Bank of the Philippine Islands v. Commissioner of Internal Revenue

FIRST DIVISION [CA-G.R. SP No. 37225. July 16, 1998.] BANK OF THE PHILIPPINE ISLANDS, AS LIQUIDATOR OF PARAMOUNT ACCEPTANCE CORPORATION , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent . D E C I S I O N BUENA , J p : This petition for review seeks to reverse and set aside the resolutions of the Court of Tax Appeals dated January 23, 1995 and April 19, 1995 which granted respondent Commissioner of Internal Revenue's motion to dismiss on the ground of " litis pendentia ", CTA Case No. 5052, a petition praying for the refund of compromise payments . Culled from the petition and the annexes thereof are the following factual antecedents: Petitioner Bank of the Philippine Islands is the liquidator of Paramount Acceptance Corporation (Paramount, for brevity, a financing corporation that was dissolved on July 17, 1997 upon resolution adopted by the Board of Directors and stockholders of said corporation on January 30, 1986 shortening its corporate life to March 31, 1987. Sometime in late February or early March (year not indicated in the Petition for Review), petitioner allegedly learned from the newspapers that former officers of Paramount were being criminally charged for willful failure to pay final deficiency tax assessments against the corporation for the calendar year 1981 and 1982 (Resolution dated January 23, 1995, CTA Case No. 5052, (Petition, Annex "C", Rollo, pp. 56-57). On March 4, 1991, petitioner wrote the Prosecution Division of the respondent stating among others, that an examination of the docket will show that the assessments never became final, because they were never served on the taxpayer; that in fact the taxpayer could not have received it because it was addressed to the taxpayer's former office; and that they are willing to compromise at 30% of the basic tax on two of the three 1981 assessments (Annex "A", Petition, Rollo, pp. 29-30). In a letter dated June 6, 1991, the respondent, in reply to petitioner's aforementioned letter stated, among others, that "As regards the feasibility of compromise settlement, this Office will only favorably consider an offer of not lower than 30% of the basic income and documentary stamp taxes and 100% of the basic expanded withholding tax due" (Rollo, p. 32). In a letter dated December 4, 1991, Paramount, through counsel, wrote the respondent the pertinent portions of which read: "In your letter dated June 6, 1991 addressed to Padilla Law Office, you advised that your Office will favorably consider an offer of not lower than 30% of their income and documentary stamp taxes and 100% of the basic expanded withholding tax due for taxable year 1981. We are amenable to this compromise settlement except for the documentary stamp tax . . . since we have documents on file that subject tax had already been paid. "Concerning the 1982 deficiency tax assessment, we are proposing the same compromise settlement as that of 1981, i.e., 30% of the basic income and percentage tax and 100% of the basic expanded withholding tax. "We understand that upon consummation of these compromise settlements, you will drop the criminal cases filed against Messrs. Horacio V. Poblador and Ramon A. Albert, and issue a Tax Clearance in favor of Paramount Acceptance Corporation." (Annex "C", Petition, Rollo, p. 33)." On April 13, 1992, after discussions with respondent's Prosecution Division, Paramount remitted and paid to Respondent the amount of P44,000.00 in settlement of the 1981 deficiency documentary stamp tax assessment; P31,298.10 in settlement of the 1981 deficiency income tax assessment and P1,625.01 as alleged settlement of the 1981 expanded withholding tax assessment. On the same day, it also remitted and paid to respondent the amount of P28,257.60, P4,797.43 and P9,836.99 as alleged settlement of the 1982 deficiency income tax, percentage tax and expanded withholding tax assessments, respectively (Annexes "E", "E-1" and "E-2", Rollo, pp. 36-38). The letter dated March 24, 1992, addressed to the Prosecution Division and received by respondent on April 13, 1992 states thus: "This is to supplement our letter dated December 4, 1991 (copy attached as Annex "A") to formalize our mutual agreement to enter into a compromise settlement of the subject cases. "As earlier discussed with you in our meeting on January 23, 1992, we are hereby remitting our payment in the amount of P75,815.13 covering the following: . . . "We are likewise remitting the amount of P44,000.00 per BPI Check No. 103756 in full settlement of the alleged deficiency documentary stamp tax (DST) assessment, without prejudice to our filing a claim for refund of the same on the basis of our