December 2013 Philippine Supreme Court Decisions on Tax Law

National Internal Revenue Code; value-added tax; claim for input value-added tax refund; prescriptive period. Taxpayer filed its monthly and quarterly value-added tax (VAT) returns for the period beginning January 1, 2003 and ending on June 30, 2003. On August 9, 2004, it filed a claim for refund for its unutilized input VAT attributable to its zero-rated sales. Due to the failure of the Commissioner of Internal Revenue (CIR) to act on the claim, the taxpayer filed a petition for review with the Court of Tax Appeals (CTA) on May 5, 2005. The CIR argued that the period within which to file the petition for review had prescribed based on Section 112(D) (now 112 (C)) of the National Internal Revenue Code (NIRC). The taxpayer, on the other hand, argued that the period had not yet prescribed based on Section 229 of the NIRC.The Court ruled that Section 112(D) (now 112 (C)) of the NIRC is the applicable provision. Section 229 applies only to erroneously or excessively collected taxes and input VAT is not an erroneously or excessively collected tax.  Therefore, Section 112(D) (now 112 (C))  prevails. In accordance with the case of  Commissioner of Internal Revenue vs. San Roque Power Corporation, the taxpayer’s judicial claim for refund must be denied for having been filed late. Although taxpayer filed its administrative claim with the Bureau of Internal Revenue before the expiration of the two-year period in Section 112 (A) of the NIRC, it failed to comply with the 120 + 30 day period in Section 112 (D) (now 112 (C)) which requires that upon the inaction of the CIR for 120 days after the submission of the documents in support of the claim, the taxpayer has to file its judicial claim within 30 days from the lapse of the said period. In this case, the 120 days granted to the CIR to decide the case ended on December 7, 2004. Thus, taxpayer had 30 days therefrom, or until January 6, 2005 to file a petition for review with the CTA. Unfortunately, taxpayer only sought judicial relief on May 5, 2005 when it belatedly filed its petition to the CTA. Thus, CTA did not properly acquire jurisdiction over the claim. Commissioner of Internal Revenue vs. Dash Engineering Philippines, Inc., G.R.No. 184145, December 11,2013. 

(Caren thanks Carlos P. Garcia for assisting in the preparation of this post.)

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December 2013 Philippine Supreme Court Decisions on Criminal Law and Procedure

Here are select December 2013 rulings of the Supreme Court of the Philippines on criminal law and procedure:

1. REVISED PENAL CODE

Falsification of public documents; falsification of local budget preparation forms. To warrant the suspension of a public officer under section 13 of R.A. 3019, he must be charged with an offense (1) under R.A. 3019, or (2) under Title Seven, Book II of the RPC, or (3) involving fraud upon government or public funds or property. Admittedly, petitioner in this case was not charged under R.A. 3019. Neither was he charged under Title Seven, Book II of the RPC as the crime of falsification of public documents under Article 171 of the RPC is covered by Title Four, Book II thereof. The relevant question now is whether falsification of public documents is considered as fraud upon government or public funds or property. To address the issue, the Supreme Court (SC) cited Bustillo v. Sandiganbayan. Petitioner therein was charged with falsifying municipal vouchers which, as used in government, are official documents. He asserted the said offense does not involve “fraud or property”; hence, his suspension finds no basis in section 13 of R.A. 3019. In construing the term “fraud” as used in section 13 of R.A. 3019, the SC held in said case that the same is understood in its general sense, that is, referring to “an instance or an act of trickery or deceit especially when involving misrepresentation.” And since vouchers are official documents signifying a cash outflow from government coffers, falsification thereof invariably involves fraud upon public funds. In the same vein, the act imputed against petitioner constitutes fraud upon government or public funds. Hadjim Hashim Abdul v. Sandiganbayan (Fifth Division) and People of the Philippines, G.R. No. 184496, December 2, 2013.

Kidnapping for ransom; elements. In proving the crime of kidnapping for ransom, the prosecution has to show that: (a) the accused was a private person; (b) he kidnapped or detained or in any manner deprived another of his or her liberty; (c) the kidnapping or detention was illegal; and (d) the victim was kidnapped or detained for ransom. All these were proven in the criminal case on review. The testimony of Alejandro and Marvelous sufficiently established the commission of the crime and the accused-appellants’ culpability. Maca was positively identified by Marvelous as one of the men who collared her, Marelie and Mae by the bedroom, tied them up and brought them to the mountains of Bagyangon. He was also identified as the one who left the group when they were on the mountains to buy food after Con-ui refused. Con-ui, on the other hand, was identified by Alejandro as the one who was addressed by one of the abductors with the statement, “why did it take you so long in coming back? We were already tired of waiting for you.” Con-ui was also identified by Marvelous as the one who took the key to the drawer, opened it and took the money in it. Their testimony also established the fact that they were deprived of their liberty when they were all hogtied and forcibly brought out of the house and into the mountains. That the deprivation of their liberty was for the purpose of extorting ransom was confirmed by Alejandro who testified that the abductors asked him for money and even let him off so he can come up with the P300,000.00 ransom. People of the Philippines v. Jonathan Con-U and Ramil Maca, G.R. No. 205442, December 11, 2013.

