Francia v IAC

June 28, 1988| Gutierrez, JR.

Compensation
AIP

DOCTRINE: The obligation to pay taxes cannot be compensated by any other claim a taxpayer may have against the government.
CASE SUMMARY: Francia received P4,116 from the national government due to the expropriation of his land. He claims that his unpaid
real estate taxes, which amounted to P2,400, can be offset by the payment he received from the government. There is no legal
compensation in this case because: 1. There can be no compensation for payment of taxes with any other claim of the taxpayer against the
government and 2. The requisites of legal compensation (NCC 1279) are lacking.

FACTS:
A 125 sq m portion of Francia’s lot in Pasay was expropriated by the Republic of the Philippines for P4,1160. The remaining portion,
203 sq m, was sold to Ho Fernandez through a public auction because he failed to pay his real estate taxes from 1963 – 1977, which
amounted to P2,400. Francia alleged that he was not present during the auction because he was in Iligan to help his uncle ship
bananas. He filed a complaint to annul the auction sale on the grounds that: 1. The price of the property sold was shockingly
inadequate, 2. He was denied due process because he was not present in the auction sale, 3. His tax delinquency was extinguished by
legal compensation when the government owed him P4,116, or the value of the expropriated land. The lower court dismissed it.

ISSUE: WON the obligation to pay real estate taxes was extinguished through legal compensation (NO)

RULING: There can be no off-setting of taxes against the claims that the taxpayer may have against the government (as decided in
Republic v Mambulao Lumber Co, and other jurisprudence). The tax was due to the city government while the expropriation was affected
by the national government. The requisites of legal compensation found in NCC 1279 are not present in this case. The payment for the
land was deposited to PNB long before the auction sale, so the petitioner could have gotten the payment for the taxes from PNB.
Moreover, it is due to his fault that he did not read the notice of auction sale when he received it, hence he was not denied his right to due
process. Inadequacy of price is not material when the law gives the owner the right to redeem the sale.

DISPOSITION:
Wherefore the petition for review is dismissed.

NOTES: