Source: http://lawlibrary.chanrobles.com/index.php?option=com_content&amp;view=article&amp;id=45883:150308&amp;catid=1459&amp;Itemid=566
Timestamp: 2019-04-26 03:54:28+00:00

Document:
G.R. No. 150308 - VIVE EAGLE LAND, INC., ET AL. v. COURT OF APPEALS, ET AL.
VIVE EAGLE LAND, INC. and VIRGILIO O. CERVANTES, Petitioners, v. COURT OF APPEALS and GENUINO ICE CO., INC., Respondents.
This is a petition filed by Vive Eagle Land, Inc. (VELI) and Virgilio Cervantes for the review of the July 19, 2001 Decision1 and October 4, 2001 Resolution of the Court of Appeals (CA) in CA-G.R. CV No. 51933.
b) To pay the capital gains tax and other requirements or expenses necessary to effect said transfer.
b) In the alternative, if eviction is not accomplished to forfeit the amount of P300,000 in favor of plaintiff.
In their answer13 to the complaint, the petitioners alleged that the respondent had no cause of action against them because (a) petitioner VELI was exempt from the payment of capital gains tax; (b) the Spouses Flores and Tobias were liable for the payment of capital gains tax; and (c) the Spouses Flores and Tobias were responsible for the eviction of the occupants/squatters from the property.
WHEREFORE, foregoing considered, judgment is hereby rendered in favor of plaintiff ordering defendants to cause the transfer of the title to the plaintiff. The payment of the capital gains tax shall be paid by the defendants. Further, defendants are hereby ordered to remove or evict or cause the removal or eviction of the squatters or unlawful occupants of the area, otherwise, the amount of P300,000.00 shall be deemed forfeited in favor of plaintiff; to pay attorney's fees of P20,000.00 and to pay the costs.
The trial court held that the petitioners were liable for the payment of the capital gains tax, and that the respondent was not privy to the deeds of absolute sale executed by the Spouses Flores and TATIC, and TATIC and petitioner VELI, and as such is not bound by the said deeds; neither could the respondent enforce the same against the Spouses Flores, TATIC and petitioner VELI.
The petitioners, in the instant Petition for Review , raise the following issues for resolution: (a) whether or not petitioner VELI is obliged to pay for the expenses for transfer of the property and the issuance of the titles to and under the name of the respondent; (b) whether or not the petitioners are liable for the capital gains tax for the sale between petitioner VELI and the respondent; and (c) whether or not the petitioners are obliged to evict the remaining squatters from the land.
from the Property at the Expense of the Petitioner.
The petitioners assail the ruling of the CA that, under Article 1487 of the New Civil Code, petitioner VELI, as vendor, is liable for the expenses for the registration of the third deed of sale in favor of the respondent, as vendee, and to secure a torrens title over the property to and under the name of the latter. The petitioners contend that, under the MOA executed by the Spouses Flores, Tobias (the broker), the Bank and TATIC, the April 14, 1988 agreement and the first deed of sale executed by the Spouses Flores and Tobias, the latter obliged themselves to spend for the registration of the said deed of absolute sale and for the issuance of torrens titles over the properties in the name of the vendees; and further obliged themselves to cause the eviction of the tenants/occupants from the property within sixty days from April 12, 1988. The petitioners, likewise, emphasize that, under the April 14, 1988 agreement of the petitioners and TATIC, the latter obliged itself to cause and spend for the registration of the second deed of sale between petitioner VELI and TATIC, and the issuance of the titles over the property in favor of petitioner VELI; and to cause the eviction of the tenants/occupants from the property within sixty days from April 12, 1988. Also, under the deed of assignment of rights executed by petitioner VELI and the respondent, the latter acquired the rights and interests of petitioner VELI under the deeds of sale executed by the Spouses Flores in favor of TATIC, and by TATIC in favor of petitioner VELI.
The petitioners aver that, under the deed of sale they executed in favor of the respondent, as well as the acts of the parties before, contemporaneous with and subsequent to the execution of the said deed, they cannot be held liable for the expenses for the registration of the third deed of sale, the transfer of titles to and under the name of the respondent, for payment of the capital gains tax and the eviction of the tenants/occupants on the property. Such acts include the execution of the following: the addendum to the said deed of sale; the deed of assignment of rights executed by petitioner VELI in favor of the respondent; and the deeds executed by the Spouses Flores, TATIC and Tobias.
