Atty. Dioscoro Y. Sanchez, Jr.

May 30, 2008 BIR RULING [DA-335-08] RR 24-02 Atty. Dioscoro Y. Sanchez, Jr. Counsel for Mr. Joel P. Rubi, Jr. c/o G. Y. Dela Serna St., Lapu-Lapu City, Cebu S i r : This refers to your letter dated January 25, 2006 addressed to BIR Cebu City and referred to this Office by way of 1st Indorsement on July 3, 2007 requesting for a legal opinion on the tax implication of a provision in the "Judgment Based on Compromise Agreement" issued by the Regional Trial Court Branch 53 Lapu-Lapu City, in the case of "Joel P. Rubi, Jr. vs. Spouses Mario Marigomen and Deborah Marigomen" (Civil Case No. 4363-L). It is represented that: a) On September 8, 1987, a Deed of Exchange was executed between Joel P. Rubi, Sr. and his sister, Sarah R. Palalay wherein the Joel Rubi, Sr. received from the latter Lot No. 51-E-8 covering an area of 213 sq. m. located in Lapu-Lapu City with TCT No. 6433; b) On the same date, a Deed of Sale was alleged to have been fraudulently executed between Sarah R. Palalay and Deborah Rubi-Marigomen covering the same property in (a). Per BIR verifications, capital gains tax was already paid and the property was registered in Lapu-Lapu City whereby the Registry of Deeds issued TCT No. 30034 in the name of Deborah Rubi; c) On March 6, 1993, a Deed of Donation was alleged to have been fraudulently executed by the spouses Joel Sr. and Dolores Rubi in favor of Deborah Rubi as donee. The properties donated were: (1) Lot 51-E-6 with an area of 331 sq. m. covered by TCT No. 6803 and (2) Lot 51-E-7 with an area of 213 sq. m. covered by TCT No. 6765. Per BIR verifications, donor's tax was paid and CAR was issued for both properties, TCT Nos. 26872 and 26873 were issued by the Registry of Deeds, Lapu-Lapu City; d) On July 15, 1993, Dolores Rubi died with Estate CAR No. E-0064-94 dated January 25, 1994; e) On May 25, 1994, a Deed of Donation was executed by Joel P. Rubi, Sr. in favor of Deborah Rubi-Marigomen, a real property Lot No. 51-E-1 with an apartment building located in Lapu-Lapu City with an area of 206 sq. m. covered by TCT 8287. Per BIR verification, donor's tax was paid and was issued CAR; f) On February 2, 1995, a Deed of Donation was executed by Joel P. Rubi, Sr. in favor of Joel Rubi, Jr., covering Lot No. 51-E-B with an area of 496 sq. m.. Per BIR verification, donor's tax was paid and a CAR was issued; g) On September 29, 1995, Joel Rubi, Sr. died leaving no properties, hence no estate clearance was filed; h) On December 19, 1995, your client, Joel P. Rubi, Jr., filed a civil case for reconveyance of parcels of land, annulment of deed of sale and deeds of donation with the Regional Trial Court (RTC) Branch 53 Lapu-Lapu City, entitled "Joel P. Rubi, Jr. vs. Spouses Mario Marigomen and Deborah Marigomen" alleging that the parcels of land registered in the name of Deborah Marigomen (also known as Deborah P. Rubi) were donated inofficiously and acquired fraudulently thereby impairing his legitime as the sole and compulsory heir of his deceased parents Joel Sr. and Dolores Rubi; i) In his complaint, Joel alleged that, in addition to real properties, spouses Joel Sr. and Dolores Rubi owned an apartment building and land which is generating income from its tenants and that Dolores Rubi owned and operated a pre-school (Opon Kindergarten and Nursery School); j) On January 4, 2002, the plaintiff and defendant executed and signed a Compromise Agreement which was subsequently approved adopted on January 8, 2002 by RTC Branch 53 as the "Judgment Based on A Compromise Agreement" wherein the entire Compromise Agreement executed by the parties is reproduced in toto . The dispositive portion of the Judgment by Compromise rendered by the Court reads: "Finding the terms and conditions of the aforequoted Compromise Agreement not contrary to law, morals, good customs, public order, and public policy, nor prejudicial to the rights of a third person recognized by law, the compromise Agreement is approved and judgment is hereby rendered in accordance therewith." k) One of the reliefs granted by the court under the said Judgment by Compromise states: "1.2. Lot No. 51-E-6, with an area of 331 square meters and covered by Transfer Certificate of Title No. 26872; Lot No. 51-E-7, with an area of 213 square meters and covered by Transfer Certificate of Title No. 26873; and Lot No. 51-E-8, with an area of 213 square meters and covered by Transfer Certificate of Title No. 30034 shall be divided between the plaintiff and defendant Deborah Marigomen as follows: To Deborah Marigomen 457 square meters; To Joel Rubi, Jr. 300 square meters;" xxx xxx xxx l) A Joint Affidavit dated December 7, 2005 executed by Joel Rubi, Jr. and Deborah Marigomen stated that they have undertaken the implementation of the Judgment by Compromise particularly paragraph 1.2., however, due to the expropriation by the Government of a 55 sq. m. portion affecting Lots 51-E-6 and 51-E-8, their respective portions will be reduced proportionately, thus: Per Compromise After Expropriation Deborah Marigomen 457 sq. m. 424 sq. m. Joel Rubi, Jr. 300 sq. m. 278 sq. m. and that in support of your request, you submitted to this Office the pertinent documents relative to your request. You are now requesting for an opinion whether the "Judgment Based on a Compromise Agreement" is subject to the issuance of a Certificate Authorizing Registration (CAR). In reply, please be informed that the "Judgment Based on a Compromise Agreement" is subject to the issuance of CAR. Since the provision in the "Judgment Based on a Compromise Agreement" declaring the division of the subject properties in subparagraph 1.2 thereof does not state the need for the execution of a separate document conveying the portion of real property to Joel Rubi, Jr., the certified true copy of the "Judgment Based on a Compromise Agreement" dated January 8, 2002 shall be the document that will be submitted to the Revenue District Office (RDO) for the issuance of the CAR, after payment of any taxes due thereon. (Revenue Regulations No. 24-02 1 dated November 15, 2002) This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained that the facts are different, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service Footnotes 1. Regulations Prescribing the Information to be Periodically Required or Obtained by The Commissioner Relative to the Registration/Recording of Transfers of Real Properties with the Register of Deeds/Assessors Pursuant to Section 5 (B) of the National Internal Revenue Code of 1997 in Relation to Sections 58 (E), 95, and 236 (J) of the Same Code as well as Providing for the Manner of the Issuance of Certificate Authorizing Registration (CAR).