findings that the DST on shares issued covering stock dividend declared in 1981 had already been paid." (Annex "D", Petition, Rollo, pp. 34-35). Notwithstanding the aforesaid compromise payments, respondent proceeded to prosecute the criminal cases it had filed against Horacio V. Poblador and Ramon A. Albert, docketed as Criminal Cases Nos. 91-5800, 91-5801 and 91-5802 (which are for the 1981 assessments; Information dated May 3, 1991, Rollo, pp. 68-70) in Branch 150, RTC-Makati and Criminal Case No. 91-4007 (which is for 1982 percentage tax; Information dated June 18, 1991; Rollo, p. 67) in Branch 143 of the same Court. Hence, by letter dated August 18, 1992, Paramount through counsel invited respondent's attention to the fact that the assessments were not sent to the proper address, were not received by the addressee and had already prescribed. It asked the respondent to refund what it had remitted by way of compromise in the total amount of P119,815.13 (Letter dated August 18, 1992, Annex "G", Petition, Rollo, pp. 39-40). llcd For more than a year, respondent failed to answer Paramount's letter. In the meantime, respondent continued with the criminal prosecution of Messrs. Poblador and Albert. During the trial of the criminal cases (Nos. 91-5800 to 02), it was shown "(a) that Paramount filed its Annual Income Tax Return for 1985 on April 2, 1986, in which it disclosed in the space provided for in the Return, that its current address was 8th Floor, FCC Bldg., Paseo de Roxas, Makati, Metro Manila, while its Previous Address (if different from current year)" was "Ground Flr., DCG Building, cor. de la Rosa and Legaspi Sts. Makati, Metro Manila"; "(b) that Paramount filed its Annual Income Tax Return for the three months of 1986, i . e ., up to March 31, 1986, on April 30, 1986 and indicated in the proper space provided for in the return that its current address was 'BPI Building, Ayala Avenue, Makati, Metro Manila" while its "Previous address (if different from current year)" was " 8th Floor, FCC Building, Paseo de Roxas, Makati, M.M." xxx xxx xxx "(e) that on July 17, 1987 the SEC issued to Paramount the Certificate of Filing of Amended Articles of Incorporation shortening the term of existence and thereby dissolving the corporation; "(f) that after issuing such Certificate, the SEC sent a letter dated July 14, 1987 to the respondent, informing him that pursuant to Executive Order No . 1026 which requires a tax clearance before a corporation may be dissolved, the SEC had dissolved Paramount as of March 31, 1986 in view of the tax clearance certificate which the respondent had issued on November 11, 1986. The same letter further informed respondent that "[t]he principal office of the corporation was located at 8th Flr., BPI-FB Bldg., 8753 Paseo de Roxas, Makati, MM; "(g) that contrary to the testimony of prosecution witness Rolando Bumbay of the respondent's Collection Enforcement Division that he just could not locate Paramount, he looked everywhere except the Makati BIR Office, where Paramount had been filing its income tax returns, and the Litigation Division of the BIR which would have informed him that instead of disappearing and hiding from the BIR, Paramount even sued the respondent in the Court of Tax Appeals for the refund of excess creditable income taxes paid in 1986, docketed as CTA Case No. 4257." (Petition, CTA Case No. 5052, Rollo, pp. 25-26; emphasis supplied). As a result of the foregoing evidence, the criminal cases filed at Branch 150 were dismissed in the Order of the RTC dated June 22, 1993, upon motion of BIR Special Prosecutor Araceli Mata "anchored on the fact that the assessments made by the BIR on the tax deficiencies of Paramount/accused Horacio Poblador and Ramon Albert for the year 1981 have already been paid and amicably settled , evidenced by Letter of Deputy Commissioner Eufracio D. Santos to Atty. Sabino Padilla, Jr., . . . dated June 6, 199(1)" (Order dated June 22, 1993, Crim. Case Nos. 91-8500 to 02, Rollo, p. 46). The Prosecution Division, however, did not move to dismiss Criminal Case No. 91-4007 pending before Branch 143. Meanwhile, on November 15, 1993, in respondent's reply to Paramount's letter dated August 18, 1992, the former denied that a compromise settlement was reached between her (CIR) and the petitioner and altogether denied petitioner's request for a refund of the amount of P119,815.13, alleging, among others, that: ". . . The payment could never have been accepted in the concept of a compromise settlement, because it could have constituted a violation of Section 204 of the Tax Code pertinent portion of which is quoted as follows: 'All criminal violations may be compromised except: '(a) those already filed