Thursday, June 12, 2008

Set-off: Compensation in Taxation

Rule on Compensation of Taxes: There can be no off-setting of taxes against the claims that the taxpayer may have against the government. Government and taxpayer are not mutually creditors and debtors of each other under Article 1278 of the Civil Code and a claim for taxes is not such a debt, demand, contract or judgment as is allowed to be set-off. (REPUBLIC vs. MAMBULAO LUMBER COMPANY, ET AL. , ENGRACIO FRANCIA vs. INTERMEDIATE APPELLATE COURT, ET AL.)

Exception to the rule: When both taxes and claim against the government is overdue, demandable and fully liquidated. Government has been recognized and an amount has already been appropriated for the purpose by a corresponding law (MELECIO R. DOMINGO vs. LORENZO C. GARLITOS, ET AL. )


G.R. No. L-17725. February 28, 1962


Defendants have a liability for forest charges to the Republic of the Philippines. Defendants contended that since the Republic of the Philippines has not made use of those reforestation charges (RA 115) collected from it for reforesting the denuded area of the land covered by its license, the Republic of the Philippines should refund said amount, or, if it cannot be refunded, at least it should be compensated with what Mambulao Lumber Company owed the Republic of the Philippines for reforestation charges.


May reforestation charges be set-off to forest charges owed by defendants to the government?


No. Appellant and appellee are not mutually creditors and debtors of each other. Consequently, the law on compensation is inapplicable. The forest charges which the defendant Mambulao Lumber Company has paid to the government, are in the coffers of the government as taxes collected, and the government does not owe anything, crystal clear that the Republic of the Philippines and the Mambulao Lumber Company are not creditors and debtors of each other, because compensation refers to mutual debts.

G.R. No. L-18994. June 29, 1963


The government has a claim against the estate of the Walter Scott Price of estate and inheritance taxes, charges and penalties amounting to P40,058.55. The government is at the same time indebted to the estate under administration in the amount of P262,200.


May the claim by the government against the estate be deducted from its debt to the estate? May compensation take place?


Yes. The claim of the estate against the Government has been recognized and an amount of P262,200 has already been appropriated for the purpose by a corresponding law (Rep. Act No. 2700). Under the above circumstances, both the claim of the Government for inheritance taxes and the claim of the intestate for services rendered have already become overdue and demandable is well as fully liquidated. Compensation, therefore, takes place by operation of law, in accordance with the provisions of Articles 1279 and 1290 of the Civil Code, and both debts are extinguished to the concurrent amount. compensation takes effect by operation of law, and extinguished both debts to the concurrent amount.

G.R. No. L-67649. June 28, 1988


On October 15, 1977, a 125 square meter portion of Francia's property was expropriated by the Republic of the Philippines for the sum of P4,116.00 representing the estimated amount equivalent to the assessed value of the aforesaid portion.
Since 1963 up to 1977 inclusive, Francia failed to pay his real estate taxes. Thus, on December 5, 1977, his property was sold at public auction by the City Treasurer of Pasay City pursuant to Section 73 of Presidential Decree No. 464 known as the Real Property Tax Code in order to satisfy a tax delinquency of P2,400.00.


May compensation take place?


There can be no off-setting 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.

A claim for taxes is not such a debt, demand, contract or judgment as is allowed to be set-off under the statutes of set-off, which are construed uniformly, in the light of public policy, to exclude the remedy in an action or any indebtedness of the state or municipality to one who is liable to the state or municipality for taxes.

Government and taxpayer are not mutually creditors and debtors of each other under Article 1278 of the Civil Code and a claim for taxes is not such a debt, demand, contract or judgment as is allowed to be set-off.

Thursday, May 29, 2008

Successive service of sentences.

