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c   

  Ê

 petitioners,
vs.
Ô   ! "#"$%&%"'$()$""* *)+(%#
, ('+!"($'$'%)+,*Ô -,!Ô  
respondents.Ê

Bito, Misa & Lozada & Associates for petitioners.

Solicitor General Estelito P. Mendoza, Asst. Solicitor General Ruben E. Agpolo and
Solicitor Deusdedit B. Quinano for respondents.

,,,  › Ê

Ô e lone issue raised in t is petition for certiorari and pro ibition, w ic seeks to annul
t e Order dated June 22, 1971 issued by t e Court of First Instance of Cagayan in Civil
Case No. II-7, w ic denied t e motion to dismiss said case dated Marc 25, 1971, filed
by petitioner;  t e Order dated June 7, 1977 of t e respondent District Judge of said
Court in t e same civil case denying petitioners' motion for reconsideration of t e said
Order of denial dated June 22, 1971;  and t e Order dated July 21, 1977, issued by t e
said respondent Judge of said Court in t e same civil case denying petitioners' motion
for leave to file a second motion for reconsideration of t e aforesaid order of denials; . is
w et er or not respondent Court of First Instance can lawfully acquire jurisdiction over a
contested assessment made by t e Commissioner of Internal Revenue against t e
deceased taxpayer Doroteo Yabes, w ic as not yet become final, executory and
incontestable, and w ic assessment is being contested by petitioners in t e Court of
Ôax Appeals, Case No. 2216, and still pending consideration. Ê

After t is Court required respondents to comment on t e petition and issued a


temporary restraining order in t e Resolution dated September 28, 1977,  t e Solicitor
General, in is Comment dated November 21, 1977, submitted t at t e petition be given
due course, and t ereafter judgment be rendered setting aside t e questioned orders
issued by t e respondent Court of First Instance of Cagayan in Civil Case No. II-7,
directing said lower Court to old in abeyance any action or proceeding in Civil Case
No. II-7, until after t e Court of Ôax Appeals s all ave finally decided CÔA Case No.
2216.
Ô e Solicitor General also filed a Manifestation dated November 22, 1977,
stating t at "in t eir Comment dated November 21, 1977, t ey ave limited t eir
appearance as counsel only for t e Republic of t e P ilippines and not for t e
respondent Judge on t e ground t at t ey do not agree wit t e latter's orders w ic
are being questioned in t e instant petition."  Ê

Œndisputed facts of record are as follows: Ê


X1) Doroteo Yabes of Calamaniugan Cagayan, w o was for sometime an exclusive
dealer of products of t e International Harvester Macleod, Inc., received on or about May
1, 1962, a letter from t e Commissioner of Internal Revenue dated Marc 27, 1962,
demanding payment of t e amount of P15,976.81, as commercial broker's fixed and
percentage taxes plus surc arges and t e sum of P2,530 as compromise penalty
alledgely due from Yabes for t e years 1956-1960; ‰ Ê

X2) On May 11, 1962, Doroteo Yabes, t roug is counsel, filed wit t e Commissioner's
Office is letter dated May 10, 1962, protesting t e assessment of commercial broker's
fixed and percentage taxes plus penalties against im on t e ground t at is agreements
wit t e International Harvester Macleod, Inc. were of purc ase and sale, and not of
agency, ence e claimed e was not able to pay suc kind of taxes;  Ê

X3) Ô ereafter, t ere ensued an exc ange of correspondence between t e lawyers of


Doroteo Yabes and t e Commissioner; t e Commissioner in a letter dated August 3,
1962, informed Doroteo Yabes t at e acted as a commercial broker "in accordance wit

t e ruling of t is Office in t e case of Cirilo D. Constantino;" in turn, Doroteo Yabes, in a
letter dated August 22, 1962, requested for t e reinvestigation, or review of t e case by
t e appellate division of t e Bureau of Internal Revenue in accordance wit standing
rules, regulations or practice on t e matter;  Yabes also wrote t e Commissioner on
August 24, 1962, requesting t at t e appeal be eld in abeyance pending final decision

of t e Case of Cirilo D. Constantino; in reply, t e Commissioner informed Doroteo
Yabes in a letter dated September 18, 1962, t at t e latter's request for reinvestigation
was denied on t e ground t at e as "not submitted any evidence to offset t e findings
of t is Office as to warrant a reinvestigation t ereof";  but eig t days later or on
September 26, 1962, t e Commissioner wrote a letter advising Doroteo Yabes t at "t e
administrative appeal ... will be eld in abeyance pending t e resolution of t e issues in a
similar case Xobviously referring to t e aforesaid Constantino case)"; Ê

