G.R. No. L-11622             January 28, 1961 Philippines.

Philippines. In due time Stevenson's will was duly admitted to probate by our
court and Ian Murray Statt was appointed ancillary administrator of the estate,
THE COLLECTOR OF INTERNAL REVENUE, petitioner,  who on July 11, 1951, filed a preliminary estate and inheritance tax return with
vs. the reservation of having the properties declared therein finally appraised at
DOUGLAS FISHER AND BETTINA FISHER, and the COURT OF TAX their values six months after the death of Stevenson. Preliminary return was
APPEALS, respondents. made by the ancillary administrator in order to secure the waiver of the
Collector of Internal Revenue on the inheritance tax due on the 210,000 shares
of stock in the Mindanao Mother Lode Mines Inc. which the estate then desired
x---------------------------------------------------------x
to dispose in the United States. Acting upon said return, the Collector of
Internal Revenue accepted the valuation of the personal properties declared
G.R. No. L-11668             January 28, 1961. therein, but increased the appraisal of the two parcels of land located in Baguio
City by fixing their fair market value in the amount of P52.200.00, instead of
DOUGLAS FISHER AND BETTINA FISHER, petitioner,  P43,500.00. After allowing the deductions claimed by the ancillary
vs. administrator for funeral expenses in the amount of P2,000.00 and for judicial
THE COLLECTOR OF INTERNAL REVENUE, and the COURT OF TAX and administration expenses in the sum of P5,500.00, the Collector assessed
APPEALS, respondents. the state the amount of P5,147.98 for estate tax and P10,875,26 or inheritance
tax, or a total of P16,023.23. Both of these assessments were paid by the
BARRERA, J.: estate on June 6, 1952.

