Ossorio Pension Foundation, Inc. v. CIR

FOURTH DIVISION [CA-G.R. SP No. 61829. May 30, 2003.] MIGUEL J. OSSORIO PENSION FOUNDATION, INCORPORATED , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent . D E C I S I O N DACUDAO , J p : Appeal by way of petition for review from the Decision dated October 24, 2000 of the Court of Tax Appeals, 1 in C.T.A. Case No. 5737, dismissing the petition of the Miguel J. Ossorio Pension Foundation, Incorporated, seeking the refund of withheld creditable tax in the amount of P3,037,500.00, arising from the sale of a real property of which that foundation claimed it was part owner. The material operative facts: On March 26, 1997, the Victorias Milling Company, Incorporated (VMC for brevity), as vendor, and the Metropolitan Bank and Trust Company (MBTC for brevity), as vendee, executed a Deed of Absolute Sale over a parcel of land situated in Barangay Alabang, Muntinlupa City, and covered by TCT No. 183907 issued by the Register of Deeds of Makati in the name of said vendor. The VMC was represented by its Vice President Rolando C. Rodriguez and Assistant Vice President Teodorico R. Escober. In virtue of the deed of absolute sale, whereby VMC insured its absolute ownership of the subject property, said vendor agreed to pay for the creditable withholding tax and other applicable taxes due the Bureau of Internal Revenue (BIR for brevity). The parcel of land containing an area of 1,089 square meters was sold by VMC to MBTC for P81,675,000.00, 2 and accordingly, the amount of P6,125,625.00 as tax on capital gains was withheld and paid to the BIR. The Revenue District Officer subsequently issued Certification No. 633440, dated March 31, 1997, authorizing the registration of the deed of absolute sale in favor of the buyer, or the MBTC. 3 On May 7, 1997, the Miguel J. Ossorio Pension Foundation, Incorporated (MJOPFI for brevity), filed a claim for refund of taxes with the BIR, alleging in substance that it was a co-owner of the parcel of land covered by TCT No. 183907 registered in the name of VMC; that in fact it owned 49.59% thereof, while the VMC owned 32.23% and the Victorias Insurance Factors Corporation (VIFC for brevity) owned 18.18% of the same; that with its consent, as well as that of the VIFC, the VMC sold the subject parcel of land to the MBTC; and that MJOPFI should be refunded its 49.59% share of the withholding tax of P6,125,625.00, or the amount of P3,037,500.00, as it was exempt from income or withholding tax. To bolster its claim of being "exempt from income or withholding taxes," the MJOPFI attached the Decision of this Court in CA-G.R. No. 23980 dated January 20, 1993. It also attached a copy of its alleged Memorandum of Agreement showing the extent of its co-ownership of the subject parcel of land as well as documents showing its alleged percentage participation in the proceeds of the sale. 4 In the case of Commissioner of Internal Revenue v. Court of Tax Appeals and Miguel J. Ossorio Pension Foundation, Inc., CA-G.R. SP No. 23980, promulgated on January 20, 1993. 5 this Court ruled on the issue of whether the MJOPFI was entitled to the refund of a certain sum representing withholding taxes on interest income from direct loans and final tax on yield from Treasury Bill placements imposed pursuant to Presidential Decree No. 1959. In affirming the Court of Tax Appeal's decision, 6 and in thus sustaining the claim of the MJOPFI, this Court cited the ruling of the Supreme Court in CIR v. Court of Appeals, 7 wherein it was held that the income earned by employees' trust funds were tax exempt under Section 56(b) of R.A. No. 1983 (Section 53(b) of Tax Code) in relation to R.A. 4917 . On August 14, 1997, the Revenue District Officer (RDO for brevity), replied to the letter claim of the MJOPFI requesting for additional documents. The RDO premised its request thusly: "Initial evaluation of the documents you have submitted to his office disclosed the following facts hereunder, to wit: "1. The tax intended to be refunded arose from the 7.5% Creditable Withholding Tax (CWT) on the sale of certain real property, registered under the name of Victorias Milling Co., Inc. only . "2. The exemption from income or withholding taxes as held under Court of Tax Appeals Case No. 4244, involved income earned from money market placement, purchase of treasury bills and withholding taxes on interest deposits, which cannot be presumed to include income of whatever kind and character from any of their properties, real or personal, from any of their activities