The petitioners contend that the CA erred in ruling that the respondent is not bound by the deeds executed by the Spouses Flores, TATIC and Tobias, and by TATIC and petitioner VELI simply because the respondent was not a party to the said deeds. The petitioners insist that the respondent acquired the rights and interests of its predecessors; and, being the vendee/owner of the property covered by TCT No. 241846, the petitioners had the right to enforce the said contracts against its predecessors.
We are not in full accord with the petitioners. It bears stressing that there are three separate deeds of absolute sale on record, to wit: first, the April 13, 1988 deed of absolute sale executed by the Spouses Flores and TATIC; second, the April 14, 1988 deed of absolute sale executed by TATIC in favor of petitioner VELI; and third, the November 11, 1988 deed of absolute sale between petitioner VELI, as vendor, and the respondent, as vendee, over the property covered by TCT No. 241846. Under the April 13, 1988 MOA executed by the Spouses Flores, Tobias, TATIC and the Bank, the Spouses Flores and Tobias obliged themselves to spend for and cause the registration of the first deed of absolute sale, to cause the issuance of the torrens titles over the property to and under the name of TATIC, as vendee, and to pay the capital gains tax on the said sales. Tobias and TATIC bound and obliged themselves to cause the eviction of the tenants/occupants on the property within sixty days from April 12, 1988, with the assistance of the Spouses Flores. On the other hand, under the April 14, 1988 agreement of TATIC and petitioner VELI, TATIC obliged itself to spend for the registration of the second deed of absolute sale and the issuance of the titles over the property to and under the name of petitioner VELI, and to cause the eviction of the tenants/occupants from the property within sixty days from April 12, 1988. TATIC did not bind itself to pay the capital gains tax for the said sale.
Under Article 149518 of the New Civil Code, petitioner VELI, as the vendor, is obliged to transfer title over the property and deliver the same to the vendee. While Article 149819 of the New Civil Code provides that the execution of a notarized deed of absolute sale shall be equivalent to the delivery of the property subject of the contract, the same shall not apply if, from the deed, the contrary does not appear or cannot clearly be inferred. In the present case, the respondent and petitioner VELI agreed that the latter would cause the eviction of the tenants/occupants and deliver possession of the property. It is clear that at the time the petitioner executed the deed of sale in favor of the respondent, there were tenants/occupants in the property. It cannot, thus, be concluded that, through the execution of the third deed of sale, the property was thereby delivered to the respondent.
Petitioner VELI is obliged to cause the eviction of the tenants/occupants unless there is a contrary agreement of the parties. Indeed, under the addendum executed by petitioner VELI and the respondent, the latter was given the right to withhold P300,000.00 of the purchase price until after petitioner VELI cleared the property of squatters.
While it is true that the respondent acquired the rights and interests of TATIC under the first deed of sale and that of petitioner VELI under the second deed of sale by virtue of the deed of assignment of rights executed by the petitioners and the respondent, the latter cannot enforce the terms and conditions of the said deeds. It must be stressed that there is no showing in the records that the Spouses Flores, Tobias and TATIC conformed to the said deed of assignment of rights or that the same was registered in the office of the Register of Deeds in accordance with Article 162520 of the New Civil Code.
NOW THEREFORE, for and in consideration of the foregoing premises, the Transferee hereby retains and holds from the Transferor the amount of Three Hundred Thousand & 00/100 Pesos (P300,000.00), from the purchase price due the Transferor until after the premises have been rid of and cleared from squatters occupying therein.
We agree with the petitioners' contention that petitioner VELI is not liable for the payment of capital gains tax for the third deed of sale. A capital gains tax is a final tax assessed on the presumed gain derived by citizens and resident aliens, as well as estates and trusts, from the sale or exchange of real property.22 Under the first sale, per the agreement of the Spouses Flores, TATIC, and Tobias, the said spouses were obliged to pay the capital gains tax. However, under the deed of absolute sale for the second sale, TATIC was not obliged to pay the said tax. The Court notes that in answer to the respondent's demand letter, petitioner VELI claimed that such tax could not be assessed against it or against TATIC for the reason that they are corporations and, therefore, exempt from the payment of capital gains tax for any sale or exchange or disposition of property.