This case relates to the determination and settlement of the hereditary estate On September 27, 1952, the ancillary administrator filed in amended estate
left by the deceased Walter G. Stevenson, and the laws applicable thereto. and inheritance tax return in pursuance f his reservation made at the time of
Walter G. Stevenson (born in the Philippines on August 9, 1874 of British filing of the preliminary return and for the purpose of availing of the right
parents and married in the City of Manila on January 23, 1909 to Beatrice granted by section 91 of the National Internal Revenue Code.
Mauricia Stevenson another British subject) died on February 22, 1951 in San
Francisco, California, U.S.A. whereto he and his wife moved and established In this amended return the valuation of the 210,000 shares of stock in the
their permanent residence since May 10, 1945. In his will executed in San Mindanao Mother Lode Mines, Inc. was reduced from 0.38 per share, as
Francisco on May 22, 1947, and which was duly probated in the Superior originally declared, to P0.20 per share, or from a total valuation of P79,800.00
Court of California on April 11, 1951, Stevenson instituted his wife Beatrice as to P42,000.00. This change in price per share of stock was based by the
his sole heiress to the following real and personal properties acquired by the ancillary administrator on the market notation of the stock obtaining at the San
spouses while residing in the Philippines, described and preliminary assessed Francisco California) Stock Exchange six months from the death of Stevenson,
as follows: that is, As of August 22, 1931. In addition, the ancillary administrator made
claim for the following deductions:
Gross Estate
Real Property — 2 parcels of land in Baguio, covered by Funeral expenses ($1,04326)
T.C.T. Nos. 378 and 379 Judicial Expenses:
Personal Property (a) Administrator's Fee P1,204.34
(1) 177 shares of stock of Canacao Estate at P10.00 each (b) Attorney's Fee 6.000.00
(2) 210,000 shares of stock of Mindanao Mother Lode Mines, (c) Judicial and Administration expenses as of
Inc. at P0.38 per share August 9, 1952 1,400.05
(3) Cash credit with Canacao Estate Inc.
(4) Cash, with the Chartered Bank of India, Australia & China    Real Estate Tax for 1951 on Baguio real properties
            Total Gross Assets P130,792.85 (O.R. No. B-1 686836)
Claims against the estate:
On May 22, 1951, ancillary administration proceedings were instituted in the ($5,000.00) P10,000.00 P10,000.00
Court of First Instance of Manila for the settlement of the estate in the Plus: 4% int. p.a. from Feb. 2 to 22, 1951 22.47
 Sub-Total The Collector of Internal Revenue, hereinafter called petitioner assigned four
errors allegedly committed by the trial court, while the assignees, Douglas and
Bettina Fisher hereinafter called respondents, made six assignments of error.
In the meantime, on December 1, 1952, Beatrice Mauricia Stevenson assigned Together, the assigned errors raise the following main issues for resolution by
all her rights and interests in the estate to the spouses, Douglas and Bettina this Court:
Fisher, respondents herein.
(1) Whether or not, in determining the taxable net estate of the decedent, one-
On September 7, 1953, the ancillary administrator filed a second amended half (½) of the net estate should be deducted therefrom as the share of tile
estate and inheritance tax return (Exh. "M-N"). This return declared the same surviving spouse in accordance with our law on conjugal partnership and in
assets of the estate stated in the amended return of September 22, 1952, relation to section 89 (c) of the National Internal revenue Code;
except that it contained new claims for additional exemption and deduction to
wit: (1) deduction in the amount of P4,000.00 from the gross estate of the
(2) Whether or not the estate can avail itself of the reciprocity proviso
decedent as provided for in Section 861 (4) of the U.S. Federal Internal
embodied in Section 122 of the National Internal Revenue Code granting
Revenue Code which the ancillary administrator averred was allowable by way
exemption from the payment of estate and inheritance taxes on the 210,000
of the reciprocity granted by Section 122 of the National Internal Revenue
shares of stock in the Mindanao Mother Lode Mines Inc.;
Code, as then held by the Board of Tax Appeals in case No. 71 entitled
"Housman vs. Collector," August 14, 1952; and (2) exemption from the
imposition of estate and inheritance taxes on the 210,000 shares of stock in (3) Whether or not the estate is entitled to the deduction of P4,000.00 allowed
the Mindanao Mother Lode Mines, Inc. also pursuant to the reciprocity proviso by Section 861, U.S. Internal Revenue Code in relation to section 122 of the
of Section 122 of the National Internal Revenue Code. In this last return, the National Internal Revenue Code;
estate claimed that it was liable only for the amount of P525.34 for estate tax
and P238.06 for inheritance tax and that, as a consequence, it had overpaid (4) Whether or not the real estate properties of the decedent located in Baguio
the government. The refund of the amount of P15,259.83, allegedly overpaid, City and the 210,000 shares of stock in the Mindanao Mother Lode Mines, Inc.,
was accordingly requested by the estate. The Collector denied the claim. For were correctly appraised by the lower court;
this reason, action was commenced in the Court of First Instance of Manila by
respondents, as assignees of Beatrice Mauricia Stevenson, for the recovery of (5) Whether or not the estate is entitled to the following deductions: P8,604.39
said amount. Pursuant to Republic Act No. 1125, the case was forwarded to for judicial and administration expenses; P2,086.52 for funeral expenses;
the Court of Tax Appeals which court, after hearing, rendered decision the P652.50 for real estate taxes; and P10,0,22.47 representing the amount of
dispositive portion of which reads as follows: indebtedness allegedly incurred by the decedent during his lifetime; and

