Elegado V CA Digest

NOTES/FF:
ILDEFONSO O. ELEGADO, as Ancillary Administrator of the

Testate Estate of the late WARREN TAYLOR
GRAHAM, petitioner
vs.
HON. COURT OF TAX APPEALS and COMMISSIONER OF
INTERNAL REVENUE respondents.
G.R. No. L-68385 May 12, 1989
CRUZ, J.:
FACTS:
1. March
a.
b.
c.
d.
14, 1976 - Warren Taylor Graham:

American national formerly resident in the Philippines,
died in Oregon, U.S.A
left certain shares of stock in the Philippines
son, Ward Graham, filed an estate tax return on September 16, 1976, with the Philippine Revenue
Representative in San Francisco, U.S.A.
2. February 9, 1978 - on the basis of the return, the respondent Commissioner of Internal Revenue assessed the
decedent's estate an estate tax of P96,509.35.
a. This assessment was protested by the law firm of Bump, Young and Walker on behalf of the estate. The
protest was denied by the Commissioner on July 7, 1978. No further action was taken by the estate in
pursuit of that protest.
3. (meanwhile) January 18, 1977 -the decedent's will had been admitted to probate in the Circuit Court of
Oregon Ward Graham.
a. The executor, Elgado, petitioned for allowance of the will in the Philippines. this was allowed and he was
dubbed ancillary administrator.
b. he filed a 2nd estate tax return w/ BIR, June 4, 1980.
c. Commissioner imposed an assessment of P72,948.87 protested by the Agrava, Lucero and Gineta Law
Office.
4. While protest was pending, the Commissioner filed in the probate proceedings a motion for the allowance of the
basic estate tax of P96,509.35. He said that there was no payment yet but the assessment was final and
executory.
5. The petitioner regarded this motion as an implied denial of the protest filed on August 13, 1980, against the
second assessment of P72,948.87. He then filed a petition for review w/ CTA.
6. The Commissioner did not immediately answer (for 195 days) and in the end instead cancelled the protested
assessment in a letter to the decedent's estate dated March 31, 1982.
7. This cancellation was notified to the CTA in a motion to dismiss on the ground that the protest had become moot
and academic.
8. CTA granted the motion and dismissed the petition.
9. Now- petition for certiorari under Rule 45 of the Rules of Court.
ISSUE:
(1) whether the shares of stocks left by the decedent should be treated as his exclusive, and not conjugal, property;
(2) whether the said stocks should be assessed as of the time of the owner's death or six months thereafter; and
(3) whether the appeal filed with the respondent court should be considered moot and academic.
HELD: (1)Unresolved (ratio 13);(2) unresolved (ratio 13) ;(3)YES (ratio 1-12)
RATIO:
1. In the letter to the decedent's estate dated March 31, 1982, the Commissioner of Internal Revenue wrote as
follows:
Estate of WARREN T. GRAHAM c/o Mr. ILDEFENSO O. ELEGADO Ancillary Administrator Philex Building cor. Brixton & Fairlane Sts. Pasig, Metro
Manila
Sir:
This is with regard to the estate of the late WARREN TAYLOR GRAHAM, who died a resident of Oregon, U.S.A. on March 14, 1976. It appears
that two (2) letters of demand were issued by this Bureau. One is for the amount of P96,509.35 based on the first return filed, and the other
in the amount of P72,948.87, based on the second return filed.
It appears that the first assessment of P96,509.35 was issued on February 9, 1978 on the basis of the estate tax return filed on September
16, 1976. The said assessment was, however, protested in a letter dated March 7, 1978 but was denied on July 7, 1978. Since no appeal was
made within the regulatory period, the same has become final.
In view thereof, it is requested that you settle the aforesaid assessment for P96,509.35 within fifteen (15) days upon receipt hereof to the
Receivable Accounts Division, this Bureau, BIR National Office Building, Diliman, Quezon City. The assessment for P72,949.57 dated July 3,
1980, referred to above is hereby cancelled.
Very truly yours,
(SGD.) RUBEN B. ANCHETA Acting Commissioner
2.
3.
It is obvious from the express cancellation of the second assessment for P72,948.87 that the petitioner had been
deprived of a cause of action as it was precisely from this assessment that he was appealing.
CTA said that the petition questioning the assessment of July 3, 1980, was "premature" since the protest to the
assessment had not yet been resolved. As a matter of fact it had: the said assessment had been cancelled by
virtue of the above-quoted letter. The respondent court was on surer ground, however, when it followed with the
