VELILLA V.

POSADAS
J. Butte | December 19, 1935
Topic 1: Kinds of Domicile
Nature: Appeal from a judgement of the CFI of Manila

PARTIES:
 A. L. VELILLA, administrator of the estate of Arthur Graydon Moody, Plaintiff-Appellant

 JUAN POSADAS, JR., Collector of Internal Revenue, Defendant-Appellee

RELEVANT INFORMATION
A. PRIL ISSUE: W/N the principles of lex loci celebrationis, lex loci contracus and "state of the most significant relationship rule" may be invoked to deprive the trial
court of its subject matter jurisdiction - NO
B. NATURE OF THE SUIT:
 Cause of Action: Cause of action of complainant is breach of contract, but this case is really about the motion to dismiss of defendant

 Subject Matter – contract

 Kind of Action: In personam (specific performance with damages)

C. MEANS TO ATTAIN JURISDICTION: not mentioned
D. FOREIGN ELEMENT/S: The ICA subject of the litigation was entered into and perfected in Tokyo, Japan, by Japanese nationals, and written wholly in the
Japanese language
E. CONFLICTING RULES: No conflicting rules pointed out

SYNOPSIS:
Ida Palmer was declared sole heiress of the deceased Moody's estate. The Collector of Internal Revenue assessed inheritance tax against the estate. The estate paid under
protest but the protest was eventually overruled by the CIR. Ida Palmer argues that there is no valid law or regulation of the Government of the Philippine Islands under or by
virtue of which any inheritance tax may be levied, assessed or collected upon transfer, by death and succession, of intangible personal properties of a person not domiciled in
the Philippine Islands

Ida Palmer's argument that taxes may not be imposed against Arthur Moody's estate because the deceased is not domiciled in the PH and there is no law imposing inheritance
tax on properties of persons not domiciled in the PH should fail. The Court found that Arthur Moody was domiciled in the Philippines until his death.

The Civil Code (art. 40) defines the domicile of natural persons as "the place of their usual residence."
To effect the abandonment of one’s domicile, there must be a deliberate and provable choice of a new domicile, coupled with actual residence in the place chosen, with a
declared or provable intent that it should be one’s fixed and permanent place of abode, one’s home.
In this case, it was found that Moody resided in Manila from his arrival in 1902/1903, did business in the Philippines and acquired the subject properties, and surreptitiously left the
Philippines only in February 1928. Moody left and refused to return to the Philippines because he was afflicted with leprosy and he knew that he would be confined to the Culion
Leper Colony if he should return. While he was in Calcutta, India (where he eventually died), he made letters to Wendt who was in Manila, where Moody offered to sell his shares
in a Philippine corporation and mentioned that he does not anymore intend to return to Manila. However, nothing on the record shows that Moody intended to move his domicile to
India.
Neither was there evidence that Moody intended to move his domicile to Paris where he previously stayed after he left Manila in order to receive treatment. There is no evidence
as to where in Paris he had any fixed abode that he intended to be his permanent home. There is no evidence that he acquired any property in Paris or engaged in any settled
business on his own account there. There is no evidence of any affirmative factors that prove the establishment of a legal domicile there. The negative evidence that he told
Cooley that he did not intend to return to Manila does not prove that he had established a domicile in Paris.

DOCTRINE:
The Civil Code (art. 40) defines the domicile of natural persons as "the place of their usual residence."
To effect the abandonment of one’s domicile, there must be a deliberate and provable choice of a new domicile, coupled with actual residence in the place chosen, with a
declared or provable intent that it should be one’s fixed and permanent place of abode, one’s home.

FACTS:
 Arthur Moody, an American citizen, came to the Philippine Islands in 1902 or 1903 and engaged actively in business in these islands up to the time of his death in

Calcutta, India on February 18, 1931.

 He has no business elsewhere and at the time of his death, he left an estate consisting principally of bonds and shares of stock of corporations organized under the laws

of the PH, bank deposits and other intangible and personal properties.
o All said properties were located and had their situs within the PH.
  Moody also had an undated will, executed in Manila in accordance with the formalities of the PH law, in which he bequeathed all his property to his sister, Ida Palmer

(citizen of New York, USA).

 Ida Palmer filed a petition for the probate of Moody's will. The will was eventually probated and Palmer was declared the sole heiress of the deceased Arthur Moody on

July 14, 1931.

 On July 22, 1931, the Bureau of Internal Revenue prepared for the estate of Arthur Moody an inheritance tax return. An income tax return for the fractional period from

January 1, 1931 to June 30, 1931 was also prepared by the BIR for the estate of the deceased.
 The estate of Moody paid under protest a total sum of P90,019.75 of which P77,018.39 covers the assessment for inheritance tax and the sum of P13,001.41 covers the

assessment for the income tax of said estate.

 The CIR however overruled the protest made by Ida Palmer.

 Ida Palmer then filed an action to recover from defendant Collector of Internal Revenue the income and inheritance taxes assessed against the estate of Arthur G.

Moody.
o Ida Palmer argues that there is no valid law or regulation of the Government of the Philippine Islands under or by virtue of which any inheritance tax may

be levied, assessed or collected upon transfer, by death and succession, of intangible personal properties of a person not domiciled in the Philippine
Islands
 The CIF sided with the CIR thus, Ida Palmer appealed the decision to the SC.

