Elpidio Yabes vs Napoleon Flojo

written by Howard

G.R. No. L-46954 – 200 Phil. 672 – 115 SCRA 286 – Taxation Law – Tax Collection Suit – Jurisdiction – When Acquired

In May 1962, Doroteo Yabes received an assessment notice from the Commissioner of Internal Revenue (CIR) demanding him to pay P15k in taxes. Doroteo filed a protest within the prescribed period. The protest was initially denied in September 1962 however, a few days after the denial, the CIR advised Doroteo to execute a waiver of the statute of limitations (SOL) and to allow the CIR to hold in abeyance the ruling of his case until a similar case (Cirilo Constantino Case) which involves exactly the same issue would be decided by the Court of Tax Appeals (CTA). Doroteo complied but while waiting for the CTA to decide that case, Doroteo died. The CTA finally decided the Constantino Case but the same was appealed to the Supreme Court (SC). And so the CIR asked the successors-in-interest of Doroteo, Elpidio and Severino Yabes, to execute another waiver while waiting for the SC decision. The waiver was duly executed and it extended the period of prescription within which the CIR may collect the assessed tax to December 31, 1970.

The Constantino Case was decided by the SC in February 1970. On December 4, 1970, before the lapse of the extended period (12/31/70), the CIR filed a tax collection suit against the estate of Doroteo Yabes with the Court of First Instance (CFI) of Cagayan. Elpidio et al received the summons on January 20, 1971. Elpidio et al then filed an appeal with the CTA on February 12, 1971. At the same time, Elpidio et al filed a motion to dismiss (MTD) the collection suit with CFI Cagayan on the ground that the filing of the collection suit is a denial by the CIR of the protest; that such denial is appealable to the CTA; that CFI Cagayan therefore has no jurisdiction over the case. However, Judge Napoleon Flojo of CFI Cagayan denied the MTD.

ISSUE: Whether or not CFI Cagayan has jurisdiction over the case.

HELD: No. The CTA acquired exclusive jurisdiction over the case when Elpidio et al appealed.

But is the appeal filed on time?

Yes. The formal assessment notice (FAN) is considered to have been formally made when the tax collection suit was filed on December 4, 1970. The FAN is considered received by Elpidio et al when they received the summons on January 20, 1971. From there, they have 30 days to file an appeal with the CTA. They filed their appeal on February 12, 1971 – well within the 30 day period to appeal.

Instead of dismissing, is it okay for CFI Cagayan to hold in abeyance the tax collection suit while the CTA decide on the appeal?

No, because it has no jurisdiction. It cannot wait for the CTA to decide, it must dismiss the case.

So what will happen to the collection suit?

In this case, the Supreme Court ordered that the complaint of the CIR in the collection suit be transferred to the CTA as a counterclaim to the appeal filed by Elpidio et al.

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