Definition

Definition | Succession | WILLS AND SUCCESSION

CIVIL LAW > VI. WILLS AND SUCCESSION > A. Succession > 1. Definition

In Philippine civil law, succession refers to the legal process through which the rights, obligations, and properties of a deceased person (decedent) are transferred to his or her heirs, devisees, or legatees. This process is governed primarily by the Civil Code of the Philippines under Book III, Title VIII.

I. Definition of Succession

Under Article 774 of the Civil Code of the Philippines, succession is defined as follows:

"Succession is a mode of acquisition by virtue of which the property, rights, and obligations to the extent of the value of the inheritance of a person are transmitted through his death to another or others either by his will or by operation of law."

This definition emphasizes that succession is an instrument for the transfer of property rights from the decedent to the heirs and involves both:

  1. Voluntary Succession: When the transfer occurs through a valid will.
  2. Intestate Succession: When there is no will, or if the will is deemed invalid or partially defective.

II. Characteristics of Succession

  1. Post-Mortem: Succession only occurs upon the death of the decedent, making it distinct from inter vivos (among the living) transfers of property.
  2. Transfer of Obligations and Rights: Succession does not solely involve assets but also includes obligations of the decedent, limited to the extent of the value of the inheritance. Heirs generally do not inherit the obligations exceeding this value.
  3. Modes of Succession:
    • Testamentary: Governed by a will, explicitly outlining the decedent’s wishes.
    • Legal or Intestate: Governed by law in the absence or invalidity of a will.
    • Mixed Succession: When a valid will disposes of part of the estate, and the remainder is governed by intestate succession.

III. Terminology in Succession

  1. Decedent: The deceased individual whose estate is the subject of succession.
  2. Heirs: Individuals designated by law or will to inherit from the decedent. There are two types:
    • Compulsory Heirs: Individuals whom the law mandates must receive a portion of the inheritance, such as legitimate children, legitimate ascendants, and the surviving spouse.
    • Voluntary Heirs: Persons named in the will who are not compulsory heirs.
  3. Devisees and Legatees: Terms specific to testamentary succession:
    • Devisees: Persons who receive real property under a will.
    • Legatees: Persons who receive personal property under a will.

IV. Distinctions in Types of Succession

  1. Intestate Succession: When there is no valid will, the estate is distributed according to statutory rules outlined in the Civil Code.
  2. Testamentary Succession: When a valid will governs the distribution of assets.
    • Wills can be of two types under Philippine law:
      • Notarial or Ordinary Will: Executed with witnesses before a notary public.
      • Holographic Will: Handwritten, dated, and signed by the testator without the need for witnesses.

V. Elements of Succession

  1. Testator or Decedent: The person who has passed away and whose estate is being settled.
  2. Estate or Inheritance: The totality of the decedent's property, rights, and obligations that form part of the succession.
  3. Successor: The person or persons to whom the estate is transmitted.
  4. Title: The legal basis by which the succession operates, which could be a will or statutory law.
  5. Transfer of Ownership: The effectuation of the change in ownership of property from the decedent to the successor.

VI. Purpose of Succession

Succession serves to:

  1. Honor the Will of the Decedent: If the decedent left a will, Philippine law, as far as it permits, enforces their wishes.
  2. Provide for Family Members: By granting certain family members a legally protected share of the estate.
  3. Maintain Social Order: Through predictable and enforceable laws governing succession.

VII. Right to Succeed

In Philippine succession law, the right to succeed may be based on the following:

  1. Legitimacy: Compulsory heirs are typically legitimate heirs.
  2. Survivorship: The successor must survive the decedent to inherit.
  3. Capacity and Worthiness: Persons deemed unworthy due to specific legal disqualifications (e.g., convicted of attempting to harm the decedent) are barred from inheriting.

VIII. Governing Law and Jurisdiction

The applicable law to determine succession rights is the nationality of the decedent at the time of death, under Article 16 of the Civil Code. Philippine courts maintain jurisdiction if the decedent is a Filipino national or if the properties in question are located within the Philippines.