finding that the said cancellation had rendered the petition moot and academic. There was really no more
assessment to review.
4.
5.
6.
7.
8.
9.
Petitioner argues - that the issuance of the second assessment on July 3, 1980, had the effect of canceling the first
assessment of February 9, 1978, and that the subsequent cancellation of the second assessment did not have the
effect of automatically reviving the first. Moreover, the first assessment is not binding on him because it was based
on a return filed by foreign lawyers who had no knowledge of our tax laws or access to the Court of Tax Appeals.
SC: The petitioner is clutching at straws.
It is noted that in the letter of July 3, 1980, imposing the second assessment of P72,948.87, the Commissioner
made it clear that "the aforesaid amount is considered provisional only based on the estate tax return filed subject
to investigation by this Office for final determination of the correct estate tax due from the estate. Any amount
that may be found due after said investigation will be assessed and collected later."
It is illogical to suggest that a provisional assessment can supersede an earlier assessment which had clearly
become final and executory.
The second contention is no less flimsy. The petitioner cannot be serious when he argues that the first assessment
was invalid because the foreign lawyers who filed the return on which it was based were not familiar with our tax
laws and procedure. Is the petitioner suggesting that they are excused from compliance therewith because of their
ignorance?
If our own lawyers and taxpayers cannot claim a similar preference because they are not allowed to claim a like
ignorance, it stands to reason that foreigners cannot be any less bound by our own laws in our own country. A
more obvious and shallow discrimination than that suggested by the petitioner is indeed difficult to find.
But the most compelling consideration in this case is the fact that the first assessment is already final and
executory and can no longer be questioned at this late hour.
a.
10.
The assessment was made on February 9, 1978. It was protested on March 7, 1978. The protest was denied on July 7, 1978. As no
further action was taken thereon by the decedent's estate, there is no question that the assessment has become final and
executory.
In fact, the law firm that had lodged the protest appears to have accepted its denial. as shown in the letter from the
commissioner. Significantly, it has not been denied by the petitioner.
11. In view of the finality of the first assessment, the petitioner cannot now raise the question of its validity before this
Court any more than he could have done so before the CTA.
12. What the estate of the decedent should have done earlier, following the denial of its protest on July 7, 1978, was to
appeal to the CTA within the reglementary period of 30 days after it received notice of said denial. It was in such
appeal that the petitioner could then have raised the first two issues he now raises without basis in the present
petition.
13. The question of whether or not the shares of stock left by the decedent should be considered conjugal property or
belonging to him alone is immaterial in these proceedings. So too is the time at which the assessment of these
shares of stock should have been made by the BIR. These questions were not resolved by the CTA because it had
no jurisdiction to act on the petitioner's appeal from an assessment that had already been cancelled. The
assessment being no longer controversial or reviewable, there was no justification for the respondent court to rule
on the petition except to dismiss it.
14. If indeed the Commissioner of Internal Revenue committed an error in the computation of the estate tax, as the
petitioner insists, that error can no longer be rectified because the original assessment has long become final and
executory. If that assessment was not challenged on time and in accordance with the prescribed procedure, that
error for error it was was committed not by the respondents but by the decedent's estate itself which the
petitioner represents. So how can he now complain.
DISPOSITIVE: WHEREFORE, the petition is DENIED, with costs against the petitioner. It is so ordered,

Elegado V CA Digest

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Elegado V CA Digest

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NOTES/FF:

ILDEFONSO O. ELEGADO, as Ancillary Administrator of the

14, 1976 - Warren Taylor Graham:

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