In fine, we are of the opinion and so hold that: (a) the one-half (½) (6) Whether or not the estate is entitled to the payment of interest on the
share of the surviving spouse in the conjugal partnership property as amount it claims to have overpaid the government and to be refundable to it.
diminished by the obligations properly chargeable to such property
should be deducted from the net estate of the deceased Walter G. In deciding the first issue, the lower court applied a well-known doctrine in our
Stevenson, pursuant to Section 89-C of the National Internal Revenue civil law that in the absence of any ante-nuptial agreement, the contracting
Code; (b) the intangible personal property belonging to the estate of parties are presumed to have adopted the system of conjugal partnership as to
said Stevenson is exempt from inheritance tax, pursuant to the the properties acquired during their marriage. The application of this doctrine to
provision of section 122 of the National Internal Revenue Code in the instant case is being disputed, however, by petitioner Collector of Internal
relation to the California Inheritance Tax Law but decedent's estate is Revenue, who contends that pursuant to Article 124 of the New Civil Code, the
not entitled to an exemption of P4,000.00 in the computation of the property relation of the spouses Stevensons ought not to be determined by the
estate tax; (c) for purposes of estate and inheritance taxation the Philippine law, but by the national law of the decedent husband, in this case,
Baguio real estate of the spouses should be valued at P52,200.00, the law of England. It is alleged by petitioner that English laws do not
and 210,000 shares of stock in the Mindanao Mother Lode Mines, Inc. recognize legal partnership between spouses, and that what obtains in that
should be appraised at P0.38 per share; and (d) the estate shall be jurisdiction is another regime of property relation, wherein all properties
entitled to a deduction of P2,000.00 for funeral expenses and judicial acquired during the marriage pertain and belong Exclusively to the husband. In
expenses of P8,604.39. further support of his stand, petitioner cites Article 16 of the New Civil Code
(Art. 10 of the old) to the effect that in testate and intestate proceedings, the
From this decision, both parties appealed. amount of successional rights, among others, is to be determined by the
national law of the decedent.
In this connection, let it be noted that since the mariage of the Stevensons in specific and express provisions of Title VI, Chapter I of our new Civil Code
the Philippines took place in 1909, the applicable law is Article 1325 of the old (Title III, Chapter I of the old Civil Code.) We, therefore, find that the lower
Civil Code and not Article 124 of the New Civil Code which became effective court correctly deducted the half of the conjugal property in determining the
only in 1950. It is true that both articles adhere to the so-called nationality hereditary estate left by the deceased Stevenson.
theory of determining the property relation of spouses where one of them is a
foreigner and they have made no prior agreement as to the administration On the second issue, petitioner disputes the action of the Tax Court in the
disposition, and ownership of their conjugal properties. In such a case, the exempting the respondents from paying inheritance tax on the 210,000 shares
national law of the husband becomes the dominant law in determining the of stock in the Mindanao Mother Lode Mines, Inc. in virtue of the reciprocity
property relation of the spouses. There is, however, a difference between the proviso of Section 122 of the National Internal Revenue Code, in relation to
two articles in that Article 1241 of the new Civil Code expressly provides that it Section 13851 of the California Revenue and Taxation Code, on the ground
shall be applicable regardless of whether the marriage was celebrated in the that: (1) the said proviso of the California Revenue and Taxation Code has not
Philippines or abroad while Article 13252 of the old Civil Code is limited to been duly proven by the respondents; (2) the reciprocity exemptions granted
marriages contracted in a foreign land. by section 122 of the National Internal Revenue Code can only be availed of
by residents of foreign countries and not of residents of a state in the United
It must be noted, however, that what has just been said refers to mixed States; and (3) there is no "total" reciprocity between the Philippines and the
marriages between a Filipino citizen and a foreigner. In the instant case, both state of California in that while the former exempts payment of both estate and
spouses are foreigners who married in the Philippines. Manresa,3 in his inheritance taxes on intangible personal properties, the latter only exempts the
Commentaries, has this to say on this point: payment of inheritance tax..

