February 2012 Philippine Supreme Court Decisions on Tax Laws

Tariff and Customs Code; Revised Administrative Code Customs Memorandum Order No. 27-2003.  Customs Memorandum Order No. 27-2003 (CMO 23-2007) is invalid. The Commissioner of Customs (1) violated the right to due process in the issuance of CMO 27-2003 when he failed to observe the requirements under the Revised Administrative Code, (2) violated the right to equal protection of laws when he provided for an unreasonable classification in the application of the regulation, and (3) went beyond his powers of delegated authority when the regulation limited the powers of the customs officer to examine and assess imported articles. CMO 27-2003 was issued without following the mandate of the Revised Administrative Code on public participation, prior notice, and publication or registration with the University of the Philippines Law Center. For tariff purposes, CMO 27-2003 classified wheat according to the following: (1) importer or consignee; (2) country of origin; and (3) port of discharge. This is a violation of the equal protection clause under the Constitution. The Court does not see how the quality of wheat is affected by who imports it, where it is discharged, or which country it came from. Thus, on the one hand, even if other millers excluded from CMO 27-2003 have imported food grade wheat, the product would still be declared as feed grade wheat, a classification subjecting them to 7% tariff. On the other hand, even if the importers listed under CMO 27-2003 have imported feed grade wheat, they would only be made to pay 3% tariff, thus depriving the state of the taxes due. The regulation, therefore, does not become disadvantageous to respondent only, but even to the state. Section 1403 of the Tariff and Customs Law, as amended mandates that the customs officer must first assess and determine the classification of the imported article before tariff may be imposed. Unfortunately, CMO 23-2007 has already classified the article even before the customs officer had the chance to examine it. Finally, Commissioner of Customs diminished the powers granted by the Tariff and Customs Code with regard to wheat importation when it no longer required the customs officer’s prior examination and assessment of the proper classification of the wheat. Commissioner of Customs vs. Hypermix Feeds Corporation, G.R. No. 179579, February 1, 2012.

(Caren thanks Lui Manalaysay for assisting in the preparation of this post.)

February 2012 Supreme Court Decisions on Political Law

Here are selected February 2012 rulings of the Supreme Court of the Philippines on political law.

Constitutional Law

Autonomous Region; plebiscite requirement. Section 18, Article X of the Constitution provides that “the creation of the autonomous region shall be effective when approved by majority of the votes cast by the constituent units in a plebiscite called for the purpose.”  The Supreme Court interpreted this to mean that only amendments to, or revisions of, the Organic Act constitutionally-essential to the creation of autonomous regions – i.e., those aspects specifically mentioned in the Constitution which Congress must provide for in the Organic Act– require ratification through a plebiscite.   While it agrees with the petitioners’ underlying premise that sovereignty ultimately resides with the people, it disagrees that this legal reality necessitates compliance with the plebiscite requirement for all amendments to RA No. 9054. For if we were to go by the petitioners’ interpretation of Section 18, Article X of the Constitution that all amendments to the Organic Act have to undergo the plebiscite requirement before becoming effective, this would lead to impractical and illogical results – hampering the ARMM’s progress by impeding Congress from enacting laws that timely address problems as they arise in the region, as well as weighing down the ARMM government with the costs that unavoidably follow the holding of a plebiscite. Also, Sec. 3 of R.A. No. 10153 cannot be seen as changing the basic structure of the ARMM regional government. On the contrary, this provision clearly preserves the basic structure of the ARMM regional government when it recognizes the offices of the ARMM regional government and directs the OICs who shall temporarily assume these offices to “perform the functions pertaining to the said offices.” Datu Michael Abas Kida, etc., et al. vs. Senate of the Phil., etc., et al./Basari D. Mapupuno vs. Sixto Brillantes, etc., et al./Rep. Edcel C. Lagman vs. Paquito N. Ochoa, Jr., etc., et al./Almarin Centi Tillah, et al. vs. The Commission on Elections, etc., et al./Atty. Romulo B. Macalintal vs. Commission on Elections, et al./Luis “Barok” Biraogo, G.R. No. 196271, February 28, 2012.

