Gonzales v. Asuncion

[CA-SP No. 04084. June 18, 1975.] * CONSUELO S. GONZALES VDA. DE PRECILLA, ET AL. , petitioners , vs . HON. ELIAS B. ASUNCION, Judge of the Court of First Instance of Manila, Branch XII, ET AL. , respondents . Taada, Sanchez, Taada & Taada for petitioners. Solicitor General Estelito P . Mendoza, Assistant Solicitor General Hector C . Fule and Special Attorney Solomon L . Vivero for respondents. SYLLABUS ESTATE OF DECEDENTS; LIABILITY FOR TAXES; POWER OF PROBATE COURT TO SELL ANY PROPERTY IS SUBJECT TO PROVISIONS OF WILL. In first instance, the property left by deceased must answer for taxes therefor, yes, but all must answer, not one alone, this is the clearest implication from Rules 88 and 89 of the Rules of Court, because under them, debts, expenses of administration, should be paid, first from part of estate so ordered to be made responsible, by testator himself, if not, from that part not disposed of by the will, Sec. 2, Rule 88, Rules of Court, and if not, yes, part or whole of any particular property of deceased might be sold, but if, "beneficial to the persons interested" under Sec. 2 of Rule 89, Rules of Court, or if, "beneficial to the heirs, devisees, legatees and other interested persons," under Sec. 4 of the same Rule; and certainly, where a particular property had been devised unto a particular heir, any sale thereof to satisfy expenses of administration, e.g., taxes, cannot be beneficial to the persons interested; it would be beneficial to the rest but not to all, for it would be prejudicial to the one to whom it had been devised, and the Rules are most emphatic, that while probate court might order sale of particular property where such sale would be beneficial to the heirs, devisees, legatees, and other interested persons, yet "such authority shall not be granted if inconsistent with the provisions of a will." Sec. 4, Rule 89, Rules of Court. D E C I S I O N GATMAITAN , J p : RESOLVING: Certiorari against Hon. Elias B. Asuncion, Presiding Judge of Court of First Instance of Manila Branch XII, et al. filed on 24 March, 1975, in which on the grounds stated, it is prayed. ". . . that, 1. Upon the filing of this Petition, a writ of preliminary injunction or restraining order be issued by this Honorable Court (a) directing respondent Judge to cease and desist from enforcing his Orders of sale dated June 17, 1974 and February 25, 1975 from approving the draft of the Deed of Absolute Sale and Real Estate Mortgage submitted by respondent Special Administrator and from performing any act or conducting any proceedings in relation thereto for the purpose of consummating the proposed sale of the C. M. Recto property; LLphil (b) if by the time the injunction or restraining order is issued, respondent Judge has already approved the draft of the Deed of Absolute Sale and Real Estate Mortgage submitted by respondent Special Administrator, enjoining and stopping respondents Special Administrator and Go Tong from executing the final Deed of Sale and Real Estate Mortgage and from doing any act in relation thereto, be it payment or acceptance of the purchase price or any part thereof or any other act that would tend to consummate the contract of sale; and (c) should the deed of sale shall have been finalized by the time an injunction or restraining order is issued, directing the Register of Deeds of Manila not to register or annotate the same on OCT No. 2056 or cancel OCT 2056 or issue a new title in lieu thereof. 2. The Petition be given due course and, after the appropriate proceedings, judgment be rendered: (a) Annulling and setting aside the Order of sale dated June 17, 1974 and the order of February 25, 1975, denying the motion to reconsider the former, as well as the March 7, 1975 Order and all orders issued pursuant to the order of sale for the purpose of carrying the same into effect; (b) Annulling and setting aside all deeds, contracts, and conveyances that may have been executed pursuant to the Order of Sale and directing the parties thereto to make mutual restitution and restore the status quo ante ; (c) Prohibiting respondent Judge from pursuing his decision to sell the C. M. Recto property and directing him to cease and desist from further proceedings in connection therewith; (d) Making the writ of preliminary injunction permanent; (e) Directing respondents to pay the costs of suit. Petitioners pray for other reliefs which may be deemed just and equitable in the premises. Makati, Rizal for Manila, March 24, 1975." pp. 48-51, Rollo. IT RESULTING: That the statement of facts by Respondent Special Administrator being correct can as well be adopted: "Before we go into the discussion of the merits of this case, the antecedents are herewith respectfully presented to the Honorable Court, to wit: 1. The Testate Estate of Gliceria A. del Rosario is pending settlement as ''Sp. Proc. 62618, Branch 5, Court of First Instance of Manila. 2. There are two (2) Wills pending final probate with the said Probate Court, namely: (a) alleged Will of 1960, per Doc. No. 1978, Page No. 65, Book No. XII, Series of 1960, of Notary Public, Remegio Tividad of Manila; attached herewith as ANNEX A; (b) alleged Will of 1956, per Doc. No. 25, Page 77, Book No. XII, Series of 1956 of Notary Public Jose Ayala, of Manila; attached herewith as ANNEX B; 3. On August 25, 1966, the alleged will of 1960 was admitted to probate by the lower court; on appeal to the Supreme Court, in G.R. L-27200, the Supreme Court reversed the order admitting the Will of 1960 to probate later, on August 18, 1972, the same Supreme Court, set aside its Decision of April 30, 1970, in G.R. L-27200, and remanded the case again to the lower court for further reception of evidence on the eyesight of the testatrix. The same is now pending before the lower court. So, there is no Will yet finally admitted to probate to control its disposition. prcd 4. It is also for which reason that the same is under administration by Special Administrators. First was Consuelo Gonzales-Precilla, followed by Vicente Mauricio, Rufina del Rosario, then Elino del Rosario, present respondent. PROCEEDINGS IN THE COURT OF FIRST INSTANCE OF MANILA 1. On June 5, 1967 , the Estate of Gliceria del Rosario thru Sp. Administratrix, Consuelo Gonzales, filed Estate and Inheritant Tax Returns and paid the Bureau of Internal Revenue P46,456.96 for estate tax. 2. On March 28, 1972 , the Commissioner of Internal Revenue filed a CLAIM before the Probate Court in Sp. Proc. 62618 for the payment of (a) P893,223.02 for deficiency estate tax; and (b) P2,107,020.15 for inheritance tax. 3. On April 1, 1972 , then Sp. Administratrix, Rufina del Rosario, filed her Opposition to the said CLAIM, claiming that as regards the Estate Tax , the (a) claims of creditors under Rule 86 should first be considered, if any, to arrive at the NET ESTATES and as regards (b) inheritance tax, the Supreme Court in its Decision of April 30, 1970, in G.R. L-27200, still leaves the ultimate beneficiaries of the Estate undetermined, for purposes of the inheritance tax, despite the previous returns made by Consuelo Gonzales. 4. On April 21, 1972 , the Commissioner of Internal Revenue filed his Reply, claiming that the Government need not wait till after all claims are filed invoking Section 93 of the Tax Code. PROCEEDINGS IN THE SUPREME COURT IN G.R. L-36962: That pending the Resolution of the CLAIM OF THE COMMISSIONER OF INTERNAL REVENUE before the Probate Court of P893,223.62 for deficiency estate tax; and P2,107,020.15 for inheritance tax, the respondent Sp. Administrator sought to stop and prohibit the said Commissioner from enforcing his collection of the same, by filing with the Supreme Court a Petition for Prohibition, per G.R. L-36962, to wit: 1. On June 3, 1973, he filed a Petition for Prohibition, per 'ESTATE OF GLICERIA A DEL ROSARIO, ETC.,' petitioner, versus THE COMMISSIONER OF INTERNAL REVENUE, praying "WHEREFORE, it is most respectfully prayed that a writ of Prohibition be issued ordering the respondent, from enforcing the collection of said P3,000,243.77 from the Estate of Gliceria A. del Rosario, until the final distribution of this Estate, when it is finally determined, what constitutes the NET ESTATE after deducting the claims of creditors and administration expenses for the Estate Tax; and for the Inheritance Tax; after final determination as to who are the ultimate beneficiaries of the Estate, their names, relationship, and value of their shares, by the Court." 2. On June 25, 1973, the Supreme Court issued a Resolution ordering the Commissioner of Internal Revenue, to COMMENT "After deliberating on the petition filed in Case G.R. No. L-36962 (Estate of Gliceria A. del Rosario, etc., vs. The Commissioner of Internal Revenue), the Court resolved, without giving due course to the petition, to require the respondent to COMMENT thereon within ten (10) days from notice hereof, and not to move to dismiss the petition." 