CTA Case No. 669 (Decision)

JOSE CONCEP8ION , as Ancillary Administrator of the Estate of Mary H. Mi t chell-Roberts (d eceased ), and JACi< F . HITCHELL-TIOBEHTS , Pe t itioner s , - versus - C.T.A . CASE NO . 669 C O~GSS IOI\'ER OF INTERNAL REVENUE , Respondent. X- - - - - - - - - - - - - - X DE C I S I 0 N This is a claim for the refund of the sums of �1,181 .33 and �2 ,616.10 representing estate and in- heri tance taxes, rE:spectivel , , including surcharges and interest, on 50 shares of stock . Jack F . Hi tchell-Roberts and ~~ary H. Mitchell.. Roberts , English subject:?,were married in Eng l and . They did not execute an antenuptial contract. Jose Concepcion, copetitioner, is the ancillary administrator of the estate of Mary H. Mi tc he ll- Roberts . Duri ng their marriage, Jack F. Mitchell- Hober ts and Hary H. Mitchell- Roberts acquired one hundred (1 00 ) shares at a par val ue of P�500 . 00 each of the stock of the Edward J . Ne l l Company, a corporation incorporated under the laws of the Philippines,under the following te r ms : trJ-. F . Jvli tchell-Roberts and/or Na ry H. Mitchell-Roberts as joint tenants with full rights of survivors hip and not as tenants in common .u (Exhs. D, D-1, D-2, BIR rec. pp . 32-34)

, \' J - 2- On February 4 , 1953, Hary H. Hitchell- Roberts died in San Francisco , State of California, U. S . A. (Exh. C, CTA rec . p .. 82) ,her r�esidenc e (Ex b. . M- 1 , BIR rec . p . 65) . Subsequently, Jose Concepcion, as attorney-in- fact of J. F . lfitchell- Roberts , filed an estate and inheritance tax return of the properties left by Mary H. Mitchell- Roberts, declaring therein the 100 shares of common stock of the Edward J . Nell Company (BIR rec . p. 8) . After investigation and deter mination of the book value as of February 4, 1953 of the said shares of stock , computed he r eunder: Capital stock (paid up) 2500 shares @ � 500.00 �������������������� ~1,250,000 . 00 Surplus as of De cember 31, 1952 474,548 . 62 Add: Capital Reserves Reserve for taxes (unexpend ed ) f' 4,3 02 . 00 Reserve .for stiff cont�d.ngencies �� 193,07 0. 53 Reserve for Hdse . contdJrugencies ��� l40,000 . 00 Net profit, J�an . 1953 ������~�� �� 35,902 .47 Net profit, F'eb . 1-4 , 1953 ����� 7,oo3 . 44 38 0 ,278.44 8t�,822.o6 Net worth as of Feb . 4, 1953 ������������� ~2 , 1~,827 . Cb Net worth �������������&����� �2 ,1 04,827 . 06 Divided by: Number of shares issued ���������� 2,~0501 . 53 Book value per share ��o����� ~ ook value of 100 shares ���� 85 ,153. 00 (Exh . 3-A, BIFt rec. p . 39) respondent assessed estate and inheritance taxes in the respective amounts of ::862.22 and 1~1,884 . 62 on the 50 shares on the theory that the 100 shares of stock are c onjugal property , one- half of which belonged to the fI

deceased wife and descended to petitioner Jack F. Hitvhell- Hoberts upon her demise . Petitioners con- tested this assessment, claiming that no estate and inheritance tax is due on the ground that : (1) There was no trar:smission of pro- perty since by the law of England, the hus- band, Jack F. Hitchell-Roberts, owns all the pr operties acquired during the marriage; and (2) The shares of stock were issued to the spouses as joint tenants with full rights of survivor ship . Their protest ha ving been adversely entertained , petiti oners appealed to this Court in CTA Case No . 168 . Howeve r, upon motion of the Commissioner of In- ternal Revenue , the petition for review in said case was di s missed for lack of jurisdiction. Whereupon, on June 14 , 1957 , petitioners paid the taxes in ques- tion amounting to ~1 , 181 . 33 (as estat~ tax) and ~2,6 16. 1 0 (as inheritance tax) , inclusive of delin- quency penalties , and at the same time filed a claim for the refund of said amounts (Exh . A, BIR rec . pp . 83-87) . In the claim for refund, petitioners also invoked the reciprocity provision of Section 122 of the Revenue Code (CTA rec . pp. 92- 93) . Without wait- ing for the decision of respondent on the claim for refund , petitioners instituted the instant appeal on June 11 , 1959 in order to avoid the prescriptive period of two years provided for in Section 306 of the Revenue Code . The iss ues posed by the parties are: 1 . What law governed the property relations of

