Cases 1 (Fulltxt)

8/12/2019 Cases 1 (Fulltxt)

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G.R. No. L-17725 February 28, 1962

REPUBLIC OF THE PHILIPPINES,plaintiff-appellee,vs.MAMBULAO LUMBER COMPANY, ET AL.,defendants-appellants.

Office of the Solicitor General for plaintiff-appellee.Arthur Tordesillas for defendants-appellants.

BARRERA, J.:

From the decision of the Court of First Instance of Manila (in Civil CaseNo. 34100) ordering it to pay to plaintiff Republic of the Philippines thesum of P4,802.37 with 6% interest thereon from the date of the filing ofthe complaint until fully paid, plus costs, defendant Mambulao LumberCompany interposed the present appeal.1

The facts of the case are briefly stated in the decision of the trial court, towit: .

The facts of this case are not contested and may be brieflysummarized as follows: (a) under the first cause of action, forforest charges covering the period from September 10, 1952 toMay 24, 1953, defendants admitted that they have a liability ofP587.37, which liability is covered by a bond executed bydefendant General Insurance & Surety Corporation for MambulaoLumber Company, jointly and severally in character, on July 29,1953, in favor of herein plaintiff; (b) under the second cause ofaction, both defendants admitted a joint and several liability infavor of plaintiff in the sum of P296.70, also covered by a bond

dated November 27, 1953; and (c) under the third cause ofaction, both defendants admitted a joint and several l iability infavor of plaintiff for P3,928.30, also covered by a bond dated July20, 1954. These three liabilities aggregate to P4,802.37. If theliability of defendants in favor of plaintiff in the amount alreadymentioned is admitted, then what is the defense interposed by thedefendants? The defense presented by the defendants is quiteunusual in more ways than one. It appears from Exh. 3 that fromJuly 31, 1948 to December 29, 1956, defendant MambulaoLumber Company paid to the Republic of the PhilippinesP8,200.52 for 'reforestation charges' and for the periodcommencing from April 30, 1947 to June 24, 1948, saiddefendant paid P927.08 to the Republic of the Philippines for

'reforestation charges'. These reforestation were paid to theplaintiff in pursuance of Section 1 of Republic Act 115 whichprovides that there shall be collected, in addition to the regularforest charges provided under Section 264 of Commonwealth Act466 known as the National Internal Revenue Code, the amount ofP0.50 on each cubic meter of timber... cut out and removed fromany public forest for commercial purposes. The amount collectedshall be expended by the director of forestry, with the approval of

the secretary of agriculture and commerce, for reforestation andafforestation of watersheds, denuded areas ... and other publicforest lands, which upon investigation, are found needingreforestation or afforestation .... The total amount of thereforestation charges paid by Mambulao Lumber Company isP9,127.50, and it is the contention of the defendant MambulaoLumber Company that since the Republic of the Philippines hasnot made use of those reforestation charges collected from it forreforesting the denuded area of the land covered by its license,the Republic of the Philippines should refund said amount, or, if itcannot be refunded, at least it should be compensated with whatMambulao Lumber Company owed the Republic of thePhilippines for reforestation charges. In line with this thought,defendant Mambulao Lumber Company wrote the director offorestry, on February 21, 1957 letter Exh. 1, in paragraph 4 ofwhich said defendant requested "that our account with yourbureau be credited with all the reforestation charges that youhave imposed on us from July 1, 1947 to June 14, 1956,amounting to around P2,988.62 ...". This letter of defendantMambulao Lumber Company was answered by the director offorestry on March 12, 1957, marked Exh. 2, in which the directorof forestry quoted an opinion of the secretary of justice, to theeffect that he has no discretion to extend the time for paying the

reforestation charges and also explained why not all denudedareas are being reforested.

The only issue to be resolved in this appeal is whether the sum ofP9,127.50 paid by defendant-appellant company to plaintiff-appellee asreforestation charges from 1947 to 1956 may be set off or applied to thepayment of the sum of P4,802.37 as forest charges due and owing fromappellant to appellee. It is appellant's contention that said sum ofP9,127.50, not having been used in the reforestation of the area coveredby its license, the same is refundable to it or may be applied incompensation of said sum of P4,802.37 due from it as forest charges. 1wph1.t


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We find appellant's claim devoid of any merit. Section 1 of Republic ActNo. 115, provides:

SECTION 1. There shall be collected, in addition to the regularforest charges provided for under Section two hundred and sixty-four of Commonwealth Act Numbered Four Hundred Sixty-six,known as the National Internal Revenue Code, the amount of fiftycentavos on each cubic meter of timber for the first and second

groups and forty centavos for the third and fourth groups cut outand removed from any public forest for commercial purposes.The amount collected shall be expended by the Director ofForestry, with the approval of the Secretary of Agriculture andNatural Resources (commerce), for reforestation andafforestation of watersheds, denuded areas and cogon and openlands within forest reserves, communal forest, national parks,timber lands, sand dunes, and other public forest lands, whichupon investigation, are found needing reforestation orafforestation, or needing to be under forest cover for the growingof economic trees for timber, tanning, oils, gums, and other minor

forest products or medicinal plants, or for watersheds protection,or for prevention of erosion and floods and preparation ofnecessary plans and estimate of costs and for reconnaisancesurvey of public forest lands and for such other expenses as maybe deemed necessary for the proper carrying out of the purposesof this Act.

All revenues collected by virtue of, and pursuant to, the provisionsof the preceding paragraph and from the sale of barks, medicalplants and other products derived from plantations as hereinprovided shall constitute a fund to be known as ReforestationFund, to be expended exclusively in carrying out the purposes

provided for under this Act. All provincial or city treasurers andtheir deputies shall act as agents of the Director of Forestry forthe collection of the revenues or incomes derived from theprovisions of this Act. (Emphasis supplied.)

Under this provision, it seems quite clear that the amount collected asreforestation charges from a timber licenses or concessionaire shallconstitute a fund to be known as the Reforestation Fund, and that thesame shall be expended by the Director of Forestry, with the approval ofthe Secretary of Agriculture and Natural Resources for the reforestationor afforestation, among others, of denuded areas which, upon

investigation, are found to be needing reforestation or afforestation. Notethat there is nothing in the law which requires that the amount collected

as reforestation charges should be used exclusively for the reforestationof the area covered by the license of a licensee or concessionaire, andthat if not so used, the same should be refunded to him. Observe too,that the licensee's area may or may not be reforested at all, dependingon whether the investigation thereof by the Director of Forestry showsthat said area needs reforestation. The conclusion seems to be that theamount paid by a licensee as reforestation charges is in the nature of atax which forms a part of the Reforestation Fund, payable by him

irrespective of whether the area covered by his license is reforested ornot. Said fund, as the law expressly provides, shall be expended incarrying out the purposes provided for thereunder, namely, thereforestation or afforestation, among others, of denuded areas needingreforestation or afforestation.

Appellant maintains that the principle of a compensation in Article 1278 ofthe new Civil Code2is applicable, such that the sum of P9,127.50 paid byit as reforestation charges may compensate its indebtedness to appelleein the sum of P4,802.37 as forest charges. But in the view we take of thiscase, appellant and appellee are not mutually creditors and debtors of

each other. Consequently, the law on compensation is inapplicable. Onthis point, the trial court correctly observed: .

Under Article 1278, NCC, compensation should take place whentwo persons in their own right are creditors and debtors of eachother. With respect to the forest charges which the defendantMambulao Lumber Company has paid to the government, theyare in the coffers of the government as taxes collected, and thegovernment does not owe anything, crystal clear that theRepublic of the Philippines and the Mambulao Lumber Companyare not creditors and debtors of each other, becausecompensation refers to mutual debts. ..

And the weight of authority is to the effect that internal revenue taxes,such as the forest charges in question, can be the subject of set-off orcompensation.

A claim for taxes is not such a debt, demand, contract orjudgment as is allowed to be set-off under the statutes of set-off,which are construed uniformly, in the light of public policy, toexclude the remedy in an action or any indebtedness of the stateor municipality to one who is liable to the state or municipality fortaxes. Neither are they a proper subject of recoupment since they

do not arise out of the contract or transaction sued on. ... (80C.J.S. 73-74. ) .


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G.R. No. L-18994 June 29, 1963

MELECIO R. DOMINGO, as Commissioner of InternalRevenue,petitioner,vs.HON. LORENZO C. GARLITOS, in his capacity as Judge of the Courtof First Instance of Leyte,and SIMEONA K. PRICE, as Administratrix of the Intestate Estate of

the late Walter Scott Price,respondents.

Office of the Solicitor General and Atty. G. H. Mantolino for petitioner.Benedicto and Martinez for respondents.

LABRADOR, J.:

This is a petition for certiorariand mandamusagainst the Judge of theCourt of First Instance of Leyte, Ron. Lorenzo C. Garlitos, presiding,seeking to annul certain orders of the court and for an order in this Courtdirecting the respondent court below to execute the judgment in favor of

the Government against the estate of Walter Scott Price for internalrevenue taxes.