IX. Legal Principles Affecting Succession

  1. Reserves and Legitime: The portions of the estate reserved by law for compulsory heirs, particularly when there are surviving descendants, ascendants, or a spouse.
  2. Freedom of Disposition: While the testator has freedom to distribute their assets via will, the law restricts total freedom to protect the rights of compulsory heirs.
  3. Doctrine of Acceptance and Repudiation: Heirs have the right to either accept or renounce their inheritance within a reasonable time following the decedent’s death.

X. Conclusion

Succession, as defined in Philippine civil law, is a structured and legally regulated process that facilitates the orderly transfer of assets and liabilities from a deceased individual to designated heirs, either through testamentary directives or statutory guidelines. It aims to balance the testamentary freedom of the decedent with the interests and rights of compulsory heirs, promoting social stability and the continuity of family wealth. This legal framework ensures fairness and predictability in handling the decedent’s estate, providing protections for both the decedent’s expressed wishes and the rightful heirs.

Definition | General Provisions | Obligations | OBLIGATIONS AND CONTRACTS

Topic: Civil Law – Obligations and Contracts – Obligations – General Provisions – Definition

Civil Law in the Philippines: Obligations are foundational concepts under Civil Law, specifically under the chapter of Obligations and Contracts in the Philippine Civil Code. The law of obligations establishes the legal binding force of commitments and responsibilities owed between parties, while contracts serve as a formalized means of securing such obligations.

Definition of Obligation

An obligation is a juridical necessity to give, to do, or not to do something, as stated in Article 1156 of the Civil Code of the Philippines. This definition captures the core idea that an obligation imposes a legal bond between two parties, compelling one party (the debtor or obligor) to fulfill a commitment towards the other party (the creditor or obligee). If the debtor fails to perform this commitment, legal mechanisms can be enforced to obtain compliance or restitution.

Essential Characteristics of Obligations

  1. Juridical Necessity: Obligations are enforceable by law. They are not merely moral or social duties but rather are backed by the legal system. If the debtor fails to comply, the creditor may seek redress through the courts.

  2. Object of Obligation: The object of an obligation involves:

    • To give – A duty to transfer ownership or possession of something.
    • To do – A duty to perform a particular action.
    • Not to do – A duty to abstain from a certain act or conduct.

  3. Parties:

    • Obligor (Debtor): The one who has the duty or responsibility to fulfill the obligation.
    • Obligee (Creditor): The one entitled to demand the performance of the obligation.

Sources of Obligations

The Civil Code, under Article 1157, enumerates the following sources of obligations:

  1. Law: Obligations that arise by operation of law are imposed without the necessity of consent or agreement. For example, obligations to support family members, pay taxes, or obey laws are based on statutory provisions.

  2. Contracts: Voluntary agreements between two or more parties create obligations that have the force of law between the contracting parties. This is governed by Article 1306, which states that parties may establish their agreements as long as they do not contravene law, morals, good customs, public order, or public policy.

  3. Quasi-Contracts: These are obligations that arise not from a contract but from lawful, voluntary, and unilateral acts which are enforceable as obligations. Common examples include solutio indebiti (where one party mistakenly receives something not due) and negotiorum gestio (where one party manages another's affairs without their authority).

  4. Delicts or Crimes: An obligation may arise from criminal acts, creating civil liability. Under Article 100 of the Revised Penal Code, every person criminally liable for a felony is also civilly liable.

  5. Quasi-Delicts or Torts: Also known as torts, quasi-delicts refer to the obligations that arise when a person causes damage to another through fault or negligence, independent of any contractual relationship. The liability here is rooted in the principle under Article 2176 of the Civil Code.

Elements of an Obligation

The core elements that form an obligation are:

  1. Active Subject (Creditor or Obligee): The party who has the right to demand the performance or fulfillment of the obligation.
  2. Passive Subject (Debtor or Obligor): The party bound to perform the obligation.
  3. Prestation: The specific act, forbearance, or thing the obligation is directed towards.
  4. Juridical Tie (Efficient Cause): The reason or source from which the obligation arises, binding the debtor to the creditor.

