Ipekdjian Merchandising Co., Inc. vs. Court of Tax Appeals

The doctrine of res judicata extends to decisions of administrative bodies upon whom judicial powers have been conferred, and a party cannot evade its operation by merely changing the form of the action when the cause of action remains the same. Decisions of the Board of Tax Appeals not appealed within the period prescribed by Republic Act No. 1125 were judicially confirmed and assumed the character of decisions of regular courts, thus satisfying the requisites of res judicata.

Ipekdjian Merchandising Co., Inc. was a corporate taxpayer engaged in the importation and sale of gold chains. The Commissioner of Internal Revenue (then Collector of Internal Revenue) assessed the company for compensating tax and surcharge under Section 190 of the Tax Code on gold chains that had been imported, melted, and converted into gold bullion for sale. The dispute traversed multiple tribunals — the Board of Tax Appeals, the Court of Tax Appeals (created by Republic Act No. 1125 on June 16, 1954), and the Supreme Court — against the backdrop of a statutory transition from the Board of Tax Appeals to the Court of Tax Appeals, which altered the appellate route for tax cases and, as the Court ultimately held, retroactively conferred judicial character on the Board's unappealed decisions.

Ipekdjian Merchandising Co., Inc. imported gold chains which it later melted and converted into gold bullion, selling the bullion as such. On January 11, 1951, the Commissioner of Internal Revenue (then Collector of Internal Revenue) assessed and demanded from the company the amount of P97,502.25 as compensating tax and surcharge on the imported gold chains, plus P200.00 as compromise penalty for violation of Section 190 of the Tax Code. Pursuant to Executive Order No. 401-A, series of 1951, the company appealed the Commissioner's decision to the Board of Tax Appeals, which after hearing on the merits rendered judgment affirming the Commissioner's assessment in B.T.A. Case No. 10.

The company appealed the Board's decision to the Supreme Court, but the appeal was dismissed without prejudice on March 30, 1954, following the ruling in University of Santo Tomas vs. Board of Tax Appeals (G.R. No. L-570, June 23, 1953), which held that the Board of Tax Appeals was an administrative body and its proceedings and decisions were administrative in character. The dismissal became final and executory. The company's subsequent petition for reinstatement of the appeal was denied on March 21, 1955.

On March 30, 1955, the company sought to reopen the case before the Court of Tax Appeals by filing a petition for review docketed as C.T.A. Case No. 107. That petition was dismissed on July 26, 1955 for lack of jurisdiction, the company having failed to maintain the necessary action in the Court of First Instance of Manila under Section 306 of the Tax Code or with the Court of Tax Appeals within 30 days from its creation on June 16, 1954 pursuant to Section 11 of Republic Act No. 1125. The motion for reconsideration was denied.

On November 3, 1955, the company made a partial payment of P5,000.00 on its tax liability. Four days later, it filed with the Commissioner a written claim for refund of that amount, simultaneously requesting cancellation of the balance of the assessment. The Commissioner denied the claim on the ground that the decision in B.T.A. Case No. 10 was already final and executory. On May 10, 1957, the company filed a petition for review in the Court of Tax Appeals (C.T.A. Case No. 374) seeking reversal of the Commissioner's denial. On June 14, 1957, the Commissioner filed his answer, raising as an affirmative defense that the decision in B.T.A. Case No. 10 operated as res judicata.

Meanwhile, on February 26, 1958, the Commissioner filed a motion for execution of judgment in B.T.A. Case No. 10, which the Court of Tax Appeals granted in its resolution of July 16, 1958. The company filed a petition for certiorari before the Supreme Court (L-14791) seeking annulment of the execution order, but that petition was dismissed on May 30, 1963. On December 29, 1958, the Court of Tax Appeals dismissed C.T.A. Case No. 374 on the ground of res judicata, and the company's motion for reconsideration was denied, giving rise to the present petition.

• Inapplicability of Res Judicata to Administrative Bodies: Petitioner argued that the doctrine of res judicata, being a doctrine of expediency, is applicable only to judgments rendered by a court or judge and does not extend to decisions of administrative agencies such as the Board of Tax Appeals, which are devoid of judicial functions.
• Difference in Cause of Action: Petitioner maintained that the cause of action in B.T.A. Case No. 10 is different from that in C.T.A. Case No. 374, the former involving a direct challenge to the assessment while the latter involved a claim for refund and cancellation of the balance of the assessment.