It appears that in Melecio R. Domingo vs. Hon. Judge S. C. Moscoso,G.R. No. L-14674, January 30, 1960, this Court declared as final andexecutory the order for the payment by the estate of the estate andinheritance taxes, charges and penalties, amounting to P40,058.55,issued by the Court of First Instance of Leyte in, special proceedings No.14 entitled "In the matter of the Intestate Estate of the Late Walter ScottPrice." In order to enforce the claims against the estate the fiscalpresented a petition dated June 21, 1961, to the court below for the

execution of the judgment. The petition was, however, denied by thecourt which held that the execution is not justifiable as the Government isindebted to the estate under administration in the amount of P262,200.The orders of the court below dated August 20, 1960 and September 28,1960, respectively, are as follows:

Atty. Benedicto submitted a copy of the contract between Mrs.Simeona K. Price, Administratrix of the estate of her late husbandWalter Scott Price and Director Zoilo Castrillo of the Bureau ofLands dated September 19, 1956 and acknowledged beforeNotary Public Salvador V. Esguerra, legal adviser in Malacaangto Executive Secretary De Leon dated December 14, 1956, thenote of His Excellency, Pres. Carlos P. Garcia, to Director

Castrillo dated August 2, 1958, directing the latter to pay to Mrs.Price the sum ofP368,140.00, and an extract of page 765 ofRepublic Act No. 2700 appropriating the sum of P262.200.00 forthe payment to the Leyte Cadastral Survey, Inc., represented bythe administratrix Simeona K. Price, as directed in the above noteof the President. Considering these facts, the Court orders thatthe payment of inheritance taxes in the sum of P40,058.55 duethe Collector of Internal Revenue as ordered paid by this Court on

July 5, 1960 in accordance with the order of the Supreme Courtpromulgated July 30, 1960 in G.R. No. L-14674, be deductedfrom the amount of P262,200.00 due and payable to the

Administratrix Simeona K. Price, in this estate, the balance to bepaid by the Government to her without further delay. (Order of

August 20, 1960)

The Court has nothing further to add to its order dated August 20,1960 and it orders that the payment of the claim of the Collectorof Internal Revenue be deferred until the Government shall havepaid its accounts to the administratrix herein amounting to

P262,200.00. It may not be amiss to repeat that it is only fair forthe Government, as a debtor, to its accounts to its citizens-creditors before it can insist in the prompt payment of the latter'saccount to it, specially taking into consideration that the amountdue to the Government draws interests while the credit due to thepresent state does not accrue any interest. (Order of September28, 1960)

The petition to set aside the above orders of the court below and for theexecution of the claim of the Government against the estate must bedenied for lack of merit. The ordinary procedure by which to settle claimsof indebtedness against the estate of a deceased person, as an

inheritance tax, is for the claimant to present a claim before the probatecourt so that said court may order the administrator to pay the amountthereof. To such effect is the decision of this Court in Aldamiz vs. Judgeof the Court of First Instance of Mindoro, G.R. No. L-2360, Dec. 29, 1949,thus:

. . . a writ of execution is not the proper procedure allowed by theRules of Court for the payment of debts and expenses ofadministration. The proper procedure is for the court to order thesale of personal estate or the sale or mortgage of real property ofthe deceased and all debts or expenses of administrator and with

the written notice to all the heirs legatees and devisees residing inthe Philippines, according to Rule 89, section 3, and Rule 90,


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section 2. And when sale or mortgage of real estate is to bemade, the regulations contained in Rule 90, section 7, should becomplied with.1wph1.t

Execution may issue only where the devisees, legatees or heirshave entered into possession of their respective portions in theestate prior to settlement and payment of the debts and expensesof administration and it is later ascertained that there are such

debts and expenses to be paid, in which case "the court havingjurisdiction of the estate may, by order for that purpose, afterhearing, settle the amount of their several liabilities, and orderhow much and in what manner each person shall contribute, andmayissue executionif circumstances require" (Rule 89, section6; see alsoRule 74, Section 4; Emphasis supplied.) And this isnot the instant case.

The legal basis for such a procedure is the fact that in the testate orintestate proceedings to settle the estate of a deceased person, theproperties belonging to the estate are under the jurisdiction of the court

and such jurisdiction continues until said properties have been distributedamong the heirs entitled thereto. During the pendency of the proceedingsall the estate is in custodia legis and the proper procedure is not to allowthe sheriff, in case of the court judgment, to seize the properties but toask the court for an order to require the administrator to pay the amountdue from the estate and required to be paid.

Another ground for denying the petition of the provincial fiscal is the factthat the court having jurisdiction of the estate had found that the claim ofthe estate against the Government has been recognized and an amountof P262,200 has already been appropriated for the purpose by acorresponding law (Rep. Act No. 2700). Under the above circumstances,both the claim of the Government for inheritance taxes and the claim ofthe intestate for services rendered have already become overdue anddemandable is well as fully liquidated. Compensation, therefore, takesplace by operation of law, in accordance with the provisions of Articles1279 and 1290 of the Civil Code, and both debts are extinguished to theconcurrent amount, thus:

ART. 1200. When all the requisites mentioned in article 1279 arepresent, compensation takes effect by operation of law, andextinguished both debts to the concurrent amount, eventhoughthe creditors and debtors are not aware of the compensation.

It is clear, therefore, that the petitioner has no clear right to execute thejudgment for taxes against the estate of the deceased Walter Scott Price.Furthermore, the petition for certiorariand mandamusis not the properremedy for the petitioner. Appeal is the remedy.

The petition is, therefore, dismissed, without costs.


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the five-year limitation period". In Capitol Subdivision, the pendency of ataxpayer's petition for clarification interrupted said period. None of thesesituations obtains here.

The government also urges that partial payment is "acknowledgment ofthe tax obligation", hence, a "waiver of the defense of prescription". Butpartial payment would not prevent the government from suing thetaxpayer. Because, by such act of payment, the government is

not thereby "persuaded to postpone collection to make him feel that thedemand was not unreasonable or that no harrassment or injustice ismeant". Which, as stated in Collector vs. Suyoc Consolidated Mining Co.,et al., L-11527, November 25, 1958, is the underlying reason behind therule that prescriptive period is arrested by the taxpayer's request forreexamination or reinvestigation even if he "has not previously waivedit [prescription] in writing". And, partial payment is no waiver "in writing".Particularly is this true here where, out of the claim of P3,805.88, butP262.27 were paid; and in reference to the other claim ofP6,220.65,15appellee made a substantial payment of P6,000.00and acknowledged liability of P220.65.

3. The government leans heavily upon the Barretto case16to strengthenits claim that the action had not yet prescribed. Because, this Court theresaid:

. . . Moreover, as already stated in the decision, forest chargesand surcharges arepayments for timber taken from publicforests, and they are considered as internal revenue taxes only inthe sense that they are to be collected by the Collector of InternalRevenue and the regulations for their collection are contained inthe National Internal Revenue Code. Forest products areobtained under licenses issued by the Government and forestcharges are in a sense contractual in origin. No prescriptive

period having been prescribed by law for this case, Sec. 43 of theCode of Civil Procedure should apply . . . .17

This opinion was planted on the views of the Tax Commission (1939), asfollows:

Forest charges, which are not property taxes but rather the pricepaid for exploiting national resources, need to be revised18tomake them more in harmony with present-day conditions in theindustry and with public policies.

Forest charges are to be distinguished from taxes. They are,strictly speaking, the price which the Government charges for theprivilege granted to concessionaires to exploit the public domain,rather than a tax imposed to support the general services of thegovernment . . . .19

Compelling reasons there are which constrain us to revise the viewsexpressed in the Barretto case.

By law, forest charges have always been categorized as internal revenuetaxes for all purposes. Our statute books say so.

We start with the Tax Code. Forest charges appear below the heading"TITLE VIII MISCELLANEOUS TAXES", under Chapter V, along withsuch others as tax on banks (Chapter I), taxes on receipts of insurancecompanies (Chapter II), franchise tax (Chapter III), and amusement taxes(Chapter IV). And Section 18 of the same Code, includes "charges onforest products" in the list of those that "are deemed to be nationalinternal revenue taxes", thus:

SEC. 18. Sources of revenue.The following taxes, fees andcharges are deemed to be national internal revenue taxes:

(a) Income tax;

(b) Estate, inheritance and gift taxes;

(c) Specific taxes on certain articles;

(d) Privilege taxes on business or occupation;

(e) Documentary stamp taxes;

(f) Mining taxes;

(g) Miscellaneous taxes, fees and charges, namely, taxes onbanks and insurance companies, franchise taxes, taxes onamusements, charges on forest products, fees for sealing weightsand measures, firearms license fees, tobacco inspection fees,and water rentals. (As amended by Rep. Act No. 1476, approvedJune 15, 1956.)20


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With the exception of radio registration fees, which were eliminated, theforegoing is a reproduction in toto of the original Section 18 of the TaxCode approved on June 15, 1939.

Section 1438, Administrative Code of 1917, the law which Section 18 ofthe Tax Code of 1939 replaced, states in part:

SEC. 1438. Sources of taxes.The following taxes, fees, and

charges in the nature of tax are deemed to be internal revenuetaxes:

xxx xxx xxx

(f) Charges for forest products.

xxx xxx xxx

Section 1438 of the Administrative Code, in turn, proceeded from Section21, Act 2339 of the Philippine Legislature known as the Internal RevenueLaw of 1914, which provides:

ARTICLE I. Sources of internal revenue.