Kinds of Obligations

Obligations can be classified in various ways:

  1. Pure and Conditional Obligations:

    • Pure Obligation: Not subject to any condition and is immediately demandable.
    • Conditional Obligation: Performance depends on a future, uncertain event.

  2. Obligations with a Period:

    • An obligation with a period is one where performance is subject to a specific date or future event that must inevitably happen.

  3. Alternative and Facultative Obligations:

    • Alternative Obligation: The debtor may choose from among different prestations.
    • Facultative Obligation: Only one prestation is due, but the debtor may substitute it with another.

  4. Joint and Solidary Obligations:

    • Joint Obligation: The debt is divided among several debtors.
    • Solidary Obligation: Each debtor may be compelled to fulfill the entire obligation.

  5. Divisible and Indivisible Obligations:

    • Divisible Obligation: Capable of partial performance.
    • Indivisible Obligation: Must be performed fully.

  6. Obligations with a Penal Clause: Imposing a penalty for breach of the obligation, meant to ensure compliance or as indemnity for damages.

Extinguishment of Obligations

According to Article 1231, obligations are extinguished through the following modes:

  1. Payment or Performance: The complete fulfillment of the obligation as per its terms.

  2. Loss of the Thing Due: The object of the obligation is lost or destroyed without fault of the debtor and before delivery.

  3. Condonation or Remission of Debt: Voluntary forgiveness by the creditor.

  4. Confusion or Merger of Rights: Occurs when the capacities of debtor and creditor are united in the same person.

  5. Compensation: When two persons are mutually debtors and creditors of each other, offsetting their respective debts.

  6. Novation: Substituting a new obligation for the original one, either by changing the object, parties, or principal terms.

Remedies in Case of Breach

  1. Specific Performance: Compelling the debtor to perform as promised.
  2. Rescission: The creditor may rescind or cancel the obligation if it becomes impossible or impractical.
  3. Damages: Compensation for losses sustained due to the breach.

Conclusion

Understanding the elements, sources, and kinds of obligations—as well as how they are extinguished or enforced—forms the foundation of Obligations and Contracts in Philippine Civil Law. This structure provides a predictable and enforceable framework for obligations, ensuring parties can rely on the legal system to uphold their rights and duties.

Definition | Income | Income Tax | National Internal Revenue Code of 1997 (NIRC), as amended by R.A. No.… | TAXATION LAW

Under the National Internal Revenue Code of 1997 (NIRC), as amended by the Tax Reform for Acceleration and Inclusion (TRAIN) Law (Republic Act No. 10963) and further supplemented by the Ease of Paying Taxes Act (Republic Act No. 11976), Income Tax is a primary category of taxation that the Bureau of Internal Revenue (BIR) imposes on both individuals and corporate taxpayers. Below, I will dissect the relevant provisions under the TRAIN Law and other pertinent amendments affecting the definition of "income" in the Philippine tax system.

Definition of Income

Income in tax law is a broad term covering various sources and forms of financial gain received by taxpayers, whether individuals or corporations, subject to Philippine income tax. Under Philippine tax law, income is generally understood as:

  1. An accession to wealth;
  2. Gains derived from capital, labor, or both combined;
  3. Exclusions and inclusions within specific statutory definitions.

1. Accession to Wealth

Income represents an increase in net worth or wealth, distinct from mere recovery of capital. Under the doctrine of "realization," income is considered realized only upon the occurrence of an event that brings an economic benefit to the taxpayer.

2. Sources of Income: Capital and Labor

The source of income may stem from:

  • Capital: Any return on investments, assets, or property; and
  • Labor: Any form of compensation or earnings for services rendered.

This comprehensive definition is essential in understanding taxable and non-taxable sources, particularly distinguishing between capital recovery and gains derived from capital.

