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    06 Francia V IAC

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    Happy Dreams Philippines
    This case discusses whether an expropriation payment can be used to offset unpaid real estate taxes. Francia owned a property that was partially expropriated by the government, who paid him P4,116. However, Francia failed to pay real estate taxes of P2,400 on the remaining property. The court ruled that the expropriation payment and tax obligation cannot be legally compensated against each other. Taxes owed to the government cannot be offset by other claims or debts the taxpayer has against the government. The tax obligation and expropriation involved different levels of government as well. Therefore, Francia's tax delinquency was not extinguished and the public auction of his remaining property for non-payment of taxes

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    06 Francia V IAC

    Uploaded by

    Happy Dreams Philippines
    62 views2 pages
    This case discusses whether an expropriation payment can be used to offset unpaid real estate taxes. Francia owned a property that was partially expropriated by the government, who paid him P4,116. However, Francia failed to pay real estate taxes of P2,400 on the remaining property. The court ruled that the expropriation payment and tax obligation cannot be legally compensated against each other. Taxes owed to the government cannot be offset by other claims or debts the taxpayer has against the government. The tax obligation and expropriation involved different levels of government as well. Therefore, Francia's tax delinquency was not extinguished and the public auction of his remaining property for non-payment of taxes

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    06 Francia v IAC

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    This case discusses whether an expropriation payment can be used to offset unpaid real estate taxes. Francia owned a property that was partially expropriated by the government, who paid him P4,116. However, Francia failed to pay real estate taxes of P2,400 on the remaining property. The court ruled that the expropriation payment and tax obligation cannot be legally compensated against each other. Taxes owed to the government cannot be offset by other claims or debts the taxpayer has against the government. The tax obligation and expropriation involved different levels of government as well. Therefore, Francia's tax delinquency was not extinguished and the public auction of his remaining property for non-payment of taxes

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    62 views2 pages

    06 Francia V IAC

    Uploaded by

    Happy Dreams Philippines
    This case discusses whether an expropriation payment can be used to offset unpaid real estate taxes. Francia owned a property that was partially expropriated by the government, who paid him P4,116. However, Francia failed to pay real estate taxes of P2,400 on the remaining property. The court ruled that the expropriation payment and tax obligation cannot be legally compensated against each other. Taxes owed to the government cannot be offset by other claims or debts the taxpayer has against the government. The tax obligation and expropriation involved different levels of government as well. Therefore, Francia's tax delinquency was not extinguished and the public auction of his remaining property for non-payment of taxes

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    Case: Francia v.

    Intermediate Appellate Court

    Topic: Taxes distinguished from Debts

    Facts:

    Engracio Francia is the registered owner of a residential lot and a two-story house built upon it situated
    in Pasay City, Metro Manila. The lot, with an area of about 328 square meters, is described and covered
    by Transfer Certificate of Title No. 4739 (37795) of the Registry of Deeds of Pasay City.

    On October 15, 1977, a 125 square meter portion of Francia's property was expropriated by the
    Republic of the Philippines for the sum of P4,116.00 representing the estimated amount equivalent to
    the assessed value of the aforesaid portion.

    Since 1963 up to 1977 inclusive, Francia failed to pay his real estate taxes. Thus, on December 5, 1977,
    his property was sold at public auction by the City Treasurer of Pasay City pursuant to Section 73 of
    Presidential Decree No. 464 known as the Real Property Tax Code in order to satisfy a tax delinquency of
    P2,400.00. Ho Fernandez was the highest bidder for the property.

    Francia filed a complaint to annual the auction sale. The lower court dismissed the complaint and the
    Intermediate Appellate Court affirmed the decision of the lower court in toto. Hence, this petition for
    review. Francia contends that his tax delinquency of P 2,400 has been extinguished by legal
    compensation. He claims that the government owed him P 4,116 when a portion of his land was
    expropriated on October 15, 1977.

    Issue:

    May the expropriation payment compensate for the real estate taxes due?

    Ruling:

    No. There is no legal basis for the contention. By legal compensation, obligations of persons, who in
    their own right are reciprocally debtors and creditors of each other, are extinguished (Art. 1278, Civil
    Code). The circumstances of the case do not satisfy the requirements provided by Article 1279, to wit:

    (1) that each one of the obligors be bound principally and that he be at the same time a principal
    creditor of the other;

    xxx xxx xxx

    (3) that the two debts be due.

    xxx xxx xxx

    This principal contention of the petitioner has no merit. We have consistently ruled that there can be no
    off-setting of taxes against the claims that the taxpayer may have against the government. A person
    cannot refuse to pay a tax on the ground that the government owes him an amount equal to or greater
    than the tax being collected. The collection of a tax cannot await the results of a lawsuit against the
    government.
    In the case of Republic v. Mambulao Lumber Co. (4 SCRA 622), this Court ruled that Internal Revenue
    Taxes can not be the subject of set-off or compensation. We stated that:

    A claim for taxes is not such a debt, demand, contract or judgment as is allowed to be set-off under the
    statutes of set-off, which are construed uniformly, in the light of public policy, to exclude the remedy in
    an action or any indebtedness of the state or municipality to one who is liable to the state or
    municipality for taxes. Neither are they a proper subject of recoupment since they do not arise out of
    the contract or transaction sued on. ... (80 C.J.S., 7374). "The general rule based on grounds of public
    policy is well-settled that no set-off admissible against demands for taxes levied for general or local
    governmental purposes. The reason on which the general rule is based, is that taxes are not in the
    nature of contracts between the party and party but grow out of duty to, and are the positive acts of the
    government to the making and enforcing of which, the personal consent of individual taxpayers is not
    required. ..."

    We stated that a taxpayer cannot refuse to pay his tax when called upon by the collector because he has
    a claim against the governmental body not included in the tax levy.

    This rule was reiterated in the case of Corders v. Gonda (18 SCRA 331) where we stated that: "... internal
    revenue taxes can not be the subject of compensation: Reason: government and taxpayer are not
    mutually creditors and debtors of each other' under Article 1278 of the Civil Code and a "claim for taxes
    is not such a debt, demand, contract or judgment as is allowed to be set-off."

    There are other factors which compel us to rule against the petitioner. The tax was due to the city
    government while the expropriation was effected by the national government. Moreover, the amount of
    P4,116.00 paid by the national government for the 125 square meter portion of his lot was deposited
    with the Philippine National Bank long before the sale at public auction of his remaining property. Notice
    of the deposit dated September 28, 1977 was received by the petitioner on September 30, 1977. The
    petitioner admitted in his testimony that he knew about the P4,116.00 deposited with the bank but he
    did not withdraw it. It would have been an easy matter to withdraw P2,400.00 from the deposit so that
    he could pay the tax obligation thus aborting the sale at public auction.

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