DOMINGO VS. GARLITOS GR No. L-18994.

29 June 1963 FACTS: This is a petition for certiorari and mandamus seeking to annul certain orders of the court issued by the respondent judge, Hon. Garlitos, and for an order in this Court directing the respondent court below to execute the judgment in favor of the government against the estate of Walter Price for internal revenue taxes. It appears that in Domingo vs. Moscoso (106 PHIL 1138), the Supreme Court declared as final and executory the order of the Court of First Instance of Leyte for the payment of estate and inheritance taxes, charges and penalties amounting to P40,058.55 by the Estate of the late Walter Scott Price. The petition for execution filed by the fiscal, however, was denied by the lower court. The Court held that the execution is not justified as the Government itself is indebted to the Estate for P262,200; and ordered the amount of inheritance taxes be deducted from the Governments indebtedness to the Estate. ISSUE: May the claim by the government against the estate be deducted from its debt to the estate? May compensation take place? HELD: 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 due 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.

*Art. 1279. In order that compensation may be proper, it is necessary:

(1) That each one of the obligors be bound principally, and that he be at the same time a principal creditor of the other; (2) That both debts consist in a sum of money, or if the things due are consumable, they be of the same kind, and also of the same quality if the latter has been stated; (3) That the two debts be due; (4) That they be liquidated and demandable; (5) That over neither of them there be any retention or controversy, commenced by third persons and communicated in due time to the debtor. **Art. 1290. When all the requisites mentioned in Article 1279 are present, compensation takes effect by operation of law, and extinguishes both debts to the concurrent amount, even though the creditors and debtors are not aware of the compensation.

Sugguiyao, Amirozelle Katya G. III-B