REPUBLIC OF THE PHILIPPINES, PLAINTIFF AND APPELLEE, VS. JOSEPH ARCACHE, ET AL, DEFENDANTS AND APPELLANTS.

On July 7, 1958, the Republic of the Philippines filed an action
against Joseph Arcache and the Globe Assurance Company, Inc. for the
forfeiture of the surety bond executed by them (Arcache, as principal,
and the Globe Assurance Company, Inc., as surety) to secure payment of
the sum of P22,E24.41 representing Arcache’s income tax for the year
1946 and surcharge, plus 1% monthly interest on the income tax proper
amounting to P18,289.71, from June 21, 1954 to August 31, 1956.

Arcache, after admitting some of the averments made in the complaint
and denying others, interposed the defense of prescription, and alleged
further that he was “compelled against his will” to execute the surety
bond sought to be forfeited, because the Bureau of Internal Revenue
refused to issue him a tax clearance – which he needed to make a
business trip abroad – unless he executed said bond to secure payment
of his alleged tax obligation.

The separate answer filed by the Globe Assurance Company, Inc.
likewise admitted some of the averments made in the complaint and
denied the others, and further alleged that it adopted the defense of
fact and law raised by its co-defendant; that the surety bond sought to
be forfeited became null and void as against it after the lapse of one
year from the date of its execution, for lack of consideration, Arcache
not having paid the required premium thereon for the second year; and
that, at any rate, it could not pay its obligation under the aforesaid
surety bond because of the injunction issued against it by the Court of
First Instance of Manila in Civil Case No. 30844. By way of
cross-claim, it sought Judgment against its co-defendant for the entire
amount that it might be sentenced to pay to the plaintiff by reason of
the surety bond heretofore mentioned, plus the sum of P863.43 as unpaid
premium on said bond.

Arcache was declared in default on the cross-claim,
and after receiving cross-plaintiffs evidence thereon, the lower court
rendered judgment as follows:

“WHEREFORE, the Court hereby
renders judgment on the cross-claim filed by defendant Globe Assurance
Company, Inc. against its co-defendant, Joseph Arcache, sentencing the
cross-defendant to pay the cross-claimant whatever amount may be
adjudged against it in favor of the plaintiff, with interest thereon at
the legal rate from the date of payment by cross-claimant until fully
paid by the cross-defendant; to pay the accrued premiums on the
ordinary bond for payment of taxes at the rate of P450.49 per annum or
fraction thereof, also with interest at the rate of 12% per annum from
the time the same became due and payable; and to pay an amount
equivalent to 15% of the total sum due to the Globe Assurance Company,
Inc.. by way of attorney’s fees. With costs against the cross
defendant.”

After trial on the issues arising from the main case, the lower
court also rendered judgment on April 27, 1959, the dispositive part of
which is as follows:

“WHEREFORE, the Court hereby renders judgment in
favor of the plaintiff and against the defendants, ordering said
defendants to pay plaintiff, jointly and severally, thru the
Commissioner of Internal Revenue, the sum of P22,524.41, plus interest
on the income tax proper of P18,289,81 at the rate of 12% per annum
from September 1, 1956 until the same is fully paid, and to pay the
costs.”

From the judgment last mentioned, Arcache appealed claiming that (a)
the lower court erred in not sustaining his defense of prescription and
(b) in holding that, by executing the surety bond to secure the payment
of the income tax allegedly due from him, he thereby acknowledged his
tax liability.

The evidence discloses that on March 1, 1947, appellant filed his
income tax return for the year 1946, which showed a loss in the amount
of P2,272.23 (Exh. B). Subsequent investigations revealed, however,
that in 1946 he had an unexplained increase in net worth, this
prompting the Bureau of Internal Revenue to use the “net worth method”
in determining his true income for said year. As a result, the
corresponding assessment was issued against him in 1948. Upon his
petition, several re-investigations of his income tax liability were
thereafter made, until finally in 1952 an assessment for P63,536.40 was
issued against him as income tax for 1946. (Exh. C) Not satisfied with
the result, Arcache asked for a further re-examination of his ease with
a view to deducting the sum of P60,000—representing advances for
goodwill, priority privilege etc— from his 1946 net income for that
year amounting to P137,944.00. The Bureau of Internal Revenue obliged
and made another re-investigation, this resulting in the finding that
appellant’s income in 1946, represented by his increase in net worth,
amounted to P77,944.00. Accordingly, on September 16, 1953, the Bureau
assessed against him the amounts of P19,080.96 and P9,540.48 as income
tax, and 50% surcharge, respectively (Exh. D-1).

