FERDINAND R. MARCOS II, petitioner, vs.

COURT OF
APPEALS, THE COMMISSIONER OF THE BUREAU OF
INTERNAL REVENUE and HERMINIA D. DE GUZMAN

G. R. No. 120880. June 5, 1997

FACTS:
 The matter of the settlement of the estate of the late former President
Ferdinand E. Marcos, and its dues to the government in estate taxes, are
still unresolved seven years after his death .
 On September 29, 1989, former President Ferdinand Marcos died in
Honolulu, Hawaii, USA.
 A Special Tax Audit Team was created on June 27, 1990 to conduct
investigations and examinations of the tax liabilities and obligations of
the late president, as well as that of his family, associates and “cronies.”
 The investigation disclosed that the Marcoses failed to file a written
notice of the death of the decedent. The Investigation also found that the
Marcoses failed to file the Estate Tax Return for the estate of the
decedent, as well as several income tax returns covering the years 1982
to 1986, -all in violation of the National Internal Revenue Code (NIRC).
 Criminal charges were filed against Mrs. Imelda R. Marcos before the
Regional Trial Court of Quezon City for violations of Sections 82, 83
and 84 of the National Internal Revenue Code (NIRC)
 Commissioner of Internal Revenue then caused the preparation and
filing of the Estate Tax Return for the estate of the late president, the
Income Tax Returns of the Spouses Marcos for the years 1985 to 1986,
and the Income Tax Returns of petitioner Ferdinand ‘Bongbong’ Marcos
II for the years 1982 to 1985.
 On July 26, 1991, the BIR issued the following:
 Deficiency estate tax assessment against the estate of the late
president Ferdinand Marcos in the amount of P23,293,607,638.00.
 Deficiency income tax assessment against the Spouses Ferdinand
and Imelda Marcos in the amounts of P149,551.70 and
P184,009,737.40 representing deficiency income tax for the years 1985
and 1986.
 Deficiency income tax assessment against petitioner Ferdinand
‘Bongbong’ Marcos II in the amounts of P258.70 pesos; P9,386.40
Pesos; P4,388.30 Pesos; and P6,376.60 Pesos representing his deficiency
income taxes for the years 1982 to 1985
 Commissioner of Internal Revenue avers that copies of the deficiency
estate and income tax assessments were all personally and constructively
served on August 26, 1991 and September 12, 1991 upon Mrs. Imelda
Marcos (through her caretaker Mr. Martinez) at her last known address.
 Copies of the deficiency tax assessments issued against petitioner
Ferdinand ‘Bongbong’ Marcos II were also personally and
constructively served upon him (through his caretaker) on September 12,
1991, at his last known address.

Sultan Sarabutnik Notes

 Formal Assessment notices were served on October 20, 1992, upon Mrs.
Marcos c/o petitioner, at his office, House of Representatives, Batasan
Pambansa, Quezon City.
 a notice to Taxpayer inviting Mrs. Marcos (or her duly authorized
representative or counsel), to a conference, was furnished the counsel of
Mrs. Marcos, Dean Antonio Coronel—but to no avail.
 The deficiency tax assessments were not protested administratively, by
Mrs. Marcos and the other heirs of the late president, within 30 days
from service of said assessments.
 On February 22, 1993, the BIR Commissioner issued twenty-two notices
of levy on real property against certain parcels of land owned by the
Marcoses—to satisfy the alleged estate tax and deficiency income taxes
of Spouses Marcos.
 On May 20, 1993, four more Notices of Levy on real property were
issued for the purpose of satisfying the deficiency income taxes.
 On May 26, 1993, additional four notices of Levy on real property were
again issued. The foregoing tax remedies were resorted to pursuant to
Sections 205 and 213 of the National Internal Revenue Code (NIRC).
 Counsel of herein petitioner called the attention of the BIR via a letter
requesting that they be duly notified of any action taken by the BIR
affecting the interest of their client Ferdinand ‘Bongbong’ Marcos II, as
well as the interest of the late president. In response, copies of the
aforesaid notices were served on April 7, 1993 and on June 10, 1993,
upon Mrs. Imelda Marcos, the petitioner, and their counsel of record ,
‘De Borja, Medialdea, Ata, Bello, Guevarra and Serapio Law Office.
 Notices of sale at public auction were posted on May 26, 1993, at the
lobby of the City Hall of Tacloban City. The public auction for the sale
of the eleven (11) parcels of land took place on July 5, 1993. There being
no bidder, the lots were declared forfeited in favor of the government.
 Petitioner Ferdinand R. Marcos II questions the actuations of the
respondent Commissioner of Internal Revenue in assessing, and
collecting through the summary remedy of Levy on Real Properties,
estate and income tax delinquencies upon the estate and properties of his
father, despite the pendency of the proceedings on probate of the will of
the late president in the Regional Trial Court of Pasig.
 Petitioner then filed with the respondent Court of Appeals a Petition for
Certiorari and Prohibition with an application for writ of preliminary
injunction and/or temporary restraining order on June 28, 1993, seeking
to annul and set aside the Notices of Levy and Notices of Sale as well as
to enjoin the Head Revenue Executive Assistant Director II from
proceeding with the Auction of the real properties covered by Notices of
Sale.
 Court of Appeals rendered its Decision on November 29, 1994, ruling
that the deficiency assessments for estate and income tax made upon the
petitioner and the estate of the deceased President Marcos have already
become final and unappealable, and may thus be enforced by the
summary remedy of levying upon the properties of the late President, as
was done by the respondent Commissioner of Internal Revenue.