SEC. 21. Sources of taxes.The following taxes, fees, andcharges in the nature of tax are deemed to be internal-revenuetaxes:

xxx xxx xxx

(f) Charges for forest products;

xxx xxx xxx

Predecessor of this provision is Section 25 of Act 1189, known as theInternal Revenue Law of 1904, which reads:

SEC. 25. The following sources of revenue shall be included inthe internal revenue for the Philippine Islands, and the taxesimposed shall be collected by the Collector of Internal Revenue . .. and the revenue obtained therefrom shall be devoted to thesupport of the several provinces and of the Insular and municipalgovernments in the manner in this Act provided:

xxx xxx xxx

1. Tax on forestry products.

xxx xxx xxx

4. Now, the law on prescription in the Tax Code does not make anydistinction at all as to the sources of taxes to which it is made applicable.Its broad sweep is articulated in the terms "internal-revenue taxes"21and"any internal-revenue tax".22Since "charges on forest products" are"internal-revenue taxes", they are within the coverage of the law onprescription of actions to collect "internal-revenue taxes" or "any internal-revenue tax". Had the Tax Code intended that forest charges be outsidethe operational rule on prescription, that statute should have so provided.We cannot insert therein any such exception now. Clearly, that isintrusion into the legislative domain in violation of a definite proscription inthe Constitution.

5. Authorities are not wanting to bring home the point that forest charges

are in reality internal revenue taxes, as such subject to the otherprovisions of internal revenue law. As early as 1918,23this Court held thatforest charges are in the nature of an internal revenue tax on property["forest products removed from the public forest"] and a distress warrantmay be issued thereon.

One month before the Barretto decision came the Lacson case.24There,this Court made mention of the observations of the Tax Commission[heretofore textually copied], which recommended the enactment of the1939 Internal Revenue Code. However, this Court sustained the views ofthe dissenting judge of the Court of Tax Appeals, thus:

. . . There appears to be no legal basis for not considering forestcharges as taxes when respondent considers them as taxesunder Republic Act No. 304, as amended, thus enabling holdersof backpay certificates to pay forest charges out of their backpay(B.I.R. ruling, November 22, 1955, Ex. B), and as internalrevenue tax under Chapter II, Title IX, of the Revenue Code, soas to authorize collection of said charges by distraint and levy(Op. Atty. Gen., Oct. 27, 1922). The argument that forest chargesare not taxes because they are theprice paid for the sale by theGovernment of forest products overlooks the fact that some forestcharges are impose on forest products cut and removed from

unregistered private lands. (See Sec. 266, Revenue Code). The


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Government cannot sell forest products which it does not own.From this it may be inferred that forest charges are not inreality the price paid for the sale by the Government of forestproducts; they are essentially taxes for theprivilege of cutting andremoving forest products . . .They stand on the same footing asthe mining taxes imposed under Title VII of the Revenue Code . .. .25

Even the Chairman of the 1939 Tax Commission later on (November 20,1939), in a decision he rendered as Secretary of Finance, in the case ofthe Dulagan Mining Interests Co., Inc., coveringforest charges,adverted to the ruling in the Hongkong and Shanghai BankingCorporation case, supra. He applied Section 1588 of the AdministrativeCode and declared that every internal revenue tax whichincludes forest charges is a lien on the property for which that tax isimposed.26

51 Am. Jur. p. 1072 is authority for the statement that:

Taxes which, although imposed under statutes containing manyvariations as to their precise phraseology, are directed generallyagainst theproduction, or severance from the soil, of such naturalresources astimber, oil, natural gas, ores, or the like, and arenormally measured according to the quantity or value of thearticles produced or severed, are usually, although not invariably,regarded as excise rather than property taxes.27

The view that forest charges are much like ad valorem taxes in mining,finds jurisprudential support. In Cebu Portland Cement Company vs.Commissioner of Internal Revenue, L-18649, February 27, 1965, we saidthat thisad valorem tax (on minerals used for cement) "is a tax not on theminerals, but upon the privilege of severing or extracting the same fromthe earth, the government's right to exact the said impost springing fromthe Regalian theory of State ownership of its natural resources".28Sosaying, this Court there applied Section 306,29under the AdministrativeProvisions [of the Tax Code] which include prescription of actions for taxcollection.

In another case,30upon the premise that forest charges "are in the coffersof the government as taxes collected", the pronouncement was thatinternal revenue taxes cannot be the subject of compensation: Reason:government and taxpayer "are not mutually creditors and debtors of each

other" under Article 1278 of the Civil Code and a "claim for taxes

is not such a debt, demand, contract or judgment as is allowed to be set-off." This decision inferentially takes forest charges out ofthe Barretto rule, because they are taxes not "in a sense contractual inorigin."

The thoughts expressed in the authorities just cited funnel down to oneidea: forest charges are internal revenue taxes, whether one labels themtaxes on property, or excise taxes, i.e., taxes upon the privilege of cutting

and carting away timber and forest products. And they fall under thephilosophy of taxation to support the general services of government.They go into the general fund.31

6. The provisions on prescription fall under Title IX, entitled GeneralAdministrative Provisions. This title applies to all taxes, fees,and charges collected under the Code. In this title's first provision(Section 305), injunction is unavailing to a forest concessionaire "torestrain the collection of any national internal-revenue tax, fee,or chargeimposed by this Code". By Section 306, the concessionaire,may only sue for tax refunds within two years from the date of

payment.32

Section 316 defines the "civil remedies for the collection ofinternal revenue taxes, fees, orcharges" to be distraint and levy, andjudicial action.33

In Section 337, the forest concessionaire34like all other taxpayers isobligated to preserve his books of account for a period of five years "fromthe date of the last entry in each book." Why? Because the government isgiven a like period of five years within which to make assessment. Ifforest charges were "in a sense contractual in origin", then theconcessionaire should be required to keep his accounting records not forfive years only, but for ten years, to jibe with the 10-year prescriptiveperiod in the Civil Code.35

In sum, here is the situation of a man called upon to pay forest charges.Applicable to him are the Tax Code provisions on distraint and levy; thetwo-year period for refund; the prohibition against injunction; the duty tokeep his books for five years. But, if we were to adhere tothe Barretto decision, then the law on prescription in the Code of CivilProcedure [now Art. 1144, Civil Code]36must have to be scissored andpasted over Sections 331 and 332 of the Tax Code. Uniformity in theapplication of the Tax Code provisions would suggest that we veer awayfrom this view.


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7. Our stand is even fortified by the facts set forth in the Barretto case.Assessment was not there based on a return. The judgment onprescription therein was grounded on fraud. Because, from anexamination of the books, it was found that "many purchases of logswere without invoices and sales under declared". The "deficienciesamounting to fraud were discovered" in 1953. And applying theprovisions of the Code of Civil Procedure, it was there declared that theperiod for prescription should be reckoned" from 1953. But the situation

presented in said case is precisely covered by Section 332(a) of the TaxCode, which reads:

(a) In the case of a false orfraudulent 37return with intent toevade tax or of a failure to file a return, the tax may be assessed,or aproceeding in court for the collection of such tax may bebegun without assessment, at any time within ten years after thediscovery of the falsity, fraud, or omission.38

Our conclusion, therefore, is that the overwhelming implication from thetext of the Tax Code leaves no other reasonable construction except that:

Forest charges come within the compass of the prescriptive periods setforth therein.

The net result still is: From September 18, 1953 (when demand forpayment was made) to July 29, 1953 (when court claim was filed), morethan five (5) years have elapsed. By the terms of Article 332(c) of the TaxCode,supra, action to collect has prescribed.

Upon the premises, the judgment appealed from is affirmed. No costs. Soordered.

Concepcion, C.J., Barrera, Dizon, Regala, Makalintal, Bengzon, J.P.,Zaldivar and Castro, JJ.,concur.Reyes, J.B.L., J.,took no part.


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G.R. No. L-25299 July 29, 1969

COMMISSIONER OF INTERNAL REVENUE,petitioner,vs.ITOGON-SUYOC MINES, INC., and THE COURT OF TAXAPPEALS,respondents.

Office of the Solicitor General Antonio P. Barredo, Assistant SolicitorGeneral Felicisimo R. Rosete and Special Attorney Oscar S. de Castrofor petitioner.Ramon O. Reynoso, Jr. and Melchor R. Flores for respondents.

FERNANDO, J .:

The question presented for determination in this petition for the review ofa decision of the Court of Tax Appeals, one that is of first impression,would not have arisen had respondent Itogon-Suyoc Mines, Inc., thetaxpayer involved, duly paid in full its liability according to its income taxreturn for the fiscal year 1960-61. Instead, it deducted right away theamount represented by claim for refund filed eight (8) months back, forthe previous year's income tax, for which it was not liable at all, so italleged, as it suffered a loss instead, a claim subsequently favorablyacted on by petitioner Commissioner of Internal Revenue but after thedate of such payment of the 1960-1961 tax. Accordingly, an interest inthe amount of P1,512.83 was charged by petitioner Commissioner ofInternal Revenue on the sum withheld on the ground that no deductionon such refund should be allowed before its approval. When the matterwas taken up before the Court of Tax Appeals, the above assessment

representing interest was set aside in the decision of September 30,1965. That is the decision now an appeal by petitioner Commissioner ofInternal Revenue. We sustain the Court of Tax Appeals.