May 2011 Philippine Supreme Court Decisions on Labor Law and Procedure

Here are selected May 2011 rulings of the Supreme Court of the Philippines on labor law and procedure:

Section 10, Republic Act No. 8042; unconstitutional.  Petitioner Yap was employed as an electrician for respondent’s vessel under a 12-month contract. He was found to be illegally terminated with nine months remaining on his contract term. The Court of Appeals (CA) awarded petitioner salaries for three months as provided under Section 10 of Republic Act No. 8042. On certiorari, the Supreme Court reversed the CA and declared that petitioner was entitled to his salaries for the full unexpired portion of his contract. The Court has previously declared in Serrano v. Gallant Maritime Services, Inc. (2009) that the clause “or for three months for every year of the unexpired term, whichever is less” provided in the 5th paragraph of Section 10 of R.A. No. 8042 is unconstitutional for being violative of the rights of Overseas Filipino Workers (OFWs) to equal protection of the laws. The subject clause contains a suspect classification in that, in the computation of the monetary benefits of fixed-term employees who are illegally discharged, it imposes a 3-month cap on the claim of OFWs with an unexpired portion of one year or more in their contracts, but none on the claims of other OFWs or local workers with fixed-term employment. The subject clause singles out one classification of OFWs and burdens it with a peculiar disadvantage. Moreover, the subject clause does not state or imply any definitive governmental purpose; hence, the same violates not just petitioner’s right to equal protection, but also his right to substantive due process under Section 1, Article III of the Constitution.  Claudio S. Yap vs. Thenamaris Ship’s Management and Intermare Maritime Agencies, Inc., G.R. No. 179532, May 30, 2011

Doctrine of Operative Fact; applied as a matter of equity and fair play. Petitioner Yap was employed on respondent’s vessel under a 12-month contract. Upon finding that he was illegally terminated, the Court of Appeals (CA) awarded petitioner salaries for three months as provided under Section 10 of Republic Act No. 8042 (RA 8042). While the case was pending in the Supreme Court, Section 10 of RA 8042 was declared unconstitutional. In deciding to award petitioner his salaries for the entire unexpired portion of his contract, the Supreme Court rejected the application of the operative fact doctrine.  As an exception to the general rule, the doctrine applies only as a matter of equity and fair play. It recognizes that the existence of a statute prior to a determination of unconstitutionality is an operative fact and may have consequences which cannot always be ignored. The doctrine is applicable when a declaration of unconstitutionality will impose an undue burden on those who have relied on the invalid law. This case should not be included in the aforementioned exception. After all, it was not the fault of petitioner that he lost his job due to an act of illegal dismissal committed by respondents. To rule otherwise would be iniquitous to petitioner and other OFWs, and would, in effect, send a wrong signal that principals/employers and recruitment/manning agencies may violate an OFW’s security of tenure which an employment contract embodies and actually profit from such violation based on an unconstitutional provision of law. Claudio S. Yap vs. Thenamaris Ship’s Management and Intermare Maritime Agencies, Inc., G.R. No. 179532, May 30, 2011.

February 2011 Philippine Supreme Court Decisions on Political Law

Here are selected February 2011 rulings of the Supreme Court of the Philippines on political law.

Constitutional Law

Administrative cases; right to be presumed innocent. The trial court was correct in declaring that respondents had the right to be presumed innocent until proven guilty. This means that an employee who has a pending administrative case filed against him is given the benefit of the doubt and is considered innocent until the contrary is proven. In this case, respondents were placed under preventive suspension for 90 days from 23 May 2002 to 21 August 2002. After serving the period of their preventive suspension and without the administrative case being finally resolved, respondents should have been reinstated and entitled to the grant of step increment. The Board of Trustees of the Government Service Insurance System, et al. v. Albert M. Velasco, et al. G.R. No. 170463, February 2, 2011.