- 4- the spouses Jack F . Mitchell-Roberts and Mary H. Mitchell- Roberts in respect to the 100 shares of stock in question? 2 . Dee s the lftw on inheritance tax of the State of California, U. S . A. give reciprocity to Section 122 of our Revenue Code? 3 . What is the book val ue of the 100 shares of stock in question as of February 4, 1953? With respect to respondent ' s defense that pe- titioners are now estopped from denying the legality and correctness of the assessment for estate and in- heritance taxes in view of the fact that they paid the same in pursuance of a decision of the Corrunis - sioner which has become final, executory and demand- able as a result of the dismissal of CTA Case No . 168 , we held in a case where the same defense was set forth: ttWe are not in accord with respondent ' s view . While it is true that the assessment appealed from has become final, executory and demandable when petitioner failed to file its appeal within the reglementary period of 30 days , such consequence did not close all avenues avail- able to the taxpayer . Having been blocked , by lapse ci' tirne, in its at tempt to bring the case to this Court under Section 11 of Republic Act No . 1125, petitioner lost no time in aval ling itself of the re medy afforded by Section 306 of the Tax Code by paying the tax and seasonably filing a written claim for refund with the res- -�

- 5- pendent . It was through this procedure that pe- titioner finally succeeded in elevating the case at bar to this Court. 11 (La Paz y Buen Via ,je (La Dicha Cigar & Cigarette Fact ory) vs. Commissi oner of Internal Revenue, CTA Case No . 700, August 4, 1960, aff ' d in G. R. No . 1-17830, Narch 30, 1963) We find no reason justifying a departure fr om the afore- quoted ruling . vle come now to the question as to vlhat law governed the property relations Gf the s pouses Jack F. Mitchell- Roberts and 1:-lary H. Mitchell-Roberts in respect to the 100 shares of stock in t he Edward J. Nell Company . Petitioners maintain that, under the provisions of Sec . 124 of the Civil Code uf the Philippines, the property relation of the Mitchell-Roberts spouses was governed by the law of England which vests in the hus- band ownership over all propert.ies acquired by the wife before and during the marriage., vie quote Se ction 124 hereunder : nArt . 124. If the mc:rriage is between a citizen of the Phili ppines and a foreigner, whether celebrated in the Philippines or abroad, the following rules shall prevail: (1) If the husband is citizen of the Philippines while the wife is a foreigner, the provisions of this Code shall govern their property relations; (2) If the husband is a foreigner and the \..rife is a citizen of the Philippines, the laws of the husband ' s country shall be followed, vlithout prejudice to the provisions of this Code with regard to immovable pro- perty .u:

- 6- Although the above-quoted provisions do not expressly provide f or a situation where both s pous e s ar e foreign ers, it is contended by petitioners that the same, neva�the- less, should be made to apply to t he sp ouses, Jack and Jl1:ary Nitchell-Roberts. They cite the commentary of 1-~an resa on Section 1325 of the Spanish Civil Code from whence A.rticle 124 was taken . rtpor el contrario, ya se celebre el matrimonio en Espapa or fuera de la misma entre dos extranjeros, o entre un ex- tranjero y una espanola, si nada se esti- pulo expresante, se entienden casados bajo el regimen del derecho comun en el pais del varon. Parece desprenderse de estas pala- bras del Codigo en el Art . 1325, que si el conjuge varon es frances, se entiende aceptado el regimen o sistema restringido de c omunidad legal existente in Francia; x x x . " (Tome IX, p . 172) On the other hand, respondent believes that Ar- ticle 16, not Article 124, of t he Civil Code should determine the rights of the spouses on their personal pro pertles located in t he Philippines . Article 16 states: ttArt . 16 . Real proper t y as well as pers onal pro perty is subject to the law of the country where it is situated. However, intestate and testamentary suc - cessions, both with respect to the order of succession and to the amount of successional rights and to the intrinsic validity of testa- mentary provisions , shall be regulated by the hational law of the per s on whose succession is under consideration, whatever may be the nature of the property and regardless of the country wherein said property may be found . 't It appears ttat the spouses Jack F. Mitchell- Roberts and Hary H. Hitchell- Roberts \vere married in Englani in 1908 (see Exh . A., BIR rec . p . 87) . There-