La regla establecida en el art. 1.315, se refiere a las capitulaciones To prove the pertinent California law, Attorney Allison Gibbs, counsel for herein
otorgadas en Espana y entre espanoles. El 1.325, a las celebradas en respondents, testified that as an active member of the California Bar since
el extranjero cuando alguno de los conyuges es espanol. En cuanto a 1931, he is familiar with the revenue and taxation laws of the State of
la regla procedente cuando dos extranjeros se casan en Espana, o California. When asked by the lower court to state the pertinent California law
dos espanoles en el extranjero hay que atender en el primer caso a la as regards exemption of intangible personal properties, the witness cited
legislacion de pais a que aquellos pertenezean, y en el segundo, a las article 4, section 13851 (a) and (b) of the California Internal and Revenue
reglas generales consignadas en los articulos 9 y 10 de nuestro Code as published in Derring's California Code, a publication of the Bancroft-
Codigo. (Emphasis supplied.) Whitney Company inc. And as part of his testimony, a full quotation of the cited
section was offered in evidence as Exhibits "V-2" by the respondents.
If we adopt the view of Manresa, the law determinative of the property relation
of the Stevensons, married in 1909, would be the English law even if the It is well-settled that foreign laws do not prove themselves in our jurisdiction
marriage was celebrated in the Philippines, both of them being foreigners. But, and our courts are not authorized to take judicial notice of them.5 Like any
as correctly observed by the Tax Court, the pertinent English law that allegedly other fact, they must be alleged and proved.6
vests in the decedent husband full ownership of the properties acquired during
the marriage has not been proven by petitioner. Except for a mere allegation in Section 41, Rule 123 of our Rules of Court prescribes the manner of proving
his answer, which is not sufficient, the record is bereft of any evidence as to foreign laws before our tribunals. However, although we believe it desirable
what English law says on the matter. In the absence of proof, the Court is that these laws be proved in accordance with said rule, we held in the case
justified, therefore, in indulging in what Wharton calls "processual of Willamette Iron and Steel Works v. Muzzal, 61 Phil. 471, that "a reading of
presumption," in presuming that the law of England on this matter is the same sections 300 and 301 of our Code of Civil Procedure (now section 41, Rule
as our law.4 123) will convince one that these sections do not exclude the presentation of
other competent evidence to prove the existence of a foreign law." In that case,
Nor do we believe petitioner can make use of Article 16 of the New Civil Code we considered the testimony of an attorney-at-law of San Francisco, California
(art. 10, old Civil Code) to bolster his stand. A reading of Article 10 of the old who quoted verbatim a section of California Civil Code and who stated that the
Civil Code, which incidentally is the one applicable, shows that it does not same was in force at the time the obligations were contracted, as sufficient
encompass or contemplate to govern the question of property relation between evidence to establish the existence of said law. In line with this view, we find
spouses. Said article distinctly speaks of amount of successional rights  and no error, therefore, on the part of the Tax Court in considering the pertinent
this term, in speaks in our opinion, properly refers to the extent or amount of California law as proved by respondents' witness.
property that each heir is legally entitled to inherit from the estate available for
distribution. It needs to be pointed out that the property relation of spouses, as We now take up the question of reciprocity in exemption from transfer or death
distinguished from their successional rights, is governed differently by the taxes, between the State of California and the Philippines.F
Section 122 of our National Internal Revenue Code, in pertinent part, provides: Applying these laws in the manner the Court of Tax Appeals did in the instant
case, we will have a situation where a Californian, who is non-resident in the
... And, provided, further, That no tax shall be collected under this Title Philippines but has intangible personal properties here, will the subject to the
in respect of intangible personal property (a) if the decedent at the time payment of an estate tax, although exempt from the payment of the inheritance
of his death was a resident of a foreign country which at the time of his tax. This being the case, will a Filipino, non-resident of California, but with
death did not impose a transfer of tax or death tax of any character in intangible personal properties there, be entitled to the exemption clause of the
respect of intangible personal property of citizens of the Philippines not California law, since the Californian has not been exempted from every
residing in that foreign country, or (b) if the laws of the foreign country character of legacy, succession, or death tax because he is, under our law,
of which the decedent was a resident at the time of his death allow a under obligation to pay an estate tax? Upon the other hand, if we exempt the
similar exemption from transfer taxes or death taxes of every character Californian from paying the estate tax, we do not thereby entitle a Filipino to be
in respect of intangible personal property owned by citizens of the exempt from a similar estate tax in California because under the Federal Law,
Philippines not residing in that foreign country." (Emphasis supplied). which is equally enforceable in California he is bound to pay the same, there
being no reciprocity recognized in respect thereto. In both instances, the
Filipino citizen is always at a disadvantage. We do not believe that our
On the other hand, Section 13851 of the California Inheritance Tax Law,
legislature has intended such an unfair situation to the detriment of our own
insofar as pertinent, reads:.
government and people. We, therefore, find and declare that the lower court
erred in exempting the estate in question from payment of the inheritance tax.
"SEC. 13851, Intangibles of nonresident: Conditions. Intangible
personal property is exempt from the tax imposed by this part if the
We are not unaware of our ruling in the case of  Collector of Internal Revenue
decedent at the time of his death was a resident of a territory or
vs. Lara (G.R. Nos. L-9456 & L-9481, prom. January 6, 1958, 54 O.G. 2881)
another State of the United States or of a foreign state or country
exempting the estate of the deceased Hugo H. Miller from payment of the
which then imposed a legacy, succession, or death tax in respect to
inheritance tax imposed by the Collector of Internal Revenue. It will be noted,
intangible personal property of its own residents, but either:.
however, that the issue of reciprocity between the pertinent provisions of our
tax law and that of the State of California was not there squarely raised, and
(a) Did not impose a legacy, succession, or death tax of any character the ruling therein cannot control the determination of the case at bar. Be that
in respect to intangible personal property of residents of this State, or as it may, we now declare that in view of the express provisions of both the
Philippine and California laws that the exemption would apply only if the law of
(b) Had in its laws a reciprocal provision under which intangible the other grants an exemption from legacy, succession, or death taxes of every
personal property of a non-resident was exempt from legacy, character, there could not be partial reciprocity. It would have to be total or
succession, or death taxes of every character if the Territory or other none at all.
State of the United States or foreign state or country in which the
nonresident resided allowed a similar exemption in respect to With respect to the question of deduction or reduction in the amount of
intangible personal property of residents of the Territory or State of the P4,000.00 based on the U.S. Federal Estate Tax Law which is also being
United States or foreign state or country of residence of the decedent." claimed by respondents, we uphold and adhere to our ruling in the Lara case
(Id.) (supra) that the amount of $2,000.00 allowed under the Federal Estate Tax
Law is in the nature of a deduction and not of an exemption regarding which
It is clear from both these quoted provisions that the reciprocity must be total, reciprocity cannot be claimed under the provision of Section 122 of our
that is, with respect to transfer or death taxes of any and every character, in National Internal Revenue Code. Nor is reciprocity authorized under the
the case of the Philippine law, and to legacy, succession, or death taxes of any Federal Law. .
and every character, in the case of the California law. Therefore, if any of the
two states collects or imposes and does not exempt any transfer, death, On the issue of the correctness of the appraisal of the two parcels of land
legacy, or succession tax of any character, the reciprocity does not work. This situated in Baguio City, it is contended that their assessed values, as
is the underlying principle of the reciprocity clauses in both laws. appearing in the tax rolls 6 months after the death of Stevenson, ought to have
been considered by petitioner as their fair market value, pursuant to section 91
In the Philippines, upon the death of any citizen or resident, or non-resident of the National Internal Revenue Code. It should be pointed out, however, that
with properties therein, there are imposed upon his estate and its settlement, in accordance with said proviso the properties are required to be appraised at
both an estate and an inheritance tax. Under the laws of California, only their fair market value and the assessed value thereof shall be considered as
inheritance tax is imposed. On the other hand, the Federal Internal Revenue the fair market value only when evidence to the contrary has not been shown.
Code imposes an estate tax on non-residents not citizens of the United After all review of the record, we are satisfied that such evidence exists to
States,7 but does not provide for any exemption on the basis of reciprocity.
justify the valuation made by petitioner which was sustained by the tax court, to have the properties of the estate declared at their fair market value as of six
for as the tax court aptly observed: months from the time the decedent died..

