Caltex, Inc., et al. vs. Commissioner of Internal Revenue

DECISION

- 2 - mortgage.

At the public au c tion sale c onducted by the Sheriff of Bataan on July 27 , 1987, the three parce ls of land were s old to Caltex for the total amount of P500 ,000.

In order to e ffe c t the registration of the sale in its favor with the Register of Dee ds on February '29, 1988, Cal tex paid capital gains taxes amounting to P440 , 969.00 and documentary stamp taxes c-unounting to P60, 000 based on the mortgage obli g at.io n of P6 , 000,000 .

(Copies of Confirmation Receipts Nos.

13532015 and 1352014 issued for such payments are hereto .:\ttached as Annexes "A" and "B" , respective ly.)

In BIR Rul ing No. 2 122-88 dated May 20, 1988, respon~ent ruled that the capital g a ins tax on the extrajudicial foreclosure sa le of the lots mortgaged by del Rosario t o Caltex shou ld be based on the bid price o f P5 00, 000 or the zonal values of said p r operties, whichever was higher, and the rlocu mentar y stamp tax should be based on the bid price of P500,000."

( Cop y of said rul ing is hereto attach e d as Annex "C" and made an integra l part hereof .) Answer was filed by respondent and it states, am o ng others , that: "1.

He ADHITS a llegations in paragraphs a nd VI of the petition ; 2.

He SPECIFICALLY the I, II, material III, V, DENIES the a llegations on paragraph IV of the petition tor being false, the truth being that it was petitioner Mario del Rosario, not petitioner Caltex (Philippines), Inc., v1ho pa id the capital g a ins tax and documentary s tamp tax 1 3..

He ADHITS the allegation in paragr a ph VIII of the petition that the 8apital gains tax and documentary stamp tax payments were in excess o f he correct a mounts payable, with the qu a lification 673 _,

- 3 - t.ha t the correct amount of e}:c e~;s payment i~ F460,065.45.

He, however, SPECIFICALLY rP.JTIES th e al l egat i on in said paragra ph that the excess payment s hould be refunded fer bein g erroneous, the truth b e ing th o se s~n te d in t he hereunder Sp ec ial and nffirmative Defenses; 4.

He ADI1ITS the alleg at ion in rara graph VIII of the petition t ha t a c l a im far refund was made for the excess payment of capita l gains tax and documentary sta mp tax , with the qualification that it was p ;~ t i t i one r ! ! a r i o de 1 R o s a r i o , that made the c l ai m for refund.

He, however, srCCI FICALLY DENIE S the al l egation in said p3ra graph that respondent has not acted upon said clai m for being fal s8, the truth ll e ing th a t said claim had been pro cess ed C"t lH1 investigated:

In fact , responde nt cl·~ nied the claim in a let t er dat ed Harch 2, l<:J :Jl ;

5.

He <lllegation f ,) r b e ing tr uth bei ng

SPECIF ICALLY

DENIES the in paragraph IX of th e petition an erroneous concl us ion , the those stated in the f ollowing - " As special an d affirmative defen ses , respondent ·'•. ll •• 9 •: ·= , e s sse n t i a 11 y , that : " 6.

Petitioner Caltex (Phil ippinefts), :!.: nc.

is not the real party in interes t to ~laim the refund of the excess payment of c~ pita l ga ins t ax and documentary stamp tax s ince i t was petitioner Mario d e l Rosari o \Jho paid the same ;

7 .

This Honorable Court has no j uri sdic ti on to take cdgnizance of th e cas e inas much as petitioner Haria del Rosario , Hllo pai.d the taxes sought to b e refunded·, did n o t file Hi th respondent a c laim for the refund thereof as requir e d un de r Sec tio n 243 (now Section 230) of the 1988 lL:tt io nal Internal Revenue Code ;" S~e m ingly finding some room f or t he applicat ion o f PuJ•: 34 of the Rules of Court , petiti oners filed 674 • - 4 - l!o tion for Summary Judgment.

The l!o tion for Summa r ~Tudgm en t was filed by petitioners on t:he main ground that exc ept f or t'YTO items all the essential faets a lleg ed on the petition are admitted . Paragraph s ::I, III, IV , V, VI, VII , VIII , \'lere alleged to have b1 ~en a dmitt e d by respondent and t hat th e only r a ined issues as to petitioners' allegation that it uas Calt ex Hho paid the taxes by contending that it uas p e t i t i o n e r H a r i o de 1 R o sa' r i o vl h o p a i cl them , a nd 1: he ot h er a l l egation that no action has been taken on the refund c laim by contending that such claim has been denied by lette r of respondent of March 2, 1990. For th e p e tit i o n ers 1 e v en with the deni al on the alleged non - a c t ion on the refund c l aim , the averment of r espon dent , is still an implied admi ss ion that the f ormer has not acted on the claim before the filing o f the Petition fo r Rev ievT on F e bruary 23 , 1990.