Respondent Itogon-Suyoc Mines, Inc., a mining corporation dulyorganized and existing in accordance with the laws of the Philippines,filed on January 13, 1961, its income tax return for the fiscal year 1959-1960. It declared a taxable income of P114,368.04 and a tax due thereonamounting to P26,310.41, for which it paid on the same day, the amountof P13,155.20 as the first installment of the income tax due. On May 17,1961, petitioner filed an amended income tax return, reporting therein a

net loss of P331,707.33. It thus sought a refund from the Commissionerof Internal Revenue, now the petitioner.1wph1.t

On February 14, 1962, respondent Itogon-Suyoc Mines, Inc. filed itsincome tax return for the fiscal year 1960-1961, setting forth its incometax liability to the tune of P97,345.00, but deducting the amount ofP13,155.20 representing alleged tax credit for overpayment of thepreceding fiscal year 1959-1960. 0n December 18, 1962, petitionerCommissioner of Internal Revenue assessed against the respondent theamount of P1,512.83 as 1% monthly interest on the aforesaid amount ofP13,155.20 from January 16, 1962 to December 31, 1962. The basis for

such an assessment was the absence of legal right to deduct saidamount before the refund or tax credit thereof was approved by petitionerCommissioner of Internal Revenue.1

Such an assessment was contested by respondent before the Court ofTax Appeals. As already noted, it prevailed. The decision of September30, 1965, now on appeal, explains why. Thus: "Respondent assessedagainst the petitioner the amount of P1,512.83 as 1% monthly interest onthe sum of P13,155.20 from January 16, 1962 to December 31, 1962 onthe ground that petitioner had no legal right to deduct the said amountfrom its income tax liability for the fiscal year 1960-1961 until the refundor tax credit thereof has been approved by respondent. As aforestated,petitioner paid the amount of P13,155.20 as first installment on itsreported income tax liability for the fiscal year 1959-1960. But, it turnedout that instead of deriving a net gain, i t sustained a net loss during thesaid fiscal year. Accordingly, it filed an amended income tax return and aclaim for the refund of the sum of P13,155.20, which sum it subsequently,deducted from its income tax liability for the succeeding fiscal year 1960-1961. The overpayment for the fiscal year 1959-1960 and the deductionof the overpaid amount from its 1960-1961 tax liability are not denied byrespondent. In this circumstance, we find it unfair and unjust for theCommissioner to exact an interest on the said sum of P13,155.20, which,after all, was paid to and received by the government even before the

incidence of the tax in question."2

That is the question before us in this petition for review by theCommissioner of Internal Revenue. He argues that the Court of Tax

Appeals should not have absolved respondent corporation "from liabilityto pay the sum of P1,512.83 as 1% monthly interest for delinquency inthe payment of income tax for the fiscal year 1960-1961."3As noted at theoutset, we find such contention far from persuasive.

It could not be error for the Court of Tax Appeals, considering theadmitted fact of overpayment, entitling respondent to refund, to hold that

petitioner should not repose an interest on the aforesaid sum ofP13,155.20 "which after all was paid to and received by the government


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even before the incidence of the tax in question." It would be, accordingto the Court of Tax Appeals, "unfair and unjust" to do so. We agree butwe go farther. The imposition of such an interest by petitioner is notsupported by law.

The National Internal Revenue Code provides that interest upon theamount determined as a deficiency shall be assessed and shall be paidupon notice and demand from the Commissioner of Internal Revenue at

the specified.4 It is made clear, however, in an earlier provision found inthe same section that if in any preceding year, the taxpayer was entitledto a refund of any amount due as tax, such amount, if not yet refunded,may be deducted from the tax to be paid.5

There is no question respondent was entitled to a refund. Instead ofwaiting for the sum involved to be delivered to i t, it deducted the saidamount from the tax that it had to pay. That it had a right to do accordingto the law. It is true a doubt could have arisen due to the fact that as ofthe time such a deduction was made, the Commissioner of InternalRevenue had not as yet approved such a refund. It is an admitted fact

though that respondent was clearly entitled to it, and petitioner did notallege otherwise. Nor could he do so. Under all the circumstancesdisclosed therefore, the applicability of the legal provision allowing such adeduction from the amount of the tax to be paid cannot be disputed.

This conclusion is in accordance with the principle announced in Castrov. Collector of Internal Revenue.6 While the case is not directly in point, ityields an implication that makes even more formidable the case forrespondent taxpayer. As there held, the imposition of the monthly interestwas considered as not constituting a penalty "but a just compensation tothe state for the delay in paying the tax, and for the concomitant use bythe taxpayer of funds that rightfully should be in the government's hands

...."

What is therefore sought to be avoided is for the taxpayer to make use offunds that should have been paid to the government. Here, in view of theoverpayment for the fiscal year 1959-1960, the sum of P13,155.20 hadalready formed part of the public funds. It cannot be said, therefore, thatrespondent taxpayer was guilty of any delay enabling it to utilize a sum ofmoney that should have been in the government treasury.

How then, as a matter of pure law, even if we lay to one side thedemands of fairness and justice, which to the Court of Tax Appeals seem

to be uppermost, can its decision be overturned? Accordingly, we find novalid ground for this appeal.

WHEREFORE, the decision of September 30, 1965 of the Court of TaxAppeals is affirmed. Without pronouncement as to costs.1wph1.t


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G.R. No. L-67649 June 28, 1988

ENGRACIO FRANCIA, petitioner,vs.INTERMEDIATE APPELLATE COURT and HOFERNANDEZ, respondents.

GUTIERREZ, JR., J.:

The petitioner invokes legal and equitable grounds to reverse thequestioned decision of the Intermediate Appellate Court, to set aside theauction sale of his property which took place on December 5, 1977, andto allow him to recover a 203 square meter lot which was, sold at publicauction to Ho Fernandez and ordered titled in the latter's name.

The antecedent facts are as follows:

Engracio Francia is the registered owner of a residential lot and a two-story house built upon it situated at Barrio San Isidro, now District of Sta.Clara, Pasay City, Metro Manila. The lot, with an area of about 328square meters, is described and covered by Transfer Certificate of TitleNo. 4739 (37795) of the Registry of Deeds of Pasay City.

On October 15, 1977, a 125 square meter portion of Francia's propertywas expropriated by the Republic of the Philippines for the sum ofP4,116.00 representing the estimated amount equivalent to the assessedvalue of the aforesaid portion.

Since 1963 up to 1977 inclusive, Francia failed to pay his real estatetaxes. Thus, on December 5, 1977, his property was sold at publicauction by the City Treasurer of Pasay City pursuant to Section 73 ofPresidential Decree No. 464 known as the Real Property Tax Code inorder to satisfy a tax delinquency of P2,400.00. Ho Fernandez was thehighest bidder for the property.

Francia was not present during the auction sale since he was in IliganCity at that time helping his uncle ship bananas.

On March 3, 1979, Francia received a notice of hearing of LRC Case No.

1593-P "In re: Petition for Entry of New Certificate of Title" filed by HoFernandez, seeking the cancellation of TCT No. 4739 (37795) and the

issuance in his name of a new certificate of title. Upon verificationthrough his lawyer, Francia discovered that a Final Bill of Sale had beenissued in favor of Ho Fernandez by the City Treasurer on December 11,1978. The auction sale and the final bill of sale were both annotated atthe back of TCT No. 4739 (37795) by the Register of Deeds.

On March 20, 1979, Francia filed a complaint to annul the auction sale.He later amended his complaint on January 24, 1980.

On April 23, 1981, the lower court rendered a decision, the dispositiveportion of which reads:

WHEREFORE, in view of the foregoing, judgment ishereby rendered dismissing the amended complaint andordering:

(a) The Register of Deeds of Pasay City toissue a new Transfer Certificate of Title infavor of the defendant Ho Fernandez over

the parcel of land including theimprovements thereon, subject towhatever encumbrances appearing at theback of TCT No. 4739 (37795) andordering the same TCT No. 4739 (37795)cancelled.

(b) The plaintiff to pay defendant HoFernandez the sum of P1,000.00 asattorney's fees. (p. 30, Record on Appeal)

The Intermediate Appellate Court affirmed the decision of the lowercourtin toto.

Hence, this petition for review.

Francia prefaced his arguments with the following assignments of graveerrors of law:

I

RESPONDENT INTERMEDIATE APPELLATE COURT COMMITTED A

GRAVE ERROR OF LAW IN NOT HOLDING PETITIONER'SOBLIGATION TO PAY P2,400.00 FOR SUPPOSED TAX


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DELINQUENCY WAS SET-OFF BY THE AMOUNT OF P4,116.00WHICH THE GOVERNMENT IS INDEBTED TO THE FORMER.

II

RESPONDENT INTERMEDIATE APPELLATE COURT COMMITTED AGRAVE AND SERIOUS ERROR IN NOT HOLDING THAT PETITIONERWAS NOT PROPERLY AND DULY NOTIFIED THAT AN AUCTION

SALE OF HIS PROPERTY WAS TO TAKE PLACE ON DECEMBER 5,1977 TO SATISFY AN ALLEGED TAX DELINQUENCY OF P2,400.00.

III

RESPONDENT INTERMEDIATE APPELLATE COURT FURTHERCOMMITTED A SERIOUS ERROR AND GRAVE ABUSE OFDISCRETION IN NOT HOLDING THAT THE PRICE OF P2,400.00 PAIDBY RESPONTDENT HO FERNANDEZ WAS GROSSLY INADEQUATE

AS TO SHOCK ONE'S CONSCIENCE AMOUNTING TO FRAUD AND ADEPRIVATION OF PROPERTY WITHOUT DUE PROCESS OF LAW,

AND CONSEQUENTLY, THE AUCTION SALE MADE THEREOF ISVOID. (pp. 10, 17, 20-21, Rollo)

We gave due course to the petition for a more thorough inquiry into thepetitioner's allegations that his property was sold at public auction withoutnotice to him and that the price paid for the property was shockinglyinadequate, amounting to fraud and deprivation without due process oflaw.

A careful review of the case, however, discloses that Mr. Francia broughtthe problems raised in his petition upon himself. While we commiserate

with him at the loss of his property, the law and the facts militate againstthe grant of his petition. We are constrained to dismiss i t.