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December 2013 Philippine Supreme Court Decisions on Labor Law

Here are select December 2013 rulings of the Supreme Court of the Philippines on labor law:

Appeal; NLRC; accredited bonding company; revocation of authority is prospective in application. The respondents filed a surety bond issued by Security Pacific Assurance Corporation (Security Pacific) on June 28, 2002. At that time, Security Pacific was still an accredited bonding company. However, the NLRC revoked its accreditation on February 16, 2003.  This subsequent revocation should not prejudice the respondents who relied in good faith on the then subsisting accreditation of Security Pacific. In Del Rosario v. Philippine Journalists, Inc. (G.R. No. 181516, August 19, 2009), it was held that a bonding company’s revocation of authority is prospective in application. Nonetheless, the respondents should post a new bond issued by an accredited bonding company in compliance with paragraph 4, Section 6, Rule 6 of the NLRC Rules of Procedure, which states that “[a] cash or surety bond shall be valid and effective from the date of deposit or posting, until the case is finally decided, resolved or terminated or the award satisfied.” Wilgen Loon, et al. v. Power Master, Inc., et al., G.R. No. 189404, December 11, 2013.

Appeal; NLRC; bond; jurisdictional. Paragraph 2, Article 223 of the Labor Code provides that “[i]n case of a judgment involving a monetary award, an appeal by the employer may be perfected only upon the posting of a cash or surety bond issued by a reputable bonding company duly accredited by the NLRC in the amount equivalent to the monetary award in the judgment appealed from.”  Contrary to the respondents’ claim, the issue of the appeal bond’s validity may be raised for the first time on appeal since its proper filing is a jurisdictional requirement. The requirement that the appeal bond should be issued by an accredited bonding company is mandatory and jurisdictional. The rationale of requiring an appeal bond is to discourage the employers from using an appeal to delay or evade the employees’ just and lawful claims. It is intended to assure the workers that they will receive the money judgment in their favor if the employer’s appeal is dismissed. Wilgen Loon, et al. v. Power Master, Inc., et al., G.R. No. 189404, December 11, 2013.

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December 2013 Philippine Supreme Court Decisions on Civil Law

Here are seclect December 2013 rulings of the Supreme Court of the Philippines on civil law:

Civil Code

Contracts; concept of contracts. A contract is what the law defines it to be, taking into consideration its essential elements, and not what the contracting parties call it. The real nature of a contract may be determined from the express terms of the written agreement and from the contemporaneous and subsequent acts of the contracting parties. However, in the construction or interpretation of an instrument, the intention of the parties is primordial and is to be pursued. The denomination or title given by the parties in their contract is not conclusive of the nature of its contents. ACE Foods, Inc. v. Micro Pacific Technologies Co., Ltd., G.R. No. 200602,  December 11, 2013.

Contracts; contract of loan; interest stipulated; reduced for being iniquitous and unconscionable. Parties to a loan contract have wide latitude to stipulate on any interest rate in view of the Central Bank Circular No. 905 s. 1982 which suspended the Usury Law ceiling on interest effective January 1, 1983. It is, however, worth stressing that interest rates whenever unconscionable may still be declared illegal. There is nothing in the circular which grants lenders carte blanche authority to raise interest rates to levels which will either enslave their borrowers or lead to a hemorrhaging of their assets.In Menchavez v. Bermudez, the interest rate of 5% per month, which when summed up would reach 60% per annum, is null and void for being excessive, iniquitous, unconscionable and exorbitant, contrary to morals, and the law. Florpina Benvidez v. Nestor Salvador, G.R. No. 173331, December 11, 2013.

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December 2013 Philippine Supreme Court Decisions on Legal and Judicial Ethics

Here are select December 2013 rulings of the Supreme Court of the Philippines on legal and judicial ethics:

Attorney; Applicability of the Code of Professional Responsibility to lawyers in government service in the discharge of their official tasks. Private respondents were charged before the Court of Tax Appeals for violation of the Tariff and Customs Code of the Philippines, as amended. However, the CTA dismissed the case since the prosecution failed to present certified true copies of the documentary evidence submitted contrary to Section 7, Rule 130 and Section 127, Rule 132 of the Rules of Court. The Run After the Smugglers (RATS) Group, Revenue Collection Monitoring Group (RCMG), as counsel for the BOC, filed a petition for certiorari but the petition was filed beyond the reglementary period.