Thi s acco rding to petitioners l eaves o nly one fa c tual issue , and that is , as to who paid th e taxes. Thus , petit i oners , i n answer to th i s question , point to the affid 3 vit of Mr.

Pedro M. Carbonell II attach to the s ubj e c t mo t ion stating that :

a ) He h andled for Calt.ex the e x tra - judicial forecl os u re of del Rosario 's lots;

b) He bid in behalf of Caltex in th e auc ti o n sa le of said lots;

c ) After t he Certifica te of Sale in favor of Caltex Has issued by 675

- 5 - the De pu ty Sheriff of Bataan, he requested the BIR Regional Distri c t Office (ROO) in Bal anga , Bataan to comput e the taxes t o be paid as required by the Regi s ter of Deeds of Bataan for the registration of the sale and a h~ndwritten computation was given to him and it indicated Caltex because the Bataan RDO was awar e that Caltex was payin g th e taxes; d) He c aus e d the preparation by the Bataan RDO of the c apital gain s tax return and signed it above the typewritten n ame "Mar io del Ros ario" and the handwritten words "For Caltex", and filed it on November 17, 1987;

e ) He tendered to the Bataan RDO Calt e x Citibank · Check No. 0 20469 dated February 16, 1988 for P500,696.00 in payment of the capital g~ins a nd docu mentary stamp taxes and copy of the cancelled c heck was attached as Annex "D" o f Mr. Carbonell's a ffid a vit.

Petiti oners argue against the first affirmative def e n s e of respondent that Caltex is not the real -· party in interest to claim the refund by citing cases th a t establis h Caltex's right to the tax, which as asserted has been erroneously paid by it.

On the second a ffirm ative defense of respondent that this Court has · no jurisdiction over the cas e since petitioner Mario del Rosario who allegedly paid for the tax did n ot file a c l ai m for refund, petitioners 676

- 6 - cou nt ~ r ed with its own elaboration of what th e y th i nk is th e underlying purpose of Section 230 of the Nati on u l Internal Revenue Code in requiring a c laim f o r re fund as a prerequisite to a suit or proceed i ng f o r th e recovery of any internal revenue tax. Respo ndent file his opposition to the motion for s umm a ry judgment contending that summary judgment is un a vailin g under the circumstances of this case in vi e \T o f the genuine issues of material facts which allegedly are;

a } Whether it '"as petitioner Caltex _, or p e titioner Haria del Rosario who paid 1:he s ubject tax;

b) Whether petitioner Mario del Rosario fi~ed a claim for refund;

c ) Whether the amoun t alleged to be eroneoun ly p a id is P461,940.00 or P460,065.45. Furthe r , that on a motion for summary judgment, the Court is not authorized to decide an issue of fa<!t, but

i. s to determine whether the pleadings and record before the Court create an issue of fact wh i ch necess i tates a trial.

And, this Court from a motion for Sllmmary .judgment is not author ized to dec i de whether it was petitioner Caltex or petitioner Mario del Ro sario who paid the tax , whether petitioner 677

- 7 - IL:t r- i o del Rosario filed a claim for refund 1 and the c a rr e ~ t amount o f tax alleged to be erroneously paid. In their "Reply to Opposition (To l!otion · for •' S u m m :t 1: y J u d g men t ) " 1 p e t i t i one r s note d t h a t r e s pond. en t r ~l i es only on hi s Answer to support his af orestited sta n d and that he failed to present supp o r ting and opp o s ing affidavits as required by Sections 3 and 5, Rul e 34 of th e Rul es of Court.

Pet iti oners contest t h t~ genuineness and mat.eriality of t h e averre d issu e s o f f act postulated by respondent by subm i tting that t h e y are not bona f ide or sub sta n t ial iss~e s .

Pet itioners point to the affidavit of llr.

Pedr•) H.

Car l;.:- nE! ll II and i ts a nnexes for proo :E ::~ s t o v7ho :)aid th e taxes in contrast to n o proof shovm by For the petitioners , the dif ferenc! in t h e a mo unt of this suit is not a substantial issue. Ci Ung cases, petitioners contend t.hat the d e t 0 r mination o f such amount is mer e ly a ma them a tical pr obl 0m and no t a substantial issu e of a materia l .f ac t.

are impressed by the lawfulness of p te~ t i tione r s ' claim.

The . evidence and the l e gal auth nri ties appear to us as supportive of this c o n c lu s ion.· I·Je find that the aff idavit of l1r.

Pedro H.