In reply to your letter dated September 11, 1985, I have the honor to inform you that Revenue Regulations No. 8-79 implementing Section 34(h) of the Tax Code, as amended by Batas Pambansa Blg. 37 is explicit that only natural persons or individuals are liable to the final capital gains tax prescribed therein. Such being the case, the gains derived by your client, the Religious of the Virgin Mary from the sale of its real property in Balanga, Bataan, is not subject to the final capital gains tax prescribed by Section 34(h) of the Tax Code, as amended by Batas Pambansa Blg. 37 but to the ordinary corporate income tax prescribed under Section 24(a) of the same Code, as amended.
This is the reason why, in the second sale, neither TATIC nor petitioner VELI paid any capital gains tax. Similarly, in the third sale, i.e., between petitioner VELI and the respondent, petitioner VELI, being a corporation, was not obliged to pay the capital gains tax. However, petitioner VELI, as seller, should have included in its ordinary income tax return, whatever gain or loss it incurred with respect to the sale of the property in dispute, pursuant to Section 24(a)26 of the 1977 NIRC, as amended.
Such tax shall be in lieu of the tax imposed under Section 21 of this Code; Provided, however, That the tax liability, if any, on gains from sales or other dispositions of real property to the government or any of its political subdivisions or agencies or to government-owned and controlled corporations shall be determined either under Section 21 hereof or under this Section, at the option of the taxpayer; Provided, further, That if the taxpayer elects to report such gains in accordance with the provisions of Section 43(b), the amount of the tax which shall be paid on each installment shall be the proportion of the tax herein imposed, which the installment payment received bears to the total selling price; Provided, finally, That failure on the part of the seller to pay tax imposed herein on any gains returnable under the installment method will automatically disqualify the seller-taxpayer from paying the tax in installments and the unpaid portion of the tax shall immediately be due and demandable. The tax herein imposed shall be returned and paid in accordance with Sections 45(c)27 and 51(a)(4) of this Code.
No registration of any document transferring real property shall be effected by Register of Deeds unless the Commissioner or his duly authorized representative has certified that such transfer has been reported and the tax herein imposed, if any, has been paid; in case of deferred-payment sales of real property where the vendor retains title to the property, the vendee shall furnish the Commissioner with a copy of the instrument of sale within the same period prescribed for payment of the tax herein imposed.
(1) In General. - The provisions of Section 39(B) notwithstanding, a final tax of six percent (6%) based on the gross selling price or current fair market value as determined in accordance with Section 6(E) of this Code, whichever is higher, is hereby imposed upon capital gains presumed to have been realized from the sale, exchange, or other disposition of real property located in the Philippines, classified as capital assets, including pacto de retro sales and other forms of conditional sales, by individuals, including estates and trusts: Provided, That the tax liability, if any, on gains from sales or other disposition of real property to the government or any of its political subdivisions or agencies or to government-owned or controlled corporations shall be determined either under Section 24(A)or under this Subsection, at the option of the taxpayer.
(5) Capital Gains Realized from the Sale, Exchange or Disposition of Lands and/or Buildings. - A final tax of six percent (6%) is hereby imposed on the gain presumed to have been realized on the sale, exchange or disposition of lands and/or buildings which are not actually used in the business of a corporation and are treated as capital assets, based on the gross selling price or fair market value as determined in accordance with Section 6(E) of this Code, whichever is higher, of such lands and/or buildings.
IN LIGHT OF ALL THE FOREGOING, the petition is PARTIALLY GRANTED. The decision of the Court of Appeals in CA-G.R. CV No. 51933 is hereby AFFIRMED WITH MODIFICATION. That portion of the Decision of the Court of Appeals mandating petitioner Vive Eagle Land, Inc. to pay capital gains tax for the November 11, 1988 sale of the property covered by TCT No. 241846 to respondent Genuino Ice Co., Inc. is DELETED. No costs.
Puno, J., Austria-Martinez, Callejo, Sr., TINGA, and Chico-Nazario, JJ., concur.
