Tax Final Batch

8/12/2019 Tax Final Batch

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3. Villanueva v City of Iloilo (privilege tax)

Relying on the passage of RA 2264 or the Local AutonomyAct, Iloilo enacted Ordinance 11 Series of1960, imposing amunicipal license tax on tenement houses in accordance withthe schedule of paymentprovided by therein.Villanueva and the other appellees are apartment owners fromwhom, the citycollected license taxes by virtue of Ordinance11. Appellees aver that the said ordinance is

unconstitutionalfor RA 2264 does not empower cities to impose apartmenttaxes; that the same isoppressive and unreasonable for itpenalizes those who fail to pay the apartment taxes; that itconstitutesnot only double taxation but treble taxation; and,that it violates uniformity of taxation.

Issues: 1. Does the ordinance impose double taxation?2. Is Iloilo city empowered by RA 2264 to imposetenement taxes?

Held: 1. While it is true that appellees are taxable under the NIRCas real estate dealers, and taxableunder Ordinance 11,double taxation may not be invoked. This is because thesame tax may be imposedby the national government aswell as by the local government. The contention thatappellees are doublytaxed because they are paying realestate taxes and the tenement tax is also devoid of merit.A license taxmay be levied upon a business or occupationalthough the land or property used in connection therewithis

subject to property tax. In order to constitute doubletaxation, both taxes must be the same kind orcharacter.Real estate taxes and tenement taxes are not of the samecharacter.2. RA 2264 confers localgovernments broad taxing powers.The imposition of the tenement taxes does not fall withinthe exceptionsmentioned by the same law. It is arguedhowever that the said taxes are real estate taxes and thus,theimposition of more the 1 per centum real estate taxwhich is the limit provided by CA 158, makes thesaidordinance ultra vires. The court ruled that the tax inquestion is not a real estate tax. It does not havetheattributes of a real estate tax.

By the title and the terms of the ordinance, the tax is a municipal tax which means animposition orexaction on the right to use or dispose of property, to pursue a business, occupation or calling, ortoexercise a privilege. Tenement houses being offered for rent or lease constitute a distinct form ofbusiness or calling and as such, the imposition of municipal tax findssupport in Section 2 of RA 2264.

It is not a tax on the land on which the tenement houses are erected, although both land andtenementhouses may belong to the same owner. Te tax is not a fixed proportion of theassessed value of thetenement houses, and does not require the intervention of theassessors or appraisers. It is not payable ata designated time or date, and is not enforceableagainst the tenement houses either by sale or distraint.

9. REPUBLIC vs. CA, and NIELSON & CO.,INC. 149 SCRA 351 GR No. L-38540 April 30, 1987

FACTS: The petitioner sought the review on certiorari of the decision of the respondent Court of Appealsreversing the decision of the then Court of First Instance of Manila which ordered private respondent

Nielson & Co., Inc. to pay the Government the amount of P11,496.00 as ad valorem tax, occupation fees,additional residence tax and 25% surcharge for late payment, for the years 1949 to 1952. Petitionerclaims that the demand letter of 16 July 1955 showed an imprint indicating that the original thereof wasreleased and mailed on 4 August 1955 by the Chief, Records Section of the Bureau of Internal Revenue,and that the original letter was not returned to said Bureau; thus, said demand letter must be consideredto have been received by the private respondent. According to petitioner, if service is made by ordinarymail, unless the actual date of receipt is shown, service is deemed complete and effective upon theexpiration of five (5) days after mailing. As the letter of demand dated 16 July 1955 was actually mailed toprivate respondent, there arises the presumption that the letter was received by private respondent in the


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absence of evidence to the contrary. More so, where private respondent did not offer any evidence,except the self-serving testimony of its witness, that it had not received the original copy of the demandletter dated 16 July 1955.

ISSUE: Was notice of assessment or demand properly served to the respondent? Should the receipt bythe respondent of the succeeding follow-up demand notices be construed as receipt of the original

demand?