X4) Ôo give time for t e Commissioner to study t e case and several ot er cases similar
t ereto, t e lawyers of Doroteo Yabes agreed to file, and t eir client, Doroteo Yabes did
file a tax waiver on October 20, 1962, extending t e period of prescription to December
31, 1967; .Ê

X5) Doroteo Yabes died on Marc 13, 1963 and no estate proceedings were instituted for
t e settlement of is estate; is widow also died during t e pendency of t e case; t e
petitioners are t e c ildren of t e deceased taxpayer;  Ê

X6) On Marc 14, 1966, t e Court of Ôax Appeals decided t e Constantino "test" case.
Ô e Court of Ôax Appeals ruled t at agreements entered into by Constantino wit t e
International Harvester Macleod, Inc. were of purc ase and sale, and not of agency,
ence no commercial broker's fixed and percentage fees could be collected from t e said
taxpayer; owever t is Court on February 27, 1970, in G.R. No. L-25926 reversed t e
Court of Ôax Appeals and ruled in favor of t e Commissioner of Internal Revenue; Ê


X7) After a lapse of about five years, t e eirs of t e deceased Doroteo Yabes, t roug
t eir lawyers, received on August 4, 1967, a letter from t e Commissioner dated July 27,
1967, requesting t at t ey "waive anew t e Statute of Limitations" and furt er confirming
t e previous understanding t at t e final resolution of t e protest of t e deceased
Doroteo Yabes was "being eld in abeyance until t e Supreme Court renders its decision
on a similar case involving t e same factual and legal issues broug t to it on appeal"
Xreferring to t e Constantino "test" case);  conformably wit t e request of t e
Commissioner, t e eirs of Doroteo Yabes filed a revised waiver furt er extending t e
period of prescription to December 31, 1970; ‰ Ê
X8) Ô ereafter, no word was received by t e petitioners or t eir lawyers during t e interim
of more t an t ree X3) years, but on January 20, 1971, petitioners as eirs of t e
deceased Doroteo Yabes received t e summons and a copy of t e complaint filed by t e
Commissioner on December 4, 1970 wit t e Court of First Instance of Cagayan w ic
seeks to collect from t e petitioners t e sum of P 15,976.82, as deficiency commercial
broker's fixed and percentage taxes, including surc arges and interest t ereon, due from
t eir predecessor-in-interest, Doroteo Yabes, by reason of t e latter's income derived
from transactions as dealer of t e products of t e International Harvester Macleod, Inc.; Ê

X9) Ôaking t e complaint as t e final decision of t e Commissioner on t e disputed


assessment against t e deceased taxpayer Doroteo Yabes, petitioners filed on February
12, 1971, a petition for review of said disputed assessment wit t e Court of Ôax

Appeals; later on t e same day, February 12, 1971, petitioners filed t eir answer to t e
complaint of t e Commissioner before t e Court of First Instance of Cagayan;  and
alleged t erein, by way of special defense, t at t e Court of Ôax Appeals as exclusive
jurisdiction of t e action and t at t ere is anot er action of t e same nature between t e
parties relating to t e same assessment pending before t e Court of Ôax Appeals; Ê

X10) On t e ot er and, t e Commissioner filed a motion to dismiss dated Marc 24,


1971, wit t e Court of Ôax Appeals in CÔA Case No. 2216, and subsequently filed a
memorandum in support of said motion to dismiss, on t e ground t at t e assessment
against Doroteo Yabes ad already become final, executory and incontestable, and t e
Court of Ôax Appeals ad no jurisdiction over t e case; Ê