conducted for profit; which according to Section 26 of the National Internal Revenue Code, as amended, regardless of its disposition is taxable. Further, Revenue Regulation No. 6-94 and 12-94 provide that exemption from creditable withholding taxes for those not specifically mentioned thereat must secure first the approval of the Commissioner of Internal Revenue (CIR). "3. Other than the Memorandum of Agreement executed by and among MJOPFI Victorias Milling Co., Inc. (VMC) and Victorias Factor Corp. (VFC) dated March 19, 1997, no documents were made available to show the kind of business transaction that transpired to explain how MJOPFI and VlFC came into the picture of becoming co-owners of the subject real property sold . " 8 (Emphasis supplied.) In its September 2, 1997 letter to the RDO, MJOPFI insisted on its claim, attaching certain documents it alleged would show that it became co-owner of the subject parcel of land. 9 Having failed to receive a favorable reply 10 from the RDO for some ten months, MJOPFI elevated the matter to the BIR Commissioner, but the latter likewise failed to act on the same. 11 So it was that on March 4, 1999, the MJOPFI filed a petition with the Court of Tax Appeals for tax refund, whereat it was docketed as C.T.A. Case No. 5737. We quote hereunder its statements in regard to its alleged co-ownership over the subject parcel of land and the documents it offered in evidence to bolster the same: 12 "4. On March 25, 1992, petitioner MJOPFI decided to invest part of the retirement or trust funds in, and to buy thru Victorias Milling Co., Inc. (or VMC), a lot in Alabang, Muntinlupa, Metro Manila, known as Madrigal Business Part lot, as shown by the minutes of the meeting of the Board of Trustees of MJOPFI held on March 25, 1992, which read in part: 13 "xxx xxx xxx "5. Petitioner's investment in the said Madrigal Business Park lot in Alabang came about upon invitation of Victorias Milling Co., Inc., which purchased two lots therein, pursuant to VMC's Board Resolution No. 92-44 adopted on March 24, 1992, which reads in part: 14 "xxx xxx xxx "6. Petitioner's share in the Madrigal Business Park lot was 49.59% thereof, which its investment manager, the Citytrust Banking Corporation, now Bank of the Philippine Islands after their merger, regularly reported to petitioner, which were noted by the MJOPFI Board of Trustees, samples of which reports as certified by its corporate secretary, for 1994, 1995, 1996 and 1997 are attached hereto . . . 15 "7. As MJOPFI needed funds to pay retirement and pension benefits of VMC employees and/to pay VMC of its advances to pay retirement and pension benefits of retired employees, the MJOPFI Board of Trustees adopted Resolution No. 96-46 dated July 24, 1996 authorizing the sale of its share in the said lot to raise the needed money, as shown by the minutes of said meeting, which read in part: 16 xxx xxx xxx "8. On March 14, 1997, with the consent of its co-owners of the said Madrigal Business Park lot, namely, herein petitioner MJOPFI and Victorias Insurance Factors Corporation (VIFC), VMC negotiated for the sale of said lot to Metropolitan Bank and Trust Co., but consummation of the sale was withheld for reasons which VMC's President, Mr. Gerardo Javellana, reported to the VMC Board in its March 17, 1997 meeting, to wit: 17 "xxx xxx xxx "9. . . . "10. . . . "11. The parties which co-owned the lot 1 covered by TCT No. 183907 executed a memorandum of agreement, which was notarized, as to their respective shares in the proceeds of the sale of said lot, the pertinent provisions of which as regard MJOPFI which owned 49.59% of the lot read: 18 "xxx xxx xxx "12. . . . "13. Mr. Orlando Fuentes, treasurer of petitioner, reported the memorandum of agreement and circulated copies of said memorandum on the sharing of the proceeds of the sale of the said lot and the disposition of the proceeds of petitioner's share to the MJOPFI Board of Trustees during its April 23, 1997 meeting, the minutes of which read in part: 19 "xxx xxx xxx" Respondent Commissioner of Internal Revenue filed his answer resisting the petition, on the premise that the subject parcel of land was in fact sold to MBTC by the VMC, the registered and absolute owner of the same, as shown by the covering title; and that even granting arguendo that the petitioner is a co-owner of the property, still the transaction with respect to its share in the property is not exempt from income tax, since the diversion of the petitioner's funds used to purchase such property was