Francia contends that his tax delinquency of P2,400.00 has beenextinguished by legal compensation. He claims that the governmentowed him P4,116.00 when a portion of his land was expropriated onOctober 15, 1977. Hence, his tax obligation had been set-off by operationof law as of October 15, 1977.

There is no legal basis for the contention. By legal compensation,obligations of persons, who in their own right are reciprocally debtors and

creditors of each other, are extinguished (Art. 1278, Civil Code). The

circumstances of the case do not satisfy the requirements provided byArticle 1279, to wit:

(1) that each one of the obligors be bound principally andthat he be at the same time a principal creditor of theother;

xxx xxx xxx

(3) that the two debts be due.

xxx xxx xxx

This principal contention of the petitioner has no merit. We haveconsistently ruled that there can be no off-setting of taxes against theclaims that the taxpayer may have against the government. A personcannot refuse to pay a tax on the ground that the government owes himan amount equal to or greater than the tax being collected. The collectionof a tax cannot await the results of a lawsuit against the government.

In the case ofRepublic v. Mambulao Lumber Co. (4 SCRA 622), thisCourt ruled that Internal Revenue Taxes can not be the subject of set-offor compensation. We stated that:

A claim for taxes is not such a debt, demand, contract orjudgment as is allowed to be set-off under the statutes ofset-off, which are construed uniformly, in the light ofpublic policy, to exclude the remedy in an action or anyindebtedness of the state or municipality to one who isliable to the state or municipality for taxes. Neither are

they a proper subject of recoupment since they do notarise out of the contract or transaction sued on. ... (80C.J.S., 7374). "The general rule based on grounds ofpublic policy is well-settled that no set-off admissibleagainst demands for taxes levied for general or localgovernmental purposes. The reason on which the generalrule is based, is that taxes are not in the nature ofcontracts between the party and party but grow out ofduty to, and are the positive acts of the government to themaking and enforcing of which, the personal consent ofindividual taxpayers is not required. ..."


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We stated that a taxpayer cannot refuse to pay his tax when called uponby the collector because he has a claim against the governmental bodynot included in the tax levy.

This rule was reiterated in the case of Corders v. Gonda(18 SCRA 331)where we stated that: "... internal revenue taxes can not be the subject ofcompensation: Reason: government and taxpayer are not mutuallycreditors and debtors of each other' under Article 1278 of the Civil Code

and a "claim for taxes is not such a debt, demand, contract or judgmentas is allowed to be set-off."

There are other factors which compel us to rule against the petitioner.The tax was due to the city government while the expropriation waseffected by the national government. Moreover, the amount of P4,116.00paid by the national government for the 125 square meter portion of hislot was deposited with the Philippine National Bank long before the saleat public auction of his remaining property. Notice of the deposit datedSeptember 28, 1977 was received by the petitioner on September 30,1977. The petitioner admitted in his testimony that he knew about the

P4,116.00 deposited with the bank but he did not withdraw it. It wouldhave been an easy matter to withdraw P2,400.00 from the deposit so thathe could pay the tax obligation thus aborting the sale at public auction.

Petitioner had one year within which to redeem his property although, aswell be shown later, he claimed that he pocketed the notice of the auctionsale without reading it.

Petitioner contends that "the auction sale in question was made withoutcomplying with the mandatory provisions of the statute governing taxsale. No evidence, oral or otherwise, was presented that the procedureoutlined by law on sales of property for tax delinquency was followed.... Since defendant Ho Fernandez has the affirmative of this issue, theburden of proof therefore rests upon him to show that plaintiff was dulyand properly notified ... .(Petition for Review, Rollo p. 18; emphasissupplied)

We agree with the petitioner's claim that Ho Fernandez, the purchaser atthe auction sale, has the burden of proof to show that there wascompliance with all the prescribed requisites for a tax sale.

The case of Valencia v. Jimenez(11 Phil. 492) laid down the doctrinethat:

xxx xxx xxx

... [D]ue process of law to be followed in tax proceedingsmust be established by proof and thegeneral rule is thatthe purchaser of a tax title is bound to take upon himselfthe burden of showing the regularity of all proceedingsleading up to the sale. (emphasis supplied)

There is no presumption of the regularity of any administrative actionwhich results in depriving a taxpayer of his property through a tax sale.(Camo v. Riosa Boyco, 29 Phil. 437); Denoga v. Insular Government, 19Phil. 261). This is actually an exception to the rule that administrativeproceedings are presumed to be regular.

But even if the burden of proof l ies with the purchaser to show that alllegal prerequisites have been complied with, the petitioner can not,however, deny that he did receive the notice for the auction sale. Therecords sustain the lower court's finding that:

[T]he plaintiff claimed that it was illegal and irregular. Heinsisted that he was not properly notified of the auctionsale. Surprisingly, however, he admitted in his testimonythat he received the letter dated November 21, 1977(Exhibit "I") as shown by his signature (Exhibit "I-A")thereof. He claimed further that he was not present onDecember 5, 1977 the date of the auction sale becausehe went to Iligan City. As long as there was substantialcompliance with the requirements of the notice, thevalidity of the auction sale can not be assailed ... .

We quote the following testimony of the petitioner on cross-examination,to wit:

Q. My question to you is this letter markedas Exhibit I for Ho Fernandez notified youthat the property in question shall be soldat public auction to the highest bidder onDecember 5, 1977 pursuant to Sec. 74 ofPD 464. Will you tell the Court whetheryou received the original of this letter?


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A. I just signed it because I was not ableto read the same. It was just sent by mailcarrier.

Q. So you admit that you received theoriginal of Exhibit I and you signed uponreceipt thereof but you did not read thecontents of it?

A. Yes, sir, as I was in a hurry.

Q. After you received that original wheredid you place it?

A. I placed it in the usual place where Iplace my mails.

Petitioner, therefore, was notified about the auction sale. It wasnegligence on his part when he ignored such notice. By his very own

admission that he received the notice, his now coming to court assailingthe validity of the auction sale loses i ts force.

Petitioner's third assignment of grave error likewise lacks merit. As ageneral rule, gross inadequacy of price is not material (De Leon v.Salvador, 36 SCRA 567; Ponce de Leon v. Rehabilitation FinanceCorporation, 36 SCRA 289; Tolentino v. Agcaoili, 91 Phil. 917 Unrep.).See also Barrozo Vda. de Gordon v. Court of Appeals(109 SCRA 388)we held that "alleged gross inadequacy of price is not material when thelaw gives the owner the right to redeem as when a sale is made at publicauction, upon the theory that the lesser the price, the easier it is for the

owner to effect redemption." In Velasquez v. Coronel(5 SCRA 985), thisCourt held:

... [R]espondent treasurer now claims that the prices forwhich the lands were sold are unconscionableconsidering the wide divergence between their assessedvalues and the amounts for which they had been actuallysold. However, while in ordinary sales for reasons ofequity a transaction may be invalidated on the ground ofinadequacy of price, or when such inadequacy shocksone's conscience as to justify the courts to interfere, suchdoes not follow when the law gives to the owner the rightto redeem, as when a sale is made at public auction,

upon the theory that the lesser the price the easier it is forthe owner to effect the redemption. And so it was aptlysaid: "When there is the right to redeem, inadequacy ofprice should not be material, because the judgmentdebtor may reacquire the property or also sell his right toredeem and thus recover the loss he claims to havesuffered by reason of the price obtained at the auctionsale."

The reason behind the above rulings is well enunciated in the caseof Hilton et. ux. v. De Long, et al.(188 Wash. 162, 61 P. 2d, 1290):

If mere inadequacy of price is held to be a valid objectionto a sale for taxes, the collection of taxes in this mannerwould be greatly embarrassed, if not rendered altogetherimpracticable. In Black on Tax Titles (2nd Ed.) 238, thecorrect rule is stated as follows: "where land is sold fortaxes, the inadequacy of the price given is not a validobjection to the sale." This rule arises from necessity, for,

if a fair price for the land were essential to the sale, itwould be useless to offer the property. Indeed, it isnotorious that the prices habitually paid by purchasers attax sales are grossly out of proportion to the value of theland. (Rothchild Bros. v. Rollinger, 32 Wash. 307, 73 P.367, 369).

In this case now before us, we can aptly use the language of McGuire, etal. v. Bean, et al. (267 P. 555):

Like most cases of this character there is here a certainelement of hardship from which we would be glad torelieve, but do so would unsettle long-established rulesand lead to uncertainty and difficulty in the collection oftaxes which are the life blood of the state. We areconvinced that the present rules are just, and that theybring hardship only to those who have invited it by theirown neglect.

We are inclined to believe the petitioner's claim that the value of the lothas greatly appreciated in value. Precisely because of the widening ofBuendia Avenue in Pasay City, which necessitated the expropriation ofadjoining areas, real estate values have gone up in the area. However,

the price quoted by the petitioner for a 203 square meter lot appears


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quite exaggerated. At any rate, the foregoing reasons which answer thepetitioner's claims lead us to deny the petition.

And finally, even if we are inclined to give relief to the petitioner onequitable grounds, there are no strong considerations of substantial

justice in his favor. Mr. Francia failed to pay his taxes for 14 years from1963 up to the date of the auction sale. He claims to have pocketed thenotice of sale without reading it which, if true, is still an act of inexplicable

negligence. He did not withdraw from the expropriation paymentdeposited with the Philippine National Bank an amount sufficient to payfor the back taxes. The petitioner did not pay attention to another noticesent by the City Treasurer on November 3, 1978, during the period ofredemption, regarding his tax delinquency. There is furthermore noshowing of bad faith or collusion in the purchase of the property by Mr.Fernandez. The petitioner has no standing to invoke equity in his attemptto regain the property by belatedly asking for the annulment of the sale.

