G.R. No. L-18956 April 27, 1972
Republic of the Philippines, plaintiff-appellee, vs. Marsman Development Company and/or F.H. Burgess, in his capacity as Liquidator of the Marsman Development Company, defendants-appellants.

FACTS

The Republic filed a collection suit against Marsman Development Company and its liquidator, F.H. Burgess, for deficiency sales taxes, forest charges, and surcharges totaling P59,133.78. The Bureau of Internal Revenue (BIR) issued assessments on October 15, 1953, September 13, 1954, and November 8, 1954. The corporation, through counsel, protested but failed to comply with the BIR’s procedural requirements for a formal reinvestigation, specifically the submission of a sworn written request and payment of half the assessment. Despite repeated warnings that non-compliance would render the assessments final, the corporation did not act. The BIR subsequently issued final notices and a warrant of distraint and levy.
The corporation was dissolved via a stockholders’ resolution on April 23, 1954, and Burgess was appointed liquidator. Appellants argued the suit was barred, contending the government’s right to collect prescribed three years after the corporation’s dissolution. They also claimed Burgess, as liquidator, could not be held personally liable as he allegedly received no corporate assets.

ISSUE

(1) Did the tax assessments become final and executory? (2) Is the action for collection barred by prescription? (3) Can the liquidator be held liable?

RULING

The Supreme Court affirmed the lower court’s decision, ordering appellants to pay. First, the assessments became final and executory. The taxpayer’s protest was procedurally defective for failing to comply with the BIR’s mandatory requirements under Department Order No. 213. The corporation’s mere letters of protest, without the sworn statement and partial payment, did not suspend the finality of the assessments. The BIR’s repeated warnings that the case would be considered abandoned were valid, making the assessments incontestable.
Second, the action did not prescribe. The three-year prescriptive period for judicial collection under the Tax Code begins from the assessment date. The assessments were issued in 1953 and 1954. The suit was timely filed as the government became a creditor of the corporation before the completion of its dissolution. The corporation’s dissolution does not extinguish the claim, and the liquidator holds the corporate assets in trust for all creditors, including the government. The prescriptive period is tolled during the liquidation process as the liquidator’s duty is to settle corporate obligations.
Third, the liquidator, F.H. Burgess, is properly held liable in his fiduciary capacity. A liquidator is a trustee of corporate assets for the benefit of creditors and stockholders. The suit against him is not for personal liability but for the execution of his trust function to apply corporate assets to settled debts. His claim of receiving no assets is a matter for execution of the judgment and does not absolve him of his official duty to satisfy valid corporate liabilities.