissioner of (nternal Revenue v. Court of Appeals % :,R, .o, 1"#"$4% 3arch ""% "$$$% #"0 5CRA 444% 4+4C4++ (citations o'itted , [41] 4+B Corpus 0uris Secundum% 8nternal Revenue S 5##, [4"] Smit+ v. C.(.R.% 0" (,C,3, (CCB &$& ("$$1 % aff@d 54 1ed, App), 41#, [4#] 40$ 1,"d 1"40,

[44] [45] [44]

4+B Corpus 0uris Secundum% 8nternal Revenue S 5"4, Prop, (reas, Reg, S, "$,"$5#C1 (/ (1 % pu/lished as R7:C14##14C$#, 5upra note 4#, [4+] T5'ith@s 7st, v, C8R% 1&0 1#d 515% 5"5 (5th Cir, 1&&& , 5ee also -@.eal@s 7st, v, =5% ""0 1, 5upp, "d 1"&$ (.! Ala, "$$" , [40] "+& =,5, 151% 4& 5, Ct, "&1% +# ;,7d, 44+ (1&"& , [4&] Commissioner of (nternal Revenue v. &+e Court of Appeals) Central Vegeta5le Manufacturing Co.) (nc.) and t+e Court of &a/ Appeals % :,R, .o, 1$+1#5% 1e/ruar6 "#% 1&&&% #$# 5CRA 5$0% 514C51+% citing Province of #ulacan v. Court of Appeals) "&& 5CRA 44" (1&&0 F Repu5lic v. (AC% 1&4 5CRA ##5 (1&&1 F C(R v. Firemen:s Fund (ns. Co.% 140 5CRA #15 (1&0+ F and C(R v. CA% "$4 5CRA 10" (1&&1 , [+$] Manila (nternational Airport Aut+orit' v. Court of Appeals% :,R, .o, 15545$% *ul6 "$% "$$4% 4&5 5CRA 5&1% 41&, [+1] ;uirino v. 9rospe% :,R, .o, 50+&+% *anuar6 #1% 1&0&% 14& 5CRA +$"% +$4C+$5% citing 9a5in v. Melli!a) 04 Phil, +&4% +&4 (1&4& ,