- 7- fore , the applicable law is Article 1325 of the old Civil Code and not Article 124 of the New Civil Code whic h took effect only in 1950 (Co l lector of I nter nal Revenue vs . Fisher , et al ., G. R. No . L-11622; Januar�y 28, 1961 ; Fisher , et al . vs. Collector of Internal Re - venue, et al . , G. R. 1':-o . L-11668, January 23, 1961) . We quote Article 1325: uArt . 1325 . Should the marri~ge be con- tracted in a for eign country between a Spaniard and a foreign woman or between a foreigner and a Spanish woman , and the contracting parties should not make a stat ement or stipula tion with respect to their property , it s hall be under- stood , when the husband is a Spaniard , t hat he marries under the system of the legal conjugal partnership , and when the wife is a Spaniard, that she marries under the systEWJ. of law in force in the husband ' s count ry , all without prejudice to the provisions of this code with respect t o real property . tt At the risk of bei ng repetitious, we restate 11J'hat I�1anresa said on the quoted provi sions ; "Por el contrario, ya se celebre el ma trimonio en Espafi.a o f uera de la misma -r- entre dos extranjeros , ,o entre un extran- jero y una espanola , se nada se estipulo 'f expresant e , se entienden casados bajo el regimen del derecho comun en el pais del varon. Parece desprenderse de estas pala- bras del Codi go en el Art . 1325 , que si el c onjuge varon es frances , se entiende aceptado el reg i men o sistema restringido de comunidad legal existente in Francia ; x x x . t' (Torno IX , p . 172) Article 1325 , as explained (in Torno IX, p . 172) by Nanresa, adhe res to the so- called na t ionality theory in determining the property relation of spouses where one of them is a foreigner and they have made mo antenuptial c ontract relative to their property right s and interests . It decrees that the

-c national law of the husband is the dominant law in ascertaining the property relation between spouses . Considering that the Mi t chell- Roberts spouses, both non- resident English subjects, were married in England, we believe and so hold that tb.eir property rela ti ::ni was governed by the law of England which is the national law of the husbando Under Englis h law, as proved by petitioners (Exhibits J ~ E-1), all properties acquired by the wife bef ore and during the marriage belong to the husband . Accordingly, the 50 shares of stock of Edviard J . Nell and Company which Mary H. Hi tchell- Roberts acquired during her marriage belong to her husband, peti tior-.er Jack F. :vitchell- Roberts . There was no transmission of property fr om wife to husband . IIence, no death tax, estate and inheritance, is due on said 50 shares of stock . The instant case should be contra- distirguished from the cases of the Collector of Internal Revenue vs. Douglas Fisher and Dettina Fisher and the Co 'J.2:' !: of Tax Appeals, G. R. No . 1- 11622, and Douglas Fisher and Bettina Fisher vs . the Collector of Internal Re- venue and the Court of Tax .b.ppeals, G. R. No . 1-11668, promulgated on January 28, 1961, wherein the Supreme Court, affirming the decision of this Court, applied the Phili1)pine law instead of the law of England in determining the property relation of the spouses . In those cases, the husband was born in the Philippines of British parents and was married in the Philippines to l(

- 9- a British subject on January 23 , 1909 . The spouses res- ided in the Philippines ur.til 1945 when they established tbeir residence in the State of California , U. S . A. Al- though the law of England was invoked by the Collector of Internal Revenue in said cases , no proof was adduced to establish the same . In the i nstant case , the spouses were British subjects since their births , \vere married in England in 1908, and never resided in the 1-'hilippines . The English law on the pro� er ty relation of husband and wife is not only invoked , but proved as well . vii th respect to the contention of respondent that Arti cle 124 s hould be read in conjunction with ~rticle 16 of the New Civil Code , suff lee it to say that the Jaw applicable, as we pointed out earlier , is Article 1325 of the dld Civil Code . Article 1325,even if read with Article 10 (from wllich Article 16 was derived) of the old Civil Code 1would not admit of the pretention of respon- dent inasmuch as, unlike Article 16 of the r~w Civil Code, the first paragraph of Art:cle 12 does not mention per- sonal pro'erty . Having thus dispo ed of the first issue , 111e find it unnecessary to consider the other questions ra~sed in this appeal . 'l'HE F'OLFGOJl~G COl\SIDElu~~IOFS , respondent IH VIEW Commissioner of Internal nevenue is hereby ordered to refund the total sum of ;3,797 . 43 tc pet~tione rs, wit ho ut pronouncement as to costs . SO C1RDEhED . QuCeziotny' September jC, 1964 I CONCUR= ~I