BIR Ruling [DA-028-00]

January 11, 2000 BIR RULING [DA-028-00] Mr. Ernesto Espiritu Gen. Luna Street, Sabang Lipa City, Batangas S i r : This refers to your letter dated September 28, 1999 requesting for exemption from the payment of capital gains tax and documentary stamp tax on the Deed of Reconveyance executed in your favor. It is represented that you are the owner of a parcel of land situated at Barangay Patiis, San Mateo, Rizal containing an area of 29,668 sq. meters, covered by Transfer Certificate of Title No. 32167; that you sold the same to a certain Zenaida Gallardo who issued several post-dated checks and have said property titled under her name; that when said checks were presented for encashment, they were returned to you for reason of account closed; that Zenaida Gallardo failed to redeem her checks; that you subsequently filed a criminal case for violation of B.P. 22 against Zenaida Gallardo; that to reconvey the property to you Zenaida Gallardo executed a Deed of Absolute Sale but failed to deliver and surrender the owner's duplicate of Transfer Certificate of Title No. 46100; that you executed an adverse claim at the back of TCT No. 46100; that Zenaida Gallardo was able to sell the property to Julieta Angeles for P200,000.00 and a certain Tomas Bayan who was able to secure the cancellation of your adverse claim and thereafter caused the transfer of the land to his name under TCT No. N-51985; that on February 9, 1983, you filed a case for Annulment of TCT No. N-51985, annulment of Deed of Sale, Reconveyance and Specific Performance with Damages with the Regional Trial Court of Pasig City; that on July 14, 1994, the Pasig City RTC ordered the transfer of the case to the RTC of San Mateo Rizal; that on October 1, 1998, the court rendered a decision in your favor ordering the cancellation of TCT No. 51985 and the reconveyance of the subject property; that as per the Certification issued by Atty. Renato V. Peralta, Clerk of Court of Branch 77, Regional Trial court, San Mateo, Rizal, the decision rendered has become final and executory; that for failure to locate the whereabouts of Tomas Bayan and his heirs, you filed a Motion for Issuance of Order Directing the Clerk of Court to Execute a Deed of Reconveyance in your favor; that on April 26, 1999 an order was issued by the Court granting the said motion and that on May 12, 1999 a Deed of Reconveyance was executed by Atty. Fermin M. Ofilas, Clerk of Court of San Mateo, Rizal RTC, Branch 77. LibLex In reply, please be informed that the Deed of Sale executed by you in favor of Zenaida Gallardo, did not produce any legal effect because of lack of consideration since the checks issued for its payment bounced. For lack of consideration, it cannot be said that your property has been disposed, transferred or conveyed in favor of Zenaida Gallardo pursuant to Article 1352 of the Civil Code which provides, viz: Art. 1352. Contracts without cause, or with unlawful cause, produce no effect whatever. The cause is unlawful if it is contrary to law, morals, good customs, public order or public policy." Consequently, since the Deed of Sale executed between you and Zenaida Gallardo failed to effect the transfer of ownership of the property for lack of consideration, the Deed of Reconveyance executed by Atty. Fermin M. Ofilas, on May 12, 1999 so as to effect the return of the subject property to you is not subject to the capital gains tax and documentary stamp taxes prescribed under Sections 24(D) and 196 of the Tax Code of 1997. (BIR Ruling No. 186-93 dated May 5, 1993) 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. Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal and Enforcement Group