[ GR No.
L-18994, Jun 29, 1963]
MELECIO R. DOMINGO v. LORENZO C.
GARLITOS
This is a petition for certiorari and
mandamus against the Judge of the Court of First
Instance of Leyte, Hon. Lorenzo C. Garlitos,
presiding, seeking to annul certain orders of the court
and for an order in this Court directing the respondent
court below to execute the judgment in favor of the
Government against the estate of Walter Scott Price
for internal revenue taxes.
It appears that in Melecio
Domingo vs. Hon. Judge S. C. Moscoso, 106 Phil.,
1138, this Court declared as final and executory the
order for the payment by the estate of the estate and
inheritance taxes, charges and penalties amounting to
P40,058.55, issued by the Court of First Instance of
Leyte in special proceedings No. 14 entitled "In the
Matter of the Inestate Estate of the Late Walter Scott
Price." In order to enforce the claims against the
estate the fiscal presented a petition dated June 21,
1961, to the court below for the execution of the
judgment. The petition was, however, denied by the
court which held that the execution is not justifiable
as the Government is indebted to the estate under
administration in the amount of P262,200. The orders
of the court below dated August 20, 1960 and
September 28, 1960, respectively, are as follows:
"Atty. Benedicto submitted a copy of the
contract between Mrs. Simeona K.
Administratrix of the estate of her late husband
Walter Scott Price and Director Zoilo Castrillo of the
Bureau of Lands dated September 19, 1956 and
acknowledged before Notary Public Salvador V.
Esguerra, legal adviser in Malacañang to Executive
Secretary De Leon dated December 14, 1956, the
note of His Excellency, Pres. Carlos P. Garcia, to
Director Castrillo dated August 2, 1958, directing the
latter to pay to Mrs. Price the sum of P368,140.00,
and an extract of page 765 of Republic Act No. 2700
appropriating the sum of P262.200.00 for the
payment to the Leyte Cadastral Survey, Inc.,
represented by the administratriX Simeona K. Price,
as directed in the above note of the President.
Considering these facts, the Court orders that the
payment of inheritance taxes in the sum of
P40,058.55 due the Collector of Internal Revenue as
ordered paid by this Court on July 5, 1960 in
R. accordance With the order of the Supreme Court
promulgated July 30, 1960 in 106 Phil., 1138, be
deducted from the amount of P262,200.00 due and
payable to the administratrix Simeona K. Price, in
this estate, the balance to be paid by the Government
to her without further delay." (Order of August 20,
1960).
"The Court has nothing further to add to its
order dated August 20, 1960 and it orders that the
payment of the claim of the Collector of Internal
Revenue be deferred until the Government shall have
paid its accounts to the administratrix herein
amounting to P262.200.00. It may not be amiss to
repeat that it is only fair for the Government, as a
debtor, to pay its accounts to its citizens-creditors
before it can insist in the prompt payment cf the
letter's account to it, specially taking into
consideration that the amount due the Government
Price, draws interests while the credit due to the present
estate does not accrue any interest." (Order of
September 28, 1960).
The petition to set aside the above orders of
the court below and for the execution of the claims of
the Government against the estate must be denied for
lack of merit. The ordinary procedure by which to
settle claims or indebtedness against the estate of a
deceased person, as an inheritance tax, is for the
claimant to present a claim before the probate court
so that said court may order the administrator to pay
the amount thereof. To such effect is the decision of
this Court in Aldamiz vs. Judge of the Court of First
Instance of Mindoro, 85 Phil., 228, Dec. 29, 1949,
thus:
"* * * a writ of execution is not the proper
procedure allowed by the Rules of Court for the
payment of debts and expenses of administration. The
proper procedure is for the court to order the sale of
personal estate or the sale or mortgage of real
property of the deceased and all debts or expenses of
administration should be paid out of the proceeds of
the sale or mortgage. The order for the sale or
mortgage should be issued upon motion of the
administrator and with the written notice to all the
heirs, legatees and devisees residing in the
Philippines, according to Rule 89, section 3, and Rule
90, section 2. And when sale or mortgage of real
estate is to be made, the regulations contained in Rule
90, section 7, should be complied with.
