Title
Beam vs. Yatco
Case
G.R. No. 48122
Decision Date
Oct 29, 1948
Plaintiffs sought refund of Philippine inheritance tax, claiming California residency exempted properties. Court ruled properties, as community assets under California law, were taxable in the Philippines due to their situs.
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Case Digest (G.R. No. 48122)

Facts:

Parties Involved:

  • Plaintiffs and Appellants: A. W. Beam, A. W. Beam, Jr., and Eugenia Beam (minors assisted by their guardian ad litem, John W. Haussermann).
  • Defendant and Appellant: A. L. Yatco, Collector of Internal Revenue of the Philippines.

Background:

  • On July 17, 1937, plaintiffs filed a complaint seeking a refund of P343,298.72 paid as inheritance tax. The tax was assessed on the estate of Lydia McKee Beam, who died on October 18, 1934.
  • The inheritance tax was assessed on properties located in the Philippines, including shares in Beam Investment Company, Benguet Consolidated Mining Company, Balatoc Mining Company, and deposits in Manila Building and Loan Association.
  • The plaintiffs paid the tax under protest, claiming that the properties were not subject to Philippine inheritance tax due to their alleged California citizenship and residence.

Key Facts:

  1. Properties in Question:

    • Lydia McKee Beam owned 15,000 shares of Beam Investment Company.
    • A. W. Beam owned 88,163 shares of Beam Investment Company, 500 shares of Benguet Consolidated Mining Company, and 2,080 shares of Balatoc Mining Company.
    • A. W. Beam, Jr. owned 5,000 shares of Beam Investment Company and a deposit of P2,933.18 in Manila Building and Loan Association.
    • Eugenia Beam owned 5,000 shares of Beam Investment Company and a deposit of P2,933.18 in Manila Building and Loan Association.
  2. Tax Assessment:

    • The Collector of Internal Revenue assessed the total value of the estate at P8,100,544.91, with half (P4,050,272.46) attributed to Lydia McKee Beam’s estate.
    • Inheritance taxes were assessed and paid by the plaintiffs under protest.
  3. Residency and Citizenship:

    • Plaintiffs claimed that they were residents and citizens of California at the time of Lydia McKee Beam’s death, and therefore, the properties should not be subject to Philippine inheritance tax.
    • The defendant argued that the plaintiffs were still residents of the Philippines at the time of death, making the properties subject to Philippine inheritance tax.
  4. Legal Proceedings:

    • The lower court dismissed the plaintiffs’ complaint, ruling that the properties were subject to Philippine inheritance tax.
    • Plaintiffs appealed, arguing that the lower court erred in its factual conclusions regarding their residency and citizenship.

Issue:

  1. Residency and Citizenship:

    • Whether the plaintiffs, particularly A. W. Beam and his deceased wife Lydia McKee Beam, were residents and citizens of California at the time of her death, thereby exempting the properties from Philippine inheritance tax.
  2. Applicable Law:

    • Whether the California law on community property applies to the properties in question, given the plaintiffs’ alleged California citizenship.
  3. Situs of the Properties:

    • Whether the properties, particularly the shares in Philippine corporations, have their situs in the Philippines, making them subject to Philippine inheritance tax.
  4. Burden of Proof:

    • Whether the plaintiffs sufficiently proved their Utah citizenship to invoke Utah law, which they claimed would exempt the properties from Philippine inheritance tax.

Ruling:

The Supreme Court affirmed the lower court’s decision, holding that:

  1. Residency and Citizenship:

    • A. W. Beam and his wife became residents and citizens of California in 1923, as evidenced by their establishment of a permanent residence in California and their intention to live there permanently.
    • Therefore, the California law on community property applies to the properties acquired during their marriage.
  2. Applicable Law:

    • Under California law, the properties acquired during marriage are considered community property, and upon the death of one spouse, half of the community property passes to the surviving spouse, while the other half is subject to inheritance tax.
    • The properties in question, being community property, were subject to Philippine inheritance tax.
  3. Situs of the Properties:

    • The shares in Philippine corporations have their situs in the Philippines, as evidenced by the location of the stock certificates and the fact that the corporations are organized under Philippine law.
    • Therefore, the properties are subject to Philippine inheritance tax under Section 1536 of the Revised Administrative Code.
  4. Burden of Proof:

    • The plaintiffs failed to sufficiently prove their Utah citizenship, and therefore, they could not invoke Utah law to exempt the properties from Philippine inheritance tax.

Ratio:

  1. Residency and Citizenship:

    • The court found that A. W. Beam and his wife established a permanent residence in California in 1923, and their actions (such as purchasing a home, sending their children to school in California, and spending most of their time there) demonstrated their intention to reside permanently in California.
    • Under the 14th Amendment of the U.S. Constitution, a person becomes a citizen of the state where they establish permanent residence.
  2. Applicable Law:

    • The court applied the principle of lex domicilii (law of the domicile) under Article 10 of the Civil Code, which provides that the personal law of the deceased (in this case, California law) governs the disposition of their personal property.
    • California law treats properties acquired during marriage as community property, and upon the death of one spouse, half of the community property passes to the surviving spouse, while the other half is subject to inheritance tax.
  3. Situs of the Properties:

    • The court held that the situs of shares in Philippine corporations is in the Philippines, as the corporations are organized under Philippine law, and the stock certificates are located in the Philippines.
    • Therefore, the properties are subject to Philippine inheritance tax under Section 1536 of the Revised Administrative Code.
  4. Burden of Proof:

    • The plaintiffs failed to provide sufficient evidence to prove their Utah citizenship, and therefore, they could not invoke Utah law to exempt the properties from Philippine inheritance tax.
    • The court emphasized that the burden of proof lies with the plaintiffs to establish their right to recover the taxes paid, and they failed to meet this burden.

Conclusion:

The Supreme Court affirmed the lower court’s decision, ruling that the properties in question were subject to Philippine inheritance tax. The court held that the plaintiffs were residents and citizens of California at the time of Lydia McKee Beam’s death, and therefore, California law on community property applied. The properties, being community property, were subject to inheritance tax, and the situs of the shares in Philippine corporations was in the Philippines, making them subject to Philippine tax laws.


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