December 2011 Philippine Supreme Court Decisions on Tax Laws

National Internal Revenue Code; Value Added Tax; Civil Code. LVM Construction was awarded the construction contract with DPWH. LVM as the contractor entered into a Sub-Contractor Agreement with a Joint Venture as sub-contractor. As the entity which directly dealt with the government insofar as the main contract was concerned, LVM was itself required by law to pay the 8.5% VAT which was withheld by the DPWH. A contract constitutes the law between the parties who are, therefore, bound by its stipulations which, when couched in clear and plain language, should be applied according to their literal tenor. That there was no agreement regarding the offsetting urged by LVM may likewise be readily gleaned from the parties’ contemporaneous and subsequent acts which are given primordial consideration in determining their intention.  In the absence of any stipulation regarding the Joint Venture’s sharing in the VAT deducted and withheld by the DPWH from its payment on the main contract, LVM has no basis in offsetting the amounts of said tax from the retention still in its possession.  LVM, as Contractor for the Project, was liable for the 8.5% VAT which was withheld by the DPWH from its payments, pursuant to Section 114 (C) of the NIRC.  Absent any agreement to that effect, LVM cannot deduct the amounts thus withheld from the sums it still owed the Joint Venture which, as Sub-Contractor of 30% of the Project, had its own liability for 10% VAT insofar as the sums paid for the sub-contracted works were concerned.   Although the burden to pay an indirect tax like VAT can, admittedly, be passed on to the purchaser of the goods or services, it bears emphasizing that the liability to pay the same remains with the manufacturer or seller like LVM and the Joint Venture.  In the same manner that LVM is liable for the VAT due on the payments made by the DPWH pursuant to the contract on the Project, the Joint Venture is, consequently, liable for the VAT due on the payments made by LVM pursuant to the parties’ Sub-Contract. LVM Construction Corporation vs. F.T. Sanchez/SOCOR/KIMWA (Joint Venture), G.R. No. 181961, December 5, 2011.

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

Dissension in the Court: December 2011

The following relates to select decisions promulgated by the High Court in December 2011 where at least one Justice felt compelled to express his or her dissent from the decision penned by the ponente.

1.         Probation or Not? (Abad vs. Peralta and Villarama)

In the case of Arnel Colinares vs. People of the Philippines, Arnel Colinares was found guilty by the Regional Trial Court (RTC) of frustrated homicide and sentenced him to suffer imprisonment from two years and four months of prision correccional, as minimum, to six years and one day of prision mayor, as maximum. Since the maximum probationable imprisonment under the law was only up to six years, Arnel did not qualify for probation.

Colinares appealed to the Court of Appeals invoking self-defense and, alternatively, seeking conviction for the lesser crime of attempted homicide with the consequent reduction of the penalty imposed on him.  However, the Court of Appeals affirmed the decision of the RTC.

Acting on his Petition for Review, the Supreme Court, through Justice Roberto A. Abad, found Colinares guilty of committing only the lesser crime of attempted homicide with its imposable penalty of imprisonment of four months of arresto mayor, as minimum, to two years and four months of prision correccional, as maximum.  As a result, the Supreme Court held that since the maximum imposable penalty was now less than six years, Colinares may apply for probation upon remand of the case to the trial court.

Justice Diosadado M. Peralta took exception to this ruling of the majority, emphasizing that probation is not a right but a privilege.

December 2011 Philippine Supreme Court Decisions on Legal and Judicial Ethics

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

Affidavit of Desistance; no effect on disciplinary proceeding.  It bears to stress that a case of suspension or disbarment is sui generis and not meant to grant relief to a complainant in a civil case but is intended to cleanse the ranks of the legal profession or its undesirable members in order to protect the public and the courts.  It is not an investigation into the acts of respondent as a husband but on his conduct as an officer of the Court and his fitness to continue as a member of the Bar.  Hence, the Affidavit dated March 15, 1995, which is akin to an affidavit of desistance, cannot have the effect of abating the instant proceedings. Elpidio P. Tiong vs. Atty. George M. Florendo. A.C. No. 4428. December 12, 2011

Attorney; gross immorality. Possession of good moral character is not only a condition for admission to the Bar but is a continuing requirement to maintain one’s good standing in the legal profession. It is the bounden duty of law practitioners to observe the highest degree of morality in order to safeguard the integrity of the Bar. Consequently, any errant behavior on the part of a lawyer, be it in his public or private activities, which tends to show him deficient in moral character, honesty, probity or good demeanor, is sufficient to warrant his suspension or disbarment. Respondent’s act of having an affair with his client’s wife manifested his disrespect for the laws on the sanctity of marriage and his own marital vow of fidelity. It showed his utmost moral depravity and low regard for his profession. He also violated the trust and confidence reposed on him by the complainant, which in itself is prohibited under Canon 17 of the Code of Professional Responsibility.  Elpidio P. Tiong vs. Atty. George M. Florendo. A.C. No. 4428. December 12, 2011