"Execution may issue only where the
devisees, legatees or heirs have entered into
possession of their respective portions in the estate
prior to settlement and payment of the debts and
expenses Of administration and it is later ascertained
that there are such debts and expenses to be paid, in
which case 'the court having jurisdiction of the estate
may, by order for that purpose, after hearing, settle
the amount of their several liabilities, and order how
much and in what manner each person shall
contribute, and may issue execution if circumstances
require' (Rule 89, section 6; see also Rule 74, section
4; Italics ours.) And this is not the instant case."
The legal basis for such a procedure is the
fact that in the testate or intestate proceedings to
settle the estate of a deceased person, the properties
belonging to the estate are under the jurisdiction of
the court and such jurisdiction continues until said
properties have been distributed among the heirs
entitled thereto. During the pendency of the
proceedings all the estate is in custodia legis and the
proper procedure is not to allow the sheriff, in case of
a court judgment, to seize the properties but to ask
the court for an order to require the administrator to
pay the amount due from the estate and required to be
paid.
Another ground for denying the petition of
the provincial fiscal is the fact that the court having
jurisdiction of the estate had found that the claim of
the estate against the Government has been
recognized and an amount of P262,200 has already
been appropriated for the purpose by a corresponding
law (Rep. Act No. 2700). Under the above
circumstances, both the claim of the Government for
inheritance taxes and the claim of the intestate for
services rendered have already become overdue and
demandable as well as fully liquidated.
Compensation, therefore, takes place by operation of
law, in accordance with the provisions of Articles
1279 and 1290 of the Civil Code, and both debts are
extinguished to the concurrent amount, thus:
"Art. 1290. When all the requisites
mentioned in article 1279 are present, compensation
takes effect by operation of law, and extinguishes
both debts to the concurrent amount, even though the
creditors and debtors are not aware of the
compensation."
It is clear, therefore, that the petitioner has no clear
right to execute the judgment for taxes against the
estate of the deceased Walter Scott
Furthermore, the petition for certiorari
mandamus is not the proper remedy for the petitioner.
Appeal is the remedy.
The petition is, therefore, dismissed, without costs.
Padilla, Bautista Angelo, Concepcion, Barrera,
Paredes, Dizon, Regala, and Makalintal, JJ., concur.
Reyes, J.B.L. in the result.
ENGRACIO FRANCIA vs. INTERMEDIATE
APPELLATE COURT
G.R. No. L-67649, June 28, 1988
FACTS: Engracio Francia is the registered owner of a
residential lot and a two-story house located in Pasay
City. On October 15, 1977, a 125 square meter
portion of Francia's property was expropriated by the
Republic for the sum of P4,116.00. 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 pursuant 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 was not present during the auction
sale since he was in Iligan City at that time helping
his uncle ship bananas. On March 3, 1979, Francia
received a notice of hearing “In re: Petition for Entry
of New Certificate of Title" filed by Ho Fernandez,
seeking the cancellation of TCT and the issuance in
his name of a new certificate of title. Upon
verification through his lawyer, Francia discovered
that a Final Bill of Sale had been issued in favour of
Ho Fernandez by the City Treasurer on December 11,
1978. The auction sale and the final bill of sale were
both annotated at the back of TCT No. 4739 (37795)
by the Register of Deeds. On March 20, 1979,
Price. Francia filed a complaint to annul the auction sale.
and The lower court rendered a decision against his
favour. The Intermediate Appellate Court affirmed
the decision of the lower court in toto. Hence, this
petition for review.
ISSUE: Whether or not the contention of Francia that
his tax delinquency of P2,400.00 has been
extinguished by legal compensation is correct
claiming that the government owed him P4,116.00
when a portion of his land was expropriated on
October 15, 1977.
RULING: 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 is being collected. The collection
of a tax cannot await the results of a lawsuit against
the government. 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.
G.R. No. L-67649 June 28, 1988
ENGRACIO FRANCIA, petitioner,
vs.
INTERMEDIATE APPELLATE COURT and HO
FERNANDEZ, respondents.
FACTS:
EngracioFrancia is the registered owner of a
residential lot and a two-story house built upon it
situated in Pasay City, Metro Manila. 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 contends that his tax delinquency of
P2,400.00 has been extinguished by legal
compensation. He claims that the government owed
him P4,116.00 when a portion of his land was
expropriated on October 15, 1977. Hence, his tax
obligation had been set-off by operation of law as of
October 15, 1977.
