Angeles v. Court of Tax Appeals

SPECIAL SECOND DIVISION [CA-G.R. SP No. 76848. June 30, 2006.] SERGIO F. ANGELES , petitioner , vs . COURT OF TAX APPEALS and THE BUREAU OF INTERNAL REVENUE , respondents . D E C I S I O N JACINTO , J p : The herein Petition for Certiorari assails the Resolutions of the Court of Tax Appeals (CTA), which denied herein petitioner's Motion to Put Up Real Estate Mortgage in Lieu of Surety Bond and the subsequent Motion for Reconsideration, in CTA Case No. 5920 entitled " Sergio Angeles, Petitioner, versus, Bureau of Internal Revenue, Respondent ." AcEIHC The tax case stemmed from Assessment No. C-I-92-IT081-95 dated November 20, 1995 issued by the Bureau of Internal Revenue (BIR) to petitioner for the payment of Php24,320,920.48 in deficiency income tax, penalties and surcharges. (p. 50, Rollo ) The assessment was based on the finding that in 1992 petitioner received as income from the exercise of his profession a 48,722-square meter piece of real property in Barangay Sta. Cruz, Antipolo City, but failed to pay the income taxes due thereon. (p. 43, Rollo ) In connection with the said assessment, the BIR also issued on April 19, 1996 a Warrant of Distraint and/or Levy (WDL) against the real and personal properties of petitioner to enforce collection of the tax. Petitioner protested the assessment but the BIR merely revised it to Php8,215,526.00. Thus, petitioner filed a Petition for Review with the CTA, praying for the following reliefs: WHEREFORE, it is respectfully prayed to this Honorable Court that before the conduct of the proper proceedings and due notice and hearing the Warrant of Distraint and/or Levy be set aside or lifted , and thereafter due and proper proceedings, the appealed "final decision" be reversed and set aside and another Decision be rendered. a. Adjudging that the subject 140,029 square meters had been co-owned by Pedrito Patapat, Rogelio Amurao, Marcelino Lopez and the petitioner in equal shares; b. The income tax should be assessed on the share of each received from the proceeds of the sale on every calendar year; c. The income tax for each co-owner should be based on the price of P280.00 per square meter of the sale of the chose-in-action stipulated in the Deed of Conditional Sale (Annex F) or the Deed of Sale (Annex G); d. The balance of the purchase price which is still under litigation should be assessed after all the cases filed against adverse claimants are fully decided . . . . (p. 39, Rollo ) Pending resolution of the tax case, the BIR issued on October 7, 1999 a Final Notice Before Seizure informing petitioner that should he fail to pay the revised assessment of Php8,215,562.00 within ten days, the April 19, 1996 Warrant of Distraint and/or Levy and Garnishment will be executed against his real and personal properties. (p. 81, Rollo ) This prompted petitioner to file with the CTA a Motion to Suspend Execution of the Warrant of Distraint and/or Levy, which was granted in a Resolution dated December 8, 1999, reading thus: It being manifest that Respondent is threatening to enforce the payment of the disputed assessment through the aforesaid Warrant of Distraint and/or Levy, as clearly shown in the Preliminary Collection Letter, dated July 23, 1999, and Final Notice Before Seizure dated October 7, 1999, which act would jeopardize the interest of the petitioner, the Court, pursuant to Rule 12 of the Rules of the Court of Tax Appeals, hereby RESOLVES to GRANT the latter's motion , PROVIDED, Petitioner files within fifteen (15) days from receipt of this resolution a surety bond from a reputable insurance company equivalent to one and one half times the amount of P8,215,562.00 or P12,323,343.00 corresponding to the total amount of deficiency income tax, surcharges and interests assessed by Respondent . . . .