HELD: As to the first issue, no. As correctly observed by the respondent court in its appealed decision,while the contention of petitioner is correct that a mailed letter is deemed received by the addressee inthe ordinary course of mail, still this is merely a disputable presumption, subject to controversion, and adirect denial of the receipt thereof shifts the burden upon the party favored by the presumption to provethat the mailed letter was indeed received by the addressee. Since petitioner has not adduced proof thatprivate respondent had in fact received the demand letter of 16 July 1955, it can not be assumed thatprivate respondent received said letter. As to the second issue, Yes. Records show that petitionerwrote private respondent a follow-up letter dated 19 September 1956, reiterating its demand for thepayment of taxes as originally demanded in petitioner's letter dated 16 July 1955. This follow-up letter isconsidered a notice of assessment in itself which was duly received by private respondent in accordancewith its own admission. And consequently, under Section 7 of Republic Act No. 1125, the assessment isappealable to the Court of Tax Appeals within thirty (30) days from receipt of the letter. The taxpayer'sfailure to appeal in due time, as in the case at bar, makes the assessment in question final, executory anddemandable. Thus, private respondent is now barred from disputing the correctness of the assessment orfrom invoking any defense that would reopen the question of its liability on the merits.

11. CABRERA vs. THE PROVINCIAL TREASURER OF TAYABAS GR No. 502, January 29, 1946

"The taxpayer should at least be apprised of the exact date of the proceeding by which she is to lose herproperty. Failure of the taxpayer to accordingly correct or change name in the assessment record cannotsupplant such absence of notice."

FACTS: The Provincial Treasurer of Tayabas issued a notice for the sale at public auction of the realproperties of Nemesio Cabrera forfeited for tax delinquency on December 15, 1940. The letter sent toNemesio Cabrera was returned marked Unclaimed for the latter was already dead in 1935. The landwas actually sold in a rescheduled public auction sale on May 1941 to Catigbac and was finalized in May1942. Basilia Cabrera, the registered owner of the land subject to attachment, filed a complaint with theCFI-Tayabas against the Provincial Treasurer and Catigbac attacking the validity of the sale on thegrounds that she was not notified, even though the property had remained in the assessment book in thename of Nemesio Cabrera, because she became the registered owner thereof since 1934 when aTorrens Title was issued to her by the Register of Deeds of Tayabas.

ISSUE: Is there a need for new notices if the land was not sold on the date specified in the previousnotice?

HELD: Yes. Under the law, even if the notice state that the sale would take place on a specified date andevery day thereafter, it is a general and indefinite notice. In order to protect the taxpayers rights, thetaxpayer should at least be apprised of the exact date of the proceeding by which she is to lose herproperty. Besides, the appellee admittedly being not notified also vitiates the proceeding. She is theregistered owner of the land and had become liable for taxes thereon. For all purposes, she is thedelinquent taxpayer "against whom the taxes were assessed." It cannot be Nemesio for the latter'sobligation to pay ended where Basilia's liability began.


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Basilia may be criticized for failure to have changed the name in the assessment record. However, suchcircumstance, nevertheless, cannot supplant the absence of notice.

13. MARCOS II vs. CA 273 SCRA 47 GR No. 120880, June 5, 1997

"The approval of the court sitting in probate is not a mandatory requirement in the collection of estate

taxes."

"In case of failure to file a return, the tax may be assessed at anytime within 10 years after the omission."

FACTS: Bongbong Marcos sought for the reversal of the ruling of the Court of Appeals to grant CIR'spetition to levy the properties of the late Pres. Marcos to cover the payment of his tax delinquenciesduring the period of his exile in the US. The Marcos family was assessed by the BIR after it failed to fileestate tax returns. However the assessment were not protested administratively by Mrs. Marcos and theheirs of the late president so that they became final and unappealable after the period for filing ofopposition has prescribed. Marcos contends that the properties could not be levied to cover the tax duesbecause they are still pending probate with the court, and settlement of tax deficiencies could not be had,unless there is an order by the probate court or until the probate proceedings are terminated.

Petitioner also pointed out that applying Memorandum Circular No. 38-68, the BIR's Notices of Levy onthe Marcos properties were issued beyond the allowed period, and are therefore null and void.