X11) On Marc 25, 1971, petitioners filed a formal motion to dismiss Civil Case No. II-7
wit t e Court of First Instance of Cagayan on t e grounds t at said Court as no
jurisdiction over t e case and t at t ere is anot er action pending between t e same
parties for t e same cause before a competent court;  Ê

X12) On June 22, 1971, t e respondent Court of First Instance of Cagayan, t roug its
former presiding judge issued t e questioned order in Civil Case No. II-7, w ic is t e
main subject of t e instant petition, denying t e petitioners' motion to dismiss on t e
ground t at t e petitioners " ave already made a previous answer w erein t ey
categorically admitted t e jurisdiction of t e court over t e subject matter and t e Court
believes t at, granting for t e sake of argument, t ere is a pending action between t e
same parties for t e same cause yet t e judgment w ic may be rendered in t e first
cited case does not necessarily bar t e present action";  Ê

X13) On September 1, 1972, t e respondent Court of First Instance of Cagayan issued an


order olding t e trial of Civil Case No. I I-7, in abeyance upon t e joint motion of t e
parties; Ê


X14) On September 29, 1974, t e Court of Ôax Appeals denied t e Commissioner's


.
motion to dismiss CÔA Case No. 2216. Accordingly, on October 30, 1975, t e
Commissioner filed is Answer to t e petition for review. Ê


X15) On December 17, 1976, owever, t e Court of First Instance of Cagayan, t is time
presided by t e respondent Judge Napoleon Flojo, upon motion of counsel for t e plaintiff
t erein, set Civil Case No. II-7 for trial on January 27 and 28, 1977. 
Ê

X16) On February 9, 1977, t e respondent Judge Flojo denied t e petitioners' motion to


suspend furt er proceedings and set t e trial of t e case for Marc 5, 1977.  Ê
X17) On May 3, 1977, t e erein petitioners filed a motion for t e reconsideration of t e
order issued on June 22, 1971 and for a ruling on t eir affirmative defense t at t e Court
of First Instance of Cagayan as no jurisdiction over t e case. Ê

X18) On June 7, 1977, t e respondent Judge denied t e aforementioned motion for


reconsideration for lack of merit, and set t e trial of t e case for June 23, 1977.  Ê

X19) On July 8, 1977, t e petitioners filed a motion seeking leave to file a second motion
for reconsideration of t e order issued on June 7, 1977,  attac ing t ereto a copy of
.
t eir motion for reconsideration. Ô e motions were denied on July 21, 1977, and trial
was set for August 18, and 19, 1977 . w ic was postponed to September 23, 1977. . Ê

Hence, t e present recourse. As prayed for, a temporary restraining order was issued
on September 28, 1977. .. Ê

As to t e issue of w et er or not t e assessment made by t e Commissioner of Internal


Revenue against t e deceased taxpayer Doroteo Yabes, as contained in t e letter
dated Marc 27, 1962, as become final, executory and incontestable, after Doroteo
Yabes ad received t e Commissioner's letter dated August 3, 1962, denying t e
latter's protest against t e said assessment on September 18, 1962 and is failure to
appeal t erefrom wit in t e 30-day period contemplated under Section 11, of Republic
Act 1125, We are constrained to agree wit t e Court of Ôax Appeals, w en it denied
t e Commissioner's motion to dismiss CÔA Case No. 2216, t at: Ê

t e period for appeal to t is Court s ould not be counted from September 18, 1962. In a
letter of July 27, 1967, respondent informed petitioners t at a resolution of t eir protest
was being eld in abeyance until t e Supreme Court renders a decision on a similar case
"involving t e same factual and legal issues". As a matter of fact, in an earlier letter dated
September 26, 1962, respondent also informed petitioners' counsel t at "administrative
appeal for and in be alf of t eir clients win be eld in abeyance pending resolution of t e
issues on a similar case w ic was appealed by you to t e Court of Ôax Appeals". It is
t us clear in t ese letters t at respondent reconsidered t e finality of is decision of
August 3, 1962, assuming arguendo t at t e letter ad a tenor of finality. Ê
.

Ô e Court of Ôax Appeals in CÔA Case No. 2216, stated furt er: Ê

Ô e records s ow t at a warrant of distraint and levy was issued on October 2, 1970.


