Case Summary (G.R. No. 242552)
Petitioner and Respondents
Petitioner challenges the Commissioner’s issuance of Notices of Levy and Notices of Sale to satisfy alleged unpaid estate and income taxes assessed against the late President’s estate and his heirs. Respondent Court of Appeals dismissed petitioner’s certiorari claim for injunctive relief.
Key Dates
• Death of Ferdinand E. Marcos: September 29, 1989
• Special Tax Audit completed: July 26, 1991
• Deficiency assessments issued: July 26, 1991
• Formal Assessment Notices: October 20, 1992
• Notices of Levy on Real Property: February 22, 1993; May 20 and May 26, 1993
• Petition for Certiorari filed in CA: June 28, 1993
• CA Decision dismissing petition: November 29, 1994
• Supreme Court Decision: June 5, 1997
Applicable Law
• 1987 Philippine Constitution (due process, separation of powers)
• National Internal Revenue Code (NIRC), including Sections 3 (BIR powers), 205, 213 (levy procedures), 218 (sale procedures), 219 (injunctive relief), 223 (prescriptive periods), 229 (protest procedures), 315 (lien on property)
• Rule 65, Rules of Court (certiorari)
Factual Background
After the former President’s death, a BIR audit uncovered omitted estate and income tax returns. The Commissioner prepared and served deficiency assessments totaling over P23 billion (estate tax) and various sums for income taxes of Ferdinand and Imelda Marcos and petitioner. No administrative protests were filed within thirty days. The BIR then issued multiple Notices of Levy and Notices of Sale on real properties to liquidate the tax obligations. Auctions held on July 5, 1993 yielded no bidders, and lots were forfeited to the government.
Procedural History
Petitioner sought in the Court of Appeals: annulment of the Notices of Levy and Sale, and injunctive relief. CA held the assessments final and unappealable, affirmed the BIR’s summary remedy rights under NIRC Sections 213 and 218, and dismissed the petition. Petitioner elevated the matter via certiorari to the Supreme Court, alleging due process violations and overreach.
Issues Presented
- Whether pendency of probate proceedings places the estate in custodia legis, precluding BIR’s summary levy.
- Whether CA erred in refusing to examine merits of petitioner’s grounds (timeliness, premature levy, lack of personal service).
- Whether courts may grant injunctive relief despite Section 219 of the NIRC.
Court of Appeals Ruling
CA found: (a) assessments became final and unappealable for want of protest; (b) summary remedies under NIRC are distinct and not barred by pending probate; (c) levy and sale procedures complied with Sections 213 and 218; (d) petitioner failed to show grave abuse of discretion; and thus denied injunctive relief.
Contentions of Petitioner
A. Probate proceedings vest exclusive control in the probate court; BIR’s levy ignores custodia legis.
B. CA wrongly declined to assess merits:
- Notices of Levy issued beyond permissible period under Revenue Memorandum Circular 38-68.
- Pendency of multiple cases (Sandiganbayan) casts uncertainty on estate value; levy premature.
- He was not personally served with Notices of Levy, violating Section 213’s notice requirement.
C. Courts retain equity power to enjoin arbitrary collection procedures despite NIRC’s no-injunction clause.
Government’s Position
• The BIR holds paramount authority to assess and collect taxes; probate court has no authority to delay summary remedies.
• Estate and income tax obligations are executive functions under Section 3, NIRC, and may be enforced without submission to the probate court.
• NIRC exemptions prioritize tax claims in probate; assessments final by default remedy (Section 229).
• Prescription and collection periods (Section 223): in case of failure to file return, assessment may be made any time within ten years, and collected by levy within three years from assessment.
• Notices were properly served, including on counsel and at petitioner’s workplace.
Jurisdiction of Probate Court vs. BIR Authority
Supreme Court distinguishes probate jurisdiction (limited to heirship, estate administration, distribution) from executive tax collection. Precedents (Echarri, Pineda, Haygood) confirm probate court may entertain tax claims but is not sole forum for collection. NIRC vests assessment and collection power in the BIR, and Section 87 mandates probate court to withhold distribution absent tax clearance from the Commissioner.
Nature of Estate Tax Assessment and Collection
Estate tax assessment is not a claim against estate in rem but a lien on heirs’ interests. Under Philippine law, estate taxes are exempt from non-claim statutes. The BIR may levy and sell estate property without probate court approval once assessments become final and demandable. Heirs are personally liable in proportion to inheritance.
Prescriptive Period and Validity of Levy
Under Section 223(a) and (c), failure to file returns extends assessment period to ten years; collection by l
Case Syllabus (G.R. No. 242552)
Procedural Background
- Petition for Certiorari and Prohibition filed by petitioner on June 28, 1993 in CA-G.R. SP No. 31363, with application for writ of preliminary injunction/temporary restraining order.
- Court of Appeals rendered decision on November 29, 1994 dismissing the petition, ruling the deficiency income and estate tax assessments final and unappealable, and declaring the summary remedy of levy on real properties valid under Sections 213 and 218 of the NIRC.
- Petitioner elevated the case by Petition for Review on Certiorari before the Supreme Court, assailing the CA decision as violative of due process and probate jurisdiction.
Facts of the Case
- Former President Ferdinand E. Marcos died on September 29, 1989 in Honolulu, Hawaii.
- A Special Tax Audit Team was created June 27, 1990 and concluded its memorandum July 26, 1991, revealing failures to file the decedent’s estate tax return and several income tax returns for 1982–1986.
- BIR issued on July 26, 1991:
• Deficiency estate tax assessment (No. FAC-2-89-91-002464) of ₱23,293,607,638.00 against the estate.
• Deficiency income tax assessments against spouses Marcos for 1985 (₱149,551.70) and 1986 (₱184,009,737.40).
• Deficiency income tax assessments against petitioner for 1982–1985 totaling small peso amounts. - Personal and constructive service of deficiency assessments occurred August 26 and September 12, 1991 upon Mrs. Imelda Marcos (through caretaker) and petitioner (through his caretaker).
- Formal assessment notices served October 20, 1992 on Mrs. Marcos c/o petitioner at Batasan Pambansa; invitation to conference dated October 8, 1992 furnished counsel of Mrs. Marcos.
- No administrative protest was filed within 30 days; assessments became final and demandable.
Levy and Sale Proceedings
- Notices of levy on real property issued February 22, 1993 (22 parcels) and May 20 & 26, 1993 (eight additional parcels) pursuant to Sections 205 and 213 of the NIRC.
- Notices of sale posted May 26, 1993 at Tacloban City Hall lobby; public auction held July 5, 1993 with no bidders, resulting in forfeiture in favor of the government.
- Copies of notices served on April 7 and June 10, 1993 upon petitioner, Mrs. Marcos, and their law firm after counsel’s March 12, 1993 request for notification.
Petitioner’s Contentions
- Summary tax remedies cannot proceed during pendency of probate (Sp. Proc. No. 10279, RTC Pasig) over the decedent’s alleged will, which placed all estate properties in custodialis legis.
- CA erred by ignoring