3. In the meantime, on July 18, 1975 , the respondent Commissioner of Internal Revenue served a ANNEX C Notice of Distraint per WARRANT OF DISTRAINT OF PERSONAL PROPERTY, dated June 25, 1973; and ANNEX D WARRANT OF LEVY ON REAL PROPERTY, dated June 25, 1973; against the properties of the respondent Estate for his claim of P3,003,243.77 and the increments; 4. So, on July 21, 1973 , respondent filed with the Supreme Court in G.R. L-36962, an "Urgent Motion for a Restraining Order against the (A) Warrant of Distraint of Personal Property: (B) Warrant of Levy on Real Property, issued by the respondent, Commissioner of Internal Revenue for P3,000,243.77 plus interest. praying the said Court, among all others . . . enjoining the respondent from enforcing his Warrants of Distraint of Personal Property and Warrant of Levy on Real Property of the Estate of Gliceria A. del Rosario in the total sum of P3,000,243.77, plus its increments, until the legality of said claim has been finally decided by the Court." xxx xxx xxx 5. On July 31, 1973 , the Sp. Administrator received copy of the COMMENT by the Commissioner of Internal Revenue, dated July 20, 1973; and on August 7, 1973 , the Supreme Court DISMISSED the Petition in L-36962, and denied as well the Urgent Motion for a Restraining Order, on the warrants of distraint and levy by the Commissioner of Internal Revenue, to wit: 'L-36962 (Estate of Gliceria A. del Rosario, etc. vs. The Commissioner of Internal Revenue). The urgent motion of petitioner for the issuance of restraining order enjoining the respondent from enforcing his warrant of distraint of personal property and warrant of levy on real property of the estate of Gliceria A. del Rosario until after the legality of said claim has been finally decided by the Court, is DENIED. Considering the allegations contained, the issues raised and the arguments adduced in the petition for prohibition, as well as the comment of the Solicitor General for respondent thereon, the Court Resolved FURTHER to DISMISS the petition for lack of merit." LexLib 6. That in view of the refusal of the Supreme Court to issue a restraining order against the Commissioner of Internal Revenue from enforcing his warrants of distraint and levy the Sp. Administrator, on August 17, 1973 , filed his " Motion for Authority To Sell Property of the Estate Covered by OCT-2056, Registry of Deeds of Manila, as Special Fund Exclusively For Inheritance and Estate Taxes ", because he believes that after the said refusal by the Supreme Court to stop him, the Commissioner of Internal Revenue may enforce his warrants and the properties of the Estate could be sold by him, or by the Court through him, thus depriving the Sp. Administrator and the heirs and devisees, their say and disposition as regards the price and other terms and conditions of a sale at auction. The estate also cannot expect to realize a higher price if the sale is not held before and by the Probate Court. That matter of sale, as approved by the Probate Court, is now the main issue of the instance special civil action before the Court of Appeals. PROCEEDINGS BEFORE THE COURT OF TAX APPEALS 1. There is now pending before the Court of Tax Appeals (a) CTA-2590, Estate of Gliceria A. del Rosario vs. Commissioner of Internal Revenue, to contest the Inheritance Tax P2,107,020.15; (b) CTA-2593, Estate of Gliceria A. del Rosario vs. Commissioner of Internal Revenue, to contest the estate tax deficiency assessment of P893,223.62;" pp. 194-201, Rollo. now it is the issuance of the Orders of 17 June, 1974, 25 February, 1975 and 7 March, 1975 that has motivated this certiorari, the dispositive portions of said three (3) orders being: IN VIEW OF THE FOREGOING, the Court hereby authorizes the Special Administrator of forthwith sell to the highest bidder or offeror the lot covered by OCT No. 2056 of the Registry of Deeds of Manila, either by public bidding or by negotiated sale, whichever appears to be most advantageous to the estate, calling his attention to observe in the sale of the same the common desire of the heirs expressed in open court during the sessions of March 1, 1974, which led this Court to issue the order of March 1, 1974. Such sale shall be subject to the prior approval of this Court. The proceeds off such sale shall be deposited with reputable bank that shall hereafter be indicated by this Court, under a Special Account, and which shall not be spent for any purpose than the payment of taxes to the government property taxes and internal revenue taxes and only upon order of the Court. prLL SO ORDERED. Manila, June 17, 1974." p. 62, Rollo. "IN VIEW OF THE FOREGOING CONSIDERATIONS, the Court hereby denies the motions for reconsideration and all other motions of the oppositor Consuelo Gonzales Vda. de Precilla as regards the sale of the Claro M. Recto property, and therefore, grants the motion of the Commissioner of Internal Revenue, in conjunction with the motions of the special administrator, for the immediate sale of the Claro M. Recto property covered by OCT-2056. SO ORDERED. Manila, February 25, 1975." p. 71, Rollo. "It appearing from all the bid proposals made and submitted by the bidders for the purchase of the lot covered by OCT-2056 belonging to the testate estate of the deceased, that