ISSUE: Are the contentions of Bongbong Marcos correct?

HELD: No. The deficiency income tax assessments and estate tax assessment are already final andunappealable -and-the subsequent levy of real properties is a tax remedy resorted to by the government,sanctioned by Section 213 and 218 of the National Internal Revenue Code. This summary tax remedy isdistinct and separate from the other tax remedies (such as Judicial Civil actions and Criminal actions),and is not affected or precluded by the pendency of any other tax remedies instituted by the government.

The approval of the court, sitting in probate, or as a settlement tribunal over the deceased's estate is nota mandatory requirement in the collection of estate taxes. On the contrary, under Section 87 of the NIRC,it is the probate or settlement court which is bidden not to authorize the executor or judicial administratorof the decedent's estate to deliver any distributive share to any party interested in the estate, unless it isshown a Certification by the Commissioner of Internal Revenue that the estate taxes have been paid.This provision disproves the petitioner's contention that it is the probate court which approves theassessment and collection of the estate tax.

On the issue of prescription, the omission to file an estate tax return, and the subsequent failure tocontest or appeal the assessment made by the BIR is fatal to the petitioner's cause, as under Sec.223 ofthe NIRC, in case of failure to file a return, the tax may be assessed at anytime within 10 years after theomission, and any tax so assessed may be collected by levy upon real property within 3 years (now 5years) following the assessment of the tax. Since the estate tax assessment had become final andunappealable by the petitioner's default as regards protesting the validity of the said assessment, there isno reason why the BIR cannot continue with the collection of the said tax.

14, MAMBULAO LUMBER CO. vs. REPUBLIC 132 SCRA 1 GR No. L-37061, September 5, 1984


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"Forest charges are internal revenue taxes and the BIR has the sole power and duty to collect them.Thus, an assessment made by the Bureau of Forestry cannot be considered an assessment made by theBIR."

FACTS: The Bureau of Forestry sent a demand letter dated January 15, 1949 to Mambulao Lumber Co.demanding for the payment of forest charges and surcharges. Mambulao protested the assessment. On

August 29,1958, the BIR likewise wrote a letter to the company demanding payment, which subsequentlyrequested reinvestigation. The BIR gave the company twenty (20) days from receipt within which tosubmit the results of its verification of payments. For failure to comply and failure to pay its tax liabilitydespite demands, CIR filed a complaint for collection with CFI-Manila on August 25, 1961. The CFI-Manila and Court of Appeals decided against Mambulao ordering it to pay the tax liability. Petitionerargued that the collection is barred by the statute of limitations under Sections 332 of the NIRC. Asstated, the collection should be made within the five (5) year period. From 1949 (date when the Bureau ofForestry assessed and demand payment as forestry charges and surcharges) up to 1961 (date of filing ofcomplaint), it is already more than five years.

ISSUE: Has the period of filing of collection complaint prescribed?

HELD: No. The action for collection is not barred by prescription. The basis of the complaint filed on August 1961 was the demand letter made by the CIR on August 29, 1958 and not the demand letter ofthe Bureau of Forestry on January 1949. So that the reckoning date of the 5-year period should be fromthe date of the BIR letter and not that of the Bureau of Forestry. This must be so because forest chargesare internal revenue taxes and the BIR has the sole power and duty to collect them.

15. FERNANDOS HERMANOS, INC. vs. COMMISSIONER 29 SCRA 552 GR No. No. L-21551,September 30, 1969

"The filing of an answer to taxpayer's petition for review is considered as institution of judicial action."

FACTS: The Commissioner of Internal Revenue assessed the petitioner investment corporation ofdeficiency income taxes for the years 1950 to 1954 and for 1957. There were two conflicting dates ofassessment, which are vital to the compliance with the statute of limitations, based on each claim of thepetitioner and the respondent; the Commisioner's record of date of assesment is February 27, 1956 whilethe petitioner believes the demand was made on December 27, 1955 so that, as the petitionercorporation claims, the Commissioner's action to recover its tax liability should be deemed to haveprescribed for failure on the part of the Commissioner to file a complaint for collection against it in anappropriate civil action.