Had t is been served on Doroteo Yabes, it would ave been equivalent to a final
decision, ... Ô ere is, owever, not ing to s ow t at it was ever served on Yabes. Neit er
is t ere anyt ing in t e record to s ow t at a formal decision of denial was made after
respondent's letter of July 27, 1967. Ê
.

Ô ere is no reason for Œs to disagree from or reverse t e Court of Ôax Appeals'


conclusion t at under t e circumstances of t is case, w at may be considered as final
decision or assessment of t e Commissioner is t e filing of t e complaint for collection
in t e respondent Court of First Instance of Cagayan, t e summons of w ic was
served on petitioners on January 20, 1971, and t at t erefore t e appeal wit t e Court
of Ôax Appeals in CÔA Case No. 2216 was filed on time. .Ô e respondent Court of
First Instance of Cagayan can only acquire jurisdiction over t is case filed against t e
eirs of t e taxpayer if t e assessment made by t e Commissioner of Internal Revenue
ad become final and incontestable. If t e contrary is establis ed, as t is Court olds it
to be, considering t e aforementioned conclusion of t e Court of Ôax Appeals on t e
finality and incontestability of t e assessment made by t e Commissioner is correct,
t en t e Court of Ôax Appeals as exclusive jurisdiction over t is case. Petitioners
received t e summons in Civil Case No. II-7 of t e respondent Court of First Instance of
Cagayan on January 20, 1971, and petitioners filed t eir appeal wit t e Court of Ôax
Appeals in CÔA Case No. 2216, on February 12, 1971, well wit in t e t irty-day
prescriptive period under Section 11 of Republic Act No. 1125. Ô e Court of Ôax
Appeals as exclusive appellate jurisdiction to review on appeal any decision of t e
Collector of Internal Revenue in cases involving disputed assessments and ot er
matters arising under t e National Internal Revenue Code. .‰ Ê

For want of jurisdiction over t e case, t e Court of First Instance of Cagayan s ould
ave dismissed t e complaint filed in Civil Case No. II-7. Ê

Ô e recommendation of t e Solicitor General t at t e lower court old in abeyance any


action or proceeding in Civil Case No. II-7 until after t e Court of Ôax Appeals s all ave
finally decided CÔA Case No. 2216, is untenable since t e lower court as no
jurisdiction over t e case. Jurisdiction over an action includes jurisdiction over all
interlocutory matters incidental to t e case and deemed necessary to preserve t e
subject matter of t e suit or protect interests of t e parties. Absent jurisdiction over t e
case, it would be improper for t e Court of First Instance of Cagayan to take cognizance
over t e case and act upon interlocutory matters of t e case, as well. Ê

Ô e dismissal of t e complaint, owever, is not sufficient. Ô e ends of justice would best


be served by considering t e complaint filed in Civil Case No. II-7 not only as a final
notice of assessment but also as a counterclaim in CÔA Case No. 2216, in order to
avoid mutiplicity of suits, as well as to expedite t e settlement of t e controversy
between t e parties. After all, t e two cases involve t e same parties, t e same subject
matter, and t e same issue, w ic is t e liability of t e eirs of t e deceased Doroteo
Yabes for commercial broker's fixed and percentage taxes due from t e said deceased. Ê

WHEREFORE, t e petition is granted and t e writs prayed for are ereby issued. Ô e
questioned orders dated June 22, 1971, June 7, 1977 and July 21, 1977 are ereby
annulled and set aside and t e complaint filed in Civil Case No. II-7 of t e Court of First
Instance of Cagayan, entitled: "Republic of the Philippines, plaintiff, versus Nicolasa
Jurado Yabes, et al., defendants," s ould be, as it is ereby, dismissed, t e same to be
transferred to t e Court of Ôax Appeals to be considered t erein as a counterclaim in
CÔA Case No. 2216. Ô e temporary restraining order eretofore issued is ereby made
permanent. Wit out costs. Ê

SO ORDERED. Ê

Barredo (Chairman), Guerrero, Abad Santos and Escolin, JJ., concur.