WHEREFORE, IN VIEW OF THE FOREGOING, the petition for review isDISMISSED. The decision of the respondent court is affirmed.

SO ORDERED.


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G.R. No. L-35238 April 21, 1989

REPUBLIC OF THE PHILIPPINES, petitioner,vs.HON. JUDGE VICENTE G. ERICTA and SAMPAGUITA PICTURES,INC., respondents.

NARVASA, J.:

This case has to do with the so-called "back pay certificates" issued bythe Philippine Government in the aftermath of the Pacific War, pursuantto Republic Act No. 304, as amended by Republic Act No. 800. Theseenactments generally recognized the right of persons who at theoutbreak of the war were employed in the classified and unclassified civilservice as well as in government-owned or controlled corporations, andthose who had served in the free local civil governments organized forpurposes of resistance against the invaders, to salaries, wages,emoluments,per diems, not received by them by reason of the war. TheTreasurer of the Philippines was empowered to receive applications for

back pay and to issue in favor of the applicants certificates ofindebtedness redeemable by the Government within ten years for theamounts determined to be justly due them.

It appears that in relation to its business of producing motion pictures,Sampaguita Pictures, Inc., hereafter simply Sampaguita, came to incuran obligation for percentage, withholding and amusement taxes in theamount of P10,268.41 in favor of the Republic of the Philippines.1Insatisfaction thereof, and of another obligation of the same nature duefrom Vera-Perez Corporation, Sampaguita Pictures, Inc. tendered anddelivered to the Office of the Municipal Treasurer of Bocaue, Bulacan, onJune 9, 1961, sixteen (16) back pay negotiable certificates ofindebtedness in the aggregate sum of P16,763.60, which had earlierbeen negotiated to them by the original holders thereof, and officialreceipts therefor were duly issued.2

Thirteen (13) days later, however, the Assistant Regional Director of theBIR wrote to Vera-Perez Corporation (his letter is dated June 22, 1961)advising that the acceptance of the Negotiable Certificates ofIndebtedness in payment of amusement, percentage and withholdingtaxes (in the total sum of P16,753.50) was erroneous and the paymentwas invalid, because actually said certificates were "not acceptable aspayments of internal revenue taxes in accordance with the provisions of ..

General Circular No. V-289 dated May 8, 1959." Request was thus made

for the payment of the tax liabilities in cash. 3 Evidently neithercorporations responded one way or the other to this letter. Anyway, thenext letter adverted to by the Government is that dated August 18, 1967,written by the Acting Deputy Commissioner of Internal Revenue to bothSampaguita and Vera-Perez Corporation. 4 That letter gave thecorporations "a last 15-day period within which to pay the said amount ofP16,763.50 in cash or certified check." Again, no acceptable responseseems to have been made by the corporations. So on June 9, 1969, eight

(8) years to the day when the negotiable certificates of indebtednesswere accepted in payment of taxes by the Municipal Treasurer atBocaue, Bulacan, the Solicitor General brought suit in behalf of theRepublic of the Philippines in relation thereto. 5 The case was docketedas Civil Case No. Q-13270 of the Court of First Instance at Quezon City,and assigned to Branch XVIII thereof, then presided over by hereinrespondent, Hon. Vicente G. Ericta. 6

The Solicitor General's complaint 7 impleaded only Sampaguita asdefendant. Why he excluded the other corporation is not disclosed by therecord. In his complaint he alleged that Sampaguita's essayed paymentwas void since it was "not the original holder of the .. certificates .. but ..only a mere assignee thereof," and tinder the law," only original holdersof back pay certificates .. are allowed to use the same in payment of theirown taxes," invoking this Court's decision to that effect in de Borja v.Gella8 promulgated on July 31, 1963.

Sampaguita's answer admitted the basic facts, but asserted that theplaintiffs cause of action had already prescribed; that the tender of thecertificates in 1961 had been "made in absolute good faith," "prior to thepromulgation of the decision .. (in) de Borja vs. Vicente Gella et al. onJuly 31, 1963;" that the certificates "having duly matured .. in the year1958, (and) plaintiff .. (being then) already duty bound to redeem them

and pay for their value," Sampaguita and the Republic became "mutualcreditors and debtors of each other for the amount of P10,268.41" withthe result that their obligations were extinguished by legal compensation."These averments wereinter alia reproduced and set up also as acounterclaim, with the additional plea that "in the remote possibility that..(it [Sampaguita 1) be still required .. to pay plaintiff the amount ofP10,268.41 for alleged unpaid taxes, the plaintiff be ordered to pay thedefendant the same amount of Pl 0,268.41 representing the face value ofthe negotiable certificates of indebtedness."

On December 29, 1971, judgment was rendered by the Trial Judge

"dismissing both the complaint and the counterclaim withoutpronouncement as to costs."9 His Honor held that delivery of the back


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pay certificates by Sampaguita had not produced the effect of payment inview of the doctrine in Borja v. Gella10 that "the right to use backpaycertificates of indebtedness in the settlement of taxes is given only tooriginal holders and not to mere assignees thereof;" this notwithstanding,Sampaguita, as assignee of the certificates of indebtedness, had"succeeded to the original rights of the holders thereof," and wastherefore authorized to demand payment by the Republic of theindebtedness thereby represented; and while there was "opinion that

(legal) compensation cannot take place against the Republic with respectto taxes, fees, duties and similar forced contributions due to it (Civil Code,Volume IV, p. 349, Tolentino; Gasperi 204; 2 Von Tuhr Obligaciones, p.165), there could be no gainsaying the proposition that, under thefacts, Sampaguita was entitled to judgment upon its counterclaim for thepayment by the Republic of its indebtedness in virtue of the back paycertificates in question, with the "ultimate result .. that the claim andcounter-claim of the plaintiff and the defendant, respectively will offseteach other."

The Solicitor General presented a motion of reconsideration. When thiswas denied, he appealed to this Court by certiorari positing reversiblelegal error on the part of respondent Judge in holding that (1) theRepublic's claim is offset by Sampaguita's counterclaim, and (2) thenegotiable certificates of indebtedness in question were "long overdueand redeemable." The petitioner's postulations are untenable.

1. The Trial Court ruled that the taxes sought to becollected by the Republic from Sampaguita were stillunpaid, its tender of the certificates of indebtedness inquestion not constituting payment; hence, it oughtproperly to be sentenced to pay the taxes. It also ruledthat even assuming the contrary, legal compensation as a

mode of extinguishing an obligation to pay taxes wasnonetheless unavailing against the government,conformably with de Borja v. Gella.

On the other hand, according to the Trial Court, at least as of date ofjudgment, more than 10 years from June 18, 1958, the date when, asexpressly stated in the certificates of indebtedness, the same wereredeemable, the obligation thereby evidenced was unquestionablyalready due and payable; hence, Sampaguita was entitled to a judgmentagainst the Republic for the payment of the face value of the certificates,the same having already been presented and surrendered within the said

period of ten years (on June 9, 1961) to the Treasurer of the Philippines(thru the Municipal Treasurer of Bocaue, Bulacan ) 11 This is correct. In

other words, even if as the Solicitor General points out, "there is nocertainty when the certificates are actually redeemable" because the lawsay "that they are redeemable .. within ten years from the date ofissuance " 12 there can be no question that after the lapse of ten (10)years from the declared date of redeemability, payment of theindebtedness was already exigible The Trial Court was saying in effectthat while judgment should be rendered in favor of the Republic againstSampaguita for unpaid taxes in the amount of P10,268.41, judgment

ought at the same time to issue for Sampaguita commanding payment toit by the Republic of the same sum, representing the face value of thecertificates of indebtedness assigned to it and for recovery of which it hadspecifically prayed in its counterclaim.

2. What has just been said confutes the petitioner'ssecond argument that redemption of the certificates ofindebtedness was not yet demandable of it because"there is no certainty when the certificates are actuallyredeemable, within the meaning of the law." It is true that,as the Solicitor General contends, "the law does not saythat they are redeemable from its approval on June 18,1958 but 'within ten years from the date of issuance' ofthe certificates, " 13 the ineludible ineluctable fact is thatmore than ten (10) years have already elapsed since theirissuance and demand for payment had been made withinsaid 10-year period. It is useless to quibble about theprecise time "within ten years" when an obligationbecomes demandable, when that period of ten years hasalready expired. Whatever inexactitude might inhere inthe phrase, "within ten years," as fixing the time of exibilityof the obligation in question, there can be no debateabout the proposition that the obligation became due and

demandable after ten years. It would be absurd and unfairto sanction the theory subsumed in the Republic's petitionthat its obligation was not demandable within ten yearsbecause of inexactitude yet became time-barred upon thelapse of that self-same period.

WHEREFORE, the petition is DENIED, and the judgment subject thereof,being in accord with the facts and the law, is AFFIRMED in toto. Nocosts.

SO ORDERED.


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G.R. Nos. L-28502-03 April 18, 1989

COMMISSIONER OF INTERNAL REVENUE,petitioner,

-versus-

ESSO STANDARD EASTERN, INC. and THE COURT OF TAX

APPEALS, respondents.

