Jose Roxas, Petitioners, vs. Court of Tax Appeals and Commissioner of Internal Revenue, Respondents.

Republic of the Philippines

SUPREME COURT

Manila

EN BANC

DECISION

April 26, 1968

G.R. No. L-25043

ANTONIO ROXAS, EDUARDO ROXAS and ROXAS Y CIA., in their own respective behalf and as judicial co-guardians of JOSE ROXAS, petitioners,

vs.

COURT OF TAX APPEALS and COMMISSIONER OF INTERNAL REVENUE, respondents.

Leido, Andrada, Perez and Associates for petitioners.

Office of the Solicitor General for respondents.

Don Pedro Roxas and Dona Carmen Ayala, Spanish subjects, transmitted to their grandchildren by hereditary succession the following properties:

(1) Agricultural lands with a total area of 19,000 hectares, situated in the municipality of Nasugbu, Batangas province;

(2) A residential house and lot located at Wright St., Malate, Manila; and

(3) Shares of stocks in different corporations.

To manage the above-mentioned properties, said children, namely, Antonio Roxas, Eduardo Roxas and Jose Roxas, formed a partnership called Roxas y Compania.

AGRICULTURAL LANDS

At the conclusion of the Second World War, the tenants who have all been tilling the lands in Nasugbu for generations expressed their desire to purchase from Roxas y Cia. the parcels which they actually occupied. For its part, the Government, in consonance with the constitutional mandate to acquire big landed estates and apportion them among landless tenants-farmers, persuaded the Roxas brothers to part with their landholdings. Conferences were held with the farmers in the early part of 1948 and finally the Roxas brothers agreed to sell 13,500 hectares to the Government for distribution to actual occupants for a price of P2,079,048.47 plus P300,000.00 for survey and subdivision expenses.

It turned out however that the Government did not have funds to cover the purchase price, and so a special arrangement was made for the Rehabilitation Finance Corporation to advance to Roxas y Cia. the amount of P1,500,000.00 as loan. Collateral for such loan were the lands proposed...