Ê
Ê

)&(')&""$Ê

/-› concurring: Ê

In 1970, t e Government sued t e eirs of Doroteo Yabes X e died in 1963), namely,


is widow, Nicolasa, and is t ree c ildren named, Elpidio, Severina and Julita, for t e
recovery of t e sum of P15,976.82 as commercial broker's fixed and percentage taxes
for t e period from 1956 to 1960 XCivil Case No. II-7 of t e CFI of Cagayan). Ê

Ô e suit, w ic was broug t to stop t e running of t e prescriptive period, was filed on


t e t eory t at t e tax assessment was uncontested. If contested, it s ould ave been
filed in t e Court of Ôax Appeals. Ê

Ordinarily, suc an action is not maintainable against t e eirs because t e remedy for
asserting money claims against t e deceased is to file a claim in t e administration
proceeding for t e settlement of is estate, as indicated in Rule 86 of t e Rules of
Court. Ê

However, t e estate of t e deceased is not under administration and is eirs ad


settled it extrajudicially. Hence, Solicitor General Felix Q. Antonio and is assistants
deemed it proper to sue directly t e decedent's eirs. Ê

Ô e taxes in question were assessed during t e taxpayer's lifetime. Ô e prescriptive


period was extended and t e enforcement of t e taxes was eld in abeyance by t e
Commissioner of Internal Revenue upon agreement wit t e Yabes eirs to await t e
outcome of a test case, t e Constantino case, regarding t e same kind of tax liability
w ic was pending in t is Court. After t e Constantino case was decided in t e
Government's favor XCommissioner of Internal Revenue vs. Constantino, L-25926,
February 27, 1970, 31 SCRA 779), t e State filed t e aforementioned collection case,
Civil Case No. II-7. Ê

Ô e Yabes eirs considered t e filing of t e collection suit as t e Commissioner's


decision w ic t ey could contest in t e Ôax Court Xa view w ic was later sustained by
t e Ôax Court). Hence, on February 12, 1971, t e Yabes eirs filed a petition for review
wit t e Ôax Court. Ô ey contended t at Doroteo Yabes was not a commercial broker.
Ô ey asked for t e cancellation of t e tax assessment XCÔA Case No. 2216). Ê

Respondent judge erred in setting Civil Case No. II-7 for trial. In my opinion, Civil Case
No. II-7 s ould be transferred to t e Ôax Court. No rule allows t e transfer to t e Ôax
Court of a tax case pending in t e Court of First Instance and vice-versa. Ê
But under t e peculiar situation in t is case, t e pragmatic, expedient and sensible t ing
to do is to transfer Civil Case No. II-7 to t e Ôax Court and to consider it as a
counterclaim to CTA Case No. 2216. Ô e two cases involve t e same parties, t e same
subject-matter and t e same issue: t e liability of t e Yabes eirs for t e commercial
broker's fixed and percentage taxes allegedly due from Doroteo Yabes. Ê

Ô at may be a novel and unprecedented solution but we ave to be practical and


s ould avoid duplicity of suits. Since it now appears t at t e Government erroneously
assumed in filing Civil Case No. II-7 in t e Court of First Instance t at t e tax
assessment is uncontested w en actually it is contested, t en t at case s ould be
consolidated wit t e case in t e Ôax Court w ic is t e proper forum for deciding
contested tax assessments. Ê

,Ô› dissenting:Ê

I vote to dismiss t e complaint filed in t e CFI, as well or to set aside all t e questioned
orders of said Court. Ê

)&(')&""$Ê

/-› concurring: Ê

In 1970, t e Government sued t e eirs of Doroteo Yabes X e died in 1963), namely,


is widow, Nicolasa, and is t ree c ildren named, Elpidio, Severina and Julita, for t e
recovery of t e sum of P15,976.82 as commercial broker's fixed and percentage taxes
for t e period from 1956 to 1960 XCivil Case No. II-7 of t e CFI of Cagayan). Ê

Ô e suit, w ic was broug t to stop t e running of t e prescriptive period, was filed on


t e t eory t at t e tax assessment was uncontested. If contested, it s ould ave been
filed in t e Court of Ôax Appeals. Ê