(Emphasis added; pp. 45-52, Rollo ) Before petitioner could file a surety bond, he received the December 17, 1999 Decision of the Supreme Court (3d Division) in G.R. No. 123780 entitled, "In Re: Petition Seeking for Clarification as to the Validity and Forceful Effect of Two (2) Final and Executory but Conflicting Decisions of the Honorable Supreme Court, Group Commander, Intelligence and Security Group, Philippine Army, under the incumbency of Colonel Pedro R. Cabuay, Jr., Petitioner, vs. Dr. Potenciano Malvar , Primex and Marcelino Lopez , as representatives of the Heirs of Hermogenes Lopez, Respondents" and "Heirs of Elino Adia, Represented by Juliana Adia, Intervenors." The dispositive portion of the said December 17, 1999 Decision of the SC (3d Division) read: "WHEREFORE, IDAEHT 1. The validity of Original Certificates of Title Nos. P-819, P-820, P-821, P-822, P-823, P-824, P-825 and P-826, registered in the name of Heirs of Elino Adia, represented by Juliana Adia, is UPHELD; 2. All certificates of title issued to the Heirs of Hermogenes Lopez and successors-in-interest, and all titles originating from any of the certificates of title so issued to the Heirs of Hermogenes Lopez, including Transfer Certificates of Title Nos. 207990, 207991, 207992, 207993, 207994, 207995, 207996, 207997, 207998, 207999, 208000, 208001, 208002, 208358, over subject tract of land, as well as TCT No. 216876 issued to Primex Corporation, and any other title derived therefrom are declared null and void ; 3. The Heirs of Hermogenes Lopez and all persons claiming any right under them, including but not limited to Primex Corporation, and Dr. Potenciano Malvar, as well as all members of the Overlooking Storeowners and Planter's Association, Inc., their assignees and successors-in-interest, are ordered to remove all their improvements on the areas covered by the Original Certificates of Title Nos. P-819 to P-826 aforementioned and to surrender possession thereof to the Heirs of Elino Adia, represented by Juliana Adia . . . . (Emphasis added; p. 100, Rollo ) Petitioner thereafter filed with the CTA a Motion for the Suspension of Proceedings or that the Case be Archived. He argued that the foregoing December 17, 1999 Decision in G.R. No. 123780 virtually cancelled the income upon which the disputed assessment was based as this income consisted of a portion of the property subject matter of G.R. No. 123780 which his clients, the Heirs of Hermogenes Lopez, conveyed to him as attorney's fees but which conveyance was now invalidated under the said decision for their lack of title to the property. The CTA granted the motion in a Resolution dated April 11, 2000 which read: Thus, considering the intimate relation between the assessment case at bar and the civil case pending with the Supreme Court and it being manifest that the latter case is determinative and vital to the resolution of the former, this Court hereby ALLOWS the suspension of the proceeding in the instant case until the Motion for Reconsideration before the Supreme Court is finally resolved. (p. 55, Rollo ) In the same breath, however, the CTA reiterated its earlier requirement that petitioner file a surety bond in order that it may enjoin the enforcement of the April 19, 1996 Warrant of Distraint and/or Levy. (pp. 55-56, Rollo ) Petitioner took exception to the said requirement and filed a pleading entitled "Petitioner's Position on the Enforceability of the Filing of Bond for the Suspension of the Warrant of Distraint and Levy." He prayed that the submission of the surety bond be held in abeyance pending resolution by the Supreme Court of the Motion for Reconsideration of the December 17, 1999 Decision in G.R. No. 123780. (p. 58, Rollo ) CTA disagreed with the position of petitioner and declared: WHEREFORE, in view of the foregoing, the prayer of the petitioner to hold in abeyance the posting of the surety bond is hereby DENIED, Petitioner is hereby ORDERED TO FILE within fifteen (15) days from receipt of this resolution a surety bond, with stern warning that failure to do so would mean automatic lifting of this Court's resolution allowing the suspension of the enforcement and execution of Warrant of Distraint and/or Levy . The same conditions and requirements as contained in this Court's resolutions dated December 8, 1999 and April 11, 2000 shall likewise be observed. (March 29, 2002 Resolution, pp. 58-61, Rollo ) It also denied the Motion for Reconsideration of petitioner in a Resolution dated September 2, 2002. Thereafter, petitioner filed with the CTA a Motion to Put Up Real Estate Mortgage in Lieu of Surety Bond on the ground that ". . . to secure surety bond would be onerous and