1 Penned by Associate Justice Cancio C. Garcia (now an Associate Justice of the Supreme Court), with Associate Justices Portia AliÃ±o-Hormachuelos and Mercedes Gozo-Dadole, concurring.
WHEREAS, the TRANSFEREE is interested to acquire any purchase that parcel of land identified above as Parcel "B" and covered by Transfer Certificate of Title No. 241846 and has offered to pay the TRANSFEROR for whatever rights and interests the two (2) instruments mentioned above, have vested on said TRANSFEROR regarding the said parcel of land, and the TRANSFEROR is agreeable to said offer under terms and conditions stated below.
16 ART. 1487. The expenses for the execution and registration of the sale shall be borne by the vendor, unless there is a stipulation to the contrary.
17 See Rural Bank of Milaor (Camarines Sur) v. Ocfemia, et al. and concurring opinion of Justice Jose Vitug, 325 SCRA 99 (2000).
18 ART. 1495. The vendor is bound to transfer the ownership of and deliver, as well as warrant the thing which is the object of the sale.
19 ART. 1498. When the sale is made through a public instrument, the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract, if from the deed the contrary does not appear or cannot clearly be inferred.
20 ART. 1625. An assignment of a credit, right or action shall produce no effect as against third persons, unless it appears in a public instrument, or the instrument is recorded in the Registry of Property in case the assignment involves real property.
22 Section 24(D) of the National Internal Revenue Code; "Tax Law and Jurisprudence," Justice Jose C. Vitug and Judge Ernesto D. Acosta, 2nd ed., Manila, Philippines, p. 74.
23 Valencia v. Locquiao, 412 SCRA 600 (2003).
(e) Capital Gains Tax from sales of real property - The provisions of Section 33(b) notwithstanding, capital gains presumed to have been realized from the sale, exchange or other disposition of real property located in the Philippines classified as capital assets, including pacto de retro sales and other forms of conditional sales, by individuals, including estates and trust, shall be taxed at the rate of 5% based on the gross selling price of the fair market value prevailing at the time of sale, whichever is higher. Provided, That the tax liability, if any, on gains from sales or other dispositions of real property to the government or any of its political subdivisions or agencies or to government-owned or controlled corporations shall be determined either under Section 21(a) or under subsection, at the option of the taxpayer.
Such tax shall be in lieu of the tax imposed under Section 21 of this Code; Provided, however, That the tax liability, if any, on gains from sales or other dispositions of real property to the government or any of its political subdivisions or agencies or to government-owned and controlled corporations shall be determined either under Section 21 hereof or under this Section, at the option of the taxpayer; Provided, further, That if the taxpayer elects to report such gains in accordance with the provisions of Section 43(b), the amount of the tax which shall be paid on each installment shall be the proportion of the tax herein imposed, which the installment payment received bears to the total selling price; Provided, finally, That failure on the part of the seller to pay tax imposed herein on any gains returnable under the installment method will automatically disqualify the seller-taxpayer from paying the tax in installments and the unpaid portion of the tax shall immediately be due and demandable. The tax herein imposed shall be returned and paid in accordance with Sections 45(c)25 and 51(a)(4) of this Code.
(a) In general. - Unless otherwise provided, a tax of 35% is hereby imposed upon the taxable income received during each taxable year from all sources within the Philippines by every corporation organized in, or existing under the laws of the Philippines, and partnerships, no matter how created or organized, but not including general professional partnerships.
27 B.P. Blg. 37 was approved on September 7, 1979. By reason of Executive Order No. 237, decreed on July 25, 1987, Section 45 of the 1977 NIRC was renumbered Section 44.
28 Section 8. Effectivity. - This Act shall take effect on January 1, 1998. Title XIV of Republic Act No. 8424, otherwise known as the "THE TAX REFORM ACT OF 1997."
29 Sec. 45. Corporations returns. - (a) Requirements. - Every corporation, subject to the tax herein imposed, except foreign corporations not engaged in trade or business in the Philippines shall render, in duplicate, a true and accurate quarterly income tax return and final or adjustment return in accordance with the provisions of Chapter IX of this Title. The return shall be filed by the president, vice-president or other principal officer, and shall be sworn to by such officer and by the treasurer or assistant treasurer.

References: v. 
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 ART. 1487
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 ART. 1495
 ART. 1498
 ART. 1625
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