7/28/2019 [Tax 1] [CIR Domingo v. Hon. Garlitos]

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TAXATION 1 | B2015CASE DIGESTS

CIR Domingo v. Hon.Garlitos

June 29, 1963

Labradoralycat

SUMMARY: In CIR Domingo v. Hon. Moscoso, the SCdeclared final and executory the CFIs order for the estateof Walter Scott Price to pay the estate and inheritancetaxes, charges, and penalties. In order to enforce theclaims against the estate, the fiscal filed a petition for theexecution of the judgment. This was denied by the lowercourt. The SC dismissed the petition, and held that CIRDomingo has no right to execute the judgment.

DOCTRINE: A tax and a debt may be compensated.Here,both the claim of the Government for inheritance taxesand the claim of the intestate for services rendered havealready become overdue and demandable. Compensation,therefore, takes place by operation of law, in accordancewith Arts. 1279 and 1290 of the Civil Code, and both debtsare extinguished to the concurrent amount.

FACTS:In a previous case entitled CIR Domingo v. Hon.

Moscoso, the Supreme Court declared final and executorythe CFIs order for the estate of the late Walter Scott Price,

to pay the estate and inheritance taxes, charges, andpenalties, amounting to P40,058.55. In order to enforce theclaims against the estate, the fiscal filed a petition for theexecution of the judgment. This was denied by the lowercourt.

ISSUES: WON the petition for execution should be granted NO

The ordinary procedure to settle claims ofindebtedness against an estate, is to present a claim beforethe probate court.

In Aldamiz v. Judge of the CFI of Mindoro, the Court

held that a writ of execution is not the proper procedureallowed by the Rules of Court for the payment of debts andexpenses of administration. The proper procedure is for thecourt to order the sale of personal estate, or the sale ormortgage of real property of the deceased.

Execution may issue where devisees, legatees, orheirs have entered into possession of their respectiveportions in the estate prior to settlement and payment ofdebts, and it is later ascertained that there are such debtsand expenses to be paid. This is not so here.

The legal basis for such a procedure is the fact thatin the proceedings to settle the estate, the propertiesbelonging to the estate are under the jurisdiction of thecourt, and jurisdiction continues until the properties havebeen distributed. During the pendency of the proceedings,the estate is in custodia legis, and the proper procedure isnot to allow the sheriff to seize the properties, but to ask thecourt to require the administrator to pay the amount duefrom the estate.

Also, the court having jurisdiction of the estate foundthat the claim of the estate against the Government hasbeen recognized and an amount has already beenappropriated for such purpose by RA 2700. Both the claim ofthe Government for inheritance taxes and the claim of theintestate for services rendered have already becomeoverdue and demandable. Compensation, therefore, takesplace by operation of law, in accordance with Arts. 12791

1 In order that compensation may be proper, it is necessary:(1) That each one of the obligors be bound principally, and that he be at thesame time a principal creditor of the other;(2) That both debts consist in a sum of money, or if the things due areconsumable, they be of the same kind, and also of the same quality if the

7/28/2019 [Tax 1] [CIR Domingo v. Hon. Garlitos]

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TAXATION 1 | B2015CASE DIGESTS

and 12902 of the Civil Code, and both debts areextinguished to the concurrent amount.

Therefore, petitioner CIR Domingo has no right toexecute the judgment for taxes against the estate of the

Walter Scott Price.

DISPOSITIVE:The petition is, therefore, dismissed, withoutcosts.

latter has been stated;(3) That the two debts be due;(4) That they be liquidated and demandable;(5) That over neither of them there be any retention or controversy,commenced by third persons and communicated in due time to the debtor.2When all the requisites mentioned in Article 1279 are present,compensation takes effect by operation of law, and extinguishes both debtsto the concurrent amount, even though the creditors and debtors are notaware of the compensation.