On October 29, 1953, appellant wrote a letter to the Collector of
Internal Revenue thanking him and his staff “for having re-examined the
assessments and having found that what he really owed the internal
revenue office is P19,080.96 instead of previous assessments,” adding
that as already manifested in previous letters, he was “willing to pay
the amounts stipulated above minus of course the P2,000 I already paid
your office on account of said assessments”. He, however, asked for the
elimination of the 50% surcharge amounting to P9,540.48 on the ground
that his refusal to pay the tax was due to a mere misunderstanding and
not to any intention to defraud. Again, this request was granted, and
on December 9, 1953, another demand was made upon him for the payment
only of the sum of P19,080.96 representing the tax proper of. his
income tax liability for 1946, plus “the delinquency penalties incident
to late payment” and the additional sum of P133.501 as advertising
expenses incurred by the Bureau in the publication of the notice of
sale of his real properties (Exh. F-1).

On December 28 of the same year, appellant wrote another letter to
the Deputy Collector of Internal Revenue reminding him of the previous
payment of P2,000 on account of his 1946 income tax liability of
P19,080.96, and requesting for an extension of one-hundred twenty days
within which to pay the balance of P17,080.96 plus the 5% surcharge and
the monthly interest of 1%. (Exh. F)” Although this request was also
granted, appellant failed to pay within the extension granted. Instead,
on June 17, 1954, he remitted to the Bureau of Internal Revenue a
P1,000.00 check as partial payment of his tax liability “in sign of
good faith”, and requested another extension to pay the balance to give
him time to sell any of his properties in order to “liquidate once and
for all my obligations to the Internal Revenue”. (Exh. H)

On August 23,1955, appellant, as principal, and the Globe Assurance
Company, Inc., as surety, executed the surety bond Exhibit A to secure
payment of the former’s tax liability then amounting to P22,524.41.
They bound themselves, jointly and severally, to pay the aforesaid
amount and “to cover full payment of the obligation of Joseph Arcache
to the Bureau of Internal Revenue for income tax, surcharge and
interest computed under the inventory method, to be paid on or before
August 31, 1956”, and to pay to the Republic of the Philippines
whatever additional penalties may accrue on account of their failure to
pay each installment as it falls due.

While appellant contends that the above mentioned bond was secured
from him through coercion imposing its execution as a condition for the
issuance to him of a tax clearance required in connection with a trip
abroad he intended to make, the Bureau of Internal Revenue contends
that the bond was required to get assurance of payment in view of
appellant’s repeated failure to comply with his promise to settle his
tax liability. The issue thus arising is, however, immaterial because
even assuming that the bond was filed for the reason alleged by
petitioner, it seems obvious that the Bureau of Internal Revenue was
perfectly within its right in demanding the filing of the bond as a
condition for the issuance of the tax clearance for appellant.

Subsequently, that is on August 31, 1956, appellant proposed to
assign to the Bureau of Internal Revenue his rights, title and interest
in the amount of P20,713.00 allegedly due to him from the Department of
Labor as rentals in arrears, in partial satisfaction of his tax
obligation, but the proposition was rejected, the Bureau granting
petitioner instead another extension provided he filed with, to ten
days another surety bond with the conditions specified in its letter of
September 4, 1956 (Exh. M). Appellant, after obtaining two extensions
of time, failed to file the bond. Consequently, a final demand on him
and his surety for the settlement of their obligation under the bond of
August 23, 1955′ (Exhibits 0-1 and P) was made, and when they both
failed to do so, the present case was filed.

