February 2011 Philippine Supreme Court Decisions on Tax Law

Here are selected February 2011 rulings of the Supreme Court of the Philippines on tax law:

Local Government Code; real property tax; tax delinquency sale; writ of possession; premature issuance. A writ of possession is mere incident in the transfer of title. In this case, it stemmed from the exercise of alleged ownership by respondent city over EDSA MRT III properties by virtue of a tax delinquency sale. The issue of whether the auction sale should be enjoined is still pending before the Court of Appeals. Pending determination, it is premature for the respondent city to have conducted the auction sale and caused the transfer of title over the real properties to its name. The denial by the Regional Trial Court (RTC) to issue an injunction or a temporary restraining order does not automatically give the respondent city the liberty to proceed with the actions sought to be enjoined, especially so in this case where a certiorari petition assailing the denial is still being deliberated in the Court of Appeals (CA). All the more it is premature for the RTC to issue a writ of possession where the ownership of the subject properties is derived from an auction sale, the validity of which is still being threshed out in the CA. The RTC should have held in abeyance the issuance of a writ of possession. At this juncture, the writ issued is premature and has no force and effect. Republic of the Philippines (Department of Transportation and Communications) vs City of Mandaluyong, G.R. No. 184879, February 23, 2011.

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February 2011 Philippine Supreme Court Decisions on Civil Law

Here are selected February 2011 rulings of the Supreme Court of the Philippines on civil law:

Civil Code

Contract; damages arising from breach of contract. The Court finds that since petitioners’ complaint arose from a contract, the doctrine of proximate cause, which is relevant only in actions for quasi-delicts, finds no application to it. What applies in the present case is Article 1170 of the Civil Code which reads: “[T]hose who in the performance of their obligations are guilty of fraud, negligence or delay, and those who in any manner contravene the tenor thereof, are liable for damages.” Breach of contract is defined as the failure without legal reason to comply with the terms of a contract. It is also defined as the failure, without legal excuse, to perform any promise which forms the whole or part of the contract. As for petitioners’ claim that respondent departed from its verbal agreement with petitioners, the same fails, given that the written contract which the parties entered into the day before the event, being the law between them.  Spouses Luigi Guanio and Anna Guanio v. Makati Shangri-la Hotel and Resort, Inc.; G.R. No. 190601. February 7, 2011.

Contract; novation. There are two ways which could indicate, in fine, the presence of novation and thereby produce the effect of extinguishing an obligation by another which substitutes the same.  The first is when novation has been explicitly stated and declared in unequivocal terms.  The second is when the old and the new obligations are incompatible on every point.  The test of incompatibility is whether the two obligations can stand together, each one having its independent existence.  If they cannot, they are incompatible, and the latter obligation novates the first.  Corollarily, changes that breed incompatibility must be essential in nature and not merely accidental.  The incompatibility must take place in any of the essential elements of the obligation such as its object, cause or principal conditions thereof; otherwise, the change would be merely modificatory in nature and insufficient to extinguish the original obligation.  Carolina Hernandez-Nievera, et al. v. Wilfredo Hernandez, et al.; G.R. No. 171165. February 14, 2011.

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Philippine Laws: February 2011

Another month gone, another month without any new laws approved.  But, there’s no need to fret.  The Legislative-Executive Development Advisory Council (LEDAC) had their 111th meeting this month (but the first under P-Noy), and discussed the 23 priority bills of the Aquino administration (let’s call them “P-Bills”).

The P-Bills fall under five general groupings—Human Development; Infrastructure Development; Economic Development; Sovereignty, Security and Rule of Law; and Good Governance.

The Human Development P-Bills include the acts (a) creating the Department of Housing and Urban Development (let’s not call this the “DHUD”); (b) rationalizing the nightwork prohibition on women workers; (c) enhancing the curriculum and increasing the number of years for basic education; (d) providing a definite targeting strategy in identifying the poor (for purposes of the National Health Insurance Act); and (e) reorganizing the National Food Authority into the National Food Corporation (let’s not call this the “NaFooCor”) and the Food Development and Regulatory Administration.

The Infrastructure P-Bills include the acts (i) amending Republic Act No. (RA) 6957 as amended, or the Act Authorizing the Financing, Construction, Operation and Maintenance of Infrastructure Projects by the Private Sector; (ii) amending RA 9136, or the Electric Power Industry Reform Act of 2001; and (iii) rationalizing the economic regulation of water utilities by, among others, creating the Water Regulatory Commission (let’s not call this the “WaR Commission”).

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February 2011 Philippine Supreme Court Decisions on Legal and Judicial Ethics

Here are selected February 2011 rulings of the Supreme Court of the Philippines on legal and judicial ethics:

Administrative proceedings; compromise agreements. The compromise agreement between complainant and respondent, or the fact that complainant already forgave respondent, does not necessarily warrant the dismissal of the administrative case. Three reasons justify the continuation of the administrative matter despite the compromise agreement or the forgiveness. One, the Court’s disciplinary authority is not dependent on or cannot be frustrated by the private arrangements entered into by the parties; otherwise, the prompt and fair administration of justice, as well as the discipline of court personnel, will be undermined. Two, public interest is at stake in the conduct and actuations of the officials and employees of the Judiciary. Accordingly, the efforts of the Court in improving the delivery of justice to the people should not be frustrated and put to naught by any private arrangements between the parties. And, three, the Court’s interest in the affairs of the Judiciary is a paramount concern that bows to no limits. Benigno B. Reas v. Carlos M. Relacion, A.M. No. P-05-2095. February 9, 2011.

Administrative Proceedings; substantial evidence. Bayani was charged with dishonesty for failure to disclose in her Personal Data Sheet that she was previously admonished in an administrative case. Bayani invoked good faith as her defense. The Court ruled that while her defense of good faith may be difficult to prove as clearly it is a question of intention, a state of mind, erroneous judgment on the part of Bayani does not, however, necessarily connote the existence of bad faith, malice, or an intention to defraud. In administrative proceedings, only substantial evidence is required to warrant disciplinary sanctions.  Substantial evidence is defined as relevant evidence as a reasonable mind might accept as adequate to support a conclusion. Thus, after much consideration of the facts and circumstances, while the Court has not shied away in imposing the strictest penalty to erring employees, neither can it think and rule unreasonably in determining whether an employee deserves disciplinary sanction. Bayani was admonished and warned that a repetition of the same or similar offense will warrant the imposition of a mere severe penalty. Re: Anonymous Complaint against Ms. Hermogena F. Bayani for Dishonesty, A.M. No. 2007-22-SC. February 1, 2011.

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Rules and Regulations Governing Deposits Not Covered by Deposit Insurance

Regulatory Issuance No. 2011-02 was published by the Philippine Deposit Insurance Corporation (PDIC) last January to clarify which deposit accounts and transactions are excluded from the coverage of deposit insurance. It will be recalled that Congress passed Republic Act No. 9576 in 2009 which increased the maximum amount of deposits covered by PDIC insurance to P500,000. The same law excluded from the coverage of the PDIC insurance the following accounts or transactions: (i) investment products, such as bonds and securities, (ii) deposit accounts which are unfunded, or that are fictitious or fraudulent, (iii) deposit accounts constituting or emanating from unsafe or unsound banking practices, and (iv) deposits determined to be the proceeds of unlawful activity.

Under the PDIC regulation, the account is an investment product if no debtor-creditor relationship exists between the bank and the client, and instead, the relationship is that of trustor-trustee or principal-agent; the principal amount is not protected; the amount is not withdrawable on demand; and other analogous features.  On the other hand, deposit accounts are unfunded or are fictitious or fraudulent if the bank did not receive the money alleged to be deposited, or when the deposit is simulated or feigned, as when it was made to appear that money was received by the bank but in fact was not, or when the bank employed means calculated to deceive.

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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.

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February 2011 Philippine Supreme Court Decisions on Criminal Law and Procedure

Here are selected February 2011 rulings of the Supreme Court of the Philippines on criminal law and procedure:


Revised Penal Code

Estafa; elements. The elements of the crime of estafa under Article 315, par. 2(a) of the Revised Penal Code are: (1) there must be a false pretense, fraudulent acts or fraudulent means; (2) such false pretense, fraudulent act or fraudulent means must be made or executed prior to or simultaneously with the commission of the fraud; (3) the offended party must have relied on the false pretense, fraudulent act or fraudulent means and was thus induced to part with his money or property; and (4) as a result thereof, the offended party suffered damage. Lyzah Sy Franco v. People of the Philippines/ Steve Besario v. People of the Philippines, G.R. Nos. 171328 and 171335, February 16, 2011.

Estafa; elements. All the elements of the crime of estafa under Article 315, par. 2(a) are present in this case. Petitioners presented themselves to Lourdes as persons possessing the authority and capacity to engage in the financing of used vehicles on behalf of Final Access Marketing.  This was a clear misrepresentation considering their previous knowledge not only of Erlinda’s complaint but also of several others as regards the failure of Final Access Marketing to deliver the motor vehicles bought.  Lourdes relied on their misrepresentations and parted with her money.  Almost a week passed by, but petitioners and Rule did not deliver the said motor vehicle.  They also did not fulfill their subsequent promise to provide a replacement or to refund her payment.  When Lourdes visited the office of Final Access Marketing to demand the return of her money, it was already closed.  She could not locate any of them except for Franco who denied any wrongdoing.  Consequently, she suffered damage. Lyzah Sy Franco v. People of the Philippines/ Steve Besario v. People of the Philippines, G.R. Nos. 171328 and 171335, February 16, 2011.

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