December 2011 Philippine Supreme Court Decisions on Criminal Law and Procedure

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

1.         REVISED PENAL CODE

Aggravating circumstances; treachery. There is treachery when the offender commits any of the crimes against the person, employing means, methods or forms in the execution thereof which tend directly and specially to insure its execution, without risk to himself arising from any defense which the offended party might make. Two conditions must concur for treachery to be appreciated.  First, is the employment of means of execution that gives the person attacked no opportunity to defend himself or to retaliate.  Second, the means of execution was deliberate or consciously adopted. People of the Philippines v. Florencio Agacer, et al, G.R. No. 177751, December 14, 2011.

Aggravating circumstances; treachery.  The essence of treachery is the sudden attack by an aggressor without the slightest provocation on the part of the victim, depriving the latter of any real chance to defend himself, thereby ensuring the commission of the crime without risk to the aggressor. On appeal, the Supreme Court debunked appellants’ contention that the trial and appellate courts erred in ruling that treachery qualified the killing of Cesario to murder since the attack on Cesario was frontal, therefore no element of surprise on the victim or suddenness of the assault that characterizes treachery. In this case, treachery is evident. From the facts, Cesario could not have been aware that he would be surrounded, attacked and killed by the appellants who were all related to him.  He could not have also been aware that Eddie had a shotgun concealed in a sack because if he was, he would not have casually approached Florencio when the latter summoned him.  Unfortunately, while Cesario was advancing towards Florencio, Eddie shot him at close range without any warning whatsoever.  Evidently, the crime was committed in a manner that there was no opportunity for Cesario to defend himself.  Also, the mode of attack did not spring from the unexpected turn of events but was clearly thought of by the appellants.  Hence, it no longer matters that the assault was frontal since its swiftness and unexpectedness deprived Cesario of a chance to repel it or offer any resistance in defense of his person. People of the Philippines v. Florencio Agacer, et al, G.R. No. 177751, December 14, 2011.

December 2011 Philippine Supreme Court Decisions on Commercial Law

Here are selected December 2011 rulings of the Supreme Court of the Philippines on commercial law:

Corporation; contracts before incorporation. With respect to petitioners’ contention that the Management Contract executed between respondent and petitioner Lucila has no binding effect on petitioner corporation for having been executed way before its incorporation, this Court finds the same meritorious.

Logically, there is no corporation to speak of prior to an entity’s incorporation.  And no contract entered into before incorporation can bind the corporation.  March II Marketing, Inc. and Lucila V. Joson vs. Alfredo M. Joson, G.R. No. 171993, December 12, 2011.

Corporation; corporate officers. In the context of Presidential Decree No. 902-A, corporate officers are those officers of a corporation who are given that character either by the Corporation Code or by the corporation’s by-laws.  Section 25 of the Corporation Code specifically enumerated who are these corporate officers, to wit: (1) president; (2) secretary; (3) treasurer; and (4) such other officers as may be provided for in the by-laws.

With the given circumstances and in conformity with Matling Industrial and Commercial Corporation v. Coros, this Court rules that respondent was not a corporate officer of petitioner corporation because his position as General Manager was not specifically mentioned in the roster of corporate officers in its corporate by-laws.  The enabling clause in petitioner corporation’s by-laws empowering its Board of Directors to create additional officers, i.e., General Manager, and the alleged subsequent passage of a board resolution to that effect cannot make such position a corporate office.  Matling clearly enunciated that the board of directors has no power to create other corporate offices without first amending the corporate by-laws so as to include therein the newly created corporate office.  Though the board of directors may create appointive positions other than the positions of corporate officers, the persons occupying such positions cannot be viewed as corporate officers under Section 25 of the Corporation Code.  In view thereof, this Court holds that unless and until petitioner corporation’s by-laws is amended for the inclusion of General Manager in the list of its corporate officers, such position cannot be considered as a corporate office within the realm of Section 25 of the Corporation Code.  March II Marketing, Inc. and Lucila V. Joson vs. Alfredo M. Joson, G.R. No. 171993, December 12, 2011.

(Hector thanks Mary Caroline A. Tan for her assistance to Lexoterica.)