"The two parcels of land containing 36,264 square meters were valued On the fifth issue, we shall consider the various deductions, from the allowance
by the administrator of the estate in the Estate and Inheritance tax or disallowance of which by the Tax Court, both petitioner and respondents
returns filed by him at P43,500.00 which is the assessed value of said have appealed..
properties. On the other hand, defendant appraised the same at
P52,200.00. It is of common knowledge, and this Court can take Petitioner, in this regard, contends that no evidence of record exists to support
judicial notice of it, that assessments for real estate taxation purposes the allowance of the sum of P8,604.39 for the following expenses:.
are very much lower than the true and fair market value of the
properties at a given time and place. In fact one year after decedent's
death or in 1952 the said properties were sold for a price of 1) Administrator's fee P1,204.
P72,000.00 and there is no showing that special or extraordinary 2) Attorney's fee 6,000.
circumstances caused the sudden increase from the price of
P43,500.00, if we were to accept this value as a fair and reasonable 3) Judicial and Administrative expenses   2,052.
one as of 1951. Even more, the counsel for plaintiffs himself admitted             Total Deductions P8,604.
in open court that he was willing to purchase the said properties at
P2.00 per square meter. In the light of these facts we believe and
therefore hold that the valuation of P52,200.00 of the real estate in An examination of the record discloses, however, that the foregoing items were
Baguio made by defendant is fair, reasonable and justified in the considered deductible by the Tax Court on the basis of their approval by the
premises." (Decision, p. 19). probate court to which said expenses, we may presume, had also been
presented for consideration. It is to be supposed that the probate court would
not have approved said items were they not supported by evidence presented
In respect to the valuation of the 210,000 shares of stock in the Mindanao
by the estate. In allowing the items in question, the Tax Court had before it the
Mother Lode Mines, Inc., (a domestic corporation), respondents contend that
pertinent order of the probate court which was submitted in evidence by
their value should be fixed on the basis of the market quotation obtaining at the
respondents. (Exh. "AA-2", p. 100, record). As the Tax Court said, it found no
San Francisco (California) Stock Exchange, on the theory that the certificates
basis for departing from the findings of the probate court, as it must have been
of stocks were then held in that place and registered with the said stock
satisfied that those expenses were actually incurred. Under the circumstances,
exchange. We cannot agree with respondents' argument. The situs of the
we see no ground to reverse this finding of fact which, under Republic Act of
shares of stock, for purposes of taxation, being located here in the Philippines,
California National Association, which it would appear, that while still living,
as respondents themselves concede and considering that they are sought to
Walter G. Stevenson obtained we are not inclined to pass upon the claim of
be taxed in this jurisdiction, consistent with the exercise of our government's
respondents in respect to the additional amount of P86.52 for funeral expenses
taxing authority, their fair market value should be taxed on the basis of the
which was disapproved by the court a quo for lack of evidence.
price prevailing in our country.