the offer of Go Tong Electrical Supply Co., Inc. appears to be the most advantageous as fully complying with the initial terms and conditions set forth by this Court in the Notice of Sale, dated 28 January, 1970, the Court hereby awards to the said Go Tong Electrical Supply Co., Inc. the right to purchase the lot covered by OCT-2056 with the further condition that, pending the preparation of the necessary papers of conveyance, said awardee shall pay to this Court, within five (5) days from receipt of this award, an earnest money of ONE HUNDRED THOUSAND (P100,000.00) PESOS, which shall be deemed forfeited in favor of the estate if and when the sale shall not be consummated by reason of causes or faults arising from, or attributable or due to, any act or omission of the awardee, otherwise, it shall form part of the purchase price. In lieu of the earnest money, the sum of TWO MILLION ONE HUNDRED TWENTY THOUSAND (P2,120,000.00) PESOS in Cashier's check may be deposited with this Court within the same period. Upon receipt of this earnest money of P100,000.00 or of the (P2,120,000.00) the Clerk of Court of this Court shall forthwith deposit the said amount with the Philippine Veterans Bank and shall open an account in his name as Clerk of Court, for and in behalf of the estate of Gliceria A. del Rosario, in order that the same may be forthcoming for any lawful expenses or payment which shall subsequently be ordained by the Court. The special administrator shall forthwith arrange for the preparation of all the necessary papers of conveyance embodying all the terms of the accepted offer of the awardee and submit the same to this Court for approval. cdll SO ORDERED. March 7, 1975." pp. 142-143, Rollo. Petitioners contend then to have constituted excess of jurisdiction and grave abuse, respondents contend otherwise; I. CONSIDERING: That the rationale of His Honor's actuations can well be read in the order of 17 June, 1974 that, "This Court had made a deep reflection and a long deliberation on the arguments, pro and con, advanced by the parties in support of their respective stand on the matter, and after weighing the same, the Court has come to the conclusion that the special administrator's arguments far outweigh those of the oppositors. The fallacy of the argument of oppositors that the government will not suffer prejudice by the postponement of the payment of the internal revenue taxes due from the estate is quite too obvious to need further refutation than saying that taxes are the lifetime of the state, and that only by their prompt payment can the state perform and discharge promptly, adequately efficiently its essential political, social and economic services to its constituents. A postponement of the collection of taxes by those entrusted to collect, or an indifference or callousness on the part of these ordained to help accelerate the collection, and a postponement of payment by those who are obligated by law to pay, would necessarily produce a salutary effect of a diminution of the effectiveness of the state in catering to the essential needs of its people from whom it draws justification of its existence. In short, it means the postponement of the state's compliance with its political, social and economic duties to the people. Public interest must hold supreme over the interests of estates or of individual persons. So too, the general interest of the estate under administration and of the heirs, testamentary or legal, shall first be served by this court, and, thereafter, the personal interest of the individual heirs. The Court sees the pressing interest of the government in collecting the internal revenue taxes as shown by the warrants of distraint and levy issued and the subsequent follow-up letters or communications made and sent by the collector of Internal Revenue to the administrator. A speculation that representation can still be made to the Collector of Internal Revenue for a postponement of the collection of the taxes seems too remote from reality. And, this court also, under the mandate of law that it must expedite these proceedings in order that these may be terminated at the earliest possible time, finds no justification for withholding its order to pay such taxes. The Court would be recreant in its duty to the State and to the estate under administration if it would allow unjustified postponement of payment of taxes, which non-payment would definitely be one of the stumbling blocks towards the early termination of the proceedings. LLphil The Court also sees the point of the administrator that a sale, upon order of the Court, would produce better and more advantageous result than a sale under as administrative warrant of distraint or levy. No further elucidation