Sultan Sarabutnik Notes

ISSUE(S):

 W/N the BIR has the authority to collect by summary remedy of levying
upon, and sale of real properties of the decedent, estate tax deficiencies,
without the cognition and authority of the court sitting in probate over
the supposed will of the deceased? (YES)
 W/N the deficiency assessments for estate and income tax made upon the
petitioner and the estate of the deceased President Marcos have already
become final and unappealable, and may thus be enforced by the
summary remedy of levying upon the properties of the late President, as
was done by the respondent Commissioner of Internal Revenue? (YES)

RULLING:

As to the issue of W/N the BIR has the authority to collect by summary
remedy of levying upon and subsequent sale of real properties of the
decedent without the cognition and authority of the court sitting in
probate; the Supreme Court ruled in the affirmative.

the assessment of an inheritance tax does not directly involve the

administration of a decedent’s estate, although it may be viewed as an
incident to the complete settlement of an estate, and, under some statutes, it
is made the duty of the probate court to make the amount of the inheritance
tax a part of the final decree of distribution of the estate. It is not against the
property of decedent, nor is it a claim against the estate as such, but it is
against the interest or property right which the heir, legatee, devisee, etc.,
has in the property formerly held by decedent. Further, under some statutes,
it has been held that it is not a suit or controversy between the parties, nor is
it an adversary proceeding between the state and the person who owes the
tax on the inheritance. However, under other statutes it has been held that the
hearing and determination of the cash value of the assets and the
determination of the tax are adversary proceedings. The proceeding has been
held to be necessarily a proceeding in rem.

The enforcement and collection of estate tax, is executive in character, as the

legislature has seen it fit to ascribe this task to the BIR.

The approval of the court, sitting in probate, or as a settlement tribunal over

the deceased is not a mandatory requirement in the collection of estate taxes.
There is nothing in the Tax Code, and in the pertinent remedial laws that
implies the necessity of the probate or estate settlement court's approval of
the state's claim for estate taxes, before the same can be enforced and
collected. On the contrary, under Section 87 of the NIRC, it is the probate or
settlement court which is bidden not to authorize the executor or judicial
administrator of the decedent's estate to deliver any distributive share to any
party interested in the estate, unless it is shown a Certification by the
Commissioner of Internal Revenue that the estate taxes have been paid.

Sultan Sarabutnik Notes

As to the Issue of W/N the deficiency assessments for estate and income
tax made upon the petitioner and the estate of the deceased President
Marcos have already become final and unappealable, and may thus be
enforced by the summary remedy of levy; the Supreme Court ruled in the
affirmative.

If there is any issue as to the validity of the BIR’s decision to assess the
estate taxes, this should have been pursued through the proper administrative
and judicial avenues provided for by law. Section 229 of the NIRC provides:

“Sec. 229. Protesting of assessment.—When the Commissioner of Internal

Revenue or his duly authorized representative finds that proper taxes should
be assessed, he shall first notify the taxpayer of his findings. Within a period
to be prescribed by implementing regulations, the taxpayer shall be required
to respond to said notice. If the taxpayer fails to respond, the Commissioner
shall issue an assessment based on his findings.

Such assessment may be protested administratively by filing a request for

reconsideration or reinvestigation in such form and manner as may be
prescribed by implementing regulations within thirty (30) days from receipt
of the assessment; otherwise, the assessment shall become final and
unappealable.

If the protest is denied in whole or in part, the individual, association or

corporation adversely affected by the decision on the protest may appeal to
the Court of Tax Appeals within thirty (30) days from receipt of said
decision; otherwise, the decision shall become final, executory and
demandable. (As inserted by P.D. 1773)”

Apart from failing to file the required estate tax return within the time
required for the filing of the same, petitioner, and the other heirs never
questioned the assessments served upon them, allowing the same to lapse
into finality, and prompting the BIR to collect the said taxes by levying upon
the properties left by President Marcos.

The omission to file an estate tax return, and the subsequent failure to
contest or appeal the assessment made by the BIR is fatal to the petitioner’s
cause, as under Article 223 of the NIRC, “In the case of a false or fraudulent
return with intent to evade tax or of a failure to file a return, the tax may be
assessed, or a proceeding in court for the collection of such tax may be
begun without assessment, at any time within ten (10) years after the
discovery of the falsity, fraud, or omission”. Since the estate tax assessment
had become final and unap-pealable by the petitioner’s default as regards
protesting the validity of the said assessment, there is now no reason why the
BIR cannot continue with the collection of the said tax. Any objection
against the assessment should have been pursued following the avenue
paved in Section 229 of the NIRC on protests on assessments of internal
revenue taxes.

Sultan Sarabutnik Notes

Objections to the assessments should have been raised, considering the
ample remedies afforded the taxpayer by the Tax Code, with the Bureau of
Internal Revenue and the Court of Tax Appeals, as described earlier, and
cannot be raised now via Petition for Certiorari, under the pretext of grave
abuse of discretion.

Sultan Sarabutnik Notes