Marcos II vs. Court of Appeals

The collection of estate taxes through summary remedies, such as levy and sale, does not require the prior approval of the probate court, and tax assessments that have become final and unappealable due to the taxpayer's failure to avail of administrative or judicial remedies can no longer be contested via a petition for certiorari. The Court ruled that the enforcement of estate taxes is an executive function vested in the BIR, and the pendency of probate proceedings does not preclude the summary collection of such taxes.

Former President Ferdinand E. Marcos died on September 29, 1989. A Special Tax Audit Team created by the BIR investigated the tax liabilities of the decedent and his family, concluding that the Marcoses failed to file estate and income tax returns. On July 26, 1991, the BIR issued deficiency estate tax assessments against the estate and deficiency income tax assessments against the Spouses Marcos and petitioner Ferdinand R. Marcos II. The assessments were served upon the heirs and their counsel at their last known addresses and offices. The heirs failed to file an administrative protest within thirty days. Consequently, the BIR issued notices of levy on real property on February 22, 1993, and May 20, 1993, followed by notices of sale. At the public auction on July 5, 1993, the properties were forfeited in favor of the government due to the absence of bidders.

• Death and Audit: Former President Ferdinand E. Marcos died on September 29, 1989. On June 27, 1990, the BIR created a Special Tax Audit Team, which found that the Marcoses failed to file estate and income tax returns.
• Assessments Issued: On July 26, 1991, the BIR issued deficiency estate tax assessments against the estate (P23,293,607,638.00) and deficiency income tax assessments against the Spouses Marcos and petitioner Ferdinand R. Marcos II.
• Service of Assessments: The assessments were personally and constructively served on Mrs. Imelda Marcos and the petitioner through their caretakers at their last known addresses on August 26, 1991, and September 12, 1991. Formal assessment notices were later served on Mrs. Marcos c/o the petitioner at his office at the House of Representatives on October 20, 1992, and a notice to taxpayer was furnished to Mrs. Marcos's counsel.
• Failure to Protest: The heirs failed to protest the assessments administratively within 30 days from service.
• Levy and Sale: On February 22, 1993, and May 20, 1993, the BIR issued notices of levy on real property. Copies of the notices were served on the petitioner, Mrs. Marcos, and their counsel on April 7, 1993, and June 10, 1993. Notices of sale were posted on May 26, 1993, and the public auction took place on July 5, 1993. With no bidders, the lots were forfeited in favor of the government.

• Petitioner argued that the probate proceedings placed all estate properties in custodia legis, requiring the BIR to seek the probate court's approval before levying and selling the properties.
• Petitioner contended that even if the assessments were final, the unlawful manner and method of collection could be questioned independently, specifically asserting that the notices of levy were issued beyond the period prescribed by Revenue Memorandum Circular No. 38-68.
• Petitioner asserted that pending ill-gotten wealth cases against the Marcoses made the total value of the estate incapable of exact determination, rendering the assessment premature and oppressive.
• Petitioner claimed he was denied due process because he was not served copies of the notices of levy as a compulsory heir, violating Section 213 of the NIRC.
• Petitioner maintained that the Court of Appeals erred in ruling it had no power to grant injunctive relief against the BIR's arbitrary collection methods.

• Respondent Commissioner of Internal Revenue countered that the state's authority to collect internal revenue taxes is paramount and the pendency of probate proceedings does not preclude the assessment and collection of estate taxes through summary remedies.
• Respondent argued that claims for payment of estate taxes need not be presented as claims against the estate in the probate court and should be paid immediately.
• Respondent maintained that the probate court, being a court of limited jurisdiction, is not the proper agency to decide whether an estate is liable for estate or income taxes.

• Procedural Issues:
  • Whether a petition for certiorari is the proper remedy to question final and unappealable tax assessments.
  • Whether the petitioner was denied due process due to lack of notice of the assessments and notices of levy.
• Substantive Issues:
  • Whether the BIR can collect estate taxes through summary remedies of levy and sale without the prior approval of the probate court.
  • Whether the notices of levy were issued beyond the prescriptive period allowed by law.

• Procedural: The Court ruled that certiorari may not be used as a substitute for a lost appeal or remedy. Because the petitioner failed to protest the assessments administratively or appeal to the Court of Tax Appeals, the assessments became final and unappealable, precluding indirect challenges via certiorari. The Court also found that there was sufficient actual and constructive notice of the assessments and levy served on the petitioner and his mother, negating the due process claim. As an heir, the petitioner is not the "delinquent taxpayer" for estate tax purposes under Section 213 of the NIRC, and service of the notice of levy on him was not legally required, although it was in fact accomplished.
• Substantive: The Court held that the BIR can collect estate taxes through summary remedies without the prior approval of the probate court. The enforcement and collection of estate taxes is executive in character, vested in the BIR by Section 3 of the NIRC. Section 87 of the NIRC, which requires a BIR certification of tax payment before the probate court authorizes the delivery of distributive shares, disproves the contention that the probate court must approve the assessment and collection. Regarding the prescriptive period, the Court ruled that the notices of levy were issued within the three-year period under Section 223(c) of the NIRC, counted from the time of assessment. Because the decedent failed to file a return, the ten-year prescriptive period for assessment under Section 223(a) applied, and the subsequent three-year period for collection by levy had not lapsed.

• Collection of Estate Taxes vs. Probate Proceedings — The collection of estate taxes through summary remedies does not require the prior approval of the probate court. The enforcement and collection of estate tax is executive in character, vested in the Bureau of Internal Revenue, and the pendency of probate proceedings does not preclude the summary collection of such taxes.
• Finality of Tax Assessments — A tax assessment that becomes final and unappealable due to the taxpayer's failure to avail of prescribed administrative and judicial remedies can no longer be contested directly or indirectly via a petition for certiorari. Certiorari may not be used as a substitute for a lost appeal.
• Presumption of Correctness of Tax Assessments — BIR assessments are presumed correct and made in good faith. The burden of proof is on the complaining party to show clearly that the assessment is erroneous; mere rhetoric regarding the improbability of the amount charged is insufficient.

• "From the foregoing, it is discernible that the approval of the court, sitting in probate, or as a settlement tribunal over the deceased is not a mandatory requirement in the collection of estate taxes. It cannot therefore be argued that the Tax Bureau erred in proceeding with the levying and sale of the properties allegedly owned by the late President, on the ground that it was required to seek first the probate court's sanction."
• "The subject tax assessments having become final, executory and enforceable, the same can no longer be contested by means of a disguised protest. In the main, Certiorari may not be used as a substitute for a lost appeal or remedy."
• "Where there was an opportunity to raise objections to government action, and such opportunity was disregarded, for no justifiable reason, the party claiming oppression then becomes the oppressor of the orderly functions of government."

• Domingo vs. Garlitos, G.R. No. L-18994 — Distinguished. Petitioner cited it to argue that claims against an estate must be presented to the probate court. The Court distinguished it, holding that estate tax collection is executive in character and does not require probate court sanction.
• Collector of Internal Revenue vs. The Administratrix of the Estate of Echarri, 67 Phil 502 — Discussed. Recognized that while a probate court has authority to order payment of taxes, it also has the authority to deny the same, which underscores why the BIR is not bound to seek probate approval for summary tax remedies.
• Vera vs. Fernandez, L-31364 — Followed. Recognized the liberal treatment of claims for taxes against the estate, exempting them from the statute of non-claims due to the necessity of government funding.
• Pineda vs. Court of First Instance of Tayabas, G.R. No. 30921 — Followed. Established that the Government has two ways of collecting taxes from a decedent's estate: by going after the heirs proportionately, or by subjecting the estate's property in the hands of an heir or transferee to the payment of the tax due via the lien created by the Tax Code.
• Commissioner of Internal Revenue vs. Algue, Inc., G.R. No. L-28896 — Cited. Affirmed the principle that taxes are the lifeblood of the government and should be collected without unnecessary hindrance.

• Section 3, National Internal Revenue Code (NIRC) — Vests the BIR with the power to assess and collect all national internal revenue taxes, affirming the executive character of estate tax collection.
• Section 87, NIRC — Requires the probate court to secure a certification from the BIR that estate taxes have been paid before authorizing the delivery of any distributive share to heirs, disproving the claim that probate court approval is needed for tax collection.
• Section 205, NIRC — Authorizes the summary remedies of distraint and levy to collect taxes, which the BIR validly employed.
• Section 213, NIRC — Governs the levy on real property and requires written notice to be served upon the delinquent taxpayer. The Court held that for estate tax delinquencies, the delinquent taxpayer is the estate, not the heir, though notice was in fact served on the petitioner.
• Section 223, NIRC — Provides the exceptions to the period of limitation for assessment and collection. The Court applied subsection (a) (10-year period for failure to file a return) and subsection (c) (3-year period to collect by levy after assessment) to uphold the validity of the levy.
• Section 229, NIRC — Prescribes the procedure for protesting an assessment. The Court held that the petitioner's failure to file a protest within 30 days rendered the assessment final and unappealable.

Regalado, Romero, Puno, and Mendoza.