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  • Engracio Francia Intermediate Appellate Court and Ho Fernandez Case Flow

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    Joshua Erik Madria
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    The Supreme Court dismissed Francia's petition for review and affirmed the decision of the Intermediate Appellate Court. Francia argued that his tax delinquency was extinguished by legal compensation since the government owed him money from expropriating a portion of his land. However, the Supreme Court held that internal revenue taxes cannot be the subject of setoff or compensation against claims a taxpayer has against the government, as a matter of public policy. Taxes must be paid when due and cannot await the results of lawsuits against the government.

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    22 Francia vs. IAC

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    The Supreme Court dismissed Francia's petition for review and affirmed the decision of the Intermediate Appellate Court. Francia argued that his tax delinquency was extinguished by legal compensation since the government owed him money from expropriating a portion of his land. However, the Supreme Court held that internal revenue taxes cannot be the subject of setoff or compensation against claims a taxpayer has against the government, as a matter of public policy. Taxes must be paid when due and cannot await the results of lawsuits against the government.

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    22 views1 page

    Engracio Francia Intermediate Appellate Court and Ho Fernandez Case Flow

    Uploaded by

    Joshua Erik Madria
    The Supreme Court dismissed Francia's petition for review and affirmed the decision of the Intermediate Appellate Court. Francia argued that his tax delinquency was extinguished by legal compensation since the government owed him money from expropriating a portion of his land. However, the Supreme Court held that internal revenue taxes cannot be the subject of setoff or compensation against claims a taxpayer has against the government, as a matter of public policy. Taxes must be paid when due and cannot await the results of lawsuits against the government.

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    © All Rights Reserved
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    of 1

    ENGRACIO FRANCIA, petitioner, vs.

    Case flow:
    INTERMEDIATE APPELLATE COURT Francia – Filed a case with the lower court
    and HO FERNANDEZ, respondents. Lower Court – Dismissed the case filed; Francia – appealed to IAC
    IAC – Affirmed the decision of the lower court in toto
    Francia – Filed Petition for Review with SC
    SC – Dismissed the petition; Affirmed IAC decision

    FACTS:
    • Engracio Francia is the registered owner of a residential lot and a two-story house built upon it situated at
    Barrio San Isidro, now District of Sta. Clara, Pasay City, Metro Manila. The lot, with an area of about 328 sqm.
    • 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.
    • 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 was not present during the auction sale since he was in Iligan City at that time helping his uncle ship
    bananas.
    • On March 20, 1979, Francia filed a complaint to annul the auction sale.
    • On April 23, 1981, the lower court rendered a decision dismissing Francia’s complaint
    • The Intermediate Appellate Court affirmed the decision of the lower court in toto.
    • Francia filed a petition for review with the SC contending 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: HELD:
    Whether or not there is legal No. Internal Revenue Taxes cannot be subject of setoff or
    basis for the contention of compensation. This Court has consistently ruled that there can be
    Francia 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. In the
    case of Republic v. Mambulao Lumber Co. (4 SCRA 622), this Court
    ruled that Internal Revenue Taxes cannot be the subject of set-off
    or compensation. We stated that: “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. x x x (80 C.J.S., 73-74). ‘The general rule based
    on grounds of public policy is well-settled that no set-off is
    admissible against demands for taxes levied for general or local
    governmental purposes. The reason on which the general rule is
    based, is that taxes are not in the nature of contracts between the
    party and party but grow out of duty to, and are the positive acts of
    the government to the making and enforcing of which, the personal
    consent of individual taxpayer is not required. x x x’ ”.

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