in court.' xxx xxx xxx "2. The claim that the deficiency assessment letters were not sent and received by the proper addressee and that the assessments have already prescribed, are mere statement of defenses of the corporation and therefore, are self-serving. Whether such defenses are meritorious or not, or whether the appreciation thereof at this stage is still proper, should be addressed to the Court where said criminal actions of the BIR are presently pending. . . ." (Letter dated November 15, 1993 of Deputy Commissioner Baez to Paramount, Rollo, pp. 47-48; emphasis supplied). Petitioner thus filed a petition before the Court of Tax Appeals, docketed as CTA Case No. 5052, asking for the refund of the amount of P119,815.13 which was allegedly received by the respondent as compromise settlement but which she refused to honor and abide by. (Rollo, pp. 22-28). In her Answer, respondent denied that a compromise settlement was reached between her and the petitioner alleging among others, that "at the time the alleged payments (were) made on April 13, 1992, the criminal actions against Horacio V. Poblador and Ramon A. Albert as officers of Paramount for willful and unlawful failure to pay their 1982 deficiency tax assessments were already pending in Court, thus cannot be the subject of compromise settlement pursuant to Section 204 of the Tax Code . She, then, moved for the dismissal of CTA Case No. 5052 on the ground that "there is another action pending between herein petitioner and respondent for the same cause docketed as Criminal Case No. 91-4007 for violation of Section 209 of the NIRC of 1977 before the Regional Trial Court of Makati, Branch 143, and to date the same is still pending litigation in said Court, hence, the petition should be dismissed pursuant to Section 1(e), Rule 16 of the New Rules of Court " (Resolution, CTA Case No. 5052, p. 4; Rollo, p. 59). In the assailed Resolution dated January 23, 1995, the Court of Tax Appeals ruled in favor of respondent, and dismissed the petition. Petitioner's motion for reconsideration was denied in the CTA's Resolution dated April 19, 1995. pred Hence, the present recourse. Petitioner submits that the Court of Tax Appeals committed a gross error in dismissing CTA Case No. 5052 for the reason that Section 1(e) of Rule 16 of the Rules of Court could not have been applied against petitioner since the parties, subject matter and reliefs prayed for in CTA Case No. 5052 are different from the parties, subject matter and prayer in Criminal Case No. 91-4007. The Court finds the petition to be meritorious. For litis pendentia to be a ground for the dismissal of an action, the following requisites must concur: (a) identity of parties or at least such as representing the same interest in both actions; (b) identity of rights asserted and relief prayed for, the relief being founded on the same facts; and (c) the identity in the two (2) cases should be such that the judgment that may be rendered in the pending case would, regardless of which party is successful, amount to res judicata in the other ( Cokaliong Shipping Lines , Inc . vs . Amin , 260 SCRA 122 ). After a careful evaluation of the factual backgrounds of CTA Case No. 5052 and Criminal Case No. 91-4007, We are inclined to accept the petitioner's submission that the Court of Tax Appeals indeed erred in dismissing CTA Case No. 5052 on the ground of litis pendentia . The parties, subject matter and reliefs prayed for in CTA Case No. 5052 are distinctly different from those in Criminal Case No. 91-4007. In Criminal Case No. 91-4007, the parties are People of the Philippines versus Horacio V. Poblador and Ramon Albert and the Commissioner of Internal Revenue, while in CTA Case No. 5052, the parties are the Bank of the Philippine Islands, as liquidator of Paramount Acceptance Corporation and the Commissioner of Internal Revenue. In Criminal Case No. 91-4007, the subject matter is the willful failure to pay deficiency corporate percentage tax for the year 1982 in the amount of P35,887.91, while in CTA Case No. 5052, the subject matter is the reimbursement of the amount of P119,815.13 which represents compromise payments both for the 1981 and 1982 deficiency assessments. The relief prayed for in Criminal Case No. 91-4007 is accused's imprisonment and payment of fine, while the relief prayed for in CTA Case No. 5052 is the refund of the said amounts due to respondent's refusal to comply with her part of the compromise agreement which is to drop the criminal case against the two officers of Paramount. A judgment of acquittal or conviction in Crim. Case No. 91-4007 would have no bearing in the issue to be resolved in CTA Case No. 5052, the question to be resolved in