NARVASA,J.:

In two (2) cases appealed to it 1by the private respondent, hereafter

simply referred to as ESSO, the Court of Tax Appeals renderedjudgment 2sustaining the decisions of the Commissioner of Internal

Revenue excepted to, save "the refund-claim .. in the amount ofP39,787.94 as overpaid interest which it ordered refunded to ESSO

Reversal of this decision is sought by the Commissioner by a petitionfor review on certiorarifiled with this Court. He ascribes to the TaxCourt one sole error: "of applying the tax credit for overpayment of the

1959 income tax of .. ESSO, granted by the petitioner (Commissioner),

to .. (ESSO's) basic 1960 deficiency income tax liability x x andimposing the 1-1/2% monthly interests 3only on the remaining

balance thereof in the sum of P146,961.00" 4(instead of the fullamount of the 1960 deficiency liability in the amount of P367,994.00).

Reversal of the same judgment of the Court of Tax Appeals is also

sought by ESSO in its own appeal (docketed as G.R. Nos. L28508-09);

but in the brief filed by it in this case, it indicates that it will not pressits appeal in the event that "the instant petition for review be deniedand that judgment be rendered affirming the decision of the Court of

Tax Appeals."

The facts are simple enough and are quite quickly recounted. ESSOoverpaid its 1959 income tax by P221,033.00. It was accordingly

granted a tax credit in this amount by the Comissioner on August5,1964. However, ESSOs payment of its income tax for 1960 was

found to be short by P367,994.00. So, on July 10, 1964, the

Commissioner wrote to ESSO demanding payment of the deficiencytax, together with interest thereon for the period from April 18,1961 to

April 18,1964. On August 10, 1964, ESSO paid under protest theamount alleged to be due, including the interest as reckoned by the

Commissioner. It protested the computation of interest, contending itwas more than that properly due. It claimed that it should not have

been required to pay interest on the total amount of the deficiency tax,

P367,994.00, but only on the amount of P146,961.00representingthe difference between said deficiency, P367,994.00, and ESSOs

earlier overpayment of P221,033.00 (for which it had been granted atax credit). ESSO thus asked for a refund.

The Internal Revenue Commissioner denied the claim for refund.

ESSO appealed to the Court of Tax Appeals. As aforestated. that Courtordered payment to ESSO of its "refund-claim x x in the amount of

P39,787.94 as overpaid interest. Hence, this appeal by theCommissioner. The CTA justified its award of the refund as follows:

... In the letter of August 5, 1964, .. (the Commissioner)

admitted that .. ESSO had overpaid its 1959 income taxby P221,033.00. Accordingly .. (the Commissioner)

granted to .. ESSO a tax credit of P221,033.00. In short,

the said sum of P221,033.00 of ESSO's money was inthe Government's hands at the latest on July 15, 1960

when it ESSO paid in full its second installment ofincome tax for 1959. On July 10, 1964 .. (the

Commissioner) claimed that for 1960, .. ESSO

underpaid its income tax by P367,994.00. However,instead of deducting from P367,994.00 the tax credit of

P221,033.00 which .. (the Commissioner) had alreadyadmitted was due .. ESSO .. (the Commissioner) still

insists in collecting the interest on the full amount of

P367,994.00 for the period April 18, 1961 to April18,1964 when the Government had already in its hands

the sum of P221,033.00 of .. ESSOs money even beforethe latter's income tax for 1960 was due and payable. If

the imposition of interest does not amount to a penalty

but merely a just compensation to the State for thedelay in paying the tax, and for the concomitant use by

the taxpayer of funds that rightfully should be in theGovernment's hand (Castro v. Collector, G.R. No. L-


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1274, Dec. 28, 1962), the collection of the interest onthe full amount of P367,994.00 without deducting first

the tax credit of P221,033.00, which has long been inthe hands of the Government, becomes erroneous,

illegal and arbitrary.

.. (ESSO) could hardly be charged of delinquency in

paying P221,033.00 out of the deficiency income tax ofP367,994.00, for which the State should becompensated by the payment of interest, because the

said amount of P221,033.00 was already in the coffers

of the Government. Neither could .. ESSO be chargedfor the concomitant use of funds that rightfully belong

to the Government because as early as July 15, 1960, itwas the Government that was using .. ESSOs funds of

P221,033.00. In the circumstances, we find it unfair and

unjust for .. (the Commissioner) to exact the interest on

the said sum of P221,033.00 which, after all, was paidto and received by the Government even before theincidence of the deficiency income tax of P367,994.00.(Itogon-Suyoc Mines, Inc. v. Commissioner, C.T.A.

Case No. 1327, Sept. 30,1965). On the contrary, theGovernment should be the first to blaze the trail and set

the example of fairness and honest dealing in the

administration of tax laws.

Accordingly, we hold that the tax credit of P221,033.00

for 1959 should first be deducted from the basicdeficiency tax of P367,994.00 for 1960 and the

resulting difference of P146,961.00 would be subject to

the 18% interest prescribed by Section 51 (d) of theRevenue Code. According to the prayer of ..(ESSO) ..

(the Commissioner) is hereby ordered to refund to ..(ESSO) the amount of P39,787.94 as overpaid interest

in the settlement of its 1960 income tax liability.

However, as the collection of the tax was not attendedwith arbitrariness because .. (ESSO) itself followed x x

(the Commissioner's) manner of computing the tax inpaying the sum of P213,189.93 on August 10, 1964, the

prayer of .. (ESSO) that it be granted the legal rate ofinterest on its overpayment of P39,787.94 from August

10, 1964 to the time it is actually refunded is denied.(See Collector of Internal Revenue v. Binalbagan

Estate, Inc., G.R. No. 1,12752, Jan. 30, 1965).

The Commissioner's position is that income taxes are determined and

paid on an annual basis, and that such determination and payment ofannual taxes are separate and independent transactions; and that a taxcredit could not be so considered until it has been finally approved and

the taxpayer duly notified thereof. Since in this case, he argues, the tax

credit of P221,033.00 was approved only on August 5, 1964, it couldnot be availed of in reduction of ESSOs earlier tax deficiency for the

year 1960; as of that year, 1960, there was as yet no tax credit to speakof, which would reduce the deficiency tax liability for 1960. In support

of his position, the Commissioner invokes the provisions of Section 51

of the Tax Code pertinently reading as follows:

(c) Definition of deficiency. As used in this Chapter in

respect of tax imposed by this Title, the term

'deficiency' means:

(1) The amount by which the tax imposed by this Title

exceeds the amount shown as the tax by the taxpayerupon his return; but the amount so shown on the return

shall first be increased by the amounts previously

assessed (or collected without assessment) as a

deficiency, and decreased by the amount previouslyabated credited, returned, or otherwise in respect ofsuch tax; ..

xxx xxx xxx

(d) Interest on deficiency.Interest upon the amountdetermined as deficiency shall be assessed at the same

time as the deficiency and shall be paid upon notice and

demand from the Commissioner of Internal Revenue;

and shall be collected as a part of the tax, at the rate ofsix per centum per annum from the date prescribed for


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the payment of the tax (or, if the tax is paid ininstallments, from the date prescribed for the payment

of the first installment) to the date the deficiency isassessed;Provided, That the amount that may be

collected as interest on deficiency shall in no case

exceed the amount corresponding to a period of threeyears, the present provision regarding prescription to

the contrary notwithstanding.

The fact is that, as respondent Court of Tax Appeals has stressed, as

early as July 15, 1960, the Government already had in its hands the

sum of P221,033.00 representing excess payment. Having been paidand received by mistake, as petitioner Commissioner subsequently

acknowledged, that sum unquestionably belonged to ESSO, and theGovernment had the obligation to return it to ESSO That

acknowledgment of the erroneous payment came some four (4) years

afterwards in nowise negates or detracts from its actuality. The

obligation to return money mistakenly paid arises from the momentthat payment is made, and not from the time that the payee admits theobligation to reimburse. The obligation of the payee to reimburse anamount paid to him results from the mistake, not from the payee's

confession of the mistake or recognition of the obligation to reimburse.In other words, since the amount of P221,033.00 belonging to ESSO

was already in the hands of the Government as of July, 1960, although

the latter had no right whatever to the amount and indeed was bound toreturn it to ESSO, it was neither legally nor logically possible for

ESSO thereafter to be considered a debtor of the Government in that

amount of P221,033.00; and whatever other obligation ESSO mightsubsequently incur in favor of the Government would have to be

reduced by that sum, in respect of which no interest could be charged.To interpret the words of the statute in such a manner as to subvert

these truisms simply can not and should not be countenanced."Nothing is better settled than that courts are not to give words a

meaning which would lead to absurd or unreasonable consequences.

That is a principle that goes back toIn re Allen(2 Phil. 630) decidedon October 29, 1903, where it was held that a literal interpretation is to

be rejected if it would be unjust or lead to absurd results." 6"Statutes

should receive a sensible construction, such as will give effect to the

legislative intention and so as to avoid an unjust or absurdconclusion." 7

WHEREFORE, the petition for review is DENIED, and the Decisionof the Court of Tax Appeals dated October 28, 1967 subject of the

petition is AFFIRMED, without pronouncement as to costs


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G.R. No. 92585 May 8, 1992

CALTEX PHILIPPINES, INC., petitioner,vs.THE HONORABLE COMMISSION ON AUDIT, HONORABLECOMMISSIONER BARTOLOME C. FERNANDEZ and HONORABLECOMMISSIONER ALBERTO P. CRUZ, respondents.

DAVIDE, JR., J.:

This is a petition erroneously brought under Rule 44 of the Rules ofCourt 1questioning the authority of the Commission on Audit (COA) indisallowing petitioner's claims for reimbursement from the Oil PriceStabilization Fund (OPSF) and seeking the reversal of said Commission'sdecision denying its claims for recovery of financing charges from the Fundand reimbursement of underrecovery arising from sales to the NationalPower Corporation, Atlas Consolidated Mining and Development Corporation(ATLAS) and Marcopper Mining Corporation (MAR-COPPER), preventing itfrom exercising the right to offset its remittances against itsreimbursement vis-a-vis the OPSF and disallowing its claims which are stillpending resolution before the Office of Energy Affairs (OEA) and theDepartment of Finance (DOF).

