July 2011 Philippine Supreme Court Decisions on Civil Law

Here are select July 2011 rulings of the Supreme Court of the Philippines on civil law:

Compensation. For legal compensation to take place, the requirements set forth in Articles 1278 and 1279 of the Civil Code, quoted below, must be present.

ARTICLE 1278. Compensation shall take place when two persons, in their own right, are creditors and debtors of each other.

ARTICLE 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.

A debt is liquidated when its existence and amount are determined. It is not necessary that it be admitted by the debtor. Nor is it necessary that the credit appear in a final judgment in order that it can be considered as liquidated; it is enough that its exact amount is known. And a debt is considered liquidated, not only when it is expressed already in definite figures which do not require verification, but also when the determination of the exact amount depends only on a simple arithmetical operation.

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July 2011 Philippine Supreme Court Decisions on Tax Law

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

National Internal Revenue Code; income tax; advances to affiliates; ; imputation of interest income; power of Commissioner of Internal Revenue. Section 43 [now Section 50] of the 1993 National Internal Revenue Code (NIRC) provides that. “(i)n case of two or more organizations, trades or businesses (whether or not incorporated and whether or not organized in the Philippines) owned or controlled directly or indirectly by the same interests, the Commissioner of Internal Revenue [(CIR)] is authorized to distribute, apportion or allocate gross income or deductions between or among such organization, trade of business, if he determines that such distribution, apportionment or allocation is necessary in order to prevent evasion of taxes or clearly to reflect the income of any such organization, trade or business,” Section 179 of Revenue Regulations No. 2 provides in part that “(i)n determining the true net income of a controlled taxpayer, the [CIR] is not restricted to the case of improper accounting, to the case of a fraudulent, colorable, or sham transaction, or to the case of a device designed to reduce of avoid tax by shifting or distorting income or deductions. The authority to determine true net income extends to any case in which either by inadvertence or design the taxable net income in whole or in part, of a controlled taxpayer, is other than it would have been had the taxpayer in the conduct of his affairs been an uncontrolled taxpayer dealing at arm’s length with another uncontrolled taxpayer.” Despite the broad parameters provided, however, the CIR’s power of distribution, apportionment or allocation of gross income and deductions under the NIRC and Revenue Regulations No. 2 do not include the power to impute “theoretical interests” to the taxpayer’s transactions.  Pursuant to Section 28 [now Section 32] of the NIRC, the term “gross income” is understood to mean all income from whatever source derived, including, but not limited to certain items. While it has been held that the phrase “from whatever source derived” indicates a legislative policy to include all income not expressly exempted within the class of taxable income under Philippine laws, the term “income” has been variously interpreted to mean “cash received or its equivalent,” the amount of money coming to a person within a specific time” or something distinct from principal or capital.” Otherwise stated, there must be proof of the actual or, at the very least, probable receipt or realization by the controlled taxpayer of the item of gross income sought to be distributed, apportioned or allocated by the CIR. In this case, there is no evidence of actual or possible showing that the advances taxpayer extended to its affiliates had resulted to interests subsequently assessed by the CIR. Even if the Court were to accord credulity to the CIR’s assertion that taxpayer had deducted substantial interest expense from its gross income, there would still be no factual basis for the imputation of theoretical interests on the subject advances and assess deficiency income taxes thereon. Further, pursuant to Article 1959 of the Civil Code of the Philippines, no interest shall be due unless it has been expressly stipulated in writing. Commissioner of Internal Revenue vs. Filinvest Development Corporation, G.R. No. 163653, July 19, 2011; Commissioner of Internal Revenue vs. Filinvest Development Corporation, G.R. No. 167689, July 19, 2011.

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July 2011 Philippine Supreme Court Decisions on Political Law

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

Constitutional Law

Court proceedings; denial of due process.  The SC here ruled that the Energy Regulatory Commission did not deprive petitioners of their right to be heard.  Where opportunity to be heard either through oral arguments or through pleadings is granted, there is no denial of due process. In this case, prior to the issuance of the assailed ERC Decision approving Meralco’s application for rate increase, petitioners were given several opportunities to attend the hearings and to present all their pleadings and evidence.  Petitioners voluntarily failed to appear in most of those hearings.  Although the ERC erred in prematurely issuing its Decision (as the same was issued prior to the lapse of the period for petitioners to file their comment on the application), its subsequent act of ordering petitioners to file their comments on another party’s motion for reconsideration cured this defect. Even though petitioners never filed their own motion for reconsideration, the fact that they were still given notice of the other motion and the opportunity to file their comments renders immaterial ERC’s failure to admit their comment on the rate application.  National Association of Electricity Consumers of reforms, Inc. [Nasecore], et al. vs. Energy Regulator Commission (ERC), et al., G.R. No. 190795. July 6, 2011.

