Case Summary (G.R. No. 46720)
Petitioner and Respondent
Petitioner/Appellant: Wells Fargo Bank & Union Trust Company
Respondent/Appellee: Collector of Internal Revenue
Key Dates
September 16, 1932 – Death of Birdie Lillian Eye
June 28, 1940 – Decision by the Supreme Court of the Philippines
Applicable Law
1935 Philippine Constitution; Administrative Code, Section 1536 (as amended) imposing inheritance tax on shares in Philippine‐organized corporations; principles of due process and situs of intangible property as developed in U.S. Supreme Court decisions.
Factual Background
Decedent died domiciled in California, owning a half-interest in 70,000 shares of the Benguet Consolidated Mining Company, a Philippine partnership. Her will was probated in California, and U.S. federal and California inheritance taxes on the shares were paid. The Philippine Collector of Internal Revenue assessed Philippine inheritance tax on the transmission of 35,500 shares to the trust. Wells Fargo filed a declaratory‐judgment petition in the Manila Court of First Instance, disputing Philippine tax jurisdiction over intangibles of a nonresident decedent.
Issue
Whether the transmission by inheritance of shares in a Philippine‐organized corporation owned by a nonresident decedent is subject to Philippine inheritance tax.
Statutory Provision
Administrative Code, Section 1536 (as amended): “Every transmission by virtue of inheritance of any share issued by any corporation or sociedad anonima organized or constituted in the Philippines is subject to the [inheritance] tax herein provided.”
Petitioner’s Argument
Intangible property follows the domicile of its owner (mobilia sequuntur personam). Citing U.S. cases (Farmers Loan & Tr. Co. v. Minnesota; Baldwin v. Missouri; Beidler v. South Carolina; First Nat’l Bank of Boston v. Maine), petitioner contended that due process prohibits taxation of a nonresident’s intangibles by the jurisdiction of incorporation.
Government’s Position and Lower Court Ruling
The Court of First Instance applied Section 1536, holding the inheritance of shares in a Philippine entity taxable in the Philippines. It found that property situated in the Philippines may be taxed here regardless of the decedent’s domicile.
Court’s Analysis on Philippine Taxing Power
– The Philippines, though under U.S. sovereignty in international law, is a separate domestic jurisdiction; unlike U.S. states, there is no constitutional limitation against one jurisdiction taxing property physically in its territory.
– The Philippine Government has inherent power to tax transmissions by inheritance of property within its borders unless the law is arbitrary, discriminatory, or violative of due process.
U.S. Case Law Consideration
– Burnet v. Brooks: federal estate tax on intangibles of a nonresident decedent upheld notwithstanding due‐process concerns, as the Government may tax property within its jurisdiction.
– Curry v. McCanless: multiple states may constitutionally tax intangibles when the owner’s activities invoke the protection and be
Case Syllabus (G.R. No. 46720)
Procedural History
- Appeal from a declaratory judgment rendered by the Court of First Instance of Manila (G.R. No. 46720, June 28, 1940).
- The lower court held that the transmission by will of 35,000 shares of stock (one-half conjugal share in 70,000 shares) in the Benguet Consolidated Mining Company is subject to Philippine inheritance tax.
- Petitioner-appellant, Wells Fargo Bank & Union Trust Company (trustee under the decedent’s will), filed this appeal contesting the tax assessment.
Facts of the Case
- Decedent: Birdie Lillian Eye, wife of Clyde Milton Eye, domiciled and last resident in Los Angeles, California; died on September 16, 1932.
- Estate included one-half conjugal share in 70,000 shares of stock of Benguet Consolidated Mining Company, a Philippine sociedad anónima with principal office in Manila.
- Decedent’s will was probated and the estate administered in California; Federal and State of California inheritance taxes on the shares were duly paid.
- Wells Fargo Bank & Union Trust Company was appointed trustee under the will.
- Philippine Collector of Internal Revenue sought to assess Philippine inheritance tax on the same shares; petitioner filed for a declaratory judgment.
Legal Issue
- Whether the transmission by inheritance of shares in a Philippine corporation, owned by a non-resident decedent domiciled in California, is subject to Philippine inheritance tax under Section 1536 of the Administrative Code, as amended.
Applicable Statutory Provision
- Administrative Code, Section 1536 (as amended): “Every transmission by virtue of inheritance of any share issued by any corporation or sociedad anónima organized or constituted in the Philippines, is subject to the tax therein provided.”
Parties’ Arguments
- Petitioner-Appellant’s Contentions:
- Philippine inheritance tax is a tax on transmission, not on property.
- Intangible personal property (shares) has its situs at the decedent’s domicile; therefore, only