ISSUE: Has the action for collection prescribed?

HELD: No. It has been held that "a judicial action for the collection of a tax is begun by the filing of acomplaint with the proper court of first instance, or where the assessment is appealed to the Court of Tax

Appeals, by filing an answer to the taxpayer's petition for review wherein payment of the tax is prayedfor." This is but logical for where the taxpayer avails of the right to appeal the tax assessment to the Courtof Tax Appeals, the said Court is vested with the authority to pronounce judgment as to the taxpayer'sliability to the exclusion of any other court. In the present case, regardless of whether the assessmentswere made on February 24 and 27, 1956, as claimed by the Commissioner, or on December 27, 1955 asclaimed by the taxpayer, the government's right to collect the taxes due has clearly not prescribed, as thetaxpayer's appeal or petition for review was filed with the Tax Court on May 4, 1960, with the


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Under the American practice this clause gives the attorneys an interest in the judgment and powerover it and to enforce it to that of their clients. It must therefore entitle them to carry on the action for thepurpose of securing their proper compensation.

Without passing on the particular steps required to enable the attorneys to carry their lien into effector on the reasonableness of the fees claimed by them, or of the contract providing thereof, we only hold

that their lien is alleged to have been properly created so as to give them a right and standing in theaction which prevents its discontinuance against their protest and without a suitable provision for theirprotection.

Fourth. The motion is not made by one of the attorneys of record. Certain motions, of their verynature, maybe made by an attorney who has not appeared in the case, where the interest of the client isadverse to that of the attorney of record. Of that character is a motion for substitution of attorneys, but notsuch a motion as the present one, which go to the merits and final disposition of the cause and which noone is entitled to make other than the attorney who duly appears of record in this court. By section 32 ofthe Code of Civil Procedure the rights is secured to a party to change attorneys. The method of suchchange is not indicated. The proper practice in this case on the part of the plaintiff would have been amotion for a substitution of attorneys, on which the question of their compensation would naturally haverisen and on the determination of which the attorney finally appearing on record could have moved adiscontinuance.

The justice sitting in this case do not all agree on each of the aforesaid grounds, but they are notunanimously of the opinion that the motion must be denied.

DECISION.

This action was brought in the Court of First Instance of the city of Manila to set aside a sale of realestate valued at P95,697.10 for unpaid taxes amounting to P2,934.76 to the defendant Jimenez, and alsothe transfer of a one-half interest therein by him to the defendant Fuster, on two grounds, first, that thedefendants had secured title under the tax sale by conspiracy with one Vicente Ablaza, plaintiff's agent,

who allowed the property to go to sale while having in his hands ample funds for the payment of taxes;and, second, that the tax sale was invalid by reason of defects in the proceedings to impose the tax.

The first cause of action was opened up, but was not persisted in at the trial and the case comesbefore us on the questions only of the irregularity of the proceedings for the sale. The most serious ofthese are the following:

(1) The statement of the owner, filed by Ablaza, as her agent, gave her name as "Doa Antonia Valencia y Orus." In the assessment roll for the year 1901 the name given was "Valencia, Antonio." In the roll of 1902 it was "Valencia, Antonia," while the tax deed had it "Antonia Valencia."

(2) The correct description given in the owner's filed statement read:

Bounded in front, on entering, 280.55 meters, by Calle de Lemery; on the right, on entering, 142.40meters, by the property of Don Nicolas del Rosario; on the left on entering, 65.10 meters, by CalleCorcuera, and at the rear, 288.70 meters, by the estuary and canal de le Reina.

In the roll of 1901 it is stated as


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A piece of land improvements, situated blocks 24, 25, 26, and 28 fronting Calle Lemery, solar deNicolas del Rosario, izquierda Calle Corcuera and espalda Canal de la Reina.

In the roll 1902:

A piece of land improvements, known as blocks 24, 25, 26, and 28 fronting izquierda Calle

Corcuera espalda Calle de la Reina, Calle Lemery, solar de Nicolas del Rosario.