on this point needs to be spread here because this truism is too obvious to ignore, and even deny." pp. 60-62, Rollo. and as to the choice of the C. M. Recto property to be sold, in His Honor's order of 25 February, 1975; ". . . On 17 January, 1975, oppositor Consuelo Gonzales Vda. de Precilla filed again a motion asking the cancellation of the bidding of the Claro M. Recto property and the discontinuation of the sale thereof, and that, alternatively, if such sale is to be made of certain properties of the estate, then it should be those properties located in Wright. Georgia, Alonza and M. H. del Pilar. This motion was answered and opposed by the special administrator, stating among other things, the following: "WHY THE C. M. RECTO PROPERTY UNDER OCT-2056 WAS CHOSEN TO BE SOLD: 3. This property has the highest market value at present due to its location; but its income of a little more than P6,000.00 a month is seriously disproportionate to its present market value which is in the neighborhood of P3,300,000.00, more or less. Thus, its worth of P3,300,000.00 more or less, even at 6% per annum, would earn P198,000.00 a year, compared with its rental income only of roughly P72,000.00 a year, minus: depreciation, repairs, taxes and bad debts. 4. This property is the one single property, which, if sold, could practically pay substantially the estate and inheritance tax obligations of the Estate. Compared with other properties cited by (Mrs.) Gonzales-de Precilla, the other properties are small and their market values very much less than the C. M. Recto property. It might take seven (7) to nine (9) other properties to be sold, to equal the probable sales proceed of this C. M. Rector property to generate the sum of more than P3,000,000.00. Then following the arguments of the Oppositor and movant (Mrs.) Precilla, the would be devisees of the remaining seven to nine properties to be sold, like the devisees, Mercedes Rios, who also was survived by her heirs; Antonio Jesus de Praga, Maria Natividad de Jesus, Dr. Jaime Rosario and Doa Rufina del Rosario, and their heirs, Dr. Lazatin, and the other religious corporations who were named devisees either in the 1956 or 1960 will of the decedent, STILL PENDING DETERMINATION, will also enter their Oppositions, and the Court will have to go back to where it started with the matter of the payment of these tax obligations." prLL After a judicious study of all these motion and oppositions, the Court is of the well-considered opinion that the rationale of the order of this Court, dated 17 June, 1974, is still as relevant, valid and compelling as it was when it was issued. The Court hereby stands on the rationale of the aforementioned order as a substantial basis for the denial of the motions for reconsideration filed by oppositor Consuelo Gonzales Vda. de Precilla, which this Court incorporates by way of reference in this order, aside from the equally valid, relevant and compelling ransoms stated by the special administrator in his "Answer and Opposition to the Motion to Cancel the Sale of the C. M. Recto Property", filed with this Court on 20 February 1975, all of which are adopted by this Court at its own and so hereby incorporates herein by way of reference." pp. 60-71, Rollo. which to state in the briefest of terms, must mean that His Honor was impressed by first, the pressing need of the State for the payment of taxes, and secondly, of all the properties of the Estate, the best to sell was the C. M. Recto property; now, this Court after its own reflection over the rationale, the attack thereon, and the defense by respondents, finds that it must pay attention to certain details to it not without importance. 1st. As to the pressing need of the State for the payment of taxes, for the reason that on 25 June, 1973, the Collector of Internal Revenue had issued warrants of distraint against the personal properties of the Estate, and as well, levy on its real property, which last warrant specifically authorized BIR to. "levy. . . . and sell so much of such real property as may be necessary to satisfy in full the sum or sums due us set forth above ". and notwithstanding petition in G.R. L-36962 filed by Special Administrator Del Rosario in Supreme Court in 21 July, 1973 against the Commissioner of Internal Revenue, the Supreme Court by resolution of 7 August, 1973, not only denied issuance of any restraining order but more importantly. "Resolved further to dismiss the petition for lack of merit." this can only mean that the Commissioner of Internal Revenue was given the go signal, so to speak, to go ahead with his warrant of distraint of personal property and warrant of levy upon the real property of the Estate; if this be the case as it is, in the mind