Ordinarily, suc an action is not maintainable against t e eirs because t e remedy for
asserting money claims against t e deceased is to file a claim in t e administration
proceeding for t e settlement of is estate, as indicated in Rule 86 of t e Rules of
Court. Ê

However, t e estate of t e deceased is not under administration and is eirs ad


settled it extrajudicially. Hence, Solicitor General Felix Q. Antonio and is assistants
deemed it proper to sue directly t e decedent's eirs. Ê

Ô e taxes in question were assessed during t e taxpayer's lifetime. Ô e prescriptive


period was extended and t e enforcement of t e taxes was eld in abeyance by t e
Commissioner of Internal Revenue upon agreement wit t e Yabes eirs to await t e
outcome of a test case, t e Constantino case, regarding t e same kind of tax liability
w ic was pending in t is Court. After t e Constantino case was decided in t e
Government's favor XCommissioner of Internal Revenue vs. Constantino, L-25926,
February 27, 1970, 31 SCRA 779), t e State filed t e aforementioned collection case,
Civil Case No. II-7. Ê

Ô e Yabes eirs considered t e filing of t e collection suit as t e Commissioner's


decision w ic t ey could contest in t e Ôax Court Xa view w ic was later sustained by
t e Ôax Court). Hence, on February 12, 1971, t e Yabes eirs filed a petition for review
wit t e Ôax Court. Ô ey contended t at Doroteo Yabes was not a commercial broker.
Ô ey asked for t e cancellation of t e tax assessment XCÔA Case No. 2216). Ê

Respondent judge erred in setting Civil Case No. II-7 for trial. In my opinion, Civil Case
No. II-7 s ould be transferred to t e Ôax Court. No rule allows t e transfer to t e Ôax
Court of a tax case pending in t e Court of First Instance and vice-versa. Ê

But under t e peculiar situation in t is case, t e pragmatic, expedient and sensible t ing
to do is to transfer Civil Case No. II-7 to t e Ôax Court and to consider it as a
counterclaim to CTA Case No. 2216. Ô e two cases involve t e same parties, t e same
subject-matter and t e same issue: t e liability of t e Yabes eirs for t e commercial
broker's fixed and percentage taxes allegedly due from Doroteo Yabes. Ê

Ô at may be a novel and unprecedented solution but we ave to be practical and


s ould avoid duplicity of suits. Since it now appears t at t e Government erroneously
assumed in filing Civil Case No. II-7 in t e Court of First Instance t at t e tax
assessment is uncontested w en actually it is contested, t en t at case s ould be
consolidated wit t e case in t e Ôax Court w ic is t e proper forum for deciding
contested tax assessments. Ê

,Ô› dissenting:Ê

I vote to dismiss t e complaint filed in t e CFI, as well or to set aside all t e questioned
orders of said Court. Ê

!'')$Ê

1 Rollo, pp. 16-17. Ê


2 ád., pp. 18-19. Ê
3 ád., pp. 20-21. Ê
4 ád., p. 100. Ê
5 ád., p. 120. Ê
6 ád., p. 123. Ê
7 ád., p. 74. Ê
8 ád., pp. 75-79. Ê
9 ád., p. 38. Ê
10 ád., p. 39. Ê
11 ád., p. 40. Ê
12 ád., p. 41. Ê
13 ád., p. 44. Ê
14 ád., p. 113. Ê
15 ád., p. 113. Ê
16 ád., pp. 45-46. Ê
17 ád., p. 47. Ê
18 ád., pp. 48-52. Ê
19 Civil Case No. II-7. Ê
20 Rollo, pp. 22-30. Ê
21 ád., pp. 16-17. Ê
22 ád., p. 87. Ê
23 ád., p. 88. Ê
24, ád., p. 115. Ê
25 ád., p. 92. Ê
26 ád., p. 94. Ê
27 ád., p. 53. Ê
28 ád., p. 18. Ê
29 ád., p. 56. Ê
30 ád., p. 58. Ê
31 ád., p. 20. Ê
32 ád., p. 97. Ê
33 ád., p. 100. Ê
34 ád., p. 91. Ê
35 ád., p. 92. Ê
36 ád., p. 92. Ê
37 Blaquera vs. Rodriguez, 103 P il. 511. Ê

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