Rule: When the culprit has to serve two or more penalties, he shall serve them simultaneously if the nature of the penalties will so permit[1]; otherwise, in the imposition of the penalties, the order of their respective severity shall be followed so that they may be executed successively.[2] (Material Accumulation System- absolute accumulation of crimes and penalties and establishes no limitation whatsoever and, accordingly, all the penalties for all the violations were imposed even if they reached beyond the natural span of human life. (Guevara))

Threefold Rule- the maximum duration of the convict’s sentence shall not be more than threefold the length of time corresponding to the most severe of the penalties imposed upon him. No other penalty shall be inflicted after the sum of those imposed equals the said maximum period. Such maximum penalty shall in no case exceed forty year.[3] (Juridical Accumulation System- the service of the several penalties imposed on one and the same culprit is limited to not more than three-fold the length of time corresponding to the most severe and in no case to exceed 40 years.)

Duration of the convict’s sentence refers to several penalties for different offenses, not yet served out.

Subsidiary imprisonment forms part of the penalty. (Bagtas vs. Director of Prisons, 84 Phil. 692, 698)

Other system of penalty- Absorption system (the lesser penalties are absorbed by the graver penalties. Observed in the imposition of complex crimes (Art 48), continuing crimes, and specific crimes like robbery with homicide, etc.)

[1] Par. 1, Art. 70, RPC
[2] Par 2, Art. 70, RPC.
[3] Par. 4 and 5, Article 70, RPC

Bar Exam Tips & Secrets

Contributed by:
Atty. Glenn M. Mortel

"There is nothing that can help a bar examinee most than a constant and intensive study of the provisions of the various codes and the interpretation and application thereof by the Supreme Court in its decisions. By study is meant, that the provisions must be correctly understood and the thought or words thereof put to memory. After a chapter, for example, has been studied, the next one should be studied next, and after this, a review of all that has already been studied re-reviewed, to keep the subject matter and the provisions fresh in mind." - Alejo Labrador

1. Actual preparation for the bar examination starts from the first day a law student attended class during the first year in the law school.

2. The blooming secret in passing the bar examination is this: Present good answers that will make the examiners take notice. Good answers anchored upon logical reasoning, written in readable English and more importantly, justified by appropriate legal authority.

3. If the candidates are at a loss as to what specific legal provisions or case doctrines to use in answering problems, the only alternative left for them is to use their own common sense.

4. The key to passing the bar examinations is contained in one word: ARTICULATION. Articulation is expressive of the following basic fundamentals: good language, impressive presentation, logical reasoning and substantial background knowledge of law and procedure.

5. The examinee who has a fairly good command of English, assuming that he is prepared in all other matters, stands definitely with a much better chance of passing.

6. The responsive character of a given answer would depend to a great extent, on command of good language, logical reasoning and impressive presentation. This objective of preparing impressive and responsive answers can only be achieved by constant practice.

7. Get this straight right now. Passing the bar examination has been, still is, and will always be a difficult proposition!

8. No one can really help you pass the bar examination but yourself.

9. The greatest blooming secret of passing the bar examination is and will always be: PREPARATION! Not just any kind of preparation, but proper, sound and systematic preparation.

10. Systematic review can only be done by the use of what we call schedules which the candidate must follow vigorously to the letter if he expects to attain the best results.

11. There will be times when you become sleepy while reviewing but never for one moment, tell yourself: Man, this review can wait! Do not be stupid. Always remind yourself that time is of the essence and is decidedly running too short for you.

12. Force yourself to read, understand and absorb what law you reviewed. Otherwise, all your efforts will go to waste.

13. Love and review cannot mix in the business of preparing for the bar examination.

14. Early to bed, early to rise, that is the way to make a man healthy, wealthy and wise.

15. A morning shower is a must.

16. Never stay up late to the wee hours of morning, cramming law into your head. This would not do you any good. Remember, you have to conserve as much energy as you possibly can.

17. Remember, keeping your health in good running condition is just as important as reviewing and passing the bar examination.

18. Good handwriting is decidedly a great factor in passing the bar examination.

19. To beat time, never write kilometric answers.

20. By far the most important tool that the bar candidate could equip himself with which to tackle the examination that is inherently personal to him is command of written English.

21. You have to write simple, grammatically correct English if you want to hurdle the examination.

22. Presentation of answers that are not only good but logical, full of substance and supported by law and other authorities, are gems to the examiner, whether he has a good or black heart.