Carb on e ll II attached t o the tlo t i o n f or Summary 67 8

• - 8 - Judgm~nt c redibly sho1-vs that it \vas Ca l tex "'h o paid the t o t a l amount of P500,696.00 repres en ting capital gains tax a nd documentary s t a mp tax b a sed on the a mount o f the loan given by Caltex in f a vor of Mario del Ros~r io equal to PG,OOO,OOO.OO.

Subsequently , Caltex rea lized the error in the amount it paid, v1hen, in answer to Caltex's own query, re s pondent r uled (Annex " C" ,

p. 7 CTA Records) that the capital gai n s t~x and d 6c umentary stamp tax i s computed on th e basis of the gross selling price or the fair market va lue prevailing at the time o f sa le, 11 b i c h e v e r i s h i g he r .

The correct me asu r e of the capital gains tax a nd t he documentary s tamp t ax was therefore the bid price of P500,000.00 and not P6 ,000, 000.0 0 ( Ibid.).

Respondent contests Caltex's right to claim refund of the excess amo unt paid on the positio n that it was Ma rio del Rosario who p a id the ta. es but since Mario del Rosario h as not filed a cla im for r e fund, this Court does not have jurisdiction on this case.

Respondent thinks such an a nswer su fficiently creates a genuine issue a s to a material fact.

But as Section 5, Rule 34 would .

require jt, the adverse party or th e respondent ·' s h ould submit· opposing affidavits and s uppo r ting document s contradicting movant's plea for summary ~ I judgment to create the condition th a t there is suc h a 679

- 9 - g e nuin e i s sue on a mate ri a l fact.

As it is, respondent did not present an y documen t countering Calt ex ' s submitted affidavit and other supporting d oc um e n ts that would have made a genuin e issue on the matter of who erroneously paid the taxe s . Tf it wa s Caltex then who erroneously paid the taxes , re spondent cannot convince this Court to look to ll a ri.o del Rosa1·io for the requisite claim for refund under .se c tion 230 of the Nati o nal Internal Rev e nue Code (NIRC} as h e did not p a y the t ax.

vie Rre in <1cc ord with petitioners in its e l a boratio n of Section 230 of the NIRC to include that construction th a t Sectio n 230 doe s not s pe c ify th e person wh'o s hou l d file the c laim for refu n d .

The deci si ons on th e mat ter are of the implication that it need no t be the ta xpayer who should file a claim f or refund as it c ould be the pe r son who actually paid the tax provi de d that the payment was involuntary or in the wo rds o f our Na tional Internal Revenu e Cod e wher e there is a s ituation where a tax was " e rrone ousl y or illeg a lly assessed or collected". The pertinent part o f Se c tion 230 provides: "Sec.

23 0 . No suit or proceeding s hall b e ma intain ed in a ny co u rt for the recover y of any . internal revenue tax hereafter a llege d to have been erroneously o r illegally assessed or collected . .. until a c J.aim for refund or credit has been duly f i led with the Commi ssione r xxx. " 680 ' .

- 10 ~ Indeed, it was Caltex who filed the claim for refund because it paid for the tax. At this point, We would mention that we find the decisional authorities cited by petitioners as not only appropriate but noteworthy. Whether Caltex’s suit ‘in this Court should be entertained or not on the basis of Section 1, Rule 5 of the this Court’s rules that the case shall be brought or submitted by “the taxpayer or the aggrieved party", : we deem that the suit can be entertained as Caltex may be considered a "taxpayer" as that term is used in said Section. Consider this pronouncement in a case on who is deemed a “taxpayer” in refund suits:

"The word "taxpayer" should not _ be deemed to include only a person against whom a tax has been assessed; on the contrary, it should be construed so as to include any person. who in fact paid made. In United States 221 U.S. 489, at page 494, 50 8. Ct. 367, at page 369. 74 L. Ed. 984, the Supreme Court said:

"Indeed, when used to connote payment of a tax, it puts no undue Strain upon the word ‘taxpayer’ to bring within its meaning that person whose property, being impressed with a trust to that end, is subjected to the burden. Certainly it would be hard to convince such a person that he had not paid a tax." (McMahon v. U.S. 172 F. Supp. 490; underscoring supplied. )

681

- 11 - He have put emphas i s as well on th e co nditi o n t h at t o recover the tax a person wh o paid the tax s h o uld h a ve paid th e tax involuntarily bec a use the tax m ~y not be recovered in the instan c e, for ex<'l mp l e , where tn x es are volu ntaril y made by one per s on fo r another with donation as the underlying mo tive fo r th e cas e (Parsons

v. Anglim 143 F.

2d.

53 4).

Here Calte x is c le ar on the inv o luntariness of it s ac t.

We recognize that it was co n s tra i ned by c i r ,~ um st.a nces to p ay t he taxes t o pr o tect its interert on the prop e rty .

Th a t is, in a f o r ec losure sa le t: lte only e viden c e of sale in fav o r o f the buyer is th ~ c ertificate of s h e riff ' s s a l e whi c h is n a t bi n ding on third persons n or d oes i t vest owners h~p on tlt r: buyer.

The a ct of registrati o n as c o rrectly n o t e d by Caltex is the operative act that conveys and a f f t: c t s the l a nd.

Con sc ious of Sec t i o n 49(a ) t h at t he sa l e cannot b e registered with o ut payment of the c0r r2 s pond ing taxes , Caltex h a d to a nd d i~ p Ry f~r the c apita l gains ta x and the documentary stamp taK. l\ s it. is , the p ayment was made by Mr .

Pedro '1.

C3 rbo ne ll II with a notice "For Caltex" appear i ng und e r Carbo n ell ' s signature (Anne x " B " ,

p. 40, CTA R ec or d~:) .

F ro m another viewpoint, it need not be the "t o :p G y~r " wh o initi a tes the suit und e r Sec . 1, Rule 682 DECISIO~T

- 12 - 5 o f t his Court's rules, as said sect i on spe a k s only o f .:111 "aggrieved party ".

Further, in relation to S e ction 11 of th e R.A.

11 2 5 it does n ot appear that sa id sec t i on restr icts the person wh o may bring or su bmi t a case to this Court to the taxpayer only as Sect i o n 11 of R . A. 1125 refers to " .~ .. 11¥ ...... P .. ~ .. :r..!.3. . .<?. .. 11 . .. - . a dverse ly affected by a decision or r uling "of the Commissioner of Internal Revenue may file an a ppeal with t h is Court.

When reference i s mad e on the " aggrieve d party" or " a ny person adversely affecte d" our 8t t e ntion ma y l ogica lly b e fo cu se d on the term " rea l party in interest" b ecause th e Rules o f Court whi c h ar e suppletory to t hi s Court' s rules , as long as t h r:> y are not in confli ct, provided that " .~.Y. .~:t::X ac ti o n mus t b e de f ended in the n a me of th e 1: •:: ;ll p a r t y in in t e r e s t " . And th e real party in interest is the party who cou ld b e ben e fited or inju re~ by the judgm Ant or who is en titled to the fruits o f the suit (Salonga

v. Warner Barnes & Co., 8R Phil. 125).

It is clear th at Caltex is the " aggrieve d party", the "person adversely affected " or a "real part y in interest " within the meaning of these t.e rms .

There i s anot her p rinciple which militates aga i nst the side of respondent in thi s case . that as a matter of equity o r the principle of 683 solutio indebiti, the sovereign or the taxing authority cannot in good conscience hold on to what is rightfully not his. Once again we pick from the citations of authoritative cases made by petitioners in this case which states:

"In recognition of the fact that srroneous determinations and assessments will ainevitably occur, the statutes, in a spirit of fairnes, invariably afford the taxpayer an opportunity at some stage to have mistakes rectified. Often an administrative hearing is afforded hefore the assessment becomes final; or administrative machinery is provided whereby an erroneous collection may be refunded; in some instances both administrative relief and redress by an action against the sovereign in one of its ’ourts are permitted methods of restitution of excessive or illegal exaction. Thus the usual procedure the recovery of debts is reversed in the field of taxation. Payment precedes defense, and the burden of proof, normally on the claimant, is shifted to the taxpayer. The assessment supersedes’ the pleading, proof and judgment necessary in an action at law, and has the force of such a judgment. The ordinary defendant stands ijn judgment only after a hearing. The taxpayer often is afforded his hearing »fter judgment and after payment, and his only redress for unjust administrative setion dis the right to claim restitution. Nut these reversals of the normal process of collecting a claim cannot obscure’ the fact that after all what is being nvcomplished is the recovery of the just debt owed the sovereign. If that which the sovereign retains was unjustly taken in yiolation of its own statute, the withholding is wrongful. Restitution is owed the taxpayer." (Bull v. U.S., 295 U.S. 247, 79 L. ed. 1421, 1927.)

684

- 14 - ~s to the proper amount , it sh oul d then be ~ he amount a ll eged by petitioners , a gain in vi ew of ~ he su pport ing do c ume nt (Annex "D" , p .

9, CTA Rec ords ) submitte d by them as against none by respondent .

A s mal l di fferen ce in the amount claim h as a lready been held as not sufficient to t~nder a genuine issue p arti c ular ly in the absence of counter affidavits opposi ng the c l a imed amount (Phil.

National Bank v .

Phl. Leather Co., 105 Phil 404).

WHEREFORE, judgment is rendered ordering the respondent Commissioner of Internal Revenue to refund to petitioner Caltex (Philippines) , Inc.

t he total amount of P461,941.00 erroneously paid capital gains tax and documentary stamp tax.