Equal Protection; valid classification. Petitioners argue that there is no substantial distinction between municipalities with pending cityhood bills in the 11th Congress and municipalities that did not have pending bills, such that the mere pendency of a cityhood bill in the 11th Congress is not a material difference to distinguish one municipality from another for the purpose of the income requirement. The SC held that the purpose of the enactment of R.A. No 9009 was merely to stop the “mad rush of municipalities wanting to be converted into cities” and the apprehension that before long the country will be a country of cities and without municipalities. It found that the imposition of the P100 million average annual income requirement for the creation of component cities was arbitrarily made as there was no evidence or empirical data, such as inflation rates, to support the choice of this amount.  The imposition of a very high income requirement of P100 million, increased from P20 million, was simply to make it extremely difficult for municipalities to become component cities. The SC also found that substantial distinction lies in the capacity and viability of respondent municipalities to become component cities of their respective provinces.  Congress, by enacting the Cityhood Laws, recognized this capacity and viability of respondent municipalities to become the State’s partners in accelerating economic growth and development in the provincial regions, which is the very thrust of the LGC, manifested by the pendency of their cityhood bills during the 11th Congress and their relentless pursuit for cityhood up to the present. League of Cities of the Phil. etc., et al. v. COMELEC, et al./League of Cities of the Phil. etc., et al. v. COMELEC, et al./League of Cities of the Phil. etc., et al. v. COMELEC, et al. G.R. No. 176951/G.R. No. 177499/G.R. No. 178056, February 15, 2011.

December 2010 Philippine Supreme Court Decisions on Political Law

Here are selected December 2010 rulings of the Supreme Court of the Philippines on political law.

Emancipation patent; issuance. Following are the steps in transferring land to a tenant-tiller under Presidential Decree No. 27: (a) identification of tenant, landowner, and the land covered; (b) land survey and sketching of portion actually cultivated by the tenant to determine parcel size, boundaries, and possible land use; (c) issuance of Certificate of Land Transfer; (d) valuation of the land for purposes of computing the amortization; (e) amortization payments of the tenant-tiller over a 15-year period; and (f) issuance of Emancipation Patent.  In this case, there is no evidence that these steps were followed. There are several supporting documents that the tenant-farmer must submit before he can receive the Emancipation Patent. The Supreme Court found that majority of these supporting documents is lacking. Hence, it was improper for the Department of Agrarian Reform Adjudication Board to order the issuance of the Emancipation Patent in favor of respondent. There was also no sufficient evidence to prove that respondent has fully paid the value of the land. Full payment of just compensation is required prior to issuance of Emancipation Patents. Renato Reyes, represented by Ramon Reyes vs Leopoldo Barrios, G.R. No. 172841, December 15, 2010.

Equal protection clause; concept.  The Court here struck down Executive Order No. 1 (which created the Truth Commission) for violating the equal protection clause.  The clear mandate of the Truth Commission is to investigate and find out the truth “concerning the reported cases of graft and corruption during the previous administration” only. The intent to single out the previous administration was plain, patent and manifest.  According to the Court, the Arroyo administration is a member of a class, that is, the class of past administrations.  It is not a class of its own. Not to include in the Commission’s mandate past administrations similarly situated constitutes arbitrariness, which the equal protection clause cannot sanction.  Although Section 17 gives the President discretion to expand the scope of investigations of the Commission so as to include acts of graft and corruption committed in other past administrations, it does not guarantee that they would be covered in the future.  This expanded mandate of the Commission will still depend on the discretion of the President.  If he decides not to include them, the provision would be meaningless. Louis “Barok” C. Biraogo vs. The Philippine Truth Commission of 2010 / Rep. Edcel C. Lagman, et al. vs. Exec. Sec. Paquito N. Ochoa, Jr., et al., G.R. No. 192935 & G.R. No. 19303, December 7, 2010.