23. Make your motto now: Stick to codal provisions! Compliment this with doctrines laid down in recent decisions of the Supreme Court.

24. Impressive answers showing the candidates reasoning faculty is what the examiners want to read in your examination notebooks.

25. Ability to retain your understanding of the substance of the law through efforts of study is more desirable quality to possess than mere ability to memorize legal provisions.

26. Memorizing a particular provision of law word for word but without understanding it and its various implications is a lot of wasted effort.

27. Never fail to read the newspapers when you are preparing for the bar examination. Read newspapers from 20 to 30 minutes every day.

28. You can never expect to pass the bar examination without preparation.

29. Predicting probable questions based on important principles or provisions of law is the safer method of speculating what the examiners are likely to ask in their examinations.

30. Never depend on tips for your passing. But never brush these tips aside as nothing but trash. They may likely cause your downfall. Never, however, bank too much on them.

31. Fountain or sign pens are really the most important equipment in bar examination. Never start for the examination without bringing along with you two or more fountain or sign pens.

32. Like the weather, examiners are absolutely a bunch of unpredictable fellows, capable of asking unpredictable questions.

33. Do not try to memorize 50 definitions or distinctions in any given time. Two or three will do.

34. The real secret in remembering the matters contained in an enumeration is the use of keywords.

35. Make your keywords on enumerations you consider important.

36. Never leave a blank in an enumeration! However, if you use the letters a, b, c, etc. for numbers in the enumeration, so much the better. Ten to one, the examiner may not count his fingers. Make the first four in the enumeration definitely good.

37. The bar candidate should do well to be always on guard against catchy questions capable of being answered in a number of ways, e.g. What is a complaint? The perfect answer should include both definitions in criminal and civil procedure.

38. Never be content to answer questions with a mere yes or no. You must, at all times, give justification why your answer is a yes or no. Unless, of course, the examiner qualifies his question with instruction enclosed in parenthesis like: (Answer with a yes or no only).

39. Always determine the real facts (examiners have the bad habit of including irrelevant facts to confuse you) and the issue or issues in controversy. Which side you take, always justify your side with reasons based on law, rule, equity and justice. Whatever your answer may be, provided it is written in legible language, the examiner will never deny you the corresponding credit you deserve.

40. Always remember, make efforts to frame your answers so that they are responsive to the questions. Never beat around the bush. Go right straight ahead with your answer. Avoid citations if and when you are not absolutely sure about them. The shorter the answers are, the more direct, the better. Avoid display of flowery expressions which are complicated by legal verbosity. All you need are sensible, direct and reasonable answers that are responsive to the questions.

41. Legal knowledge is not enough to solve a particular legal issue. What is important is ability to apply this knowledge to the solution of legal controversies.

42. The most convenient method of tackling problem questions is to present immediately the conclusion of a given answer. Practice, practice, constant practice will help the bar candidate write good answers that examiners will give favorable credit.

43. The technique of writing down answers responsive to questions is a matter that the candidate must learn as a matter of imperative necessity.

44. Brevity and directness when done properly could make an answer both effective and impressive. However, when overdone to a point where the ideas sought to be conveyed becomes vague and difficult to understand, they become a liability.

45. Never forget that every candidate is a potential bar topnotcher.

46. So, if you are a candidate just preparing for the bar examination, whose chances of passing are quite problematical, just limit your ambition for the present to just working hard to obtain a 75 percent in the great battle of your life.

47. Take comfort in this: That even those who become lawyers by "just luck", are making good in the practice of law. Nothing can really put a determined man down.

48. In your preparation for the greatest battle of your life, call upon Him who is the source of all knowledge, wisdom and understanding. In deep humility, bended knees and tears, He will make all things beautiful in His time. Victory belongs to the most persevering!

All excerpts, except the last (No. 48), were taken by Atty. GLENN M. MORTEL from the book "SECRETS ON HOW TO PASS THE BAR EXAMINATION" by Dean Wenceslao G. Laureta, 1990 edition.

Source: Atty. Ralph's Website,