clearly done for purposes other than the exclusive benefit of the employees, hence a violation of one of the two requisites under Section 53(b) of the Tax Code. The parties submitted a stipulation of facts and petitioner formally offered its evidence before the executive clerk. On October 24, 2000, the Court of Tax Appeals rendered a Decision denying the petition for lack of merit. Undaunted, the MJOPFI interposed the present petition for review, and now contends that the Court of Tax Appeals erred: 1. In holding that petitioner as trustee of the employee trust was not a party interest entitled to file the claim for tax refund, said holding being violative of the rule on conclusiveness of judgment in CA-G.R. SP No. 23980 and of statutory and case law. 2. In holding that there was no evidence to show that petitioner was a co-owner of the property in question, such holding being merely speculative or conjectural and its very own factual findings negating its conclusions and overwhelmingly showing by more than substantial evidence petitioner's co-ownership to the extent of 49.59% thereof. 3. In making speculative claims and in holding that petitioner`s notarized or public documentary evidence of its ownership recognized by the parties thereto were all "self-serving evidence", confusing the latter from the former and rendering useless Secs. 19 and 23 of Rule 132, Rules of Court, to arrive at its erroneous conclusions. 4. In holding that as between a notarized documents of co-ownership and other documents in which the parties agreed that the property be registered in the name of VMC, the certificate of title prevails over the former, in violation of case law on the matter. 5. In not holding that petitioner was entitled to a tax refund of P3,037,500.00, being tax exempt under Sec. 53(b), then Sec. 56(b), now Sec. 60(b), of the Tax Code. The petition is untenable. We believe that the only issue that clamors for resolution in the present case is whether the petitioner MJOPFI invested funds from the employee's trust funds under its administration to acquire a 49.59% share in the parcel of land covered by TCT No. 183907, as to be entitled to a refund of 49.59% of the withheld capital gains tax of P6,126,625.00 (or the amount of P3,037,500.00), paid to the BIR upon the sale of said land. The Court of Tax Appeals stated its findings on the matter thusly: 20 "We proceed to the second and third issues which to this Court, are interrelated because if indeed, Petitioner is a co-owner of the real property covered by TCT No. 183907, then it may possibly be a party in interest entitled to claim a refund of the withholding tax paid by Victorias Milling Company, Inc. "To prove its ownership over the subject lot, Petitioner presented the Secretary's Certificate showing how the purchase and eventual sale of the lot came about. Likewise, Petitioner presented various Memoranda Agreement showing varying details. The first one executed on February 24, 1994 and notarized on March 3, 1994 showed that the lot in question was co-owned by VMC and Petitioner on a 50/50 basis. On the second one, however, likewise executed on February 24, 1994 and notarized on March 3, 1994, VMC only held the property in trust for North Legaspi Land Development Corporation, North Negros Marketing Co., Inc., Victorias Insurance Factors Corp., Victorias Science and Technical Foundation, Inc. and Canetown Development Corporation. The last Memorandum of Agreement, which allegedly cancelled previous understanding on the matter and notarized on March 19, 1997, showed that the property in question was co-owned by Petitioner, VMC and VIFC. There was no explanation given by Petitioner as to why there were three Memoranda of Agreement executed by the parties with different co-owners appearing therein. "We agree with Respondent that these pieces of evidence are self-serving and cannot by themselves prove Petitioner's ownership over the subject lot when the Transfer Certificate of Title, the Deed of Absolute Sale and the Monthly Remittance Return of Income Taxes Withheld disclose otherwise. This Court likewise wonders why Petitioner, knowing fully well that the income of its pension fund is exempt from income tax, not to mention that it has the obligation to protect the interest of the employees of VMC and its affiliates, did not bother to have the property transferred in its name. The various Memoranda of Agreement acknowledging Petitioner as co-owner was even executed years after the purchase of the lot took place, which casts more