ArticuLaw Primo

G.R. No. L-21108, November 29, 1966

REPUBLIC OF THE PHILIPPINES vs. LEONOR DE LA RAMA, ET AL.

 

 

Facts:

 

   This is an appeal from the decision of the Court of First Instance (Now Regional Trial Court) of Manila, dated December 23, 1961, in its Civil Case No. 46494, dismissing the complaint of the Republic of the Philippines against the heirs of the late Esteban de la Rama from the collection of P56,032.50 as deficiency income tax, inclusive of 50% surcharge, for the year 1950.

 

   The estate of the late Esteban de la Rama was the subject of Special Proceedings No. 401 of the Court of First Instance (now Regional Trial Court) of Iloilo. The executor-administrator, Eliseo Hervas, filed on March 12, 1951, income tax returns of the estate corresponding to the taxable year 1950, declaring a net income of P22,796.59, on the basis of which the amount of P3,919.00 was assessed and was paid by the estate as income tax. The Bureau of Internal Revenue later claimed that it had found out that there had been received by the estate in 1950 from the De la Rama Steamship Company, Incorporation cash dividends amounting to P86,800.00, which amount was not declared in the income tax return of the estate for the year 1950. The Bureau of Internal Revenue then, on March 7, 1956, made an assessment as deficiency income tax against the estate in the sum of P56,032.50 of which amount P37,355.00 was the deficiency and P18,677.50 was the 50% surcharge.

 

   The Collector of Internal Revenue wrote a letter, dated February 29, 1956, to Mrs. Lourdes de la Rama-Osmeña informing her of the deficiency income tax and asking payment thereof. On March 13, 1956 the latter's counsel wrote to the Collector acknowledging receipt of the assessment but contended that Lourdes de la Rama-Osmeña had no authority to represent the estate, and that the assessment should be sent to Leonor de la Rama who was appointed to by said counsel as the administratrix of the estate of her late father. On the basis of this information the Deputy Collector of Internal Revenue, on November 22, 1956, sent a letter to Leonor de la Rama as administratrix of the estate, asking payment. The tax, as assessed, not having been paid, the Deputy Commissioner of Internal Revenue, on September 7, 1959, wrote another letter to Mrs. Lourdes de la Rama-Osmeña demanding, through her, upon the heirs, the payment of the deficiency income tax within the period of thirty days from receipt thereof. The counsel of Lourdes de la Rama-Osmeña, in a letter dated September 25, 1959, insisted that the letter should be sent to Leonor de la Rama. The Deputy Commissioner of Internal Revenue wrote to Leonor de la Rama another letter, dated February 11, 1960, demanding, through her as administratrix, upon the heirs of Esteban de la Rama, the payment of the sum of P56,032.50, as deficiency income tax including the 50% surcharge, to the City Treasurer of Pasay City within thirty days from receipt thereof.

 

   The deficiency income tax not having been paid, the Republic of the Philippines filed on March 6, 1961 with the Court of First Instance (now Regional Trial Court) of Manila a complaint against the heirs of Esteban de la Rama, seeking to collect from each heir his/her proportionate share in the income tax liability of the estate. An amended complaint dated August 31, 1961, was admitted by the court.

 

   The defendants-appellees, Lourdes de la Rama-Osmeña, Leonor de la Rama, Estefania de la Rama-Pirovano, Dolores de la Rama-Lopez, Charles Miller, and Aniceta de la Rama-Sian, through counsel, filed their respective answers, the gist of their allegations and/or defenses being (1) that no cash dividends of P86,800.00 had been paid to the estate; (2) that the administration of the estate had been extended by the probate court precisely for the purpose of collecting said dividends; (3) that Leonor dela Rama had never been administratrix of the estate; (4) that the executor of the estate, Eliseo Hervas, had never been given notice of the assessment, and consequently the assessment had never become final; and (5) that the collection of the alleged deficiency income tax had prescribed. Fausto F. Gonzales, Jr., one of the defendants, not having filed an answer, was declared in default.

 

    From the evidence introduced at the trial, both oral and documentary, the lower court found that the dividends of P86,800.00 declared by the De la Rama Steamship Company in favor of the late Esteban de la Rama were applied to the obligation of the estate to the company declaring the dividends; that Leonor de la Rama was not the administratrix of the estate, but it was the late Eliseo Hervas who was the executor-administrator; that the administration of the estate was extended for the purpose of recovering for the estate said dividends from the De la Rama Steamship Company Incorporated and that the question of whether the deceased Esteban de la Rama was a debtor to the entity known as the Hijos de I. de la Rama, which was also indebted to the De la Rama Steamship Company Incorporated, was not a settled one.

 

    After trial, the lower court rendered its decision, dated December 23, 1961, dismissing the complaint. The Republic of the Philippines appealed from said decision to the Court of Appeals, but the appeal was later certified to Supreme Court because only questions of law was involved.

 

 

Issue:

 

   Whether or not notice must be sent to the administrator of the estate before paying the legal obligation and discharge all debts of the estate.

 

 

Held:

 

    Supreme Court clarified that, when an estate is under administration, notice must be sent to the administrator of the estate, since it is the said administrator, as representative of the estate, who has the legal obligation to pay and discharge all debts of the estate and to perform all orders of the court. In that case legal notice of the assessment was sent to two heirs, neither one of whom had any authority to represent the estate. In this case, the assessment was served not even on heir of the estate but on a completely disinterested third party. This improper service was clearly not binding on the petitioner.