ISSUE:WON there is legal compensation to off-set
Francia’s tax obligation to the government
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 xxxxxx
(3) that the two debts be due.
xxx xxxxxx
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.
MELECIO R. DOMINGO vs. HON. LORENZO
C. GARLITOS
G.R. No. L-18994, June 29, 1963
FACTS: This is a petition for certiorari and
mandamus against respondent judge seeking to annul
certain orders of the court and for an order in this
Court to direct respondent to execute the judgment in
favor of the Government against the estate of Walter
Scott Price for internal revenue taxes. It appears that
in Melecio R. Domingo vs. Hon. Judge S. C.
Moscoso, G.R. No. L-14674, January 30, 1960, this
Court declared as final and executory the order for
the payment by the estate of the estate and
inheritance taxes, charges and penalties, amounting to
P40,058.55, issued by the Court of First Instance of
Leyte in, special proceedings No. 14 entitled "In the
matter of the Intestate Estate of the Late Walter Scott
Price." In order to enforce the claims against the
estate the fiscal presented a petition dated June 21,
1961, to the court below for the execution of the
judgment. The petition was, however, denied by the
court which held that the execution is not justifiable
ISSUE: Whether or not the petitioner has the clear
right to execute the judgment for taxes against the
estate of the deceased Walter Scott Price.
RULING: The petition to set aside the above orders
of the court below and for the execution of the claim
of the Government against the estate must be denied
for lack of merit. The ordinary procedure by which to
settle claims of indebtedness against the estate of a
deceased person, as an inheritance tax, is for the
claimant to present a claim before the probate court
so that said court may order the administrator to pay
the amount thereof. Another ground for denying the
petition is the fact that the court having jurisdiction of
the estate had found that the claim of the estate
against the Government has been recognized and an
amount of P262,200 has already been appropriated
for the purpose by a corresponding law (Rep. Act No.
2700). Under the above circumstances, both the claim
of the Government for inheritance taxes and the claim
of the intestate for services rendered have already
become overdue and demandable is well as fully
liquidated. Compensation, therefore, takes place by
operation of law, in accordance with the provisions of
Articles 1279 and 1290 of the Civil Code, and both
debts are extinguished to the concurrent amount. It is
clear, therefore, that the petitioner has no clear right
to execute the judgment for taxes against the estate of
the deceased Walter Scott Price.
Abra Valley College v. Aquino
[GR L-39086, 15 June 1988]
Facts: Petitioner Abra Valley College is an
educational corporation and institution of higher
learning duly incorporated with the SEC in 1948. On
6 July 1972, the Municipal and Provincial treasurers
(Gaspar Bosque and Armin Cariaga, respectively)
and issued a Notice of Seizure upon the petitioner for
the college lot and building (OCT Q-83) for the
satisfaction of said taxes thereon. The treasurers
served upon the petitioner a Notice of Sale on 8 July
1972, the sale being held on the same day. Dr.
Paterno Millare, then municipal mayor of Bangued,
Abra, offered the highest bid of P 6,000 on public
auction involving the sale of the college lot and
building. The certificate of sale was correspondingly
issued to him.
The petitioner filed a complaint on 10 July
1972 in the court a quo to annul and declare void the
“Notice of Seizure” and the “Notice of Sale” of its lot
and building located at Bangued, Abra, for non-
payment of real estate taxes and penalties amounting
to P5,140.31. On 12 April 1973, the parties entered
into a stipulation of facts adopted and embodied by
the trial court in its questioned decision. The trial
court ruled for the government, holding that the
second floor of the building is being used by the
director for residential purposes and that the ground
floor used and rented by Northern Marketing
Corporation, a commercial establishment, and thus
the property is not being used “exclusively” for
educational purposes. Instead of perfecting an appeal,
petitioner availed of the instant petition for review on
certiorari with prayer for preliminary injunction
before the Supreme Court, by filing said petition on
17 August 1974.
The Supreme Court affirmed the decision of
the CFI Abra (Branch I) subject to the modification
that half of the assessed tax be returned to the
petitioner. The modification is derived from the fact
that the ground floor is being used for commercial
purposes (leased) and the second floor being used as
incidental to education (residence of the director).
Issue: Should there be tax exemption?