• Res Judicata as Affirmative Defense: Respondent Commissioner raised as an affirmative defense that the decision in B.T.A. Case No. 10 operates as res judicata to petitioner's appeal in C.T.A. Case No. 374, the assessment of liability for compensating tax having been previously adjudicated and having become final and executory.

• Applicability of Res Judicata to Administrative Bodies: Whether the decision of the Board of Tax Appeals in B.T.A. Case No. 10 operates to bar C.T.A. Case No. 374 on the ground of res judicata, notwithstanding that the Board of Tax Appeals was an administrative body rather than a court.
• Identity of Cause of Action: Whether the cause of action in B.T.A. Case No. 10 is the same as that in C.T.A. Case No. 374 such that the requisites of res judicata are satisfied.

• Applicability of Res Judicata to Administrative Bodies: Yes. Republic Act No. 1125 conferred judicial character on the proceedings and decisions of the Board of Tax Appeals, such that its unappealed decisions assumed the character of decisions of regular courts and could operate as res judicata.
• Identity of Cause of Action: Yes. The cause of action in both cases was identical — petitioner's claim to non-liability for compensating taxes under Section 190 of the Tax Code — and a party cannot evade res judicata by merely superficially changing the form of the action.

• Applicability of Res Judicata to Administrative Bodies: The essential requisites for res judicata are: (1) the former judgment must be final; (2) it must have been rendered by a court having jurisdiction over the subject matter and the parties; (3) it must be a judgment on the merits; and (4) there must be identity of parties, subject matter, and cause of action between the first and second actions. Petitioner's argument that res judicata applies exclusively to decisions of what are ordinarily understood as courts was rejected as unreasonably circumscribing the doctrine's scope. The more equitable view is to extend the defense to decisions of bodies upon whom judicial powers have been conferred. While the Board of Tax Appeals was originally an administrative body whose decisions were administrative in character — as held in University of Santo Tomas vs. Board of Tax Appeals — Republic Act No. 1125, enacted on June 16, 1954, altered that characterization. Section 21 of the Act provided that all cases theretofore decided by the Board and appealed to the Supreme Court pursuant to Executive Order No. 401-A shall be decided by the Supreme Court on the merits as if the Executive Order had been duly enacted by Congress, and that all cases pending in the Board shall be transferred to the Court of Appeals. As the Court had already ruled in the companion case (L-14791), Republic Act No. 1125 conferred judicial character on the proceedings and decisions of the Board. Decisions of the Board not brought before the Court of First Instance or the Court of Tax Appeals within the 30-day period prescribed by Section 11 of the Act were judicially confirmed and considered final and executory, enforceable by execution like any other decision of a court of justice. Because the B.T.A. decision in Case No. 10 was not appealed within that period, it acquired judicial character and satisfied the jurisdictional requisite of res judicata.

• Identity of Cause of Action: In B.T.A. Case No. 10, petitioner sought review of the Collector's decision holding it liable for P97,502.25 as compensating tax, with the purpose of having the assessment reversed. In C.T.A. Case No. 374, petitioner alleged the same facts embodied in the B.T.A. decision, with the additional circumstance of partial payment, and prayed that it be held not subject to the compensating tax, that the P5,000.00 paid be refunded, and that the balance of the assessment be cancelled. The alleged cause of action in both cases was the same: petitioner's claim to non-liability for compensating taxes. The only appreciable difference was that in the B.T.A. case petitioner assailed the Collector's decision assessing the tax, while in the C.T.A. case it assailed the Collector's denial of the refund claim and request for cancellation of the balance. In both cases, however, the central issue was identical — whether petitioner is liable for the compensating tax prescribed in Section 190 of the Tax Code. A party cannot, by merely superficially changing the form of the action, plead the non-application of the rule of bar by prior judgment. All the requisites of res judicata being present, the Court of Tax Appeals properly dismissed the petition.