The Supreme Court held that the display of patent violations of even the elementary rules shows that the case against respondents was doomed by design from the start. This stance taken by the lawyers in government service rouses the Court’s vigilance against inefficiency in the administration of justice. Verily, the lawyers representing the offices under the executive branch should be reminded that they still remain as officers of the court from whom a high sense of competence and fervor is expected. The Court will not close its eyes to this sense of apathy in RATS lawyers, lest the government’s goal of revenue enhancement continues to suffer the blows of smuggling and similar activities. The Court reminded the lawyers in the BOC that the canons embodied in the Code of Professional Responsibility equally apply to lawyers in government service in the discharge of their official tasks. Thus, RATS lawyers should exert every effort and consider it their duty to assist in the speedy and efficient administration of justice. People of the Philippines v. The Hon. Juanito C. Castaneda, Jr., et al., G.R. No. 208290, December 11, 2013.

Attorney; Champertous contract. Complainants engaged the legal services of Atty. Bañez, Jr. in connection with the recovery of their properties from Fevidal. Complainants signed a contract of legal services, where they would not pay acceptance and appearance fees to Atty. Bañez Jr., but that the docket fees would instead be shared by the parties. Under the contract, complainants would pay him 50% of whatever would be recovered of the properties. Later, however, complainants terminated his services and entered into an amicable settlement with Fevidal. Atty. Bañez, Jr. opposed the withdrawal of their complaint in court. Thus, complainants filed a case against him alleging that the motion of Atty. Baez, Jr. for the recording of his attorney’s charging lien was the “legal problem” preventing them from enjoying the fruits of their property.

Section 26, Rule 138 of the Rules of Court allows an attorney to intervene in a case to protect his rights concerning the payment of his compensation. According to the discretion of the court, the attorney shall have a lien upon all judgments for the payment of money rendered in a case in which his services have been retained by the client. In this case, however, the contract for legal services is in the nature of a champertous contract – an agreement whereby an attorney undertakes to pay the expenses of the proceedings to enforce the client’s rights in exchange for some bargain to have a part of the thing in dispute. Such contracts are contrary to public policy and are thus void or inexistent. They are also contrary to Canon 16.04 of the Code of Professional Responsibility, which states that lawyers shall not lend money to a client, except when in the interest of justice, they have to advance necessary expenses in a legal matter they are handling for the client. Thus, the Court held that Atty. Bañez, Jr. violated Canon 16.04 of the Code of Professional Responsibility. Conchita Baltazar,et al. v. Atty. Juan B. Bañez, Jr., A.C. No. 9091, December 11, 2013.

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December 2013 Philippine Supreme Court Decisions on Commercial Law

Here are select December 2013 rulings of the Supreme Court of the Philippines on commercial law:

Corporations; doctrine of apparent authority. The doctrine of apparent authority provides that a corporation will be estopped from denying the agent’s authority if it knowingly permits one of its officers or any other agent to act within the scope of an apparent authority, and it holds him out to the public as possessing the power to do those acts.  The doctrine of apparent authority does not apply if the  principal did not commit any acts or conduct which a third party knew and relied upon in good faith as a result of the exercise of reasonable prudence. Moreover, the agent’s acts or conduct must have produced a change of  position to the third party’s detriment. Advance Paper Corporation and George Haw, in his capacity as President of Advance Paper Corporation v. Arma Traders Corporation, Manuel Ting, et al., G.R. No. 176897, December 11, 2013.

Corporations; doctrine of apparent authority . In People’s Aircargo and Warehousing Co., Inc. v. Court of  Appeals,  we ruled that the doctrine of apparent authority is applied when the petitioner, through its president Antonio Punsalan Jr., entered into the First Contract without first securing board approval. Despite such lack of  board approval, petitioner did not object to or repudiate said contract, thus “clothing” its president with the power to bind the corporation. “Inasmuch as a corporate president is often given general supervision and control over corporate operations, the strict rule that said officer has no inherent power to act for the corporation is slowly giving way to the realization that such officer has certain limited powers in the transaction of the usual and ordinary business of the corporation.”

In the absence of a charter or bylaw provision to the contrary, the president is presumed to have the authority to act within the domain of the general objectives of its business and within the scope of his or her usual duties. Advance Paper Corporation and George Haw, in his capacity as President of Advance Paper Corporation v. Arma Traders Corporation, Manuel Ting, et al., G.R. No. 176897, December 11, 2013.

(Hector thanks Miracle Rodriguez and Camille Maria M. Castolo for their assistance to Lexoterica.)