Interpretation of the phrase “used
exclusively for educational purposes”
Section 22, paragraph 3, Article VI, of the then 1935
Philippine Constitution, expressly grants exemption
from realty taxes for “Cemeteries, churches and
parsonages or convents appurtenant thereto, and all
lands, buildings, and improvements used exclusively
for religious, charitable or educational purposes.”
This constitution is relative to Section 54, paragraph
c, Commonwealth Act 470 as amended by RA 409
(Assessment Law). An institution used exclusively
for religious, charitable and educational purposes,
and as such, it is entitled to be exempted from
taxation; notwithstanding that it keeps a lodging and
a boarding house and maintains a restaurant for its
members (YMCA case). A lot which is not used for
commercial purposes but serves solely as a sort of
lodging place, also qualifies for exemption because
this constitutes incidental use in religious functions
(Bishop of Nueva Segovia case).
Exemption in favour of property used
exclusively for charitable or educational purposes is
‘not limited to property actually indispensable’
therefor but extends to facilities which are incidental
to and reasonably necessary for the accomplishment
of said purposes (Herrera v. Quezon City Board of
Assessment Appeals). While the Court allows a more
liberal and non-restrictive interpretation of the phrase
“exclusively used for educational purposes,”
reasonable emphasis has always been made that
exemption extends to facilities which are incidental
to and reasonably necessary for the accomplishment
of the main purposes. The use of the school building
or lot for commercial purposes is neither
contemplated by law, nor by jurisprudence. In the
case at bar, the lease of the first floor of the building
to the Northern Marketing Corporation cannot by any
stretch of the imagination be considered incidental to
the purpose of education.
Abra Valley College vs. Aquino, 162 SCRA 106
(1988) G.R. No. L-39086 June 15, 1988
Fact: Petitioner, filed a complaint in the court a quo
to annul and declare void the “Notice of Seizure’ and
the “Notice of Sale” of its lot and building located at
Bangued, Abra, for non-payment of real estate taxes
and penalties. The “Notice of Sale” was caused to be
served upon the petitioner by the respondent
treasurers for the sale at public auction of said college
lot and building, which sale was held on the same
date. Dr. Paterno Millare, then Municipal Mayor of
Bangued, Abra, offered the highest bid which was
duly accepted. the respondent filed through counstel a
motion to dismiss the complaint. Nonetheless, the
trial court disagreed because of the use of the second
floor by the Director of petitioner school for
residential purposes. He thus ruled for the
government and rendered the assailed decision.
Hence petitioner instead availed of the instant
petition for review on certiorari with prayer for
preliminary injunction before the Supreme Court.
Adrian Avilado Antazo
Issue: Whether the Educational Institution Properties
which is not exclusively used for educational
purposes is not eligible for tax exemption.
Held: Yes, Under the 1935 Constitution, the trial
court correctly arrived at the conclusion that the
school building as well as the lot where it is built,
should be taxed, not because the second floor of the
same is being used by the Director and his family for
residential purposes, but because the first floor
thereof is being used for commercial purposes.
However, since only a portion is used for purposes of
commerce, it is only fair that half of the assessed tax
be returned to the school involved. Moreover, the
exemption in favor of property used exclusively for
charitable or educational purposes is ‘not limited to
property actually indispensable’ therefor but extends
to facilities which are incidental to and reasonably
necessary for the accomplishment of said purposes.
But it must be stressed however, that while the court
allows a more liberal and non-restrictive
interpretation of the phrase “exclusively used for
educational purposes”, reasonable emphasis has
always been made that exemption extends to facilities
which are incidental to and reasonably necessary for
the accomplishment of the main purposes. Otherwise
stated, the use of the school building or lot for
commercial purposes is neither contemplated by law,
nor by jurisprudence, The lease of the first floor
thereof to the Northern Marketing Corporation cannot
by any stretch of the imagination be considered
incidental to the purpose of education.
PROVINCE OF ABRA vs. HERNANDO
G.R. No. L-49336 August 31, 1981
FACTS: On the face of this certiorari and mandamus
petition, it clearly appears that the actuation of
respondent Judge Hernando left much to be desired.
There was a denial of a motion to dismiss an action
for declaratory relief by Roman Catholic Bishop of
Bangued desirous of being exempted from a real
estate tax followed by a summary judgment granting
such exemption, without even hearing the side of
petitioner. It was the submission of counsel that an
action for declaratory relief would be proper only
before a breach or violation of any statute, executive
order or regulation. Moreover, there being a tax
assessment made by the Provincial Assessor on the
properties of respondent, petitioner failed to exhaust
the administrative remedies available under PD No.