of this Court, His Honor's recital of the pressing need for payment of taxes was not very important, with or without the orders impugned, the Commissioner could go ahead; indeed, the pressing need of the State for payment of taxes was not very relevant precisely because of the go-signal by the Supreme Court, what was most relevant was whether the C. M. Recto property should be sold upon His Honor's orders; for the purpose; 2nd. Since notwithstanding that the taxes could have been paid, their collection enforced, thru administrative processes, apart from and without there having been invoked the authority of Probate Court, but precisely because its jurisdiction was that sought for the purpose, it must necessarily follow that the actuations of Respondent Judge would have had to be circumscribed within the Rules governing administration of estates of deceased persons in relation to the law on wills; and since in this connection, this Court cannot overlook that decedent, a spinster, without any forced heirs, appears to have made two wills, the first in 1956 and the second in 1960, and in the second, the C. M. Recto property is devised unto petitioners, see page 208, rollo; and this second will is in the process of probate; its probate is opposed yes, but surely there can be no dispute that it might be probated, perhaps, a casual scrutiny of the document would not even reveal valid grounds for opposition, well then, in the event that it should be probated, and since once it is, the conditional title of devisees, herein petitioners, would have become converted into absolute, this Court can only wonder at how devisees would by then have been reimbursed for its loss; of course, if an estate is insolvent, it does not pay its taxes, estate taxes due, nor do the heirs pay their inheritance taxes, before they might ever receive their inheritance, the estate must first have to go to taxes, and this must mean that in first instance, the property left by deceased must answer therefor, yes, but all must answer, not one alone, this is the clearest implication from Rules 88 and 89 because under them, debts, expenses of administration, should be paid, first from part of estate so ordered to be made responsible, by testator himself, if not, from the part not disposed of by the will, Sec. 2, Rule 88, and it not, yes, part or whole of any particular property of deceased might be sold, but if, "beneficial to the persons interested" under Sec. 2 of Rule 89, or if, "beneficial to the heirs, devisees, legatees and other interested persons. under Sec. 4 of the same Rule; and certainly, where a particular property had been devised unto a particular heir, any sale thereof to satisfy expenses of administration, e.g., taxes, cannot be beneficial to the persons interested; it would be beneficial to the rest but not to all, for it would be prejudicial to the one to whom it had been devised; and note that the Rules are most emphatic, that while probate court might order sale of particular property where such sale would be beneficial to the heirs, devisees, legatees, and other interested persons, yet, LLpr "such authority shall not be granted if inconsistent with the provisions of a will." Sec. 4. and here, deceased had willed the C.M. Recto property unto petitioners, in the second will, that of 1960, in process of probate, with the aggravating circumstance that as this Court reads this second will, apparently, it is petitioners whom deceased most dearly loved, see pars. 1 and 2 thereof, so much so that she appointed him as administrator without bond, par. 6, id ., and perhaps, there can be no gainsaying the point that with the unfortunate continuous trend of inflation, the monetary value of the C.M. Recto property would have and surely would increase with the years, and so it is that with more reason, can petitioners complain that there is absolutely no way by which Respondent Judge had provided any recourse by which they could be compensated if and when, but also has this Court seen that His Honor by his aforesaid orders, has denied them equal justice, to state it bluntly, what Respondent Judge has done was to make petitioners a Simon Cirineo , that certainly was unduly burdensome and obnoxious, they should not be made to carry the cross for private respondents, so that in the mind of this Court, foregoing considerations having demonstrated that His Honor had gravely abused his discretion. IN VIEW WHEREOF, this Court is constrained to grant, as it now grants, certiorari, the orders of 17 June, 1974 and 25 February, 1975, are set aside, and as a consequence, also the last order of 7 March, 1975, costs against private respondents. SO ORDERED. Pascual and Chanco, JJ ., concur. Footnotes * Vol. 20 C.A.R. (2s), p.