the latter case being "whether the respondent Commissioner of Internal Revenue has the right to retain the compromise payments made to the BIR by paramount even if she has refused to do her part of the compromise, i . e ., to withdraw those criminal cases, inclusive of Criminal Case No. 91-4007. In the assailed Resolution dated January 23, 1995, the Court of Tax Appeals cited the case of CIR vs . Court of Appeals, Citytrust Banking Corporation and Court of Tax Appeals (July 21, 1994) , where the Supreme Court ruled that: ". . . To award such refund despite the existence of that deficiency assessment is an absurdity and a polarity in conceptual effects. Herein private respondent cannot be entitled to refund and at the same time be liable for a tax deficiency assessment for the same year." This Court is of the considered opinion that the said ruling is not applicable to this case. What is at issue in CTA Case No. 5052 is whether or not the respondent acted with fairness and justice towards the petitioner. The respondent, through the Bureau of Internal Revenue's Special Counsel Araceli V. Mata, in its Motion to Dismiss the three Criminal Cases in Branch 150 of the Regional Trial Court, stated that: "2. During the hearing held on 18 May 1993, the Accused Horacio V. Poblador offered as evidence the testimony of Mr. Jaime R. Villarin, essentially for the purpose of showing that the matter of the supposed deficiency taxes referred to in the three (3) Information, namely, deficiency income tax for 1981, deficiency documentary stamp tax for 1981, and deficiency corporate expanded withholding tax for 1981, had all been amicably settled by express agreement of Paramount Acceptance Corporation (PAC) through its Trustee in liquidation, Bank of the Philippine Islands (BPI), and the Bureau of Internal Revenue. The said amicable settlement is evidenced by the following documents, all of which are admitted by the BIR Prosecutor, to wit: (a) Letter of Deputy Commissioner Eufracio D. Santos to Atty. Sabino Padilla, Jr. dated 06 June 1991 ( Vide : Exh. "1") (b) Validated Authority to Accept Payment with Serial Nos. 67766 and 67767 ( Vide : Exhs. "2" and "3", respectively) "3. All the foregoing clearly show the utter inequity and futility of proceeding with the trial of the instant criminal cases . "4. This amicable settlement is not contrary to law, morals, good custom, public order and public policy . "5. To avoid useless waste of the valuable time of this Honorable Court, and in order to avoid further torment inflicted upon and anguish suffered by the Accused, all the undersigned parties, in the interest of justice, jointly move this Honorable Court to dismiss the instant criminal cases." (Joint Motion to Dismiss, Criminal Case Nos. 91-5800 to 02; Rollo, pp. 71-73). It thereby acknowledged the fact that an amicable settlement was had between the BIR and the petitioner and that the former agreed to the compromise payments. It even went on to say that said "amicable settlement is not contrary to law, morals, good custom, public order and public policy." And yet in respondent's answer in the petition before the Court of Tax Appeals, the respondent denied that a compromise settlement was reached, and averred that a compromise settlement was no longer possible as the Criminal Cases had already been filed when the payment was made, citing Section 204 of the Tax Code (Resolution, CTA Case No. 5052, p. 4; Rollo, p. 59). Contrary to the Court of Tax Appeals' ruling, the assessment case is not inextricably intertwined with the present case for refund. The issue in CTA Case No. 5052 does not involve the validity or the finality of the assessment. The issue in CTA Case No. 5052 is whether or not the respondent made an empty promise to the petitioner, considering that it was able to move for the dismissal of the three (3) criminal cases in Branch 150 on the ground of amicable settlement, but the respondent did not do the same thing in the similar criminal case in Branch 143 of RTC Makati. The parties, rights asserted and relief prayed for are not identical in CTA Case No. 5052 and Crim. Case No. 91-4007; and the judgment that may be rendered in the pending case (Crim. Case 91-4007) would, regardless of which party is successful, not amount to res judicata in the other. Thus, the Court of Tax Appeals erred in dismissing CTA Case No. 5052 on the ground of litis pendentia . WHEREFORE, the petition is hereby GRANTED. The Resolutions of the Court of Tax Appeals dated 23 January 1995 and 19 April 1995 are REVERSED and SET ASIDE. The Court of Tax Appeals is hereby ordered to immediately commence trial on the merits in CTA Case No. 5052. SO ORDERED. Mabutas , Jr . and Aquino , JJ ., concur.