Cruz Cruz & Navarro III Law Firm

January 17, 2008 BIR RULING [DA-021-08] Section 21 (d), NIRC; DA-435-2000 dtd 12/18/00 Cruz Cruz & Navarro III Law Firm Suite 602, The Centerpoint Condominium J. Vargas Ave., Ortigas Center Pasig City Attention: Constantino L. Navarro III Counsel Gentlemen : This refers to your letter dated June 18, 2007, requesting the waiver of all expenses, taxes and fees in connection with the reconveyance of the title of the property to the original owners pursuant to a decision of the Supreme Court in GR No. 168369 affirming in toto the lower court's decision. SCIAaT Documents submitted disclosed that the parties in Civil Case No. Q-91-9808, entitled "Julia S. Torio, et al. vs. Erie and Dick Aquino" are brothers and sisters as the plaintiffs and their niece and her husband as defendants; that the case stemmed from the surreptitious sale by the defendants of a parcel of land covered by TCT No. 338205/T-13681 of the Registry of Deeds for Quezon City together with its improvement inherited by the plaintiffs from their deceased parents; that the defendants are the daughter and son-in-law of one of the plaintiffs (Cesar F. Suck); that the plaintiffs agreed among themselves to sell the said property and for expediency in the selling, they agreed that the owner's duplicate Certificate of Title be entrusted to one of the plaintiffs, GEORGINA S. MARTINEZ; that defendants signified their interest in helping to sell the property; that they borrowed the title from Georgina S. Martinez, to which the latter acceded, only to find out later that the title was now transferred in the names of the defendants, Sps. Erie and Dick Aquino by falsifying plaintiffs' signatures; that worse, the new title (TCT #13682) was mortgaged with PCI Bank; that a case was filed with the Regional Trial Court (RTC) Branch 81, Quezon City for the cancellation of sale and mortgage, and the reconveyance of Title to the original owners; that RTC-Branch 81, Quezon City rendered judgement in favor of the plaintiffs and the intervenor and against the defendants, quoted hereunder as follows: TcIAHS "1. Declaring as spurious, inexistent and null and void the Special Power of Attorney dated February 9, 1990 (Exh. "B") and the Deed of Absolute Sale dated March 20, 1990 (Exh. "D"); "2. Declaring as null and void TCT No. 13682 (Exh. "C") and the Deed of Real Estate Mortgage of subject property in favor of the Defendant PCI Bank. (Exh. "17" to "17-b") and ordering defendants Erie Aquino and Dick Aquino to reconvey the subject property to the plaintiffs and the intervenor; "3. Ordering the Register of Deeds of Quezon City to cancel TCT No. 13682 and to issue in its place another certificate of title in the name of the same owner appearing in cancelled TCT No. 338205/T-13681, free all liens and encumbrances except those originally annotated in TCT No. 338205/T-13681; "4. . . ." that the defendants assailed the decision of the RTC and appealed to the Court of Appeals (CA), and eventually to the Supreme Court (SC); and that, however, the SC affirmed in toto the decision rendered by the RTC and the CA. Hence, this request. IECcaA In reply, please be informed that the judgment of the Court ordering defendants Dick Aquino and Erie Aquino to reconvey the subject property to the plaintiffs and the intervenor and directing the Register of Deeds of Quezon City to cancel TCT No. 13682 and to issue instead another TCT in the name of the same owner appearing in the cancelled TCT No. 338205/T-13681, is not a taxable transaction or event. Accordingly, the transfer of the title of the property to the true and rightful owners without consideration will not involve any actual sale or conveyance of ownership since what is being transferred is merely legal title to the property. Such being the case, the transaction is not subject to the capital gains tax under Section 21 (d) of the 1997 Tax Code, as amended. Furthermore, it is not subject to the donor's tax since there is no donative intent, but rather a transfer sanctioned by the court for the reconveyance of the title to the true and lawful owners as they were unlawfully deprived by the defendants of their right to their property. Neither is the transfer subject to documentary stamp tax since the monetary consideration in the conveyance of said property from which the tax shall be based is wanting. IATSHE Considering the foregoing, your request for tax exemption from capital gains tax, documentary stamp tax and donor's tax is hereby granted. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation it will be disclosed that the facts are different, then this ruling shall be considered null and void. cSDHEC Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service