Pursuant to the 1987 Constitution, 2any decision, order or ruling of theConstitutional Commissions 3may be brought to this Court on certioraribythe aggrieved party within thirty (30) days from receipt of a copy thereof.The certiorarireferred to is the special civil action for certiorariunder Rule 65of the Rules of Court. 4

Considering, however, that the allegations that the COA acted with:(a) total lack of jurisdiction in completely ignoring and showing absolutelyno respect for the findings and rulings of the administrator of the funditself and in disallowing a claim which is still pending resolution at theOEA level, and (b) "grave abuse of discretion and completely without

jurisdiction" 5in declaring that petitioner cannot avail of the right to offset anyamount that it may be required under the law to remit to the OPSF againstany amount that it may receive by way of reimbursement therefrom aresufficient to bring this petition within Rule 65 of the Rules of Court, and,considering further the importance of the issues raised, the error in thedesignation of the remedy pursued will, in this instance, be excused.

The issues raised revolve around the OPSF created under Section 8 ofPresidential Decree (P.D.) No. 1956, as amended by Executive Order(E.O.) No. 137. As amended, said Section 8 reads as follows:

Sec. 8 . There is hereby created a Trust Account in thebooks of accounts of the Ministry of Energy to bedesignated as Oil Price Stabilization Fund (OPSF) for thepurpose of minimizing frequent price changes brought

about by exchange rate adjustments and/or changes inworld market prices of crude oil and imported petroleumproducts. The Oil Price Stabilization Fund may besourced from any of the following:

a) Any increase in the tax collectionfrom ad valoremtax or customs dutyimposed on petroleum products subject totax under this Decree arising fromexchange rate adjustment, as may bedetermined by the Minister of Finance inconsultation with the Board of Energy;

b) Any increase in the tax collection as aresult of the lifting of tax exemptions ofgovernment corporations, as may bedetermined by the Minister of Finance inconsultation with the Board of Energy;

c) Any additional amount to be imposedon petroleum products to augment theresources of the Fund through anappropriate Order that may be issued by

the Board of Energy requiring payment bypersons or companies engaged in thebusiness of importing, manufacturingand/or marketing petroleum products;

d) Any resulting peso cost differentials incase the actual peso costs paid by oilcompanies in the importation of crude oiland petroleum products is less than thepeso costs computed using the referenceforeign exchange rate as fixed by the

Board of Energy.


24/46

The Fund herein created shall be used for the following:

1) To reimburse the oil companies for costincreases in crude oil and importedpetroleum products resulting fromexchange rate adjustment and/or increasein world market prices of crude oil;

2) To reimburse the oil companies forpossible cost under-recovery incurred as aresult of the reduction of domestic pricesof petroleum products. The magnitude ofthe underrecovery, if any, shall bedetermined by the Ministry of Finance."Cost underrecovery" shall include thefollowing:

i. Reduction in oil companytake as directed by the

Board of Energy withoutthe correspondingreduction in the landedcost of oil inventories inthe possession of the oilcompanies at the time ofthe price change;

ii. Reduction in internal advaloremtaxes as a resultof foregoing governmentmandated price

reductions;

iii. Other factors as may bedetermined by the Ministryof Finance to result in costunderrecovery.

The Oil Price Stabilization Fund (OPSF) shall beadministered by the Ministry of Energy.

The material operative facts of this case, as gathered from the pleadings

of the parties, are not disputed.

On 2 February 1989, the COA sent a letter to Caltex Philippines, Inc.(CPI), hereinafter referred to as Petitioner, directing the latter to remit tothe OPSF its collection, excluding that unremitted for the years 1986 and1988, of the additional tax on petroleum products authorized under theaforesaid Section 8 of P.D. No. 1956 which, as of 31 December 1987,amounted to P335,037,649.00 and informing it that, pending suchremittance, all of its claims for reimbursement from the OPSF shall beheld in abeyance. 6

On 9 March 1989, the COA sent another letter to petitioner informing itthat partial verification with the OEA showed that the grand total of itsunremitted collections of the above tax is P1,287,668,820.00, brokendown as follows:

1986 P233,190,916.001987 335,065,650.001988 719,412,254.00;

directing it to remit the same, with interest and surcharges thereon, withinsixty (60) days from receipt of the letter; advising it that the COA will holdin abeyance the audit of all i ts claims for reimbursement from the OPSF;and directing it to desist from further offsetting the taxes collected againstoutstanding claims in 1989 and subsequent periods. 7

In its letter of 3 May 1989, petitioner requested the COA for an earlyrelease of its reimbursement certificates from the OPSF covering claimswith the Office of Energy Affairs since June 1987 up to March 1989,invoking in support thereof COA Circular No. 89-299 on the lifting of pre-

audit of government transactions of national government agencies andgovernment-owned or controlled corporations. 8

In its Answer dated 8 May 1989, the COA denied petitioner's request forthe early release of the reimbursement certificates from the OPSF andrepeated its earlier directive to petitioner to forward payment of thelatter's unremitted collections to the OPSF to facilitate COA's audit actionon the reimbursement claims. 9

By way of a reply, petitioner, in a letter dated 31 May 1989, submitted tothe COA a proposal for the payment of the collections and the recovery

of claims, since the outright payment of the sum of P1.287 billion to the


25/46

OEA as a prerequisite for the processing of said claims against the OPSFwill cause a very serious impairment of its cash position. 10The proposalreads:

We, therefore, very respectfully propose the following:

(1) Any procedural arrangementacceptable to COA to facilitate monitoring

of payments and reimbursements will beadministered by the ERB/FinanceDept./OEA, as agencies designated bylaw to administer/regulate OPSF.

(2) For the retroactive period, Caltex willdeliver to OEA, P1.287 billion as paymentto OPSF, similarly OEA will deliver toCaltex the same amount in cashreimbursement from OPSF.

(3) The COA audit will commenceimmediately and will be conductedexpeditiously.

(4) The review of current claims (1989) willbe conducted expeditiously to precludefurther accumulation of reimbursementfrom OPSF.

On 7 June 1989, the COA, with the Chairman taking no part, handeddown Decision No. 921 accepting the above-stated proposal butprohibiting petitioner from further offsetting remittances andreimbursements for the current and ensuing years. 11Decision No. 921reads:

This pertains to the within separate requests of Mr.Manuel A. Estrella, President, Petron Corporation, andMr. Francis Ablan, President and Managing Director,Caltex (Philippines) Inc., for reconsideration of thisCommission's adverse action embodied in its lettersdated February 2, 1989 and March 9, 1989, the formerdirecting immediate remittance to the Oil PriceStabilization Fund of collections made by the firms

pursuant to P.D. 1956, as amended by E.O. No. 137, S.

1987, and the latter reiterating the same directive butfurther advising the firms to desist from offsettingcollections against their claims with the notice that "thisCommission will hold in abeyance the audit of all . . .claims for reimbursement from the OPSF."

It appears that under letters of authority issued by theChairman, Energy Regulatory Board, the aforenamed oil

companies were allowed to offset the amounts due to theOil Price Stabilization Fund against their outstandingclaims from the said Fund for the calendar years 1987and 1988, pending with the then Ministry of Energy, thegovernment entity charged with administering the OPSF.This Commission, however, expressing serious doubts asto the propriety of the offsetting of all types ofreimbursements from the OPSF against all categories ofremittances, advised these oil companies that suchoffsetting was bereft of legal basis. Aggrieved thereby,these companies now seek reconsideration and insupport thereof clearly manifest their intent to make

arrangements for the remittance to the Office of EnergyAffairs of the amount of collections equivalent to what hasbeen previously offset,providedthat this Commissionauthorizes the Office of Energy Affairs to prepare thecorresponding checks representing reimbursement fromthe OPSF. It is alleged that the implementation of such anarrangement, whereby the remittance of collections dueto the OPSF and the reimbursement of claims from theFund shall be made within a period of not more than oneweek from each other, will benefit the Fund and notunduly jeopardize the continuing daily cash requirements

of these firms.

Upon a circumspect evaluation of the circumstancesherein obtaining, this Commission perceives no furtherobjectionable feature in the proposed arrangement,provided that 15% of whatever amount is due from theFund is retained by the Office of Energy Affairs, the sameto be answerable for suspensions or disallowances,errors or discrepancies which may be noted in the courseof audit and surcharges for late remittances withoutprejudice to similar future retentions to answer for anydeficiency in such surcharges, and provided further that


26/46

no offsetting of remittances and reimbursements for thecurrent and ensuing years shall be allowed.

Pursuant to this decision, the COA, on 18 August 1989, sent the followingletter to Executive Director Wenceslao R. De la Paz of the Office ofEnergy Affairs: 12

Dear Atty. dela Paz:

Pursuant to the Commission on Audit Decision No. 921dated June 7, 1989, and based on our initial verification ofdocuments submitted to us by your Office in support ofCaltex (Philippines), Inc. offsets (sic) for the year 1986 toMay 31, 1989, as well as its outstanding claims againstthe Oil Price Stabilization Fund (OPSF) as of May 31,1989, we are pleased to inform your Office that Caltex(Philippines), Inc. shall be required to remit to OPSF anamount of P1,505,668,906, representing remit

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