iniquitous to the petitioner who cannot afford to pay the premium because he has been spending for the hospitalization and medical treatment of his wife for malignant cancer . . ." (p. 77, Rollo ). In support of his motion, petitioner attached the hospital records of his spouse. (pp. 67-68, Rollo ) The CTA denied petitioner's Motion. It ruled in its February 7, 2003 Resolution that the filing of a surety bond is a requirement sine qua non to the suspension of the execution of the warrant of distraint and/or levy. It also held that the real estate mortgage being offered by petitioner will not adequately protect the interest of the government because the piece of property being offered for mortgage is owned by petitioner in common with three other persons who might renege on the mortgage. (p. 25, Rollo ) Petitioner filed a Motion for Reconsideration, which was denied by the CTA in its April 11, 2003 Resolution. (p. 27, Rollo ) He now asks the Court to annul the February 7, 2003 and April 11, 2003 Resolutions of the CTA. We grant the petition. In CTA No. 3865 entitled " Antonio Tuason, Inc. vs. Commissioner of Internal Revenue ", the CTA enjoined execution of the warrant of distraint and levy issued by the BIR without requiring the taxpayer to pay a bond. The exemption was made upon the finding that the right asserted by the BIR to collect the taxes involved by the summary methods of distraint and levy was not clear. In this case, the property income basis of the assessment for deficiency tax against petitioner was under litigation in various courts. It was only on March 5, 2003 that the Supreme Court in Eleuterio Lopez, et al. vs. Court of Appeals, et al ., (G.R. No. 127827) upheld the title of the Heirs of Hermogenes Lopez over the property as against the adverse claims of Eleuterio Lopez, et al., Earlier on September 24, 2002, the Supreme Court En Banc resolved the conflict between the September 13, 1990 Decision of the Supreme Court First Division in G.R. No. 90380 which recognized the title of Ambrosio Aguilar and his predecessors-in-interest in the property and the August 11, 1993 Resolution of the Supreme Court (3d Division) in G.R. No. 110900 in which the adverse claim of the Heirs of Elino Adia in the same property prevailed. Not only that, the Supreme Court (3d Division) in G.R. No. 81092 issued on April 6, 1998 a Resolution affirming the ownership of the Heirs or Hermogenes Lopez as against the claim of Ambrosio Aguilar in the same property. It is evident then that the basis of the disputed assessment was completely tenuous at the time petitioner sought the suspension of the CTA proceeding and the lifting of the warrant of distraint and levy. It is not that petitioner is unwilling to provide security. He offered a real estate mortgage over the property but the CTA rejected this on the ground that the property offered for security was under co-ownership. With this reasoning, it would appear then that the CTA accepted petitioner's position that the disputed assessment was sweeping and capricious in that it holds him single-handedly liable for deficiency tax over a piece property which he co-owned with other persons. In a real sense, the CTA, has virtually acknowledged the arbitrariness of the assessment against petitioner. For this alone it should have granted the motion for lifting of the warrant of distraint and/or levy upon the security offered by petitioner. Failing in that, and in upholding respondent BIR's erroneous assessment against petitioner who was virtually made liable for deficiency income tax over a property that he co-owned with 3 other persons, instead of` limiting his liability only on the basis of his 1/4 share therein, the CTA had clearly acted with grave abuse of discretion amounting to lack or excess of jurisdiction. WHEREFORE, under the premises, judgment is hereby rendered granting the petition and the writ prayed for, and the assailed Resolutions of the CTA are therefore SET ASIDE, without prejudice to respondent BIR's right to pursue its claim for deficiency income tax against petitioner which must be based only on his 1/4 share in the property or its proceeds. SO ORDERED. *Asuncion-Vicente and De Leon, JJ., concur. * Vice Justice Enriquez, Jr., who is on leave.