In the notice of sale under "Description," "Kind of property land and improvement;" "Street andnumber," it reads, "Read of Canal de la Reina, left of Corcuera;" "Lots, 24, 25, 26 28;" "Block, ."

The description in the final deed is correct, whereas in the tax certificate it was copied from that inthe notice of sale, and is defective.

The words "Lots" and "Blocks" were proved to refer to a plan made by the assessor and collectorand kept in his office for his own use, but to which individuals might have access, on which it was shownas lots 24, 25, 16, and part of 28 in block 1. This plan was made after the filing of the declaration by theproperty owners but before the assessment.

(3) The amount of the taxes in these several document is set down in columns, the centsbeing divided from the dollars, but without any dollar-mark.

(4) That only proof of the fixing of the notices of sale was a recital in the certificate of the cityassessor and collector that the notice was posted "at the main entrance of said municipal building and atfive other public places in the city of Manila," without specifying the places, and also a recital in the deedthat a copy was posted in the proper barrio.

(5) The tax certificate did not fully recite the proceedings and give the details required bysections 78 and 80 of Act No. 82, but, on the contrary, showed the defects n the description and notice ofsale, whereas the final deed substantially complied with the statute.

The American law does not create a presumption of the regularity of any administrative actionwhich results in depriving a citizen or taxpayer of his property, but, on the contrary, the due process of lawto be followed in tax proceedings must be established by proof and the general rule is that the purchaserof a tax title is bound to take upon himself the burden of showing the regularity of all proceedings leadingup to the sale. The difficulty of supplying such proof has frequently lead to the efforts on the part oflegislatures to avoid it by providing by statute that a tax deed shall be deemed either conclusive orpresumptive proof of such regularity.

Those statutes attributing to it a conclusive effect have been held invalid as operating to deprive theowner of his property without due process of law. But those creating a presumption only have beensustained as affecting a rule of evidence, changing but the burden of proof. (Turpin vs. Lemon, 187 U.S.,51.)

The tax law applicable to Manila does not attempt to give any special probative effect to the deed ofthe assessor and collector, and therefore leaves the purchaser to establish the regularity of all vital stepsin the assessment and sale. By section 84 and 86 of Act No. 82 it is enacted that no tax shall be declaredinvalid for irregularities unless they "shall have impaired the substantial rights of the taxpayer."

The first apparent defect in this assessment is the error in the name of the owner.


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In Marx vs. Hanthorn (148 U.S., 172), where it does not even appear that under the law of the Stateof Oregon the tax was a personal one, the tax was held bad because the owner's name had been writtenin the roll as "Ida F. Hawthorn" instead of "Ida J. Hanthorn."

Under the Municipal Law of the Philippines, sections 74 to 78, the tax is primarily a personal oneand is enforcible against realty only in the event of a deficiency of personality, whereas in the City of

Manila its character is somewhat qualified by the provisions in section 47 of the charter only.Nevertheless, the requirement of the statute in so imperative that the rule of the Hanthorn case ismanifestly applicable here.

But we deem it unnecessary to take up in detail the several irregularities and to determine theeffect of each one upon the validity of the tax sale. The most vital requisite of such an assessment is thatthe property shall be so described as to be easily identified both by the owner and by the personadesiring to bid therefor. The description prior to those in the deed are all more or less defective, but thosein the assessment roll for 1902 and in the final notice of the tax sale are so confused and inadequate asnot only to fail to give notice to a stranger of the location of the property, but as to the incapable ofverification by a person familiar with it. This is especially true of the description in the notice of sale, whichof all the steps in the procedure is the one calling for a most definite and intelligible description. It issettled doctrine that, where one sale embraces two different taxes, a vital defect in either tax invalidatesthe whole sale, so that, considered apart from the notice of sale, the rather understandable description inthe roll of 1901 does not cure the vice in that of 1902. We are satisfied that the failure to adequatelydescribe the property both in the substantials rights of the taxpayer, "within the meaning of sections 84and 86 of the Municipal Code, and upon this failure we are content to rest our judgment, affirming the partof the judgment of the Court of First Instance of the city of Manila to Juan Jimenez y Mijares, and thedeed of the latter to Gabriel Fuster y Fuster, invalid and awarding to the plaintiff the possession of theproperty described in the complaint.

