ENGRACIO FRANCIA vs. INTERMEDIATE APPELLATE COURT G.R. No.

L-67649 JUNE 28, 1988

FACTS: Engracio Francia (petitioner) is the registered owner of a residential lot and a two-story house
built upon it situated at Barrio San Isidro, Pasay City, Manila. The Republic of the Philippines
expropriated on October 15, 1977, 125 square meters of the portion of Francia’s property for the sum of
P4,116.00. On December 5, 1977, however, Francia’s property was sold at a public auction by the City
Treasurer of Pasay City to Ho Fernandez because Francia failed to pay his real estate taxes from 1963 up
to 1977. Francia’s tax delinquency amounted to P2,400.00. Francia filed a complaint to annul the auction
sale based on the allegation that he was not duly notified of the auction sale; that his tax delinquency
was supposed to be set off by the government’s debt to him; and that the amount paid by the highest
bidder was grossly inadequate.

ISSUES: Whether petitioner’s tax delinquency of P2,400.00 was supposed to be set off by the
government’s debt to the petitioner by the amount of P4,116.00.

RULING: No. There can be 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. In the case of Corders v. Gonda (18 SCRA 331),
the Supreme Court reiterated that “…internal revenue taxes cannot be the subject of compensation
[because] government and taxpayer are not mutually creditors and debtors of each other…” Moreover,
the tax was due to the city government while the expropriation was effected by the national
government.