Value added tax on toll fees; non-impairment clause.  Petitioners argue that since VAT was never factored into the formula for computing toll fees under the Toll Operation Agreements, its imposition would violate the non-impairment of contract clause of the constitution.  The SC held that Petitioner Timbol has no personality to invoke the non-impairment clause on behalf of private investors in the tollway projects.  She will neither be prejudiced nor affected by the alleged diminution in return of investments that may result from the VAT imposition.  She has no interest in the profits to be earned under the TOAs. The interest in and right to recover investments belongs solely to the private tollway investors. Renato V. Diaz and Aurora Ma. F. Timbol vs. The Secretary of Finance and the Commissioner of Internal Revenue, G.R. No. 193007. July 19, 2011.

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July 2011 Philippine Supreme Court Decisions on Criminal Law and Procedure

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


Qualifying circumstance; treachery. The Supreme Court affirmed the findings of the trial court that the qualifying circumstance of treachery attended the commission of the crime. Milan’s act of closing the door facilitated the commission of the crime, allowing Carandang to wait in ambush. The sudden gunshots when the police officers pushed the door open illustrate the intention of appellants and Carandang to prevent any chance for the police officers to defend themselves. Treachery is thus present in the case at bar, as what is decisive for this qualifying circumstance is that the execution of the attack made it impossible for the victims to defend themselves or to retaliate. People of the Philippines v. Restituto Carandang, et al, G.R. No. 175926, July 6, 2011.


 Dangerous drugs; chain of custody. The Supreme Court upheld the conviction of the accused by ruling that the failure of the policemen to make a physical inventory and photograph the two plastic sachets containing the shabu subject of this case do not render the confiscated items inadmissible in evidence. Likewise, the failure of the policemen to mark the two plastic sachets containing shabu at the place of arrest does not render the confiscated items inadmissible in evidence. In People v. Resurreccion, G.R. No. 186380, 12 October 2009, 603 SCRA 510, it was held that “the failure of the policemen to immediately mark the confiscated items does not automatically impair the integrity of chain of custody.” Francisco Imson y Adriano vs. People of the Philippines, G.R. No. 193003, July 13, 2011.

Dangerous drugs; chain of custody. The failure to strictly comply with Section 21(1), Article II of RA 9165 does not necessarily render an accused’s arrest illegal or the items seized or confiscated from him inadmissible. What is of utmost importance is the preservation of the integrity and the evidentiary value of the seized items, as these would be utilized in the determination of the guilt or innocence of the accused. The presumption is that the policemen performed their official duties regularly. In order to overcome this presumption, the accused must show that there was bad faith or improper motive on the part of the policemen, or that the confiscated items were tampered. In this case, the accused failed to do so. Francisco Imson y Adriano vs. People of the Philippines, G.R. No. 193003, July 13, 2011.

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July 2011 Philippine Supreme Court Decisions on Legal and Judicial Ethics

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

Court personnel; dishonesty and conduct prejudicial. A complaint was filed against the respondent alleging that he accepted employment as Chief Judicial Staff Officer of the Supreme Court, and thus received salaries and other benefits as such, while still remaining an active member and officer of the Philippine National Police (PNP).  The Court found that respondent was liable for gross dishonesty and conduct prejudicial to the best interest of the service.  His non-disclosure of the material fact that he was still employed as an active member of the PNP and receiving his monthly salaries during the period that he was already a Court employee is considered substantial proof that he tried to cheat/defraud both the PNP and the Court. Respondent transgressed the Constitution and the Civil Service law on the prohibition on dual employment and double compensation in the government service. Re: Gross violation of Civil Service Law on the prohibition against dual employment and double compensation in the government service committed by Mr. Eduardo V. Escala, etc. A.M. No. 2011-04-SC, July 5, 2011