464 before filing such court action. Respondent Judge
alleged that there "is no question that the real
properties sought to be taxed by the Province of Abra
are properties of the respondent Roman Catholic
Bishop of Bangued, Inc." The very next sentence
assumed the very point it asked when he categorically
stated: "Likewise, there is no dispute that the
properties including their procedure are actually,
directly and exclusively used by the Roman Catholic
Bishop of Bangued, Inc. for religious or charitable
purposes." For him then: "The proper remedy of the
petitioner is appeal and not this special civil action."
ISSUE: Whether or not the properties of respondent
Roman Catholic Bishop should be exempt from
taxation
RULING: Respondent Judge would not have erred so
grievously had he merely compared the provisions of
the present Constitution with that appearing in the
1935 Charter on the tax exemption of "lands,
buildings, and improvements." There is a marked
difference. Under the 1935 Constitution:
"Cemeteries, churches, and parsonages or convents
appurtenant thereto, and all lands, buildings, and
improvements used exclusively for religious,
charitable, or educational purposes shall be exempt
from taxation." The present Constitution added
"charitable institutions, mosques, and non-profit
cemeteries" and required that for the exemption of
"lands, buildings, and improvements," they should
not only be "exclusively" but also "actually and
"directly" used for religious or charitable purposes.
The Constitution is worded differently. The change
should not be ignored. It must be duly taken into
consideration.

CALTEX PHILIPPINES VS CA
G.R. 925585 MAY 8, 1992
Davide, J.:
FACTS: In 1989, COA sent a letter to Caltex
directing it to remit to OPSF its collection of the
additional tax on petroleum authorized under PD
1956 and pending such remittance, all of its claims
from the OPSF shall be held in abeyance. Petitioner
requested COA for the early release of its
reimbursement certificates from the OPSF covering
claims with the Office of Energy Affairs. COA denied
the same.
ISSUE: Whether or not petitioner can avail of the
right to offset any amount that it may be required
under the law to remit to the OPSF against any
amount that it may receive by way of reimbursement.
RULING:
It is a settled rule that a taxpayer may not offset taxes
due from the claims that he may have against the
government. Taxes cannot be the subject of
compensation because the government and taxpayer
are not mutually debtors and creditors of each other
and a claim for taxes is not such a debt, demand,
contract or judgment as is allowed to be set-off.
The oil companies merely acted as agents for the
government in the latter’s collection since taxes are
passed unto the end-users, the consuming public.
Herrera vs. Quezon City Board of Assessment
Appeals
G.R. L-15270
Facts: In 1952, the Director of the Bureau of
Hospitals authorized Jose V. Herrera and Ester
Ochangco Herrera to establish and operate the St.
Catherine’s Hospital. In 1953, the Herreras sent a
letter to the Quezon City Assessor requesting
exemption from payment of real estate tax on the
hospital, stating that the same was established for
charitable and humanitarian purposes and not for
commercial gain. The exemption was granted
effective years 1953 to 1955. In 1955, however, the
Assessor reclassified the properties from “exempt” to
“taxable” effective 1956, as it was ascertained that
out 32 beds in the hospital, 12 of which are for pay-
patients. A school of midwifery is also operated
within the premises of the hospital.
Issue: Whether St. Catherine’s Hospital is exempt
from reallty tax.
Ruling: The admission of pay-patients does not
detract from the charitable character of a hospital, if
all its funds are devoted exclusively to the
maintenance of the institution as a public charity.
The exemption in favour of property used exclusively
for charitable or educational purpose is not limited to
property actually indispensable therefore, but extends
to facilities which are incidental to and reasonably
necessary for the accomplishment of said purpose,
such as in the case of hospitals — a school for
training nurses; a nurses’ home; property used to
provide housing facilities for interns, resident
doctors, superintendents and other members of the
hospital staff; and recreational facilities for student
nurses, interns and residents. Within the purview of
the Constitution, St. Catherine’s Hospital is a
charitable institution exempt from taxation
LUNG CENTER VS. QUEZON CITY that in order to be entitled to the exemption, the lung
center must be able to prove that: it is a charitable
GR 144104 June29, 2004
institution and; its real properties are actually, directly
En Banc, Callejo J: and exclusively used for charitable purpose.