• Res Judicata Applicable to Quasi-Judicial Bodies — The doctrine of res judicata is not confined to judgments of what are ordinarily known as courts but extends to all bodies upon whom judicial powers have been conferred. Whenever any board, tribunal, or person is by law vested with authority to judicially determine a question, such determination, when final, is as conclusive as though rendered by a court of general jurisdiction. In this case, Republic Act No. 1125 conferred judicial character on the decisions of the Board of Tax Appeals that were not appealed within the prescribed 30-day period, thereby enabling those decisions to operate as res judicata.

• Requisites of Res Judicata — The essential requisites are: (1) the former judgment must be final; (2) it must have been rendered by a court having jurisdiction of the subject matter and the parties; (3) it must be a judgment on the merits; and (4) there must be, between the first and second actions, (a) identity of parties, (b) identity of subject matter, and (c) identity of cause of action. All four requisites were found present in this case.

• Bar by Prior Judgment Not Evaded by Change of Form — Notwithstanding a difference in the form of two actions, res judicata applies where the parties are in effect litigating for the same thing. A party cannot, by varying the form of the action, escape the effects of res judicata.

• "To say that the doctrine applies exclusively to decisions rendered by what are usually understood as courts would be to unreasonably circumscribe the scope thereof. The more equitable attitude is to allow extension of the defense to decisions of bodies upon whom judicial powers have been conferred." — This passage articulates the ratio decidendi on the first issue, establishing the principle that res judicata extends beyond conventional courts to quasi-judicial bodies vested with judicial power.

• "Appellant cannot, by merely superficially changing the form of his action, plead the non-application of the rule of bar by prior judgment." — This statement resolves the second issue, establishing that identity of cause of action is not defeated by a party's reformulation of the relief sought.

• "It is clear that the alleged cause of action in both cases is the same: appellant's claim to non-liability for compensating taxes." — This passage defines the operative test for identity of cause of action in the context of tax assessments, focusing on the substantive liability rather than the procedural posture.

• University of Santo Tomas vs. Board of Tax Appeals, G.R. No. L-570, June 23, 1953 — Held that the Board of Tax Appeals was an administrative body and its proceedings and decisions were administrative in character. This case was distinguished in the present decision because Republic Act No. 1125 subsequently conferred judicial character on the Board's decisions.

• Ipekdjian Merchandising Co., Inc. vs. Court of Tax Appeals, L-14791, May 30, 1963 — The companion case in which the Court refused to annul the CTA's resolution granting execution of judgment in B.T.A. Case No. 10, ruling that Republic Act No. 1125 had conferred judicial character on the Board's proceedings and decisions. This ruling was directly relied upon in the present decision.

• Navarro vs. Director of Lands, L-18814, July 31, 1962 — Cited for the enumeration of the essential requisites of res judicata.

• Valenzuela vs. Court of Appeals, L-12645, September 15, 1960 — Cited for the proposition that a party cannot, by varying the form of the action, escape the effects of res judicata.

• Section 190, National Internal Revenue Code (Tax Code) — Imposes compensating tax on articles imported and sold or used in the Philippines. This provision was the substantive basis for the assessment against petitioner and the central issue in both B.T.A. Case No. 10 and C.T.A. Case No. 374.

• Section 11, Republic Act No. 1125 — Prescribed a 30-day period from the creation or organization of the Court of Tax Appeals within which cases pending before or decided by the Board of Tax Appeals could be brought before the Court of Tax Appeals. Failure to appeal within this period resulted in the Board's decisions becoming final and executory with judicial character.

• Section 21, Republic Act No. 1125 — Provided that all cases theretofore decided by the Board of Tax Appeals and appealed to the Supreme Court pursuant to Executive Order No. 401-A shall be decided on the merits as if the Executive Order had been enacted by Congress, and that all pending cases shall be transferred to the Court of Appeals. This provision was the statutory basis for conferring judicial character on the Board's decisions.

• Executive Order No. 401-A, series of 1951 — Governed the appeal from the Commissioner of Internal Revenue's decisions to the Board of Tax Appeals. Section 306 of the Tax Code provided an alternative route through the Court of First Instance.

Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Barrera, Paredes, Dizon, and Regala, JJ., concurred.