In connection with the deduction of P652.50 representing the amount of realty

Upon the other hand, we find merit in respondents' other contention that the
taxes paid in 1951 on the decedent's two parcels of land in Baguio City, which
said shares of stock commanded a lesser value at the Manila Stock Exchange
respondents claim was disallowed by the Tax Court, we find that this claim has
six months after the death of Stevenson. Through Atty. Allison Gibbs,
in fact been allowed. What happened here, which a careful review of the
respondents have shown that at that time a share of said stock was bid for at
record will reveal, was that the Tax Court, in itemizing the liabilities of the
only P.325 (p. 103, t.s.n.). Significantly, the testimony of Atty. Gibbs in this
estate, viz:
respect has never been questioned nor refuted by petitioner either before this
court or in the court below. In the absence of evidence to the contrary, we are,
therefore, constrained to reverse the Tax Court on this point and to hold that 1) Administrator's fee
the value of a share in the said mining company on August 22, 1951 in the
2) Attorney's fee
Philippine market was P.325 as claimed by respondents..
3) Judicial and Administration expenses as of August 9, 1952
It should be noted that the petitioner and the Tax Court valued each share of             Total
stock of P.38 on the basis of the declaration made by the estate in its
preliminary return. Patently, this should not have been the case, in view of the
fact that the ancillary administrator had reserved and availed of his legal right added the P652.50 for realty taxes as a liability of the estate, to the P1,400.05
for judicial and administration expenses approved by the court, making a total
of P2,052.55, exactly the same figure which was arrived at by the Tax Court for foreign court over which our courts have no control. We do not believe such a
judicial and administration expenses. Hence, the difference between the total procedure is countenanced or contemplated in the Rules of Court.
of P9,256.98 allowed by the Tax Court as deductions, and the P8,604.39 as
found by the probate court, which is P652.50, the same amount allowed for Another reason for the disallowance of this indebtedness as a deduction,
realty taxes. An evident oversight has involuntarily been made in omitting the springs from the provisions of Section 89, letter (d), number (1), of the National
P2,000.00 for funeral expenses in the final computation. This amount has been Internal Revenue Code which reads:
expressly allowed by the lower court and there is no reason why it should not
be. . (d) Miscellaneous provisions — (1) No deductions shall be allowed in
the case of a non-resident not a citizen of the Philippines unless the
We come now to the other claim of respondents that pursuant to section 89(b) executor, administrator or anyone of the heirs, as the case may be,
(1) in relation to section 89(a) (1) (E) and section 89(d), National Internal includes in the return required to be filed under section ninety-three the
Revenue Code, the amount of P10,022.47 should have been allowed the value at the time of his death of that part of the gross estate of the non-
estate as a deduction, because it represented an indebtedness of the resident not situated in the Philippines."
decedent incurred during his lifetime. In support thereof, they offered in
evidence a duly certified claim, presented to the probate court in California by In the case at bar, no such statement of the gross estate of the non-resident
the Bank of California National Association, which it would appear, that while Stevenson not situated in the Philippines appears in the three returns
still living, Walter G. Stevenson obtained a loan of $5,000.00 secured by submitted to the court or to the office of the petitioner Collector of Internal
pledge on 140,000 of his shares of stock in the Mindanao Mother Lode Mines, Revenue. The purpose of this requirement is to enable the revenue officer to
Inc. (Exhs. "Q-Q4", pp. 53-59, record). The Tax Court disallowed this item on determine how much of the indebtedness may be allowed to be deducted,
the ground that the local probate court had not approved the same as a valid pursuant to (b), number (1) of the same section 89 of the Internal Revenue
claim against the estate and because it constituted an indebtedness in respect Code which provides:
to intangible personal property which the Tax Court held to be exempt from
inheritance tax.
(b) Deductions allowed to non-resident estates. — In the case of a
non-resident not a citizen of the Philippines, by deducting from the
For two reasons, we uphold the action of the lower court in disallowing the value of that part of his gross estate which at the time of his death is
deduction. situated in the Philippines —

