Francia v Intermediate Appellate Court (1988)

Francia v Intermediate Appellate Court GR No L-67649, June 28, 1988

FACTS:
Engracio Francia was the registered owner of a house and lot located in Pasay City. A portion of such property was
expropriated by the Republic of the Philippines in 1977. It appeared that Francia did not pay his real estate taxes
from 1963 to 1977. Thus, his property was sold in a public auction by the City Treasurer of Pasay City. Francia filed a
complaint to annual the auction sale. The lower court dismissed the complaint and the Intermediate Appellate Court
affirmed the decision of the lower court in toto. Hence, this petition for review. Francia contends that his tax
delinquency of P 2,400 has been extinguished by legal compensation. He claims that the government owed him P
4,116 when a portion of his land was expropriated on October 15, 1977.

ISSUE:
May the expropriation payment compensate for the real estate taxes due?

RULING:
No. There can be no offsetting 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. The collection of a tax cannot await the results of a lawsuit against the government. Internal revenue
taxes cannot be the subject of compensation. The Government and the taxpayer are not mutually creditors and
debtors of each other under Article 1278 of the Civil Code and a claim of taxes is not such a debt, demand, contract
or judgment as is allowed to be set-off.

Moreover, the amount of P4,116 paid by the national government for the 125 square meter portion of his lot was
deposited with the Philippine National Bank long before the sale at public auction of his remaining property. It would
have been an easy matter to withdraw P 2,400 from the deposit so that he could pay the tax obligation thus aborting
the sale at public auction. Thus, the petition for review is dismissed. The taxes assessed are the obligations of the
taxpayer arising from law, while the money judgment against the government is an obligation arising from contract,
whether express or implied.