Types of Income Defined Under the NIRC and TRAIN Law

The TRAIN Law has updated tax definitions, specifically widening the scope and tax rate structure applicable to different income types. Categories include:

  1. Compensation Income: Earned from services rendered by an employee under an employer-employee relationship. The TRAIN law introduced a more progressive tax rate on compensation income for individuals, adjusting brackets and reducing rates for lower- and middle-income earners.

  2. Business or Professional Income: Derived from any trade, business, or profession engaged by the taxpayer. The tax law treats this income distinctly, particularly under self-employed or professional income, where simplified tax filing and optional flat tax rates may apply under certain conditions.

  3. Passive Income: Includes interest, dividends, royalties, prizes, and other earnings derived from assets or investments rather than labor. The TRAIN Law modified the tax rates on passive income, imposing final withholding tax rates on certain types, such as 20% on interest and dividends (for individuals).

  4. Capital Gains: Gains realized from the sale, exchange, or disposition of capital assets. The TRAIN law notably changed the tax treatment for capital gains on real property (imposing a flat 6% rate) and on the sale of shares in a domestic corporation (capital gains tax rates and exemptions clarified).

Key Amendments Under the TRAIN Law Affecting the Definition of Income

The TRAIN law amended the NIRC to redefine and adjust the tax treatment of various income sources, with significant changes that include:

  1. Thresholds and Exemptions:

    • TRAIN increased the threshold for personal income tax exemption, exempting income below PHP 250,000 from taxation. This adjustment impacts the understanding of what constitutes taxable income.

  2. Simplification of Tax Rates and Brackets:

    • Progressive Tax Rates: TRAIN introduced progressive rates to encourage compliance among individuals in the low- to mid-income brackets.
    • Capital Gains and Passive Income Adjustments: TRAIN introduced uniform tax rates for capital gains on real properties (6%) and clarified passive income tax rates, thereby defining taxable income categories more distinctly.

Ease of Paying Taxes Act (R.A. No. 11976) and Its Effect on Income Definition

The Ease of Paying Taxes Act introduces reforms aimed at simplifying tax compliance for taxpayers. Although it does not redefine "income" directly, it impacts its administrative framework:

  1. Improved Taxpayer Classification: Under the Ease of Paying Taxes Act, taxpayers are classified by size, which includes criteria based on income. This classification streamlines compliance obligations by categorizing taxpayers into Large, Medium, and Small, thus indirectly affecting how income sources are reported.

  2. Simplified Compliance Procedures: By reducing filing requirements and simplifying procedures for self-employed individuals and professionals, R.A. No. 11976 promotes ease of reporting various income types, thereby influencing the procedural understanding of income.

Case Law and Principles in Income Taxation

The judiciary has elaborated on "income" definitions through various landmark cases:

  • Commissioner of Internal Revenue v. Manning: Establishes that income is not merely cash or property received but an economic gain realized from a clear event.
  • Conwi v. Commissioner of Internal Revenue: Reinforces that income includes compensations, business profits, gains from investments, and other accesses to wealth.
  • Madrigal & Co. v. Rafferty: An early case that clarified income as derived from labor or capital, integral to determining the scope of taxable income under Philippine law.

Income Exemptions

Certain types of income are exempt from taxation under specific conditions. Examples include:

  • Overseas Filipino Workers (OFWs): Exempt from income tax on income earned abroad.
  • Minimum Wage Earners: Exempt under the TRAIN law.
  • Gifts, Bequests, and Devises: Excluded from income, as these are generally covered under different tax categories, such as donor’s or estate taxes.

Conclusion

The comprehensive definition of "income" under the NIRC, as amended by the TRAIN Law and supplemented by the Ease of Paying Taxes Act, reflects the evolution of Philippine tax laws towards simplification, fairness, and progressivity. The term "income" encompasses various forms of economic benefits, whether derived from capital, labor, or both, with adjustments in the tax structure to cater to specific taxpayer classifications and the ease of compliance.

The intricate changes introduced by these laws underscore the importance of a meticulous understanding of income for compliance and effective tax planning, reinforcing the core principles of income taxation in the Philippines.

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