The judgment of the Court of First Instance not only awarded the plaintiff the real estate, but alsothe rents and profits thereon, both from the time the defendants took possession until the commencementof the action, and those accrued during the pendency of the action which have been collected by thedefendant Gabriel Fuster y Fuster as receiver. This part of the judgment should be modified.

By article 451 of the Civil Code, the possessor of property in good faith is entitled to the profitsthereof until his possession is legally interrupted. By article 448, the possessor under claim of ownershipis presumed to have a just title. By article 434, good faith is always presumed, while bad faith must beaffirmatively proved. By article 435, possession acquired in good faith does not lose that character untilthe occurrence of something showing that the possessor is not ignorant of the weakness of his title.

That portion of the present action having been abandoned which involved the direct charge ofconspiracy on the part of the defendants, they are entitled, as the case stands, to the benefit of thesearticles of the code unless they can be charged with actual bad faith. Applying the standard of theSpanish law expressed in these articles, there is not sufficient in the case to establish such a chargealthough it is somewhat indicated in the evidence. It may be urged, however, that the tax deed derives itsforce from the law under which it is given and must take us an incident its quality and effects from thatlaw, so that the holder thereof acquires no other status in respect of good faith than such as the Americanlaw attributes to him in that character. The rule of that law is usually stated to good faith (Cooley onTaxation, pp. 218, 220), qualified, however, in this important particular, that in respect of improvementshe who, without actual knowledge of defects, holds a deed regular on its face, is considered in good faithand is entitled to rely upon that deed without an investigation of the proceedings upon which it is founded.But if the deed itself exposes an irregularity, he must take notice of it. (Madland vs. Benland, 24 Min.,


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372; O'Mulcahy vs. Florer, 27 Min., 499; Bedell vs. Shaw, 59 N.Y., 46; Lynch vs. Brudie, 63 Pa., 206.) Wehave to seek the meaning of the term "good faith" in the cases on the subject of improvements because,in the American system, it can not arise in connection with rents and profits, which are recoverable by thesuccessful plaintiff in any event without regard to it.

In the present instance, the final deed is regular on its face, and in the opinion of the majority of the

court, in the absence of actual notice, sufficed to protect the holders thereof, although the preliminarycertificate of sale which they had held and surrendered showed in its recital that the sale was irregular.Therefore, applying either the Spanish or the American criterions as to good faith, the plaintiff may notrecover the rents and profits down to the time when it is plain that the defendants were advised of the viceof their title.lawphil.net

This limit is fixed at the date on which, after being informed by the beginning of an action, theyvoluntarily appear therein and assert their claim. (Judgments of the supreme court of Spain of November23, 1900, and October 12, 1901.)

The defendants' first pleading in this case, the demurrer, was served on the 16th of May, 1906, andthe plaintiff is entitled to recover the rents and profits from that date until the termination of the action, andthe receiver must account to her therefor.

In conclusion, so much of the judgment of the Court of First Instance as awards to the plaintiff thepossession of the property in suit, declaring void the deed from the city assessor and collector to JuanJimenez y Mijares, together with the deed of the latter to the defendant Gabriel Fuster y Fuster, and alsoso much thereof as directs the payment to the plaintiff of the rents and profits of the property from the16th of May, 1906, and also awards to the defendants the sum of P2,934.76, with interest from the 17thof December , 1904, to the 26th o f April, 1906, being the amount of the tax with interest deposited underthe statute as a condition to maintain the action, but thereafter withdrawn under stipulation, is affirmed;but so much of said judgments as directs payment to the plaintiff of the rents and profits of the real estate

prior to the 16th of day of May, 1906, amounting to P4,337.73, is revoked.

This action is hereby remanded to the Court of First Instance for the purpose of taking suchaccounts and conducting such other proceedings herein as may be necessary to carry out the aforesaid

judgment, but without costs of this. So ordered.

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