Accordingly, the portions occupied by the hospital
Facts:
used for its patients are exempt from real property
The lung center is a charitable institution within the taxes while those leased to private entities are not
context of 1973 and 1987 constitutions. The elements exempt from such taxes.
considered in determining a charitable institution are:
Philex Mining vs. CIR
the statue creating the enterprise; its corporate
purposes; constitution and by-laws, methods of GR 125704, August 28, 1998
administration, nature of actual work performed,
Facts: Philex Mining Corporation assails the decision
character of the services rendered, indefiniteness of
of the court of appeals which affirmed the decision of
the beneficiaries, and the use occupation of
the court of tax appeals ordering philex to pay its
properties. As a gen. principle, a charitable institution
excise tax liability philex refused to pay and
doe not lose its character as such and its exemption
contended it has pending claims for vat input credit
form taxes simply because it derives income from
or refund against the government which should be
paying patients, or receives subsidies from
made compensate or set-off its tax liability.
government; and no money insures to the private
benefit of the persons managing or operating the Issue: can tax be subject for set-off?
institution.
Ruling: No. tax cannot be the subject for
Issue: compensation for simple reason that the government
and the tax payer are not mutual creditors and debtors
Whether or not the real properties of the lung center
of each other. Debts are due in the government in its’
are exempt from real property taxes.
corporate capacity while taxes are due to the
Ruling. government in its’ sovereign capacity. A tax payer
cannot refuse to pay his taxes when they fall due
Partly No. Those portions of its real property that are
simply because he has a claim against the
leased to private entities are not exempt from
government that the collection of the tax is contingent
actually, direct and exclusively used for charitable
on the result of the law suit it filed against the
purpose. Under PD 1823, the lung center does not
government.
enjoy any property tax exemption privileges for its
real properties as well as the building constructed
thereon.
REPUBLIC OF THE PHILIPPINES vs.
The property tax exemption under Sec. 28(3), Art. Vi MAMBULAO LUMBER COMPANY, ET AL…
of the property taxes only. This provision was
implanted by Sec.243 (b) of RA 7160.which provides
G.R. No. L-17725, February 28, 1962 to the payment of the sum of P4,802.37 as forest
charges due and owing from defendant to plaintiff.

RULING: The court find defendants claim devoid of

FACTS: There are three causes of action in this case
any merit. Note that there is nothing in the law which
in which the defendants admitted all these three
requires that the amount collected as reforestation
liabilities with an aggregate amount of P4, 802.37.
charges should be used exclusively for the
Though such liabilities are admitted it interposed the
reforestation of the area covered by the license of a
defence though exhibits that from July 31, 1948 to
licensee or concessionaire, and that if not so used; the
December 29, 1956, defendant Mambulao Lumber
same should be refunded to him. The general rule,
Company paid to the Republic of the Philippines
based on grounds of public policy is well-settled that
P8,200.52 for 'reforestation charges' and for the
no set-off is admissible against demands for taxes
period commencing from April 30, 1947 to June 24,
levied for general or local governmental purposes.
1948, said defendant paid P927.08 to the Republic of
The reason on which the general rule is based, is that
the Philippines for 'reforestation charges'. These
taxes are not in the nature of contracts between the
reforestation were paid to the plaintiff in pursuance of
party and party but grow out of a duty to, and are the
Section 1 of Republic Act 115 which provides that
positive acts of the government, to the making and
there shall be collected, in addition to the regular
enforcing of which, the personal consent of
forest charges provided under Section 264 of
individual taxpayers is not required.
Commonwealth Act 466 known as the National
Internal Revenue Code, the amount of P0.50 on each
cubic meter of timber... cut out and removed from
any public forest for commercial purposes. The total
amount of the reforestation charges paid by
Mambulao Lumber Company is P9,127.50, and it is
the contention of the defendant that since the
Republic of the Philippines has not made use of those
reforestation charges collected from it for reforesting
the denuded area of the land covered by its license,
the Republic of the Philippines should refund said
amount, or, if it cannot be refunded, at least it should
be compensated with what Mambulao Lumber
Company owed the Republic of the Philippines for
reforestation charges.

ISSUE: Whether or not the sum of P9, 127.50 paid by

defendant company to plaintiff as reforestation
charges from 1947 to 1956 may be set off or applied