Judicial review; requisites. Judicial review requires the following: (1) an actual case or controversy calling for the exercise of judicial power; (2) the person challenging the act must have the standing to question the validity of the act or issuance; (3) the question of constitutionality must be raised at the earliest opportunity; and (4) the issue of constitutionality must be the very subject matter of the case. As to standing, the Court here held that petitioners, who are legislators, met the requirement as they are questioning the constitutionality of Executive Order No. 1 creating the Truth Commission on the basis that the latter’s mandate constitutes usurpation of the power of the Congress.  However, with regard to the petitioner who is questioning EO No. 1 as a taxpayer, the Court held that he had no standing since he has not shown that he sustained, or is in danger of sustaining, any personal and direct injury attributable to the implementation of that EO.  The Court took cognizance of the case as the matter involved was of transcendental importance.  Louis “Barok” C. Biraogo vs. The Philippine Truth Commission of 2010 / Rep. Edcel C. Lagman, et al. vs. Exec. Sec. Paquito N. Ochoa, Jr., et al., G.R. No. 192935 & G.R. No. 19303, December 7, 2010.

August 2010 Philippine Supreme Court Decisions on Political Law

Here are selected August 2010 rulings of the Supreme Court of the Philippines on political law:

Constitutional Law

Civil Service Commission; jurisdiction. The civil service encompasses all branches and agencies of the Government, including government-owned or controlled corporations with original charters, like the Government Service Insurance System (GSIS), or those created by special law. Thus, GSIS employees are part of the civil service system and are subject to the law and to the circulars, rules and regulations issued by the Civil Service Commission (CSC) on discipline, attendance and general terms and conditions of employment. The CSC has jurisdiction to hear and decide disciplinary cases against erring employees. Winston F. Garcia vs. Mario I. Molina, et al./Winston F. Garcia vs. Mario I. Molina, et al., G.R. No. 157383/G.R. No. 174137, August 18, 2010.

Double compensation. Section 8, Article IX-B of the Constitution provides that no elective or appointive public officer or employee shall receive additional, double or indirect compensation, unless specifically authorized by law, nor accept without the consent of the Congress, any present emolument, office or title of any kind from any foreign government.  Pensions and gratuities shall not be considered as additional, double or indirect compensation. This provision, however, does not apply to the present case as there was no double compensation to the petitioners. The questioned resolutions of the Monetary Board are valid corporate acts of petitioners that became the bases for granting them additional monthly representation and transportation allowance (RATA), as members of the Board of Directors of Philippine International Convention Center Inc. (PICCI), a government corporation whose sole stockholder is the Bangko Sentral ng Pilipinas (BSP). RATA is distinct from salary as a form of compensation.  Unlike salary which is paid for services rendered, RATA is a form of allowance intended to defray expenses deemed unavoidable in the discharge of office.  Hence, RATA is paid only to certain officials who, by the nature of their offices, incur representation and transportation expenses.  Indeed, aside from the RATA that they have been receiving from the BSP, the grant of RATA to each of the petitioners for every board meeting they attended, in their capacity as members of the Board of Directors of PICCI, in addition to their per diem, does not violate the constitutional proscription against double compensation. Gabriel C. Singson, et al. vs. Commission on Audit, G.R. No. 159355, August 9, 2010.

Eminent domain; voluntary agreement by landowner. Where the landowner agrees voluntarily to the taking of his property by the government for public use, he thereby waives his right to the institution of a formal expropriation proceeding covering such property. Failure for a long time of the owner to question the lack of expropriation proceedings covering a property that the government had taken constitutes a waiver of his right to gain back possession. The landowner’s remedy in such case is an action for the payment of just compensation, not ejectment. Here, the Court of Appeals erred in ordering the eviction of petitioner from the property that it has held as government school site for more than 50 years. The evidence on record shows that the respondents intended to cede the property to the City Government of Lipa permanently. In fact, they allowed the city to declare the property in its name for tax purposes. And when they sought to have the bigger lot subdivided, the respondents earmarked a specific portion for the City Government of Lipa. Under the circumstances, it may be assumed that the respondents had agreed to transfer ownership of the land to the government, whether to the City Government of Lipa or to the Republic of the Philippines, but the parties never formalized and documented such transfer. Consequently, petitioner should be deemed entitled to possession pending the respondents’ formal transfer of ownership to it upon payment of just compensation. Republic of the Philippines vs. Primo Mendoza and Maria Lucero, G.R. No. 185091, August 8, 2010.