MELECIO R. DOMINGO, AS COMMISSIONER OF INTERNAL REVENUE, PETITIONER, VS. HON. LORENZO C. GARLITOS, IN HIS CAPACITY AS JUDGE OF THE COURT OF FIRST INSTANCE OF LEYTE, AND SIMEONA …

This is a petition for certiorari and mandamus against the Judge of
the Court of First Instance of Leyte, Hon. Lorenzo C. Garlitos,
presiding, seeking to annul certain orders of the court and for an
order in this Court directing the respondent court below to execute the
judgment in favor of the Government against the estate of Walter Scott
Price for internal revenue taxes.

It appears that in Melecio R. Domingo vs. Hon. Judge S. C.
Moscoso, 106 Phil., 1138, this Court declared as final and executory
the order for the payment by the estate of the estate and inheritance
taxes, charges and penalties amounting to P40,058.55, issued by the
Court of First Instance of Leyte in special proceedings No. 14 entitled
“In the Matter of the Inestate Estate of the Late Walter Scott Price.”
In order to enforce the claims against the estate the fiscal presented
a petition dated June 21, 1961, to the court below for the execution of
the judgment. The petition was, however, denied by the court which held
that the execution is not justifiable as the Government is indebted to
the estate under administration in the amount of P262,200. The orders
of the court below dated August 20, 1960 and September 28, 1960,
respectively, are as follows:

“Atty. Benedicto submitted a copy of the contract
between Mrs. Simeona K. Price, Administratrix of the estate of her late
husband Walter Scott Price and Director Zoilo Castrillo of the Bureau
of Lands dated September 19, 1956 and acknowledged before Notary Public
Salvador V. Esguerra, legal adviser in Malacañang to Executive
Secretary De Leon dated December 14, 1956, the note of His Excellency,
Pres. Carlos P. Garcia, to Director Castrillo dated August 2, 1958,
directing the latter to pay to Mrs. Price the sum of P368,140.00, and
an extract of page 765 of Republic Act No. 2700 appropriating the sum
of P262.200.00 for the payment to the Leyte Cadastral Survey, Inc.,
represented by the administratriX Simeona K. Price, as directed in the
above note of the President. Considering these facts, the Court orders
that the payment of inheritance taxes in the sum of P40,058.55 due the
Collector of Internal Revenue as ordered paid by this Court on July 5,
1960 in accordance With the order of the Supreme Court promulgated July
30, 1960 in 106 Phil., 1138, be deducted from the amount of P262,200.00
due and payable to the administratrix Simeona K. Price, in this estate,
the balance to be paid by the Government to her without further delay.”
(Order of August 20, 1960).

“The Court has nothing further to
add to its order dated August 20, 1960 and it orders that the payment
of the claim of the Collector of Internal Revenue be deferred until the
Government shall have paid its accounts to the administratrix herein
amounting to P262.200.00. It may not be amiss to repeat that it is only
fair for the Government, as a debtor, to pay its accounts to its
citizens-creditors before it can insist in the prompt payment cf the
letter’s account to it, specially taking into consideration that the
amount due the Government draws interests while the credit due to the
present estate does not accrue any interest.” (Order of September 28,
1960).

The petition to set aside the above orders of the court below and
for the execution of the claims of the Government against the estate
must be denied for lack of merit. The ordinary procedure by which to
settle claims or indebtedness against the estate of a deceased person,
as an inheritance tax, is for the claimant to present a claim before
the probate court so that said court may order the administrator to pay
the amount thereof. To such effect is the decision of this Court in
Aldamiz vs. Judge of the Court of First Instance of Mindoro, 85 Phil., 228, Dec. 29, 1949, thus:

“*  *  * a writ of execution is not the proper
procedure allowed by the Rules of Court for the payment of debts and
expenses of administration. The proper procedure is for the court to
order the sale of personal estate or the sale or mortgage of real
property of the deceased and all debts or expenses of administration
should be paid out of the proceeds of the sale or mortgage. The order
for the sale or mortgage should be issued upon motion of the
administrator and with the written notice to all the heirs, legatees
and devisees residing in the Philippines, according to Rule 89, section
3, and Rule 90, section 2. And when sale or mortgage of real estate is
to be made, the regulations contained in Rule 90, section 7, should be
complied with.

“Execution may issue only where the devisees,
legatees or heirs have entered into possession of their respective
portions in the estate prior to settlement and payment of the debts and
expenses Of administration and it is later ascertained that there are
such debts and expenses to be paid, in which case ‘the court having
jurisdiction of the estate may, by order for that purpose, after
hearing, settle the amount of their several liabilities, and order how
much and in what manner each person shall contribute, and may issue execution if circumstances require’ (Rule 89, section 6; see also Rule 74, section 4; Italics ours.) And this is not the instant case.”

The legal basis for such a procedure is the fact that in the testate
or intestate proceedings to settle the estate of a deceased person, the
properties belonging to the estate are under the jurisdiction of the
court and such jurisdiction continues until said properties have been
distributed among the heirs entitled thereto. During the pendency of
the proceedings all the estate is in custodia legis and the
proper procedure is not to allow the sheriff, in case of a court
judgment, to seize the properties but to ask the court for an order to
require the administrator to pay the amount due from the estate and
required to be paid.

Another ground for denying the petition of the provincial fiscal is
the fact that the court having jurisdiction of the estate had found
that the claim of the estate against the Government has been recognized
and an amount of P262,200 has already been appropriated for the purpose
by a corresponding law (Rep. Act No. 2700). Under the above
circumstances, both the claim of the Government for inheritance taxes
and the claim of the intestate for services rendered have already
become overdue and demandable as well as fully liquidated.
Compensation, therefore, takes place by operation of law, in accordance
with the provisions of Articles 1279 and 1290 of the Civil Code, and
both debts are extinguished to the concurrent amount, thus:

“Art. 1290. When all the requisites mentioned in
article 1279 are present, compensation takes effect by operation of
law, and extinguishes both debts to the concurrent amount, even though
the creditors and debtors are not aware of the compensation.”

It is clear, therefore, that the petitioner has no clear right to
execute the judgment for taxes against the estate of the deceased
Walter Scott Price. Furthermore, the petition for certiorari and
mandamus is not the proper remedy for the petitioner. Appeal is the
remedy.

The petition is, therefore, dismissed, without costs.

Padilla, Bautista Angelo, Concepcion, Barrera, Paredes, Dizon, Regala, and Makalintal, JJ., concur.
Reyes, J.B.L. in the result.