In the light of the undisputed facts stated heretofore we are of the
opinion that1 appellant is now barred from invoking the defense of
prescription.

In the first place, it appears obvious that the
delay in the collection of his 1946 tax liability was duo to his own
repeated requests for reinvestigation and similarly repeated requests
for extension of time to pay. This case, therefore, falls clearly
within the purview of our ruling in Collector of Internal Revenue vs.
Suyoc Consolidated Mining Company, et al. (104 Phil., 819) to this
effect:

“While we may argue with the Court of Tax Appeals that a mere request
for re-examination or reinvestigation may net have the effect of
suspending the running of the period of limitation for in such a ease
there is need of a written agreement to extend the period between the
Collector and the taxpayer, there are cases however where a taxpayer
may be prevented from setting up the defense of prescription even if he
has not previously waived it in writing as when by his repeated
requests or positive acts the Government has been, for good reasons,
persuaded to postpone collection to make him feel that the demand was
not unreasonable or that no harassment or injustice is ineant by the
Government. And when such situation comes to pass there are authorities
that hold, based on weighty reasons, that such an attitude or behavior
should not be countenanced if only to protect the interest of the
Government.”

“This case has no precedent in this jurisdiction for it is the first
time that such has arisen, hut thore arc several precedents that may to
invoked in American jurisprudence. As Mr. Justice Cardoso has said:
“The applicable principle is fundamental and unquestioned. ‘He who
prevents a thing from being done mav not avail himself of the
non-performance which he has himself occasioned, for the law says to
him in effect ‘this is your own act and therefore you are damnified.’
(R.H. Stearns Co. v. U.S., 78 L. ed., 647). Or, as was aptly said, “The
tax could have been collected, but the government withheld action at
the specific request of the plaintiff. The plaintiff is now estopped
and should not be permitted to raise the defense of the Statute of
Limitations.” (Newport Co. v. U.S., (DC-WIS), 34 F. Supp. 588)”.

In the second place, appellant admitted in writing his tax
obligation and promised to pay the same, not once but several times
even after the date when—according to him—the Government’s right to
-collect had already prescribed, In fact, he not only made such
repeated promises to settle his account but he actually made two
partial payments, the first of P2,000 and the last of P1,000.

In the third place, it is to be noted that the present action was
filed for the forfeiture of the bond Exhibit A in satisfaction of the
tax obligation of appellant. Thus, the action is for the enforcement of
a written contractual obligation, for which the: prescriptive period is
ten years —which in this case had not yet elapsed when the action was
filed. It is already settled in this connection that the giving of a
bond as a condition of an extension of time for the payment of income
tax, even after the collection of the tax as such was barred by the
statute of limitations, dees not preclude recovery on the bond (John
Bart Company vs. U.S., 279 U.S. P. 370; 73 L. Ed. 743) ; U.S. vs. E.
Hogshire and Co. (1930; D.C.) 37 F. (2d) 720; U.S. vs. Ruth, 62 (2d)
385 (CCA 5th, 1933).

Finally, to the same effect is our ruling in Sembrano vs. the Court of Tax Appeals, et al., 101 Phil., 1, as follows:

“By virtue of this instrument, petitioner in fact acknowledged the
existence of the tax liabilities * * * * *, and assumed the obligation
to settle the same. Although the percentage tuxes for the years
1939-1941 and 1945 may have been extinguished by prescription on
ilecount of the mandate of Sections 331 and 332, yet in the case at
bar, petitioner’s obligation to pay the percentage taxes for the years
1939-1941 and 1945, assessed on January 6, 1951, and re-assessed on
April 28, 1951, as well as other tax deficiencies, was acknowledged by
means of the chattel mortgage of, May 3.1931. an act which amounts to a
renewal (renovacion) of the obligation or a waiver of the benefit
granted by law to the petitioner who is estopped from raising the
question of prescription after having waived such defense by the
execution of said mortgage.”

WHEREFORE, finding no error in the decision appealed from, the same is hereby affirmed, with costs.

Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Reyes, J. B. L., Barrera, Paredes, Regala, and Makalintal, JJ., concur.