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 R…

What the petitioner presents as a rather complicated problem is in reality a very simple
question from the viewpoint of the Solicitor General.  We agree with the latter.  There is actually only one issue to be resolved
in this action.  That issue is whether or not the respondent
Court of Tax Appeals erred in dismissing the petitioner’s appeal on grounds of
jurisdiction and lack of a cause of action.

Appeal from what?  That
indeed is the question.

But first the facts.

On March
14, 1976, Warren
Taylor Graham, an American national formerly resident in the Philippines, died in Oregon, U.S.A.^[1] As he left certain shares of stock in the Philippines, his son, Ward Graham, filed an estate tax
return on September 16, 1976, with the Philippine Revenue Representative
in San
Francisco, U.S.A.^[2]

On the basis of this
return, the respondent Commissioner of Internal Revenue assessed the decedent’s
estate an estate tax in the amount of P96,509.35 on February
9, 1978.^[3] This assessment was protested on March 7,
1978, by the law
firm of Bump, Young and Walker on behalf of the estate.^[4] The protest was denied by the Commissioner
on July 7, 1978.^[5] No further action was taken by the estate in
pursuit of that protest.

Meanwhile, on January
18, 1977, the
decedent’s will had been admitted to probate in the Circuit Court of
Oregon.^[6] Ward Graham, the designated executor, then
appointed Ildefonso Elegado,
the herein petitioner, as his attorney-in-fact for the allowance of the
will in the Philippines.^[7]

Pursuant to such
authority, the petitioner commenced probate proceedings in the Court of First
Instance of Rizal.^[8] The will was allowed on December
18, 1978, with the
petitioner as ancillary administrator.^[9] As such, he filed a second estate tax return with the Bureau of Internal
Revenue on June 4, 1980.^[10]

On the basis of this
second return, the Commissioner imposed an assessment on the estate in the amount of P72,948.87.^[11] This was protested on behalf of the estate
by the Agrava, Lucero and Gineta
Law Office on August 13, 1980.^[12]

While this protest was
pending, the Commissioner filed in the probate proceedings a motion for the
allowance of the basic estate tax of P96,509.35 as
assessed on February 9, 1978.^[13] He said that this liability had not yet been
paid although the assessment had long become final and executory.

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.^[14] On this understanding, he filed on September
15, 1981, a petition
for review with the Court of Tax Appeals challenging the said assessment.^[15]

The Commissioner did not
immediately answer (in fact, as the petitioner stressed, no answer was filed
during a delay of 195 days) and in the end instead canceled the protested
assessment in a letter to the decedent’s estate dated March
31, 1982.^[16] This cancellation was notified to the Court
of Tax Appeals in a motion to dismiss on
the ground that the protest had become
moot and academic.^[17]

The motion was granted
and the petition dismissed on April 25, 1984.^[18] The petitioner then came to this Court on certiorari under
Rule 45 of the Rules of Court.

The petitioner raises
three basic questions, to wit, (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.

We deal first with the third
issue as it is decisive of this case.

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. ILDEFONSO O.
ELEGADO

Ancillary
Administrator

Philex Building
cor. Brixton &

Fairlane
Sts.

Pasig, Metro Manila

S i r :

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^[19]

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.

In its decision, the Court of Tax Appeals said that the petition
questioning the assessment of July 3,
1980, was “premature” since the protest to the assessment
had not yet been resolved.^[20]
As a matter of fact it had:  the said
assessment had been canceled 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.

The 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.

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.”^[21] 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 petititoner
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.  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.  In his motion with the
probate court, the respondent Commissioner stressed that “in a letter
dated January 29, 1980, the
Estate of Warren Taylor Graham thru the aforesaid foreign law firm informed
claimant that they have paid said tax liability thru the Agrava,
Velarde, Lucero and Puno,
Philippine law firm of 313 Buendia Avenue Ext., Makati, Metro Manila that initiated the instant ancillary
proceedings” although he added that such payment had not yet been
received.^[22] This letter was an acknowledgment by the
estate of the validity and finality of the first assessment.  Significantly, it has not been denied by the
petitioner.

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 Court of Tax Appeals.  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 Court of Tax Appeals 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.

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 Court of Tax Appeals
because it had no jurisdiction to act on the petitioner’s appeal from an
assessment that had already been canceled. 
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.

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?

WHEREFORE, the petition is DENIED, with costs against the
petitioner.  It is so ordered.

Narvasa, (Chairman), Griño-Aquino, and Medialdea, JJ., concur.

Gancayco, J., on leave.

^[1]
Rollo, p. 9.

^[2]
Ibid., p. 40

^[3]
Id.

^[4]
Id.

^[5]
Id.

^[6]
Id., p. 65.

^[7]
Id., pp. 65-66.

^[8]
Id., p. 66; Sp. Proc. No. 8869.

^[9]
Id.

^[10]
Id.

^[11]
Id., p. 67.

^[12]
Id., p. 68.

^[13]
Id., pp. 47-50.

^[14]
Id., p. 69.

^[15]
Id., p. 50.

^[16]
Appendix B, Rollo, p. 35.

^[17]
Rollo, p. 50.

^[18]
Decision, penned by Judge Alex Z. Reyes, with Presiding Judge Amante
Filler and Judge Constante C. Roaquin,
concurring.

^[19]
Appendix B, Rollo, p. 35.

^[20]
Rollo, pp. 53-54.

^[21]
Ibid., p. 11.

^[22]
Id., p. 49.