ISSUES/HELD:

W/N the estate of Arthur G. Moody is liable to pay the inheritance taxe assessed against it by the BIR – YES
 Under Sec. 1536 of the Revised Administrative Code provides that Every transmission by virtue of inheritance x x x of real property located in the Philippine; of any

shares, obligations, or bonds issued by any corporation x x x organized or constituted in the Philippine Islands in accordance with its laws; of any shares or rights in any
x x x business or industry established in the Philippine Islands or of any property located in the Philippine Islands shall be subject to the following tax: xxx
o Since Arthur Moody's estate consists of property whose situs is within the Philippine Islands, it may be imposed with taxes by the BIR

[RELEVANT] Ida Palmer's argument that taxes may not be imposed against Arthur Moody's estate because the deceased is not domiciled in the PH and there is no law imposing
inheritance tax on properties of persons not domiciled in the PH should fail. The Court found that Arthur Moody was domiciled in the Philippines until his death.
 The Civil Code (art. 40) defines the domicile of natural persons as "the place of their usual residence."

 To effect the abandonment of one’s domicile, there must be a deliberate and provable choice of a new domicile, coupled with actual residence in the place chosen, with

a declared or provable intent that it should be one’s fixed and permanent place of abode, one’s home.
 IN THIS CASE:
o Moody's usual residence is in Manila.
 Moody was never married and there is no doubt that he had his legal domicile in the Philippine Islands from 1902/1903 forward, during
which he accumulated fortune from his business in the Philippines. He lived in the Elk's Club in Manila for many years until he left Manila
during the latter part of February, 1928
o Moody only left Manila in order to evade confinement after he was afflicted with leprosy.
 Moody left because he was afflicted with leprosy in an advanced stage. When he knew that he would be reported to the Philippine
authorities for confinement in the Culion Leper Colony, Moody surreptitiously left the country.
 Moody then lived with a friend in Paris, France from March to April of 1929 where he received treatment at the Pasteur Institute.
 The record does not show where Moody was thereafter until he wrote a letter on November 26, 1930 to Harry Wendt of Manila, offering to
sell him his interest in the Camera Supply Company (PH corporation). In said letter, Moody stated: "Certainly I'll never return there to live or
enter business again". He wrote more letters (December 12, 1930; January 3, 1931) along the same lines to Wendt.
 As Moody died of leprosy less than two months after these letters were written, there can be no doubt that he would have been immediately
segregated in the Culion Leper Colony had he returned to the Philippine Islands. He was, therefore, a fugitive, not from justice, but from
confinement in the Culion Leper Colony in accordance with the law of the Philippine Islands.
o There is no record showing that Moody established a new domicile in a foreign country.
 There were no claims from Ida Palmer that Moody moved his domicile to Calcutta (where he made the letters and died) nor to Paris in
February 1929.
 There is no evidence as to where in Paris he had any fixed abode that he intended to be his permanent home. There is no evidence that he
acquired any property in Paris or engaged in any settled business on his own account there. There is no evidence of any affirmative factors
that prove the establishment of a legal domicile there.
 The negative evidence that he told Cooley that he did not intend to return to Manila does not prove that he had established a domicile in
Paris.
DISPOSITIVE:

Finding no merit in any of the assignments of error of the appellant, we affirm the judgment of the trial court, first, because the property in the estate of Arthur G. Moody at the time of
his death was located and had its situs within the Philippine Islands and, second, because his legal domicile up to the time of his death was within the Philippine Islands. Costs against
the Appellant.

SEPARATE OPINION

Goddard, J., concurring:

 The evidence clearly establishes that Moody had permanently abandoned his residence in the Philippine Islands. But even so, his estate would be liable for the taxes

which the plaintiff-appellant seeks to recover in this action. Section 1536 of the Revised Administrative Code makes no distinction between the estates of residents and
of non-residents of the Philippine Islands.

[IRRELEVANT] W/N assessment of income tax against the Moody estate is illegal – NO
 That the amount of P259,986.69 was received by the estate of Moody as dividends declared out of surplus by the Camera Supply Company is clearly established by the evidence.

 The appellant contends that this assessment involves triple taxation: First, because the corporation paid income tax on the same amount during the years it was accumulated as surplus;

second, that an inheritance tax on the same amount was assessed against the estate, and third, the same amount is assessed as income of the estate.
o As to the first, it appears from the collector’s assessment, Exhibit II, that the collector allowed the estate a deduction of the normal income tax on said amount because it

had already been paid at the source by the Camera Supply Company. The only income tax assessed against the estate was the additional tax or surtax that had not been
paid by the Camera Supply Company for which the estate, having actually received the income, is clearly liable.
o As to the second alleged double taxation, it is clear that the inheritance tax and the additional income tax in question are entirely distinct. They are assessed under different

statutes and we are not convinced by the appellant’s argument that the estate which received these dividends should not be held liable for the payment of the income tax
thereon because the operation was simply the conversion of the surplus of the corporation into the property of the individual stockholders. Section 4 of Act No. 2833 as
amended, which is relied on by the appellant, plainly provides that the income from exempt property shall be included as income subject to tax.