Firstly, we believe that the approval of the Philippine probate court of this (1) Expenses, losses, indebtedness, and taxes. — That proportion of
particular indebtedness of the decedent is necessary. This is so although the the deductions specified in paragraph (1) of subjection (a) of this
same, it is averred has been already admitted and approved by the section11 which the value of such part bears the value of his entire
corresponding probate court in California, situs of the principal or domiciliary gross estate wherever situated;"
administration. It is true that we have here in the Philippines only an ancillary
administration in this case, but, it has been held, the distinction between
domiciliary or principal administration and ancillary administration serves only In other words, the allowable deduction is only to the extent of the portion of
to distinguish one administration from the other, for the two proceedings are the indebtedness which is equivalent to the proportion that the estate in the
separate and independent.8 The reason for the ancillary administration is that, Philippines bears to the total estate wherever situated. Stated differently, if the
a grant of administration does not ex proprio vigore, have any effect beyond properties in the Philippines constitute but 1/5 of the entire assets wherever
the limits of the country in which it was granted. Hence, we have the situated, then only 1/5 of the indebtedness may be deducted. But since, as
requirement that before a will duly probated outside of the Philippines can have heretofore adverted to, there is no statement of the value of the estate situated
effect here, it must first be proved and allowed before our courts, in much the outside the Philippines, no part of the indebtedness can be allowed to be
same manner as wills originally presented for allowance therein.9 And the deducted, pursuant to Section 89, letter (d), number (1) of the Internal
estate shall be administered under letters testamentary, or letters of Revenue Code.
administration granted by the court, and disposed of according to the will as
probated, after payment of just debts and expenses of administration.10 In other For the reasons thus stated, we affirm the ruling of the lower court disallowing
words, there is a regular administration under the control of the court, where the deduction of the alleged indebtedness in the sum of P10,022.47.
claims must be presented and approved, and expenses of administration
allowed before deductions from the estate can be authorized. Otherwise, we In recapitulation, we hold and declare that:
would have the actuations of our own probate court, in the settlement and
distribution of the estate situated here, subject to the proceedings before the
 (a) only the one-half (1/2) share of the decedent Stevenson in the
conjugal partnership property constitutes his hereditary estate subject
to the estate and inheritance taxes;

(b) the intangible personal property is not exempt from inheritance tax,
there existing no complete total reciprocity as required in section 122
of the National Internal Revenue Code, nor is the decedent's estate
entitled to an exemption of P4,000.00 in the computation of the estate
tax;

(c) for the purpose of the estate and inheritance taxes, the 210,000
shares of stock in the Mindanao Mother Lode Mines, Inc. are to be
appraised at P0.325 per share; and

(d) the P2,000.00 for funeral expenses should be deducted in the

determination of the net asset of the deceased Stevenson.

In all other respects, the decision of the Court of Tax Appeals is affirmed.

Respondent's claim for interest on the amount allegedly overpaid, if any

actually results after a recomputation on the basis of this decision is hereby
denied in line with our recent decision in  Collector of Internal Revenue v. St.
Paul's Hospital  (G.R. No. L-12127, May 29, 1959) wherein we held that, "in the
absence of a statutory provision clearly or expressly directing or authorizing
such payment, and none has been cited by respondents, the National
Government cannot be required to pay interest."

WHEREFORE, as modified in the manner heretofore indicated, the judgment

of the lower court is hereby affirmed in all other respects not inconsistent
herewith. No costs. So ordered.