doubt on the alleged ownership of Petitioner. "Petitioner also failed to present any evidence to prove that the money used to purchase the lot came from the pension/retirement funds of VMC. Since, what is exempted from payment of the income tax as held by this Court in CTA Case No. 4244 is income of the trust or pension fund, Petitioner must show that the money used to purchase the lot belongs to the pension fund and falling in this regard, a refund cannot be sought. "To this Court, Petitioner is estopped from claiming tax exemption considering that VMC, by its execution of the Deeds of Absolute Sale, both during the purchase and subsequent sale of the subject lot, by having the lot registered solely in its name and consequently, by paying the tax in its name, has led the government to believe that it is the sole owner of the property in question. Petitioner may not now claim a refund of a portion of the tax paid by the mere expediency of presenting Secretary's Certificates and Memoranda of Agreement in order to prove its ownership as the same are not only self-serving and which can easily be devised to suit one's purpose and therefore merit very little weight." The findings of the Court of Tax Appeals involved three types of documentary evidence presented by the petitioner MJOPFI to bolster its contention that it had purchased some 49.59% of the subject land with the employee's trust funds: (1) The memorandum of agreements allegedly executed by petitioner and/or other subsidiaries of VMC with the latter; (2) The Secretary's Certificates in regard to alleged excerpts from minutes of meetings conducted by the respective boards it directors/trustees of VMC and MJOPFI; (3) The certifications issued by its investment banker in regard to its alleged investments for the years 1994 to 1997. In regard to the memorandum of agreements adverted to by the Court of Tax Appeals, the petitioner argues: "1. The three (3) documents themselves explained why there were three documents. The first memorandum of agreement was dated February 24, 1994 and notarized on March 3, 1994, which was only between VMC and petitioner, stating that petitioner was owner to the extent of 50% of the property. The second memorandum of agreement was dated February 24, 1994 and notarized on March 3, 1994, in which petitioner was not a party thereto, and in which the parties were VMC and its subsidiary companies, namely, North Legaspi Land Development Corp., North Negros Marketing Co., Victorias Insurance Factors Corp., Victorias Science and Technical Foundation, Inc., Canetown Development Corp. and Victorias Milling Co., Inc., all having common addresses at VMC Building, 165 Legaspi St., Legaspi Village, Makati City, and stating that they were co-owners of the other property therein stated. And the third document was a consolidation of the two documents, this time the only parties thereto were petitioner, VMC, North Negros Marketing Co. and Victorias Ins. Factors Corp. There was need for such consolidation of the two documents into one document, Exh. H, because (a) North Negros Marketing Co. acquired the shares of the other parties in the second memorandum of agreement, as shown from the marginal notes thereof, which explained why the other parties in said second memorandum were no longer parties in the third memorandum; and (b) petitioner's co-ownership was terminated and its share given to it, making the consolidated agreement a document of termination of co-ownership." We are, however, unable to make a fair and clear-cut finding on the above counter-arguments, inasmuch as petitioner has failed to provide us with copies of the first two memorandum of agreements. What we have as part of the records of the instant case are three (3) copies of the alleged memorandum of agreement notarized on March 19, 1999. 21 Be that as it may, we agree with the Court of Tax Appeals that said agreements, together with the secretary's certificates offered in evidence by the petitioner, area largely self-serving and can be devised easily. The most credible among the petitioner's documentary evidence, relatively, would have been the certifications issued by its investment banker vis-a-vis petitioner's alleged investment portfolio. However, we note that while the subject parcel of land was apparently bought in 1992, the bare reports of petitioner's investment banker only covered the years 1994 to 1997. But more importantly, said reports, as well as the other documentary evidence of the petitioner, did not show that funds already part and