Court personnel; effect of absences without approved leave. An administrative case was filed against Cabrera, a Utility Worker in the MTCC of Lipa City, who has failed to file his Daily Time Records (DTRs) and to seek leave for any of his absences. The Court held that pursuant to the Omnibus Rules on Leave, an employee’s absence without official leave for at least 30 working days warrants his separation from the service.  A public office is a public trust. Public officers must at all times be accountable to the people, serve them with the utmost degree of responsibility, integrity, loyalty, and efficiency.  By going on AWOL, Cabrera grossly disregarded and neglected the duties of his office. He failed to adhere to the high standards of public accountability imposed on all those in government service. Re: Dropping from the Rolls of Cornelio Reniette Cabrera, etc. A.M. No. P-11-2946. July 13, 2011

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July 2010 Philippine Supreme Court Decisions on Labor Law and Procedure

Here are selected July 2010 rulings of the Supreme Court of the Philippines on labor law and procedure:

Labor relations; in pari delicto rule in illegal strikes or lockouts.  When management and union are in pari delicto, the contending parties must be brought back to their respective positions before the controversy; that is, before the strike.  In this case, management’s fault arose from the fact that a day after the union filed a petition for certification election before the DOLE, it hit back by requiring all its employees to undergo a compulsory drug test. Indeed, the timing of the drug test was suspicious.  Moreover, management engaged in a runaway shop when it began pulling out machines from the main building (AER building) to the compound (AER-PSC premises) located on another street on the pretext that the main building was undergoing renovation. On the other hand, like management, the union and the affected workers were also at fault for resorting to a concerted work slowdown and walking out of their jobs in protest of their illegal suspension. It was also wrong for them to have forced their way to the AER-PSC premises to try to bring out the boring machines. Adding to the injury was the fact that the picketing employees prevented the entry and exit of non-participating employees and possibly AER’s clients to the premises.  Thus, the Supreme Court affirmed the ruling of the Court of Appeals favoring the reinstatement of all the complaining employees, including those who tested positive for illegal drugs, without backwages. Automotive Engine Rebuilders, Inc. et al. v. Progresibong Unyon ng mga Manggagawa sa AER, et al./Progresibong Unyon ng mga Manggagawa sa AER, et al. v. Automotive Engine Rebuilders, Inc., et al., G.R. No. 160138/G.R. No. 160192. July 13, 2011.

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Vacancy in the Senate

On 14 July 2007, the Commission on Elections declared Juan Miguel Zubiri the 12th elected senatorial candidate in the 2007 elections, narrowly prevailing over rival candidate Aquilino “Koko” Pimentel by a margin of 19,292 votes.  The other day, on 3 August 2011 (more than four years after his proclamation), Mr. Zubiri resigned from the Senate amidst renewed allegations of cheating during the 2007 polls.

Questions on the validity of the 2007 electoral results had resurfaced in the wake of disclosures made last month by Zaldy Ampatuan (former Governor of the Autonomous Region in Muslim Mindanao, who is currently facing charges relating to the massacre of 58 persons in late 2009, during preparations for the 2010 national election).  According to Mr. Ampatuan, former President Gloria Macapagal-Arroyo ordered the rigging of the 2007 senatorial elections.  Mr. Ampatuan claims that the former President  ordered his father, then-Maguindanao Governor Andal Ampatuan Sr., to transfer all votes cast for senatorial candidates Panfilo Lacson, Alan Peter Cayetano and Benigno Aquino III (who was subsequently elected President in 2010) to the candidates belonging to then-President Arroyo’s senatorial slate (which included Mr. Zubiri).  These allegations were corroborated several days later when former Maguindanao Election Supervisor Lintang Bedol reappeared after four years in hiding.  According to Mr. Bedol, he was instructed by the senior Ampatuan to rig the 2007 elections in favor of administration candidates.

Unfortunately for Mr. Pimentel, however, Mr. Zubiri’s resignation will not automatically elevate Mr. Pimentel to the Senate.  Unless the official results of the 2007 senatorial elections are reviewed and overturned, Mr. Pimentel will continue to be viewed as having received the 13th most votes in those elections and therefore, not entitled to a Senate seat.

How are Senate vacancies filled?  Under Article VI, Section 9 of the 1987 Constitution, in the case of a vacancy in the Senate, a special election may be called to fill the vacancy “in the manner prescribed by law,” provided that the Senator thus elected will serve only for the unexpired term.  This is operationalized by Section 4 of Republic Act No. 7166 (1991), which provides:

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