parcel of the employees' trust funds were in fact used to purchase the subject parcel of land, or at least a portion of the same. We are constrained to echo the findings of the Court of Tax Appeals in regard to the failure of the petitioner to ensure that legal documents pertaining to its investments, e.g. title to the subject property, were really in its name, considering its awareness of the resulting tax benefit that such foresight or providence would produce; hence, genuine efforts towards that end should have been exerted, this notwithstanding the alleged difficulty of procuring a title under the names of all the co-owners. Indeed, we are unable to understand why petitioner would allow the title of the property to be placed solely in the name of petitioner's alleged co-owner, i.e. the VMC, although it allegedly owned a much bigger (nearly half), portion thereof. Withal, petitioner failed to ensure a "fix" so to speak, on its investment, and we are not impressed by the documents which the petitioner presented, as the same apparently allowed "mobility" of the subject real estate assets between or among the petitioner, the VMC and the latter's subsidiaries. Given the fact that the subject parcel of land was registered and sold under the name solely of VMC, even as payment of taxes was also made only under its name, we cannot but concur with the finding of the Court of Tax Appeals that petitioner's claim for refund of withheld creditable tax is bereft of solid juridical basis. WHEREFORE, the petition is hereby DENIED DUE COURSE, and consequently DISMISSED. Costs shall be assessed against the petitioner. SO ORDERED. Jacinto and Pine, JJ . , concur. Footnotes 1. Penned by Associate Judge Ramon O. De Veyra, concurred in by Presiding Judge Ernesto D. Acosta and Associate Judge Amancio Q. Saga. 2. Deed of Absolute Sale dated March 26, 1997, Rollo, pp. 5254. 3. Rollo, pp. 5556. 4. Rollo, pp. 7071. 5. Fifteenth Division, penned by Associate Justice Emeterio G. Cui, concurred in by Associate Justices Jainal D. Rasul and Pacita Caizares-Nye. 6. CTA Case No. 4244. 7. 207 SCRA 487. 8. Rollo, p. 72. 9. Rollo, pp. 7374. 10. Letter dated June 29, 1998, Rollo, p.75. 11. Letters dated October 26, 1998 and January 5, 1999; Rollo, pp. 7677. 12. Petition dated March 3, 1999, pp. 26: Rollo, pp. 3539. 13. Petitioner attached a notarized "Secretary's Certificate" dated March 1, 1999 signed by MJOPFI's corporate secretary Ruben E. Agpalo ( Rollo , p. 43) that "per records of said corporation the Board of Trustees . . . held a Board meeting on March 25, 1992, the minutes of which show the following excerpts and adoption of Resolution No. 92-34, which read as follows: 'Mr. C.R. de Luzuriaga, Jr. informed the Board that Victorias Milling Co., Inc. and some of its subsidiaries are buying Ayala-Alabang lots in Muntinlupa. He inquired whether MJOPFI would be willing to invest in, or buy part, of the lots being purchased by VMC. Upon motion of Mr. Emilio Y. Hilado, Jr. seconded by Mr. Orlando D. Fuentes, it was unanimously 'RESOLUTION NO. 92-34 'RESOLVED, that MJOPFI buy one-half (1/2) of one (1) Ayala-Alabang lot thru Victorias Milling Co., Inc., the purchase price thereof to be paid thru VMC and/or to be reimbursed to VMC.'" 14. Petitioner attached a notarized "Secretary's Certificate" dated March 1, 1999 signed by VMC's corporate secretary Ruben E. Agpalo ( Rollo, p. 44) that per records of the VMC, "the Board of Directors held a board meeting on March 24, 1992 and adopted Resolution No. 92-44, which read as follows: 'RESOLVED, that this Company purchase the two lots offered by Ayala Land, Inc. at the Madrigal Business Park of Alabang Ayala totaling a little more than 2,000 sq.m. at the cost of P10,000.00 per sq.m., with downpayment of P1.0 MM. xxx xxx xxx 'RESOLVED, STILL FURTHER, that Management be instructed to confer with the different subsidiaries of the company if they wish to participate as co-owners in this purchased property and to report to this Board next Board meeting what participation the subsidiary are prepared to take.'" 15. Petitioner attached its "Portfolio Mix Analysis" for 1994, 1995, 1996, 1997 prepared by the CityTrust banking Corporation that show that it invested P5,504,748.23 in the "Madrigal Business Park I"; Rollo, pp. 4649. 16. Petitioner attached a notarized "Secretary's Certificate" dated March 1, 1999 signed by MJOPFI's secretary Ruben E. Agpalo ( Rollo, p. 50) that per records of the MJOPFI, the Board of Trustees held a Board Meeting on July 24, 1996, "the minutes of which show the following excerpts and adoption of Resolution No. 96-46, which read as follows: '2. Mr. Gerardo B. Javellana informed the Board that there is a need to raise cash to pay pension benefits. Upon motion of Mr. Rolando Hautea, seconded by Mr. Orlando D. Fuentes, it was unanimously Resolution No. 96-46 'RESOLVED, that MJOPFI's property consisting of 500 sq.m. situated at Madrigal Park in Alabang, Muntinlupa, be sold at the best price available, and that any of the corporate officers, namely, Mr. C.R. de Luzuriaga, Jr. or Mr. Rolando Hautea, or Mr. Orlando D. Fuentes be authorized to sign the required deed of sale.'" 17. Petitioner attached a notarized "Secretary's Certificate" dated March 1, 1999 signed by VMC's corporate secretary Ruben E. Agpalo ( Rollo, p. 61) which states that per records of sold corporation, the Board of Directors held a meeting on March 17, 1997, "the minutes of which show the following excerpts and adoption of a resolution, which read as follows: 'Mr. Gerardo Javellana informed the board that pursuant to previous authority from the Board, VMC sold the Lot 1, Block 4 of the land, registered in VMC's name as TCT No. 183907 of the Registry of Deeds of Makati, which land is co-owned with Miguel J. Ossorio Pension Foundation, Inc. and Victorias Insurance Factors Corp., in favor of Metro Bank on March 14, 1997 for P81,675,000,00; that Metro Bank issued a check in favor of VMC of P75,549,375.00 (which is less of P6,125,625.00 withholding tax), which was supposed to have been deposited with Urban Bank, but in view of the latter's freezing all VMC's deposits. VMC advised Metro Bank not to fund the check (to stop payment), which it did. However, Metro Bank thereafter refused to release the proceeds of the check to VMC, saying that it would apply part of the proceeds of the sale to the obligations of VMC to Metrobank. As Metrobank's moves meant that if did not pay VMC, because a check amounted to payment only when cashed, upon motion of Mr. Manuel Manalac, seconded by Mr. Gerardo Javellana, it was unanimously 'RESOLVED, That in the event matters would not be amicably resolved or ironed out with Metrobank, a letter be sent to Metrobank rescinding or canceling the deed of sale of Lot 1, Block 4 at the Madrigal Business Park in Muntinlupa, with TCT No. 183907.'" 18. Petitioner attached a "Memorandum Agreement" notarized on March 19, 1997 between the VMC, the MJOPFI, the VIFC and the North Negros Marketing Co., Inc., ( Rollo, pp. 5758) which states: "1. Victorias Milling Co. Inc., (VMC) is the registered owner of a parcel of land with TCT Nos. 183907 and 183908 located at Barangay Alabang, City of Muntinlupa (Madrigal Business Park). "2. The said parcels of land are actually co-owned by the following: BLOCK 4 LOT 1 COVERED BY TCT No. 183907 % SQ.M. AMOUNT MJOPFI 49.59% 540.00 P5,504,748.25 VMC 32.23% 351.02 3,578,294.70 VIFC 18.18% 197.98 2,018,207.30 xxx xxx xxx "3. Since Lot 1 has been sold for P81,675,000 (gross of 7.5% withholding tax and 3% broker's commission, MJOPFI's share in the proceeds of the sale is P40,500,000.00 (gross of 7.5% withholding tax and 3% broker's commission.) However, MJO Pension Fund is indebted to VMC representing pension benefit advances paid to retirees amounting to P21,425,141.54, thereby leaving a balance of P14,822,358.46 in favor of MJOPFI. Check for said amount of P14,822,358.46 will therefore be issued to MJOPFI as its share in the proceeds of the safe of Lot 1. The check corresponding to said amount will be deposited with MJOPFI's account with BPI Asset Management & Trust Group which will then be invested by it in the usual course of its administration of MJOPFI funds. "4. This Memorandum of Agreement cancels previous understanding on the matter. 19. Petitioner attached a notarized "Secretary's Certificate" dated March 1, 1999 signed by the MJOPFI corporate secretary Ruben E. Agpalo ( Rollo, p. 67) which states that per records of the corporation, its Board of Trustees held a meeting on April 23, 1997, "the minutes of which show the following excerpts follows: '4. . . . 'Mr. Orlando Fuentes also said that since the property was registered in the name of VMC, 7.5% of P81,675,000 or P6,126,625.00 was withheld as tax by Metro bank for remittance to the BIR, even when MJOPFI is co-owner and is exempt from income tax, and that a claim for P3,037,697.40, representing 49.59% of the tax withheld will have to be filed with the BIR . . .' 20. Decision dated October 24, 2000, pp. 79; Rollo, pp. 9597. 21. Rollo, pp. 57, 65 and 68.